How Much Money Do You Need to Retire?

When it comes to retirement, one question stands out more than most: “How much money do I need to retire?” Unfortunately, there is no one-size-fits-all answer. One person’s retirement income needs will differ from another’s, as it depends on their circumstances and goals. However, it’s worth noting that the average 401(k) participant believes they’ll need $1.8 million to retire, according to Schwab. ¹ You can decide whether this is enough based on these factors.

A financial advisor can help guide your retirement planning process.

When Do You Want to Retire?

When you plan to retire is one of the most important pieces when determining how much you’ll need when you get there. Your retirement age determines when you start withdrawing savings and how long the funds must last.

The average retirement age for men and women in the U.S. is 65 and 63, respectively. ² No one can predict exactly how long they will live. However, having a rough estimate for retirement can go a long way when determining how much 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.

Before calculating your target savings, determine your best age to retire and the number of 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? This will require your retirement income to match your pre-retirement cash flow.

Everyone’s income needs will differ. However, experts say the average retiree will need to replace around 80% of their pre-retirement income with savings and Social Security benefits. ³ 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 the most recent data, households led by someone between 55 and 64 spent an average of $84,946. ⁴ That number was $65,354 for households in the 65- to 74-year-old age range. Meanwhile, households in the 75+ age group spent an average of $55,834.

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

Retirement Savings Recommendation

Fidelity recommends having 10-times your pre-retirement income saved by age 67. ⁵

This means someone with a $150,000 salary should have $1.5 million saved by 67. To reach that savings goal, Fidelity recommends aiming to have the following.

Fidelity’s Retirement Savings by Age Rule of Thumb

Diversifying Your Streams of Retirement Income

Another consideration 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. However, a retiree simply relying on regular withdrawals from a 401(k) or IRA will likely need more.

Don’t forget to count Social Security as an income stream. The average monthly benefit for a retired worker was approximately $2,071, as of January 2026. ⁶

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

Retirement Savings 4% Rule

If you’re struggling to determine how much to save each year, consider the 4% rule.

This rule of thumb suggests withdrawing 4% from a balanced portfolio (50% stocks, 50% bonds) in your first year of retirement. You then adjust annual withdrawals for inflation. Doing so will preserve a person’s savings for 30 years. Therefore, under the 4% rule, you would need $2.5 million at the age of retirement for a $100,000 income retirement.

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. This will ultimately depend on your nest egg target and portfolio growth rate.

The general rule is to save 6% of your monthly income to contribute towards that nest egg. However, you may need to save more or less. It all depends on your current age and how many years you have left to save.

How Inflation and Healthcare Costs Can Change Your Number

The savings benchmarks and income replacement guidelines are useful starting points, but they assume a relatively stable cost of living.

Two variables in particular can push your actual number significantly higher than any rule of thumb suggests: inflation and healthcare.

Inflation

Inflation reduces the purchasing power of every dollar you have saved.

A retirement that begins with $80,000 in annual spending does not stay at $80,000 in real terms. At a 3% average inflation rate, that same lifestyle costs roughly $130,000 annually after 15 years.

This is a particular problem for retirees relying heavily on fixed income sources or conservative withdrawal strategies. The gap between their budget and the actual cost can widen considerably over a 20- to 30-year retirement.

Healthcare

Healthcare is the more unpredictable variable.

While overall spending tends to decline as retirees age, healthcare costs tend to move in the opposite direction. Several costs can escalate significantly in the later years of retirement, including:

• Premiums
• Out-of-pocket expenses
• Prescription costs
• Possibility of long-term care

According to Fidelity’s 2025 Retiree Health Care Cost Estimate, a single retiree at age 65 may need approximately $172,000 for healthcare expenses throughout retirement, excluding long-term care. ⁷ For a couple, that figure rises to around $330,000.

What this means is that an 80% income replacement target may underestimate actual spending needs. This is particularly the case in the later stages of retirement when healthcare demands increase. Building a buffer into your savings goal, rather than targeting the minimum, gives you more flexibility to absorb costs that are difficult to predict decades in advance.

A financial advisor can help you stress-test your retirement number against different inflation and healthcare scenarios. This will help ensure your plan holds up under realistic conditions, not just ideal ones.

Bottom Line

When planning for retirement, how much you’ll need to save depends several factors. These include your retirement age, 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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