How much do I need to retire?

That question drives me nuts. There is only one answer; that depends. It depends on your lifestyle and how much you earn because a major factor for most people is their Social Security benefit.

So, how do YOU figure your answer. You can do this. The tools are readily available.

Following is a very general example using SSA tools and a Future Value Calculator available to anyone.

Let’s assume you earn $50,000 (or will earn that at retirement).

Go to the Social Security calculator and enter your information. Your monthly benefit at age 66 in 2019 is $1,397 or $16,764 per year. NOTE: You can use a SS calculator that is based on your specific earnings record with the SSA and will project future inflation adjusted dollars.

Assuming a conservative (my idea of normal) 100% income replacement, after SS you need to come up with $33,236 per year. You may be happy with 90% or even 80%.

Using the simple 4% withdrawal rule, you need $830,900 on the day you retire. Now, how do you reach that goal?

If you are saving for thirty years and earn only 6% a year on investments, you need to save roughly $800 a month (Better converted to a steady percentage of your growing income).

There is a great deal of flexibility here. For example, load up on savings in the early years and the task is easier. If you have an employer match on 401k savings, your burden is less.

You may earn more than 6%. Adjusted for inflation, the historical average annual return for the S&P 500 is around 7% and is substantially higher if all dividends were reinvested which you certainly would do.

Of course, we are talking long-term, not every given period of years will reach those earnings or any earnings for that matter.

Yup, you can determine your goal and you can meet your goal.


  1. About income replacement, there are a few factors in the retiree’s favor:

    1. Payroll tax is not applied to savings or Social Security benefits, “saving” 7.65%.

    2.Social Security benefits : 85% is subject to tax (if at all) not 100%.

    3.Many retirees, not sure how many, are mortgage free

    4. Most retirees don’t commute to anywhere. For me, that is a huge saving.

    5. Most retirees have no student debt! Yeah, ok, the way things are going that may no longer be the case in the future.

    6. Clothing requirements generally decrease substantially in retirement.


    1. I have found that all those savings and more are offset by other spending. My health ins premiums including Medicare went from $150 to over $1,000 per month for couple and travel offsets the rest and more. Plus you have the challenge of keeping up with inflation.


  2. The correct answer to the How Much Do I Need To Retire is, How Much Are Your Expenses? I could argue and tweak the numbers and the percentages for ROR but what I found is it doesn’t matter unless you understand your expenses of today.

    The assumption that you need 100% of your pay is a good starting point in your 20’s. There is no way that I could have saved or invested to have an income stream of 100% based on salary for the day that I did retire. By then I was making 5 times more than in my 20’s. The people who ask this question in their 50’s missed the boat and will need to lower their retirement expectations.

    I will say that you’ll need 100%+ of your expenses in retirement. If you want to retire with a mortgage payment on a McMansion and a new car payment, then you’ll need a lot of money saved. If you are living off of credit cards now, then you’ll never be able to retire.

    If everything is going to be paid off prior to retiring, you stand a good chance of having a very nice retirement. You’ll need tens of thousands of dollars less in income if you are not paying off a mortgage which will equate to requiring hundred of thousands of dollars invested for a drawdown at a 4% rate.

    People do not know how much they spend day-to-day now. Once they figure out where their money is going, the retirement question would be how much do I need to put away today to cover my expenses tomorrow? Do you want to retire in a McMansion on a lake when you are 80 or do you want to retire at 60 on a lake in a trailer and spend the next 20 years fishing instead of working?


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