What’s Your Number? How Much You Really Need to Retire

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How big of a nest egg do you need for a comfortable retirement? It’s a common question people ask. And it’s likely one of the more difficult ones to answer.

So many variables come into play that the correct answer for one person might not work for another – even if they’re the same age. Much depends on how long you will work and what your expenses will be. And the big unknown: How long will your retirement savings last?

Still, it’s useful to have a target number to guide your savings plan. For a personalized number, you can run the numbers yourself, or meet with a licensed financial advisor who can do the math for you. Either way, here are some key factors you’ll want to consider.

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Common Retirement Savings Benchmarks

When you’re several years away from retirement, there are a few financial guidelines that can provide an early warning that you may be saving too little.

For example, one rule is you will need 75% of your gross pre-retirement income to maintain your present lifestyle once you’re no longer working.1 That’s because some of your current expenses, such as Social Security and Medicare taxes and retirement contributions, will disappear. You also may no longer be shouldering a mortgage or paying higher income taxes.

Many rules have exceptions though, and this one does, too. If you have grand travel plans or expect to pursue expensive hobbies once you’re no longer working, you might need 100% or more of your pre-retirement income during your most active retirement years.

Some financial firms have calculated how much savings workers will need at various ages that – along with Social Security – will generate enough retirement income. Fidelity Investments, for example, suggests workers who want to retire at age 67 and maintain their lifestyle, should save three times their salary by age 40, six times by age 50 and 10 times their final salary by retirement.2

For a more detailed analysis, you can use our retirement calculator. It allows you to adjust assumptions, such as your retirement date, how much you save, the return on your investments and more. The result can tell you how long your savings will last or how much more you should set aside each month to meet your goals.

Fine-Tuning Your Savings Target

As you enter your 50’s, retirement is on the horizon, and you may have a clearer picture of what your later years will look like. This is a good time to run more detailed retirement projections because you still have time to correct course if your nest egg is too small. Starting in your 50s, you can make catch-up contributions to tax friendly IRAs and 401(k)s or similar workplace plans. For annual contribution limits, visit IRS.gov.

At this point, consider working with a financial advisor. An advisor can review your projections, assess your savings progress and determine a comfortable withdrawal rate.

Or analyze the numbers yourself. First, calculate your annual retirement expenses. Start by looking at what you spend now and how that may change in the future. Will you still have a mortgage? Do you plan to downsize or move to a less expensive area? Will your travel budget increase once you have more leisure time? Keep in mind that your expenses will rise each year with inflation.

Next, add up how much guaranteed income you expect to receive annually from sources such as a pension, annuity or Social Security. (Get an estimate of your future Social Security benefit by opening a “my Social Security” account online.) Then, subtract income from expenses to find the amount you’ll need to pull from savings and investments each year to make ends meet.

If you draw too much from your nest egg each year, you could outlive your money. How much is too much? Use our “How Long Will My Money Last” calculator to determine a safe withdrawal rate. If you find you are likely to outlive your money, you can choose to save more now or reduce your spending in retirement.

You can also consider working longer, giving you more time to save money while reducing the number of retirement years you must finance. In addition, working longer will allow you to postpone Social Security and may increase your benefit.

Expecting the Unexpected

Even the best-laid plans for retirement can go awry thanks to a surprise life event. For example:

  • Among today’s retirees, more than 4 in 10 leave the labor force earlier than expected, often triggered by health issues or a layoff.3
  • Becoming a caregiver can also create financial challenges. Nearly one-third of workers leave their jobs due to caregiving responsibilities, according to Harvard Business School.4 And about half of caregivers experience an impact to their finances because they stop saving or take on more debt.5
  • And it’s not unusual for adult children to need financial help, causing parents to save less for their own retirement, according to Merrill/Age Wave research.6

A common “surprise” expense during retirement is long-term care. But almost half of people who reach age 65 will need at least some paid care over their lifetimes.7

As you plan for your retirement, think about the impact of potential disruptions on your nest egg. While you may not be able to avoid such scenarios, a commitment to saving regularly can provide the flexibility you may need later if you must revise your plans.

Find more resources to plan and protect yourself from unexpected costs on the path to retirement in Retiring Now.

1 How Much Retirement Income Will You Need?, T. Rowe Price, November 12, 2019.

2 How much do I need to retire?,, Fidelity Investments, July 21, 2020.

3 2019 Retirement Confidence Survey, Employee Benefit Research Institute, April 23, 2019.

4 The Caring Company, Harvard Business School, January 17, 2019.

5 Caregiving in the U.S., AARP and the National Alliance for Caregiving, May 2020.

6 The financial journey of modern parenting: Joy, complexity and sacrifice, Merrill Lynch/Age Wave, 2018.

7 What is the Lifetime Risk of Needing and Receiving Long-Term Services and Supports?, US Department of Health and Human Services, April 4, 2019.

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