How Much Money Do You Need To Retire?


It’s very hard to determine exactly how much you will need for retirement. The amounts will vary widely depending on the lifestyle you plan to lead, your health care expenses, whether you are still paying a mortgage or have other credit obligations and where you are living (some areas have a much less expensive cost of living). These are just some of the expenses that need to be factored into your calculations when trying to determine how much you will need for retirement.

Financial planners as a general rule of thumb estimate you will need somewhere between 70% and 85% of your pre-retirement income when you retire. Many retirees in actual practice are enjoying retirement with a lesser percentage of their pre-retirement income.

To try and determine what you will need figure out what you expect your expenditures to be when you are retired. Factor in the necessary expenses such as rent or a mortgage, property taxes, insurance premiums (including life and health insurances) medical costs, transportation expenses, upkeep on home and car, food. Then add on expenses for spending money, clothing, gifts, travel and eating out. You also need to add on any money you think will be necessary for taxes which are not being withheld. The figure you come up with is the amount you think you will need when you retire.

Determine how much income you will have coming in from Social Security and any pension plans and other investments. You can obtain a copy of projected Social Security payments online from them.

Subtract the amount you anticipate you will need from the income you expect to have coming in. For most people there will be a shortfall.


The shortfall is what you need to be able to handle and this is why it is so important to start saving early for retirement. If you have saved 7 or 8 times your salary be the time you retire you should be able to have enough income from your savings to meet your shortfall.

If you were unable to save enough money you might be able to make some extra money by working part time. In addition to helping the family finances part time work may help keep you feeling younger and more useful. If you have a financial shortfall and own your own home you might want to look into a reverse mortgage.

Begin saving as early as possible (ideally begin with your very first paycheck) and continue saving during your entire working life. Take advantage of any 410 (k) 403 (b) or other retirement savings accounts offered by your employer. Defer as much as you can afford. Compounding interest works wonders so save your money, have diversified investments and do not make withdrawals from your retirement savings until you retire (except for a rare emergency or possibly to purchase a home). Even if you need to start saving with a small percentage amount as you can afford it increase your deferrals till you are contributing the maximum allowed.

It is expensive, but you may want to consider purchasing some long-term-care insurance. If you need a nursing home or assisted living when you retire you can be facing $80,000 or more annually for a private room in a nursing home or $50,000 or more annually for assisted living.

How much you will need to retire really depends on you. You will need a much higher amount if you live in an expensive area, go out several times a week for meals and plan to travel extensively.

On the other hand if you live an area where expenses are reasonable, don’t travel very much and are content to eat most meals at home your living expenses will be much less. You are the only one who can determine what is important for you when you retire. Keep in mind you are planning for 20 – 25 years of your life.

For most people if they find themselves in retirement with less then the amount they hoped to have they are able to adjust and still have a happy retirement.