How Much Do I Need to Retire? Here’s How to Find Out

Table of Contents:

  1. How much should I have saved for retirement?
  2. What is the 4% rule?
  3. What is the average retirement age?
  4. Ways to calculate retirement savings
  5. Key definitions & considerations
  6. The bottom line

Planning for retirement can be daunting. Most of us don’t know what to expect next week, much less 20, 30, or 40 years into the future. That’s why planning for retirement can feel scary. And unfortunately, that has stopped a lot of people from getting started.

The reality is planning for retirement doesn’t have to be overwhelming or complicated. One of the most challenging things is just taking the time to put a plan together. You don’t need to have a background in finance or to invest, but if you do want to start, the sooner, the better.

Everyone has a different view of what they want their retirement to look like. You may want to ease into it by scaling down your work week so you can play more golf, start a small business, or write that book, or you may have goals of retiring early and traveling the world.

Whatever your goals are, you’ll need to have enough retirement savings to make your plans a reality, and knowing just how much you need is the key.

How much money should you have for retirement?

How much money is needed to retire depends on a few choices. First, think about how you want to live your life when you retire. It’s OK to have fun with this. The possibilities are endless. Remember, you’re planning for an exciting future, so consider everything that interests you.

Where do you want to live? What do you want to do? Be as specific as possible, then write all of your goals down. Don’t worry. You’re not locked into anything. Over time, you will shift and adjust those plans as your goals change, but having a vision is a vital part of planning, so don’t hold back.

You also want to consider how long it is until you retire and your age now. For example, if you’re in your 20s, your plan will look different than if you’re in your 40s or beyond. There are a variety of retirement calculators and formulas that can be useful to discover how much money you’ll need to save to stay on track and reach your retirement no matter where you are in the planning process.

Key Takeaways:

  • Calculating how much you need to save depends on your current age, pre-retirement income, and the lifestyle you want to have in retirement.
  • Several formulas are available that can assist in determining your financial needs based on your age and keep you on track to reach those financial goals.
  • Everyone should be saving for retirement, and the earlier you start, the more likely you are to stay on track to reach your savings goals.

How much should I have saved for retirement?

When it comes to knowing how much is enough to retire, experts say, generally, you want to aim to have 80% of your annual income from when you were working. So, for example, if your annual salary was $60,000 per year, in retirement, you’d want to have at least $48,000 per year to live comfortably, according to this advice.

Still, we need to keep in mind that most people are living longer too. Some people are active well into their 80s and 90s and may need their retirement income to last 20 years or more.

Of course, the lifestyle you want will also factor into the equation. For instance, if you plan to travel extensively, you may want to include travel expenses when considering the amount you’ll need.

What is the 4% rule?

The 4% rule is a retirement planning formula that can help determine how much money you want to save to meet your retirement goals. According to the 4% rule, you can withdraw 4% of your savings each year.

The 4% rule is used to help maintain a reliable income stream without jeopardizing the money needed for the years ahead. The focus on withdrawals would come from dividends and interest earned on your savings.

Although the 4% rule is used regularly by financial planners and other financial experts, it’s essential to consider other factors, such as inflation, cost of living, and emergencies.

In order to prepare for inflation, adjustments may be necessary. Setting the Federal Reserve’s recommended 2% increase per year or adjusting for actual inflation rates can be a beneficial way to keep up with inflation rates and cost of living increases.

Pros and cons of using the 4% rule

Like any formula, there are pros and cons of how effective it may be depending on personal circumstances. But using it can be a valuable asset for staying on track. Still, it can’t guarantee your retirement savings will be enough to last.


  • It’s a simple formula that’s easy to calculate.
  • It can help to determine what you need for retirement.
  • It can help you track spending and keep you from running out of money.


  • To be effective, you have to be strict about following it.
  • It doesn’t allow for flexibility or unforeseen emergencies.
  • It may be more practical to shoot for 5% to help account for increased cost of living expenses.

The 4% rule isn’t perfect for everyone, but using it as a starting point can be valuable for planning for the future and keeping retirement spending in check.

What is the average retirement age?

Despite the average retirement age being about 65 years old, burnout from the grind has many people deciding to say goodbye to their jobs earlier in search of a more relaxing way of life.

For some, that can mean working fewer hours or doing less demanding work. For others, it’s leaving a job behind to pursue lifelong dreams of hiking mountains, traveling the world, being with family, or any other activities one might enjoy. So, knowing how much money is needed to retire depends on what you want to be doing.

First, your retirement age will largely depend on whether you’re on track to meet your retirement goals. Have you saved enough money? Paid down debt? Have a nest egg for emergencies?

We’d all like to be sure we’re financially ready when we do make the leap. Although 65 may be the average age to say goodbye to the workforce, it may not be the magic number for everyone.

If you’re looking to maximize benefits, it’s important to remember that waiting to take Social Security benefits until your full retirement age means you’ll get 100% of those benefits, while claiming them earlier than that reduces Social Security permanently. So, waiting will offer the largest benefit.

For example, if you were born between 1943 and 1954, your full retirement age is 66; if you were born in 1955 your full retirement age would be 66 and 2 months, etc. If you were born in 1960 or later, the full retirement age is 67 years old.

Ways to calculate retirement savings

One of the most important questions to consider when planning for retirement is how much do you need to save? Although having a concrete number would be helpful, it may not be easy.

That’s why starting early is so important. It takes time. If you start early and plan appropriately, you’ll have time to acquire the money needed by the time you reach retirement age.

The considerations to keep in mind for planning are:

  • Age – how old you are now, and what is your ideal retirement age?
  • Income – all income sources that will contribute to your retirement funds, including employment, savings accounts, money markets, Roth IRA, 401(k), investments, pensions, and Social Security.
  • Goals – what are your retirement goals?

