Why The Money Guy’s 25% Savings Rule Actually Starts at 15%

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The Money Guy Show’s 25% savings rule has become one of the most repeated benchmarks on personal finance YouTube, and one of the most misunderstood. On a recent episode walking through their updated retirement savings chart, co-host Brian Preston quietly downgraded the headline number for anyone who started early: “If you take that into account and go back to the chart now, you can see for a lot of people now, if you discover this in your 20s, if you do 15% and your employer does 5%, you’re going to be A-okay.”

That single sentence rewrites the rule for millions of workers in their 20s. If you treat 25% as a non-negotiable floor, you may delay retirement saving entirely because the number feels unreachable, or you may over-save in a taxable account when you could have funded a Roth IRA, paid down a student loan, or built a house down payment instead.

The Headline Number Is Padding for Late Starters

Preston’s 15% comment is mathematically correct, and the 25% headline is a conservative buffer aimed at the average American who doesn’t begin saving until age 30. The underlying model assumes a 10% rate of return for 20-year-olds (dropping 0.1% annually), 3% inflation, 3% wage growth, a 4% withdrawal rate, and 80% income replacement at retirement. Plug in a 24-year-old, and 20% of gross income is enough to retire at 55. The 25% figure exists because most people don’t start at 24.

A dollar invested at 25 has 40 years to compound before a 65-year-old taps it. At a 7% real return, that dollar becomes roughly $15. The same dollar invested at 35 has 30 years grows to about $8. The early dollar does almost twice the work, which is why the required savings rate falls as your starting age drops.

A 24-year-old earning $70,000 with a 5% employer match needs to contribute about $10,500 annually (15% of gross). Combined with the $3,500 employer contribution, the total $14,000 hits the 20% target. A 30-year-old earning the same salary needs to put away $14,000 personally on top of any match, because six years of lost compounding must be made up by raw contributions.

Where the Rule Holds and Where It Cracks

The 15% personal rate works cleanly if you meet three conditions: you start in your 20s, you receive an employer match in the 4% to 5% range, and you earn under $100,000 single or $200,000 married. The Money Guy carves out higher earners because Social Security replaces a smaller share of pre-retirement income for them, so the match-counts-toward-total shortcut breaks down.

The rule cracks for several profiles:

1. Late starters in their mid-30s. Bo Hanson notes that “Even if you’re someone who doesn’t start saving and investing until your mid-30s, age 34, age 35, a 25% savings rate will still get you to retirement by a normal retirement age of age 65”. A 15% personal rate at 35 will not.
2. Workers without a match. Roughly a third of private-sector employees have no employer-sponsored plan at all. For them, the full 20% to 25% must come out of their own paycheck.
3. Early-retirement aspirants. Targeting 55 instead of 65 raises the required rate at every age because you are funding a longer retirement out of a shorter earning window.
4. High earners above the income thresholds. The match shortcut disappears, and the savings target resets to your personal contribution alone.

The Inflation and Return Assumptions Under Pressure

The model’s 3% inflation assumption is being tested. CPI sits at 330.3, with a recent monthly jump of 1.1%, annualizing well above 3%. The 10-year Treasury yields about 4.4%, meaning the 10% nominal return baked into the 20-year-old’s plan implies a sizable equity risk premium. Both assumptions remain defensible over a 40-year horizon, but a saver who experiences sustained higher inflation or lower equity returns will need to lean toward 25% rather than 15%.

The personal savings rate in the most recent quarter was 4%, down from 6.2% at the start of 2024. Most households are nowhere near 15%, let alone 25%.

What to Do With This

Pull your last pay stub and add your personal 401(k) contribution percentage to your employer’s match. If the combined number is at least 20% and you started before 30, you are tracking. Or, f you are above 30, target 25% combined. If your employer offers no match, the entire burden is yours, and the 15% shortcut does not apply. Run the numbers in the SSA’s retirement estimator alongside a compound-interest calculator to confirm whether your current rate hits 80% income replacement.

The Money Guy is right that 25% is the safe answer. The more useful answer is that early starters with a match can hit the same target at 15% personal, and that distinction is the difference between a saver who feels defeated and one who actually begins.