How Much Do You Need To Retire?

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A lot goes into figuring out how much money you need to retire, but experts offer rules of thumb you can use as a starting point. One common piece of advice is that you need about $1 million. Another suggests 10 times your salary, on average, saved by age 65. Yet another advises saving enough to replace 80% of your pre-retirement salary for the roughly 20 years you can expect to live in retirement. But in the end, the amount you need to retire depends as much on the amount you spend as it does on the amount you have saved.

Retirement at Any Age: Get Retirement Tips That Fit Every Stage of Life
See: 5 Things You Must Do When Your Savings Reach $50,000

You can spend your golden years living on less and still live 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 importantly, learn how to create a budget and follow it.

Planning Retirement Savings Is About Spending, Not Income

Your lifestyle today can have an impact on how much money you have left over in your retirement years.

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Experts recommend having around 10 times your salary saved by the time you reach retirement age and withdrawing just 4% per year to make sure it lasts. However, a January report from investment firm BlackRock revealed that only 43% of retirees plan to spend consistently throughout their retirement. The rest plan to ramp up or ramp down spending as they age — and some have no spending plan at all. If you fit somewhere in that group, the 4% rule might not work for you.

You can’t anticipate every expense, but starting with spending rather than an arbitrary savings goal gives you a more realistic picture of how much you need to retire.

Living on Less in Retirement

In 2021, household spending peaked at $83,854 per year for the 45-to-54 age group, then dropped to $45,820 per year for people 75 and older, according to data from the Bureau of Labor Statistics. The figures show a trend of spending less and living more simply in the golden years. With a reduction in overall expenses, it’s easier to live well on less during retirement.

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Drive Less or Use Cheaper Transportation

Seniors between 65 and 74 spend an average of $8,356 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 pre-retirement. 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 Dining Out and 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 organizations aimed at your age group.

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 other nest egg investments you might have — like annuities or CDs — can also help when you retire.

Retire Comfortably

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. If you are looking to further build your portfolio or want to start investing, explore safe, high-return investment options.

How Much Money Do You 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 only contribute to a traditional IRA 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, and estimate how much tax you’ll pay on retirement income.

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.

Should I Retire Now?

No hard-and-fast rule mandates you must retire at 65, or even at your full retirement age of 66 or 67. More seniors are choosing to work past the retirement age nowadays, and some are forgoing retirement altogether.

Social Security offers financial incentives to delay retirement. Currently, the full retirement age for a worker born between 1943 and 1954 is 66, and the FRA increases by two months for each subsequent birth year. According to the Social Security Administration, working an extra year results in the worker receiving 108% of their monthly Social Security benefit because they delayed receiving benefits for a year.

If they wait until age 70, they’ll receive 132% of their monthly benefit because they delayed getting benefits for four years. After age 70, however, delaying retirement stops increasing 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 — or 10 times your salary, or enough to replace 80% of your salary — is a great goal to have. But if you retire on less, with a bit of budgeting, you can still have a happy, healthy retirement.

Daria Uhlig, John Csiszar, Ruth Sarreal, Paul Sisolak and Cameron Cole contributed to the reporting for this article.

Information is accurate as of Dec. 12, 2022.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

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About the Author

Jamie Young is an editor and writer at GOBankingRates. Previously she was Editor in Chief of and a technology writer. Her work has appeared on Huffington Post, MSN, CBS News and more. She has also hosted and co-hosted multiple podcasts.
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