There are a few ways to calculate retirement needs and include:

  • Income – Consider taking your annual income and multiplying it by 10 or 12 times. Those numbers are actually debatable among experts, so you’ll have to decide what you will be able to live on.
  • Expenses – How much money do you need to cover your expenses each year? Remember, your retirement expenses can differ dramatically depending on your goals. Keeping a detailed monthly budget before retirement can help determine what you’ll need.

Percentage of income for retirement

We move through stages in life and our careers where we may make less or more money. Although it can feel daunting, experts agree that saving 15% of your gross salary every year from the beginning of your work life is a smart way to save.

By diversifying savings over a 401(k), stocks, bonds, IRAs, and other investments, you can put the power of compound interest to work, especially when you start in your 20s.

Compound interest is the interest earned from the principal deposit plus earned interest. An easy way to think about it is using the snowball effect. It starts out small, but as it rolls and more snow (money) is added, it grows bigger over time.

Not everyone begins at investing in their 20s, and that’s OK. Starting as soon as you can and waiting as long as you can to retire is what’s important, as it offers more time for compound interest to work.

Retirement savings by age

Deciding the age you want to retire plays an essential part in how much you’ll want to save. As we’ve seen, the longer you can wait, the longer compound interest can work, and the more Social Security benefits you’ll be able to collect.

For some who have worked in high-stress jobs or in an industry that becomes more difficult to compete in as you get older such as construction, waiting until full retirement age can be challenging For some, the question is how much do I need to retire at 60?

Although we can’t always control our retirement timeline due to health issues or other lifestyle factors, the longer we can put it off, the more we can save. When figuring out how much is enough to retire, some experts recommend considering benchmarks of what you should save at various ages using multiples of your income.

For example, some experts suggest the following total retirements savings based on your age:

Age 30 — save 1 time your annual salary

Age 40 — save 3 times your annual salary

Age 50 — save 6 times your annual salary

Age 60 — save 8 times your annual salary

Age 67 — save 10 times your annual salary

Of course, there are more aggressive formulas that can increase the percentage of savings per year, which may appeal to you based on your retirement goals for retirement.

One issue that can be a concern for late savers is not having enough saved when it’s time to retire. The good news is that you won’t have to rely solely on savings. Social Security will help in paying for some of your expenses.

How does social security work?

When we enter the workforce, we begin paying into the Social Security system and continue paying as we move from job to job over time and earn credits that count toward our future eligibility, even if we take time away from work to raise a family or travel.

As discussed, we can’t begin claiming Social Security benefits until 62, and the longer you wait, the higher your benefits will be. Consider it this way: The earlier you take Social Security benefits, the lower your monthly benefit payment will be. Of course, how much you get depends on your earnings record while employed.

So, if your full-retirement age is 67, and you decide to start collecting at age 62, you’ll receive 70% of your benefits. If you wait until age 65, you’ll get 86.7%, and waiting until 67 gives you 100% of your benefits.

What you may not know is that once you start taking Social Security out, there is no turning back, so you’ll want to think carefully about making the decision to take Social Security early. On the other hand, if you can wait, even beyond the age of 67, or your full-retirement age, your payout will increase. For every year you wait, up to age 70, your payout will go up, giving you a bigger monthly payout until age 70 when it’s maxed out.

The reason retirement savings are so significant is because Social Security is only designed to take the place of about 40% of your salary. However, experts agree that we need about 70% to 80% of our income to live comfortably. So even with Social Security, you’ll need about 30% to come from some type of retirement savings.

If you have retirement plans that cost more, such as extensive travel or living in a more expensive area, you’ll want to have even more saved to afford those plans.

Key definitions & considerations

Some of us thrive in our careers and all that comes with them and are in no rush to retire. But if you’re considering early retirement, it’s essential to know that to receive your full retirement benefits from Social Security, you’ll have to wait until you’re of full retirement age.

Key terms

  • 401(k) – An employer-sponsored retirement savings plan. It allows you to contribute a percentage of your paycheck to investments you choose. The contribution is before taxes, and some employers match contributions.
  • Individual retirement account (IRA) – An investment account that anyone can open but isn’t usually offered by an employer. If you don’t have an employer-sponsored retirement plan, this may be a good option. Contributions may be tax-deductible.
  • Compound interest – It’a a type of interest that’s based on adding the original deposit amount with any accumulated interest over time.
  • Social Security – A federal government pension program for retirees that replaces a portion of your earnings from work starting at age 62 or later, depending on when you decide to begin receiving benefit payments.
  • Exchange-traded funds (EFTs) – Are investments that offer a diversified mix of securities through an IRA or taxable investment account.
  • Mutual funds – A diversified basket of securities managed by a team of experts that select and trade securities. You can purchase mutual funds through an IRA, 401(k), or taxable investment account.
  • Stocks (equities) – A type of security that represents ownership of a fraction of a company. The ownership entitles stockholders to a portion of the profits based on how many shares or units are owned.

The bottom line

Our lives don’t move in a straight line. We all have unexpected events happen that can alter retirement planning. Of course, living a good life costs money, and you don’t want to put off doing the things that make you happy and fulfilled. But saving for the future is a vital part of your life as well, so starting early and having a plan to keep you on track can ensure a happy retirement.

When you begin your journey into the workforce, one thing to do is learn about investing for beginners and start planning for retirement.

It can feel like it’s too early to start thinking about how you want your life to look at retirement age, especially when you’re in your 20s. But starting early and making regular contributions can make it easier to save and give compound interest the opportunity to grow your money over time.

It doesn’t have to be complicated, so why not put your plan together and begin your investment journey today by downloading the Public app?

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