How Much Money Do You Need to Retire?

Few financial questions are more common than “how much money do I need to retire?” Unfortunately, there is no one-size-fits-all answer. One person’s retirement income needs will be different from the next, depending on their circumstances and goals. However, it’s worth noting that a 2024 Schwab survey found that on average, 401(k) participants believe they’ll need $1.8 million to retire. You might consider whether that amount is enough or too little, based on these factors. A financial advisor can also help you answer this important question and guide your retirement planning process.

When Do You Want to Retire?

The age at which you plan to retire is one of the most important pieces of the puzzle to determining how much you’ll need when you get there. Your retirement age determines when you start withdrawing savings and how long they must last. No one can predict exactly how long they will live, but having a rough estimate for the length of your retirement can go a long way in helping you determine how much you’ll need to save.

For example, a person who plans to retire relatively early at age 55 will presumably need more in savings than a person who plans to delay until age 72. The younger person will likely be retired for far longer than his older counterpart.

For reference, the average retirement age for men and women in the U.S. is 65 and 63, respectively. According to the Social Security Administration, a 65-year-old man can expect to live for another 17 years, while a 63-year-old woman can expect to live another 21 years.

Before calculating your target savings, identify your retirement age and how many years you expect to fund.

How Much Income You’ll Need in Retirement

Calculating how much money you need to retire also requires estimating how much you plan to spend. Will your spending habits change dramatically now that you will no longer be working? Or will your lifestyle and living expenses largely remain the same, requiring your retirement income to match that of your pre-retirement cash flow?

While everyone’s income needs will differ, experts say the average retiree will need to replace around 80% of their pre-retirement income with savings and Social Security benefits. Therefore, someone with an annual salary of $150,000 would need around $120,000 per year to maintain their lifestyle in retirement. If that same person plans to live another 25 years after retiring, they would need approximately $3 million in savings and future Social Security benefits.

Spending Habits Impact Savings

It’s also important to remember that retirees’ spending habits aren’t static. Average annual expenditures fall as people get older.

According to Bureau of Labor Statistics data, households led by someone between 55 and 64 spent an average of $83,379 in 2023 — the most recent year for which data is available. That number was $65,149 for households in the 65- to 74-year-old age range, while households in the 75+ age group spent an average of $53,031 in 2023, according to the BLS.

Someone in their 60s may easily estimate retirement spending, but younger workers often struggle to forecast decades ahead. As a result, setting savings goals that are tied to one’s age can be an effective strategy, especially for younger workers who are just starting out.

Retirement Savings Recommendation

Fidelity recommends having 10-times your pre-retirement income saved by age 67. That means someone with a $150,000 salary would want to have $1.5 million saved by the time they turn 67. To reach that savings goal, Fidelity recommends aiming to have at least your annual income saved by age 30; three times your annual income saved by age 40; six times your annual income by age 50 and eight times your annual income by age 60.

Fidelity’s Retirement Savings by Age Rule of Thumb

Diversifying Your Streams of Retirement Income

The third thing to consider when contemplating how much you’ll need to save for retirement is your streams of income. A retiree with multiple income streams, like cash-flowing rental properties and dividend-paying stocks, may need less money in savings than a retiree who will simply rely on making regular withdrawals from a 401(k) or IRA to get by.

Don’t forget to count Social Security as an income stream. The average monthly benefit for a retired worker was approximately $1,980, as of February 2025.

Annuities are also common investment products that retirees can purchase to ensure they’ll have income in retirement beyond Social Security. In exchange for paying monthly premiums or making a lump sum payment, an insurance company will make guaranteed payments to you in the future. Annuities typically pay benefits until your death, but some plans only allow you to receive payments for a fixed amount of time.

Retirement Savings 4% Rule

If you’re struggling to try to figure out how much to save each year, you can consider living by the 4% rule. This rule of thumb suggests withdrawing 4% from a balanced portfolio (50% stocks, 50% bonds) in your first year of retirement and then adjusting annual withdrawals for inflation. Doing so, the rule asserts, will preserve a person’s savings for 30 years. So if you want an income of $100,000 in retirement, your nest egg would need to be $2.5 million at the age of retirement to follow the 4% rule.

Then again, many experts argue that the 4% rule is simply a starting point. Many retirees’ spending needs are not static, so a fixed withdrawal rate may not be appropriate. You may require a more dynamic withdrawal strategy. In this case, a financial advisor may be able to help design a more nuanced distribution strategy.

You can also use a retirement calculator to determine how much money you’ll need to save. How much you need to save each year depends on your nest egg target and portfolio growth rate. The general rule is to save 6% of your income each month to contribute towards that nest egg, but you may need to save more or less depending on your current age and how many years you have left to save.

Bottom Line

When planning for retirement, how much you’ll need to have saved will depend on your retirement age and time horizon, spending habits and streams of retirement income. Remember that your income needs in retirement will likely change as you get older, so it may be wise to anticipate higher spending levels earlier in retirement. Meanwhile, Fidelity recommends having 10 times your annual income for retirement by age 67.

Retirement Planning Tips

• Consider working with a financial advisor to create a retirement plan based on your needs and assets. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Still need help estimating your income needs for retirement? Check out our full retirement guide to determine what else you may need to learn and calculate during your retirement planning.

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