How Much Do You Need To Retire?

Christian Worstell
In this article...
  • Prepare yourself for retirement with a solid financial plan. Learn how much you need to retire and the best methods you can use to save up for your golden years.

Most Americans can expect to spend about 70 to 80% of their pre-retirement income for each year of retirement. That means a person who earns $80,000 annually should have enough funds saved to ensure they have up to $64,000 in available cash for every year of retirement. Determining how much you need to retire depends then on two key factors: your annual salary and your age at retirement.

What to Consider When Setting Retirement Savings Goals

While your income and current expenses are obvious things you'll need to consider when you start saving for retirement, there are several other things to think about as well.

While most people retire at around
66 years old, some are fortunate enough to retire earlier and others may need to work several years longer to afford retirement. The age you retire has a huge influence on how much you need to save. If you retire at 66, most experts recommend planning for a minimum of 15 to 25 years keeping in mind that the average life expectancy in the United States is almost 80. However, many adults live well beyond that. If you retire sooner or work longer, you can consider adjusting the amount you need to save accordingly.

The lifestyle you currently have might not be the same lifestyle you plan to keep up after retirement. If that's the case, it's also important to factor in extra spending, especially if you plan on lofty expenses, such as international travel or purchasing a vacation home. That said, you might also plan to cut costs when you retire and if you do, you might be able to get away with saving a little less for retirement. 

Building Your Nest Egg

Putting aside a portion of your paychecks is a great way to start saving for retirement, but unless you earn a hefty salary and plan to dramatically decrease your spending after retirement, chances are you'll never be able to save enough. 

In addition to topping up your savings account regularly, consider investing in the stock market, opening a retirement account or purchasing bonds and/or certificates of deposit (CDs). A retirement account carries the least risk when it comes to retirement investing. It's worth noting that the potential for lofty gains does exist when you purchase stocks, but a portfolio that focuses solely on stocks carries an extremely high risk.

It's also important to keep in mind income you'll be able to obtain from other sources, such as
Social Security and life insurance payouts. 

The 4% Rule

The 4% rule is a strategy that's commonly used when determining how much you might need to save for retirement. While it's not perfect, it's a good way to start calculating what you might need. 

The 4% rule limits you to making retirement withdrawals of no more than 4% of your total assets each year. This amount may need to be adjusted over time to account for inflation and unexpected needs.

Under this rule, you can also multiply the annual income you expect you'll need in retirement by 25, the result should be your savings goal. So for example, if you want $100,000 per year to live on, you'll need to save $2,500,000 for retirement. 

Retiring With a 401(k) 

A 401(k) is an employer-sponsored retirement account. Employees can have contributions deducted automatically from their paychecks and in most cases, employers will match their investment up to a specified amount. Tax on 401(k)s is deferred and employees can usually select the investments they want to make with the contributions.

What's the Average 401k Balance for a 65-Year-Old?

The average 65-year-old has saved a little less than $280,000 in their 401(k), so it goes without saying that you should consider a variety of savings methods when determining how much you need to retire. While a 401(k) can go a long way in building your nest egg, it's not usually enough on its own.

Deciding When To Retire

Retirement can be one of the best times of your life — provided you're adequately prepared. While spending time with family and relaxing are probably things you're excited for, it's important to make sure you'll have enough money to live comfortably once you stop working. 

It can be useful to know that delaying your retirement can net you a
higher Social Security payout, and provide you with several more years to invest and save. It also means you'll have fewer years to stretch your post-retirement income across.

It's important to be prepared for the unexpected as factors outside of your control, such as health or availability of work, may force you into earlier retirement. The earlier you start saving, the better off you'll be in the end. 

Paying Yourself in Retirement

Once you've retired, you'll need to have a strategy in place to make sure you don't run out of cash too soon. Monitor your funds diligently and keep a close eye on your spending. You might even want to consider working with a financial advisor who can track your withdrawals, spending and income. 

The Flooring Strategy

The flooring retirement income strategy helps you determine a budget for your retirement income by prioritizing the things you need to pay for. 

Your regular income, such as Social Security or pension benefits, is used to cover needs such as mortgage payments, utility bills and groceries, while any additional income from stocks, bonds and other investments can be used to pay for vacations and other non-necessary expenses.

Christian Worstell
About the Author

Christian Worstell is a senior Medicare and health insurance writer with He is also a licensed health insurance agent. Christian is well-known in the insurance industry for the thousands of educational articles he’s written, helping Americans better understand their health insurance and Medicare coverage.

Christian’s work as a Medicare expert has appeared in several top-tier and trade news outlets including Forbes, MarketWatch, WebMD and Yahoo! Finance.

While at HelpAdvisor, Christian has written hundreds of articles that teach Medicare beneficiaries the best practices for navigating Medicare. His articles are read by thousands of older Americans each month. By better understanding their health care coverage, readers may hopefully learn how to limit their out-of-pocket Medicare spending and access quality medical care.

Christian’s passion for his role stems from his desire to make a difference in the senior community. He strongly believes that the more beneficiaries know about their Medicare coverage, the better their overall health and wellness is as a result.

A current resident of Raleigh, Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. You can find Christian’s most recent articles in our blog.

If you’re a member of the media looking to connect with Christian, please don’t hesitate to email our public relations team at

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