Investing money can help you to build wealth. The sooner you start investing, the more time you have to benefit from compounding interest. So, how much should you invest per month? It’s not a simple question. There’s a lot to consider, including your income, goals and risk tolerance. A financial advisor can also help you put together a plan that works for you.

Investing Money vs. Saving It

When you invest money, you’re putting it into the market. For example, you might invest in stocks, exchange-traded funds, bonds or cryptocurrency. The rate of return you earn depends on how well your investments perform. When you save money, you’re typically depositing it into a savings account, money market account or CD account. You can earn interest on your money with minimal risk.

Which is better, saving or investing?

Saving is safe, since it’s very difficult to lose money in a savings account. On the other hand, you may not earn a lot of interest on deposits. Online banks can offer high-yield savings accounts with competitive rates, but they can still lag behind the stock market’s performance.

Investing is riskier, but there’s a greater possibility of earning a better return for your money. Compounding allows you to earn interest on your interest, which can help you to grow your money faster over time.

How Much Should I Invest Per Month for Retirement?

Financial experts generally recommend that you save and invest 10% to 15% of your income for retirement each month. However, whether you need to invest more or less than that can depend on several factors, including:

How old you are
What age do you plan to retire
Your annual income
Where you’re investing for retirement (i.e., 401(k), IRA, etc.)
Whether you’re getting any type of matching retirement contributions
How much money do you expect to need for retirement

For example, let’s assume that you’re 27 years old and plan to retire at 67. You have 40 years to invest and you’ve set a $1.5 million savings goal. You make $65,000 a year after taxes.

To reach your goal, you’d need to invest $900 per month or 17% of your income. These numbers assume you’re single and they don’t factor in any retirement income you might draw from Social Security. Getting married or getting a raise could affect your calculations.

Now, let’s say you’re 37 years old with the same savings goal and annual income. You’d have to invest nearly $1,700 per month or 31% of your income to reach $1.5 million in savings by age 67. That’s a big difference as a result of waiting to get started with investing.

Having to invest that much could make it more difficult to reach other goals like buying a home or putting money into a 529 college savings account for your kids. That’s why it can be helpful to use a retirement savings calculator to estimate how much you might need to save based on your unique situation.

How Much Should I Invest Per Month If I Have Debt?

An investor discusses with their advisor how much to invest per month.

Deciding whether to invest or pay off debt is a common dilemma, and the answer isn’t always clear-cut. It ultimately depends on your financial situation and priorities.

On one hand, paying off debt first can be compelling. Eliminating debt frees up cash flow that can later be redirected toward investing. For instance, if student loan payments are consuming a large portion of your budget, tackling those loans quickly could provide much-needed breathing room. Similarly, paying off high-interest credit card debt can save you significant money in interest over time.

On the other hand, delaying investments could mean missing out on years of compound growth, making it harder to catch up later. Striking a balance between these goals might be the best strategy, allowing you to reduce debt while also building your financial future.

Let’s consider an example: You decide to allocate $450 per month toward investing for retirement starting at age 27 and use another $450 to pay off debt faster. Over the next eight years, this approach helps you eliminate debt while also building a $100,000 balance in your 401(k), thanks to steady contributions, solid returns and an employer match.

By age 35, with your debt cleared, you can shift your focus entirely to investing. To reach a $1.5 million retirement savings goal by age 67, you’d need to invest just over $1,000 per month — or about 20% of your income.

This example highlights the value of having a tailored plan that allows you to make progress on both fronts. With a balanced approach, you can invest in your future while working toward financial freedom today.

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How Much Should I Invest Per Month to Retire Early?

Early retirement generally means retiring any time before the typical age range of 65 to 67. How much you need to invest per month to retire early can depend on when you plan to retire and how long you need that money to last.

So, here’s another example. Say that you’re 27 and you want to retire at 47. You know how 20 years to invest versus 40 and that money needs to last you until age 87. With that in mind, you’ve increased your retirement goal to $2 million.

To reach that goal, based on an annual income of $65,000, you’d need to invest 70% of what you make. Now, is that realistic? Probably not, at least not without some tweaking of your plan. You may need to drastically cut expenses or find ways to make more money.

Creating a Monthly Investment Plan

If you’re ready to start investing or fine-tune your existing investment strategy, here are a few tips that can help.

Review your budget to see how much money you currently have to invest each month.
Go over your expenses to see if there’s anything you can cut to free up more money for investing.
Review your workplace retirement contribution plans if you have a 401(k) or similar plan.
Consider adjusting your 401(k) contributions if you’re not getting the full employer match offered.
Set your 401(k) contributions to increase by one to two percentage points annually to coincide with your yearly raise.
Open a traditional or Roth IRA at a brokerage and set up a recurring monthly direct deposit.
Consider supplementing your 401(k) and IRA with deposits into a taxable brokerage account.

You may also want to review your investment plan monthly or quarterly to see how well your investments are performing and what you’re paying in fees. You can schedule reviews to coincide with budget reviews, which can be an opportunity to look for additional money to invest.

Take into Account Your Risk Profile

If you are risk-averse or prefer less volatile investment options, you’ll want to adjust your expectations for returns. A lower assumed rate of return will require you to increase your annual contributions to meet your financial goals.

During your 20s, 30s and 40s, a longer investment horizon allows you to take on more risk in pursuit of potentially higher returns. As you approach retirement, it’s wise to shift toward lower-volatility assets, such as fixed-income investments, to reduce portfolio fluctuations.

Bottom Line

A couple determine how much to invest per month.

How much should I invest per month? It’s a personal question that requires a personal answer since everyone’s financial situation is different. Understanding where you’re starting from and where you hope to go can help you create an investment plan that fits your needs and budget.

Investing Tips

Consider talking to your financial advisor about the best way to divide up your investment dollars if you only have a limited amount of money to work with each month. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When deciding where to invest, remember that there’s a difference between tax-advantaged and taxable accounts. Tax-advantaged accounts, such as a 401(k) or traditional IRA, allow for tax-deductible contributions. A Roth IRA lets you make qualified withdrawals tax-free when you retire. Taxable accounts are subject to capital gains when you sell investments for more than what you paid for them. Managing your tax liability with investments is important for preserving as much of your returns as possible.