How Much Do You Need to Retire? Let’s Find Out Together

Retirement. Just saying the word can feel overwhelming, can’t it? Maybe you’re lying awake at night wondering if you’ll ever have enough money to stop working. Or perhaps you’re scrolling through financial advice online, feeling more confused than when you started. Here’s the truth: figuring out how much you need to retire doesn’t have to be scary or complicated.

I’m going to walk you through this journey together—no confusing jargon, no intimidating math, just practical steps that actually make sense. By the end of this guide, you’ll have a clear picture of your retirement number and, more importantly, you’ll understand why it matters and how to get there.

Why Most People Get Retirement Planning Wrong

Before we dive into the numbers, let’s talk about the biggest mistake people make: they either overestimate (and stress unnecessarily) or underestimate (and don’t save enough). Both are problems, but they stem from the same issue—guessing instead of planning.

The retirement you’re imagining right now probably looks different from what it’ll actually be. That’s okay! The goal isn’t perfection; it’s having a realistic roadmap that you can adjust as life happens.

The Real Numbers: What Does Retirement Actually Cost?

Let’s start with the foundation. Most financial experts suggest you’ll need about 70-80% of your pre-retirement income to maintain your current lifestyle in retirement. Notice I said “suggest”—this isn’t a one-size-fits-all rule.

Here’s why this range exists:

• Some expenses disappear: You’re not commuting to work anymore, buying professional wardrobes, or contributing to retirement accounts
• Some expenses decrease: You’ve likely paid off your mortgage by retirement age
• Some expenses increase: Healthcare costs rise as you age, and you’ll have more time for hobbies and travel

Breaking Down a Real Example

Let’s say you currently earn $60,000 per year. Using the 80% rule, you’d need $48,000 annually in retirement. Over a 25-year retirement (from age 65 to 90), that’s $1,200,000. Sounds like a lot, right?

But wait—Social Security will cover some of that. The average Social Security benefit in 2025 is about $1,907 per month, or roughly $22,884 per year. Subtract that from your $48,000 need, and you’re looking at $25,116 that needs to come from your savings annually.

Now we’re getting somewhere manageable!

The Four-Step Method to Calculate Your Personal Retirement Number

Forget cookie-cutter advice. Let’s figure out your specific number using a simple four-step process that anyone can follow.

Step 1: Estimate Your Retirement Expenses

Grab a piece of paper (or open a note on your phone) and think about your monthly expenses in these categories:

Essential Expenses:

• Housing (mortgage/rent, property taxes, insurance, maintenance)
• Utilities (electricity, water, gas, internet, phone)
• Food and groceries
• Healthcare and insurance premiums
• Transportation (car payments, insurance, gas, maintenance)

Lifestyle Expenses:

• Entertainment and hobbies
• Dining out and travel
• Gifts and charitable donations
• Personal care and clothing

Don’t forget the hidden costs:

• Long-term care insurance (this becomes more important after 70)
• Home modifications for aging (grab bars, ramps, stair lifts)
• Increased medical co-pays and prescriptions

Add everything up and multiply by 12 to get your annual number. Be honest with yourself—this is your future we’re planning.

Step 2: Factor In Your Income Sources

Now let’s look at money coming in during retirement:

Social Security: Visit the Social Security Administration website (ssa.gov) and create a “my Social Security” account. You’ll see your projected benefits based on your work history. This takes 10 minutes and gives you real numbers—not guesses.

Pension: If you’re lucky enough to have one, contact your HR department to get your projected monthly benefit. Many Americans don’t have pensions anymore, but if you worked in government, education, or for a large corporation for many years, you might.

Part-time work: Many retirees work part-time, not because they have to, but because they want to stay active. Even $10,000-15,000 per year from a flexible job can dramatically reduce your savings needs.

Other income: Rental properties, annuities, or income from a business you plan to keep running.

Add up all your annual income sources. This is what you won’t need to pull from savings.

Step 3: Calculate Your Savings Gap

Here’s the simple math:

Annual Retirement Expenses – Annual Retirement Income = Annual Gap You Need to Cover

Using our earlier example: $48,000 – $22,884 (Social Security) = $25,116 per year needed from savings.

Step 4: Apply the 4% Rule (With a Reality Check)

The famous “4% rule” says you can safely withdraw 4% of your retirement savings each year without running out of money. It’s been used for decades, though some experts now suggest 3.5% to be more conservative.

Here’s how it works: If you need $25,116 per year from savings, divide that by 0.04 (which is 4%).

$25,116 ÷ 0.04 = $627,900

So you’d need approximately $630,000 saved by retirement to generate that $25,116 annually.

Important reality check: The 4% rule assumes a 30-year retirement and a balanced investment portfolio. If you retire early or are very conservative with investments, you might want to use 3% or 3.5% instead, which would increase your target savings number.

Age Matters: Where Should You Be Right Now?

