How to Retire With Enough Money and Income

Saving for retirement is the granddaddy of all financial goals--but how much do you really need? Find out where retirement income comes from and easy ways to figure the amount of savings and income you'll need to enjoy a comfortable retirement.

Laura Adams, MBA
9-minute read
Episode #555

How Much Money Do You Really Need to Retire?

Most people need to accumulate about ten times their income to generate enough retirement income. So, if you earn $100,000, having $1 million is a wise goal.

Let’s say you earn $75,000 and want to retire at age 67 with 80% of your pre-retirement income, or $60,000. You can probably count on getting about $20,000 a year from Social Security and the remaining $40,000 must come from savings.

Assuming you’ll live 30 years after you retire, and continue earning a conservative rate of return on your nest egg, getting income equal to 5% per year is reasonable. If you divide your annual desired income by this rate, that’s a total required savings of $800,000 ($40,000 / .05 = $800,000).

As you can see, multiplying your pre-retirement income by ten, which comes to $750,000 ($75,000 x 10), gets you pretty close to the same number. But if you wanted to have 100% of your income (instead of 80%), you’d need about 14 times $75,000 in savings, or just over $1 million.

There are many unknowns, but using these basic calculations gives you a target savings number to shoot for. If you’re not on pace to have what you’ll need, it’s time to increase your savings rate.

One way to make sure you’re on track is to have a goal based on your age, such as saving:

  • Your annual salary by age 30
  • Two times your salary by age 40
  • Four times your salary by age 50
  • Eight times your salary by age 60
  • 10 times your salary by age 66 to 67

As your income, debt, and lifestyle changes, reevaluate how much retirement income you’ll need and whether you’re saving enough to achieve it. 

See also: 6 Essential Habits of Financially Healthy People

8 Factors That Affect How Much Savings You Need to Retire

Here’s a list of eight factors to consider when planning how much you’ll need for retirement.

1. Your retirement age – is critical because the earlier you need income, the more you’ll need to save. Most people use the age they’ll start receiving Social Security as a default. But if you accumulate a large nest egg, it’s possible to retire earlier.

2. How much you’ve saved already – plays a big role in how big your nest egg will be. The sooner you begin saving, the more compounding interest works in your favor to grow your balance.  

3. Your average pre-retirement investment return – determines how quickly your balance can grow. For example, investing $200 a month for 40 years at a 3% return would grow to $185,000. But if you got an 8% return, you’d have $700,000.

4. Your post-retirement investment return – is also important because you need to keep your savings working for you once you're retired. However, to keep your nest egg safe, the best choice will be low-risk, low-return investments.

5. How much Social Security you’ll receive – or other income, such as a pension, is key for accurate retirement planning. For typical workers, Social Security may replace 30% of your pre-retirement income.

6. Inflation – causes prices to rise, which makes your retirement income less valuable. It’s good to know that Social Security retirement benefits are adjusted for inflation as the cost of living rises.

7. Your withdrawal rate – is how much money you take out of your nest egg each year. Many people believe they can live on less than their pre-retirement income. But if you dream of lavish trips, living in an expensive area, or believe you’ll need costly medical care, you may need more income in retirement.

8. Your longevity - is the biggest unknown when it comes to planning for retirement. If you’re relatively healthy at full retirement, statistics show that you’ll live into your late 80s. If you have a good family health history and take care of yourself, it's possible that you could need retirement income into your 90s.

If all these unknown variables for retirement planning make your head swim, here’s a simple solution: save no less than 15% of your gross income. Use tax-advantaged accounts—such a 401k, 403b, or IRA—to reduce your taxes and put away even more for your future financial security. You can download the Retirement Account Comparison Chart to learn more about which account is right for you and the best places to open one. 

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Senior Couple on Holiday image courtesy of Shutterstock


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.