July 9th, 2026
A couple came to me last month with one goal: retire at 60 on $12,500/month of income. They're both high earners in their mid 40s, and they wanted to know if it was realistic. With that clear goal, I was able to tell them exactly how much they needed to save every year for the next 15 years. But the reality is most people have no clue when they’ll retire and how much they’ll spend. For those people, I recommend a simpler approach: save 20% of your gross income. But where does that number come from?
Where Does the 20% Savings Rate Come From?
The 20% savings rate comes from the book All Your Worth: The Ultimate Lifetime Money Plan by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi. In it, they introduce the 50/30/20 rule, where 50% of your after-tax income should go to needs, 30% to wants, and 20% to savings. Needs are essentials like your mortgage or rent, groceries, and utilities. Wants are discretionary spending like dining out, shopping, and travel. The authors argue that if you follow this framework as your income grows over the years, you’ll live a comfortable retirement.
I like the framework, but it was likely designed for the average American who will rely primarily on Social Security for retirement income. My clients are Big Law attorneys, so I had to adapt it. Social Security will make up a much smaller share of their retirement income, and because they work high-stress careers, most want to retire earlier than the traditional retirement age.
That's why I changed the rule to 20% of gross income, not after-tax income. It's a higher bar, but it's what a high earner who can't rely on Social Security needs to retire comfortably. Also, keep in mind that "saving" is broad. If a client has student loans, I count those payments in their savings rate, since once the loans are gone, they'll redirect that money into investments.
A Real-Life Example of How the 20% Savings Rate Works
I recently onboarded two new clients (different from the couple mentioned above). Let’s name them Bill and Laura for the sake of anonymity. They are in their mid-thirties, have two young children, and have a combined income of around $600,000. Unlike the couple in the intro paragraph, they didn’t have specific retirement goals. To quote them: “We want to make sure we save enough to retire one day while still being able to enjoy our money now.”
Sure, I could use my financial planning tool to run projections, but the assumptions would probably be wrong. Instead, I suggested we focus on saving 20% of their gross income. That means they needed to save $120,000 per year.
So where should all that money go? Here’s a breakdown:
- Bill’s 401(k): $24,500
- Laura’s 401(k): $24,500
- HSA: $8,750
- Bill’s Backdoor Roth IRA: $7,500
- Laura’s Backdoor Roth IRA: $7,500
- 529 plan: $12,000
- Joint brokerage: $35,000
Total: $119,750
Savings rate: 19.96%
Close enough.
If you want to learn more about each of these accounts, check out this blog.
Bottom Line
You don't need to know your retirement number to start saving for it. Bill and Laura didn't. They saved 20% of their gross income and spread it across different accounts for maximum flexibility and tax efficiency. If you're a high earner without a set retirement date, that's the move. Save 20% and let the plan grow as your income grows. You can nail down the specifics when your goals get specific.
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About SharpEdge Financial
SharpEdge Financial is a fee-only financial planning firm serving Millennial and Gen Z attorneys. Whether you’re just starting out in Big Law or approaching a career transition, we’re here to guide you through the complex decisions that come with high-income professional life.
What does fee-only mean? Our clients pay us to give them holistic, unbiased advice. That’s it. We do not sell commission-based products, so we have the freedom to develop your financial plan and investment strategy free of outside influence.
Are you a fiduciary? The fiduciary standard is the highest standard of care. As a fiduciary to our clients, we always make recommendations that are in your best interest, not ours.
Why are you independent? As an independent Registered Investment Adviser, we have the flexibility to serve our clients in the way that best meets your needs. No outside influence from a large corporation.
SharpEdge Financial LLC is a registered investment adviser registered with the State of Texas. Registration does not imply a certain level of skill or training. The views and opinions expressed are as of the date of publication and are subject to change. The content of this publication is for informational or educational purposes only. This content is not intended as individualized investment advice, or as tax, accounting, or legal advice. Although we gather information from sources that we deem to be reliable, we cannot guarantee the accuracy, timeliness, or completeness of any information prepared by any unaffiliated third-party. When specific investments or types of investments are mentioned, such mention is not intended to be a recommendation or endorsement to buy or sell the specific investment. The author of this publication may hold positions in investments or types of investments mentioned. This information should not be relied upon as the sole factor in an investment-making decision. Readers are encouraged to consult with professional financial, accounting, tax, or legal advisers to address their specific needs and circumstances.