Knowing your final number is great, but what about the journey there? Here are realistic benchmarks based on your current age:

By Age 30: Have 1x your annual salary saved (If you earn $50,000, aim for $50,000 saved)

By Age 40: Have 3x your annual salary saved ($50,000 salary = $150,000 saved)

By Age 50: Have 6x your annual salary saved ($50,000 salary = $300,000 saved)

By Age 60: Have 8x your annual salary saved ($50,000 salary = $400,000 saved)

By Age 67: Have 10x your annual salary saved ($50,000 salary = $500,000 saved)

Not there yet? Don’t panic. These are guidelines, not requirements. What matters more is that you’re moving in the right direction and increasing your savings rate now.

The Three Biggest Factors That Change Everything

Your retirement number isn’t set in stone. These three factors can dramatically increase or decrease what you need:

1. Healthcare Costs

This is the wildcard nobody can predict perfectly. The average couple retiring at 65 in 2025 will spend approximately $315,000 on healthcare throughout retirement (not including long-term care). That’s a big chunk!

What you can do:

• Contribute to a Health Savings Account (HSA) if you have a high-deductible health plan—it’s triple tax-advantaged
• Plan for Medicare premiums, which start around $174/month for Part B
• Research Medicare Supplement or Medicare Advantage plans before you turn 65

2. Where You Live

Retiring in San Francisco requires a completely different savings target than retiring in Knoxville, Tennessee. State income taxes, property taxes, and cost of living vary wildly.

Some retiree-friendly states with no income tax include: Florida, Texas, Nevada, Tennessee, South Dakota, and Wyoming. Moving could stretch your retirement savings by 20-30%.

3. Your Retirement Age

Every year you delay retirement does double duty: you save more money and you have fewer years to fund. Retiring at 67 instead of 62 means:

• Five more years of saving and compound growth
• Five fewer years drawing down your savings
• A higher Social Security benefit (it increases by about 8% per year you delay between 62 and 70)

Working just three extra years can sometimes make the difference between a comfortable retirement and a tight one.

[Image placeholder: A comparison chart showing three retirement scenarios – retiring at 62, 67, and 70 – with visual bars showing total savings needed, Social Security benefits, and number of retirement years funded]

Taking Action: Your First Steps This Week

Information without action doesn’t change anything. Here’s what you should do in the next seven days:

Day 1-2: Create your “my Social Security” account and check your projected benefits. This is free and gives you real numbers.

Day 3-4: List your current monthly expenses. Use your bank statements from the last three months to be accurate. Multiply by 12 for your annual spending.

Day 5: Use the four-step method above to calculate your personal retirement number.

Day 6: Check your current retirement account balances (401(k), IRA, other investments).

Day 7: Calculate the gap between where you are and where you need to be. Don’t judge yourself—just acknowledge reality so you can make a plan.

The Catch-Up Plan: What If You’re Behind?

First, breathe. Most Americans are behind on retirement savings, so you’re not alone. Here’s how to catch up:

Max out catch-up contributions: If you’re 50 or older, you can contribute extra to retirement accounts:

• 401(k): Extra $7,500 per year (2025 limit)
• IRA: Extra $1,000 per year (2025 limit)

Automate savings increases: Set up automatic annual increases in your retirement contributions. Even 1% more each year adds up dramatically over time.

Consider delaying Social Security: For every year you delay claiming between 62 and 70, your benefit increases. This is guaranteed growth you can’t get anywhere else.

Reduce housing costs: This is often the biggest expense. Downsizing, moving to a lower-cost area, or paying off your mortgage early can free up thousands per year.

Work longer, even part-time: Just two more years of full-time work, or five years of part-time work earning $15,000 annually, can bridge a significant gap.

Common Questions Beginners Ask

“What if I live longer than expected?” This is actually a good problem to have! Plan for age 90-95 to be safe. If you have family history of longevity, lean toward the higher end. The 4% rule is designed to handle 30-year retirements.

“Should I pay off my mortgage before retiring?” Generally yes, especially if your interest rate is above 4-5%. Having no mortgage payment dramatically reduces your retirement income needs and provides peace of mind.

“What about inflation?” The 4% rule and retirement calculators typically account for inflation. Your investments should grow faster than inflation over time, and Social Security has cost-of-living adjustments built in.

“Can I rely on Social Security?” Yes, but it’s wise to be slightly conservative. Even worst-case scenarios from Social Security’s trustees suggest the program will be able to pay about 77% of scheduled benefits if no changes are made. It’s not disappearing, but it might provide less than currently projected.

You’ve Got This

Here’s what I want you to remember: retirement planning isn’t about achieving perfection—it’s about making consistent progress. You don’t need to figure everything out today, tomorrow, or even this year. What you need is to start.

Calculate your number using the steps we covered. Look honestly at where you are right now. Then make one small change—increase your 401(k) contribution by 1%, open an IRA, or cut one unnecessary expense and redirect that money to savings.

That’s how retirement gets built: one decision, one dollar, one year at a time.

You’re not alone on this journey, and you don’t need to be a financial expert to succeed. You just need to be intentional, consistent, and willing to adjust as you go.

Now take that first step. Your future self is already thanking you.