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Retirement Calculator: How Much Money Do I Need To Retire?

Andrew Dehan5-minute read
November 12, 2021

Answering the question “How much money do I need to retire?” doesn’t have to be overwhelming. While everyone has different ideas of what they want their retirement to look like, it’s useful to consider existing benchmarks to see whether you’re on the right track.

You want to estimate your specific needs and goals. This includes how much you want to spend each year in retirement. It also depends on when you want to retire. Someone who retires in their mid-40s will need more money than someone who works longer and retires in their mid-60s.

Here are some questions and retirement planning strategies to help you estimate how much you need to retire.

How Much Money Do You Need To Retire?

There’s no universal answer to this question – the amount of money you need depends on your unique financial circumstances and retirement goals.

Some of the variables that impact how much you need to retire are: your age, pre- and post-retirement income, expenses and desired retirement lifestyle. The higher your estimated retirement expenses, the more money you’ll need to save for retirement.

While it can be difficult to calculate, asking yourself these retirement planning questions could help: 

  • When would you like to retire?
  • Will you work part-time?
  • Will your expenses increase or decrease after retirement?
  • What income sources will you have post-retirement?
  • Do you plan on relocating to a lower cost of living area?
  • How long do you expect your retirement to last? 

To understand the need for a customized retirement plan, consider this example. Imagine that two people, Kayla and Kimberly, want to retire in 20 years and both have a $100,000 retirement fund at age 35. Kayla wants to travel more when she retires. Her estimated annual retirement expense is $100,000.

Meanwhile, Kimberly expects to move to a lower cost of living area and expects to spend $40,000 a year in retirement. Since Kayla’s estimated retirement expenses are higher, she’ll need to save more than Kimberly.

Like Kimberly and Kayla, the amount you’ll need to save will depend on your personal goals.

Retirement Strategies

Financial experts recommend several retirement saving strategies. Since each recommendation has pros and cons, it’s a good idea to examine them carefully. Let’s take a look at three common guidelines.

Percentage Of Your Salary

Some experts recommend that you save at least 70 – 80% of your preretirement income. This means if you earned $100,000 year before retiring, you should plan on spending $70,000 – $80,000 a year in retirement.

A benefit of this strategy is that it’s easy to calculate. And you can use the result to estimate how much you need to save for retirement. For instance, if your current income is $50,000 and you expect your retirement to last at least 30 years, you’ll need roughly $1.5 million for your nest egg ($50,000 x 30).

However, a major downside of this guideline is that it doesn’t consider inflation. You won’t know how much you’ll need to retire unless you look at your current salary and adjust it for inflation. You can use an inflation calculator (search for “forward flat rate”), which can be the simplest option, or you can use the rule of 72.

If you take 72 and divide it by the average inflation rate, you’ll get the number of years it takes to double your cost of living. For example, using a 3% inflation rate, it’ll take 24 years for it to double. While this is a good rule of thumb, the more accurate way is to use an inflation calculator.

Another downside is that it’s hard to determine how much money you’ll need because it’s hard to predict how long your retirement will last. That said, you can still use it as a guideline to start setting aside a percentage of your income into retirement and savings accounts.

The 4% Rule

The 4% rule refers to the withdrawal rate you should make from your retirement assets so that your money can last at least 30 years. If you decide to follow this guideline, you’ll make a 4% withdrawal from your funds the first year. And you’d adjust your withdrawal rate for inflation in the following years.

For instance, say you plan on living on $40,000 a year during retirement. If you follow the 4% rule, you’d need $1,000,000 to retire, or 25 times your annual expenses. Once you reached that goal, you’d withdraw $40,000 a year the first year.

And if inflation was 4% in year one, you’d withdraw $41,600 the second year ($40,000 X 0.04) +$40,000 = $41,600)

You may have seen this percentage floating around, especially among members of the FIRE movement (Financial Independence, Retire Early). That’s because one of the biggest fears (and risks) for retirees is having their funds run out. Though there’s no guarantee you’ll live to be 100, it’s better to be safe than sorry.

Although the 4% rule is easy to follow, it has some disadvantages. For example, withdrawing 4% each year might cause you to run out of money faster if you don’t have enough saved. In addition, the rule doesn’t account for market fluctuations.

Some experts believe that spending more when the economy is doing well and spending less when it isn’t can help your retirement portfolio survive longer. This is sometimes referred to as dynamic spending.

Multiples Of Your Annual Income

Fidelity recommends saving a certain percentage of your salary based on your age and income. It recommends this strategy because your age has a huge impact on the amount you need to save for retirement.

You start off at a smaller percentage when you’re younger so by the time you reach retirement age, compound interest will have done its work, helping you achieve a comfortable retirement.

The brokerage suggests you start by saving at least 15% of your gross salary when you’re 25 and investing heavily in more aggressive assets like stocks. By the time you’re 30, you should have saved at least 50% of your salary. Of course, you could be more aggressive with your 401(k) savings goals.

Retirement Goals By Age

Here’s a table that shows an estimate of how much of your annual income you should budget for retirement by age.


Conservative Savings

Aggressive Savings

30 years old

½ x annual salary

1 x annual salary

40 years old

2 x annual salary

3 x annual salary

50 years old

4 x annual salary

5 x annual salary

60 years old

6 x annual salary

7 x annual salary

67 years old

8 x annual salary

8 x annual salary


How Much Money Do I Need To Retire At 55?

If your goal is to retire at age 55, Fidelity recommends that you save at least seven times your annual income. That means if your annual income is $70,000 a year, you need to save $490,000. But remember, this is only an estimate – it doesn’t consider your unique goals and other unknown variables, like future medical expenses and your life expectancy.


Also, keep in mind that there are benefits to waiting to retire. For example, those born between 1943 and 1954 can take 100% of any Social Security benefits you qualify for if you wait until your full retirement age at 66. And the longer you wait, the more the benefits increase – up to 132% if you’re 70 or older.

If you expect to receive a pension, waiting could increase the percentage of your salary you receive during retirement. The amount will likely depend on certain factors, like your years of service and income. You’ll have to contact your benefits department for specifics.

In addition, waiting until you’re 59½ to withdraw money from a Roth or Traditional Individual Retirement Account (IRA) will give you access to your funds without penalty.

Waiting also allows you to add more catch-up contributions – additional funds investors who are at least 50 years old can add to certain funds, including IRAs, 403(b)s and 401(k)s.

To estimate how much money you need to retire by a certain age, use our retirement calculator.

The Bottom Line

Saving 70 – 80% of your preretirement earnings can help you live a lifestyle similar to your existing one, if you adjust it for inflation. The 4% rule can be used as a guide when drawing down your retirement assets. And the multiples of your annual income strategy can help you decide how much you need to save based on your age.

Whatever strategy you choose, the most important thing you can do is start planning now. The sooner you start, the faster your retirement assets can start growing. And if things don’t go according to plan, remember, you can always make adjustments.

If you need help creating your retirement plan, consider contacting a financial professional. You can learn more about planning for retirement, buying your first home, building an emergency fund and more by visiting our Learning Center.

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Andrew Dehan

Andrew Dehan is a professional writer who writes about real estate and homeownership. He is also a published poet, musician and nature-lover. He lives in metro Detroit with his wife, daughter and dogs.