Flat Is a Slogan

A flat savings rate ignores that income and life change. A rate that rises with the earning years can reach the same goal and leave more room early.

"Save 15% of everything, forever" is easy to remember, and that's most of its appeal. It treats a 26-year-old with a starter salary and a 50-year-old at peak earnings as the same saver. Real lives don't work that way, and the economics never said they did.

In his 1985 Nobel lecture, Franco Modigliani described the pattern his life-cycle model was built on: income "typically exhibits a marked hump pattern which peaks somewhat past age 50, falls thereafter." From that, he wrote, "one might expect, and generally finds a fairly constant rate of saving in the central age group, but lower saving or even dissaving in the very young or old."⁵ Milton Friedman's permanent income idea is the companion piece: people tend to spend from what they expect to earn over the long run, not just from this year's paycheck.⁶

This page takes that idea and turns it into one question. If the savings rate were allowed to rise and fall with the earning years, what rate at each age would reach the same goal?

Figure 2.1. Our Teaching Shape

These six numbers are ours. No agency publishes a typical savings rate by age, so this is a teaching shape, built to follow the hump Modigliani described and the one in the Census data. In 2024, median earnings for people with earnings were $51,420 at 25–34, $61,550 at 35–44, $63,230 at 45–54, $60,040 at 55–64 and $41,110 at 65 and older.⁷ Using Social Security earnings records for men, Fatih Guvenen and coauthors found the same thing in much finer detail: the life-cycle earnings profile "has the usual hump-shaped pattern that peaks around age 50."⁸

One honest wrinkle. Among people who actually put money into a workplace plan, the share of pay they contribute keeps rising with age in IRS data, from 5.94% at 26–34 to 7.11% at 45–54 and 8.34% at 65–74.⁹ What falls late in life is income and the number of people still contributing, not the rate itself. So the taper at the end of our shape isn't something we observed. It's a teaching choice: a dollar saved at 62 has only a few years left to grow before 67.

Figure 2.2. The Curve and the Flat Line

Here's the tool at its defaults: 32 years old, $70,000 of household income, $70,000 already saved, and a goal of 20 times income at 67, which is $1,400,000 in today's dollars. The flat line is the familiar rule, "aim to save at least 15% of your income annually," as Fidelity puts it.² The tool then solves for one curve in our teaching shape that lands exactly on the goal.

It starts at 4.5% of gross income, about $265 a month. It climbs to 6.8% in the late 30s and early 40s, peaks at 9.1% ($529 a month) from 45 to 54, then eases to 5.4% and 3.2% on the way to 67.^M Flat 15% overshoots, ending at $2,244,848.^M Nothing is wrong with overshooting. But if the goal is the goal, the solved path gets there and leaves more of every paycheck in the early years, when paychecks are usually smaller. At the defaults, both reach the goal. The difference is the $27,710 your rate leaves in your pocket from 32 to 35.^M

The tool keeps your income flat in today's dollars on purpose, so only the rate moves. Actual paychecks usually rise into the 40s, which would make the later, higher rates easier to carry, not harder.

Why not just take the bigger pile?

Flat ends at $2,244,848, about $844,848 past the goal.^M More sounds better, so why not take it? Look at where the extra comes from. Flat asks for 15% at 32, when the curve asks for 4.5%, and it asks hardest in the years when paychecks are usually smallest.⁷ Those early dollars have other jobs waiting for them: a first home, a growing family, time itself. In the time-use data, the hours people spend with their children peak around age 39, at about 4.3 a day on average, and fall steeply after that.¹⁰

The life-cycle economists saw this coming. Modigliani expected "lower saving or even dissaving in the very young,"⁵ and Friedman's permanent income idea says people spend from what they expect to earn over a lifetime, not just this year.⁶ A bigger pile at 67, bought with the tightest years, isn't free. It's a trade, and this page shows the price so the reader can weigh it. A Year Is Not a Year puts a second clock on those early years.

Figure 2.3. Where 20× Comes From

Where does 20× come from? Two rules of thumb, stacked. The first is replacement: the Department of Labor says, "Experts estimate that you will need 70 to 80 percent of your preretirement income to maintain your standard of living."¹ That number is softer than it sounds. An SSA Bulletin review found "no single authoritative source" for it, calling it "a rough consensus among financial planners."¹¹ The second is the 4% starting draw from William Bengen's 1994 study, which we unpack in Four Isn't Fate.⁴ If spending is 80% of income and the draw is 4%, the pile has to be 20 times income: 0.80 ÷ 0.04 = 20.

That makes 20× a cautious teaching target, not what a household needs. It leaves Social Security out on purpose, even though Social Security replaces a real share of income for many retirees, and popular rules that count it land closer to 10×.³ We keep the bigger number so the tool never quietly leans on a benefit it can't see.

Same goal, three very different stories. The Ahead household already has the hard part done: time and an early balance do the lifting, so at these assumptions the tool's answer is 0%. That's arithmetic, not a suggestion to stop. In between is the curve from Figure 2.2. The Behind household shows what the cap is for. Starting at 45, with 22 years to go, even 30% of income every year doesn't quite close the gap, and the page says so in dollars instead of pretending.

That's the two levers in one table. Time is the one you can't get back, and savings rate is the one you can move. A rate that follows life's shape lets the second lever do its heavy work when the paychecks are biggest.

What this is not

This isn't a savings plan, a target for any real household, or a claim about what Americans do. The shape is ours, 7% is a historical teaching rate, and 20× is a deliberately cautious goal that leaves Social Security out. The page shows how a rate that follows the earning years compares with a flat one under those labeled assumptions. Education, not advice.

Try it: Not Flat. Change your age, income and savings, and watch the curve move.