How Much Do I Need to Retire?

Learn how to calculate how much you'll need to retire.

A lot goes into figuring out how much money you need to retire, but one common piece of advice is that you need about $1 million — and some sources suggest even more. In fact, 15 percent of people believe you need at least $2 million, according to a recent Transamerica study.

Of the people involved in the Transamerica study, only 9 percent used a retirement calculator for their estimates and 47 percent just guessed. Although many think you need $1 million in the bank to retire comfortably, that number is not necessarily based on real calculations — nor is it the right number for everyone.

You can spend your golden years living on less than $1 million — and living well. To figure out how much you’ll need to retire, you must assess your lifestyle needs, understand your risk tolerance, consider the effects of inflation and most important, learn how to create a budget and follow it.

Planning Retirement Savings Is About Spending, Not Income

What many people might not realize is that retirement planning isn’t so much about how much you earn, but how much you spend. Your lifestyle today can have an impact on how much money you’ve got left over in your retirement years.

“I have met people who make $30,000 take-home per month and still have no retirement savings,” said Jeff Rose, certified financial planner and creator of Good Financial Cents, a financial planning blog. “Keep your lifestyle in check and make sure you are putting money away every month. Set a benchmark based on what [you] need per year and plan to live to 100.”

You might have heard you’ll need 55 to 80 percent of your preretirement income to live well, but with some budgeting and lifestyle changes, it’s possible to live on less. “A person or couple that has no house payment or car payments can live off less than 70 percent,” Rose said.

Don’t Miss: Saving for Retirement Is Not a Priority for 40% of Americans

Living on Less: How to Make a Budget for Retirement

Spending peaked at $71,166 per year for the 45 to 54 age group, then dropped to $38,691 per year for people 75 and older — a figure that shows a trend of spending less and living more simply in the golden years — according to the Bureau of Labor Statistics of the U.S. Department of Labor. With a reduction in overall expenses, it’s easier to live well on less during retirement. Here are some ways to achieve that:

  • Drive less or use cheaper transportation. The typical senior between 65 and 74 spends $8,420 on transportation costs annually, according to the BLS. If you opt for an economy car, you can save money on gas and on the actual car because it will cost a lot less than a luxury model. You might also consider using public transportation.
  • Downsize your home. The best places to retire might not be where you lived preretirement. Selling a home in California or the Northeast U.S. would enable you to buy something cheaper in, say, Detroit or Philadelphia — and you’d likely have cash left over.
  • Cut back on entertainment. Spending less on things like dining out is an easy way to cut expenses. Be coupon savvy at the grocery store and buy only what you need. Seek out low-cost activities with a senior discount, or clubs and groups aimed at your age group.

See: 17 Biggest Budgeting Mistakes You’re Making

Rely More on Investments Than Benefits

Your liquid savings probably won’t be your only assets when you enter retirement. Any employer-sponsored savings you’ve accrued can significantly supplement your retirement savings and any other nest egg investments you may have — like annuities or CDs — can also help when you retire.

Experts advise that with current and forthcoming Social Security trends, it’s not wise to rely solely on Social Security benefits to fund your retirement. “Right now, I would plan on getting 70 percent of the Social Security income we are being promised,” Rose said.

How Much Money Do I Need to Retire?

Estimating how much money you’ll need in retirement can be a difficult task. Here’s a starting point to find what your average monthly income in retirement should be:

  1. Calculate your current monthly income and your monthly expenses.
  2. Factor in lifestyle changes that might occur, like a cost of living adjustment, healthcare needs, travel plans and expenses, and money you plan to spend on kids and grandchildren.
  3. Subtract what you’re currently investing each month in your individual retirement account or Roth IRA. Although you can contribute to a Roth IRA as long as you live, you likely won’t after you retire, and you can contribute to a traditional IRA only until you turn 70.5.
  4. Factor in any pensions you’ll be receiving as part of your income.
  5. Subtract the amount of taxes you’ve been paying on your current paycheck because you won’t be paying them anymore.

When you do these calculations you’ll end up with a retirement budget. You’ll be adding all of your income, subtracting your expenses and seeing how much — more or less — you’ll need to live on.

Why Should I Retire Now?

There’s no hard and fast rule that mandates you must retire at 65. More seniors are choosing to work past the retirement age nowadays, and some are foregoing retirement altogether.

Social Security offers financial incentives to delay retirement. As of 2017, a worker born in 1943 or later gets an additional 8 percent for each year he puts off collecting benefits past the retirement age of 66.

Related: How Your Retirement Age Impacts Your Social Security Benefits

Avoid Retirement Pitfalls

Now that you have a better idea of what to do to save for your later years, remember to avoid some of the potential pitfalls, like carrying debt or prematurely withdrawing retirement funds.

So, how much do you need to retire? Aiming for $1 million is a great goal to have. But if you retire on less you can still have a happy, healthy retirement.

John CsiszarRuth Sarreal and Paul Sisolak contributed to the reporting for this article.

  • broke as a joke

    Thats good to know because I am in the red and have 40 years to retire and make a million.

  • Guest

    I lived the good life. Travelled all around the world since 1976. I had the big salary. I have the big retirement nest egg. All I dream about is selling the mansion and buying a double-wide near a stream in Tennessee. I won’t need much. The internet. Movies. A few books. An old car. Some peace and quiet. Life is what you make of it. You can be happy anywhere, if you try. Everywhere I’ve been in the world, I have found people living in the most miserable poverty, yet they found ways to be happy. I think I can do it too. On a shoe string if need be. The million dollars is fool’s gold and a fool’s errand. You don’t really need that much to be contented or happy.

  • valsvet

    well, I am 64, still working and loving it, planning to work full time till 66-69 – depends on my health. Successfully invested my IRA money and 401 k, still contributing. My Social Security benefit will be around $2,130 a month at 66 but will improve dramatically if I keep working and delay till 69 or even 70. I have to support my daughter because her disability check is only $850 a month. My son is a Freshman at UC so I am responsible for tuition, books etc. , and he lives at home. We have three cars and spend a lot on gas, toll and insurance. But nevertheless i am optimistic about my future. My IRAs and 401-k should be around $700k if retire at 68. I am very good in investing and should easily earn 4%-5% without taking too much risk. So my Soc Security and investment earnings should be sufficient for a very good life. Oh, my house in Northern California will be paid off in 2022.

    • Ian

      You shouldn’t feel like you’re responsible for your son’s tuition, etc… help him out if you wish but he’s not learning to budget his own money. Those skills are required long after he graduates and you might run short if your mom doesn’t have saving, you have $700,000 and your house isn’t paid off.
      Look out for yourself (and wife & daughter), Junior will survive without your 100% funding.

      • Ian

        wife not mom

  • I fully expect the retirement age to be bumped up to 75 years old or more by the time I get there. Paying down debt, living within your means and saving for your golden years is certainly one part of the puzzle, but I’d better love the job I choose or I’ll end up hating the next 60 years of my life. My dream would be to find a job I enjoy so much that I do it for fun rather than money, but short of that, I’ll work my @$$ off and build passive income streams as quickly as possible to get out of the rat race. I’m lucky there’s a lot of good advice and opportunities to be had for young people these days.




    What happed to the money congess took out s.s.and stop giving aid to countrys and take care of us at


    what happed to the money peoples pay into ss and died before retired

  • Jordy

    How come we never hear of WELFARE ,FOOD STAMPS,ETC. running out of money?????????

  • Jeff Stark

    Paul, you need to correct your article in one regard: you do not make more SS money by waiting one minute over age 70, that’s the cap. Waiting to 72 means you just wasted two years of the same thing you’d have made at 70.

  • Guest

    So….I don’t need a lot of money to retire, given I spend less money on entertainment and travel…..When I retire I want to be entertained by travel. Your thinking doesn’t allow retirees to enjoy retirement. If I’m making $100k at age 64, who’s to say that just because I turned 65 I only need $75k to live on? I appreciate your thoughts but reject your premise sir. Even if I save $1M that is still a 7.5% withdrawal rate each year. Most “experts” suggest if I take that high of a withdrawal that I will run out of money in 15-18 years. I guess if I work late and die early I’ll be ok.