How much money is needed to retire at age 65 depends on several factors, including lifestyle expectations, anticipated expenses and income sources. The general guideline is to aim for a savings target based on annual salary multiples, but individual needs vary. Some retirees may rely heavily on Social Security, while others draw from pensions, retirement accounts or investments. Estimating spending, life expectancy and withdrawal strategies can help determine a sustainable financial plan.
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How Much Money Is Needed to Retire at Age 65?
Every pre-retiree’s answer to this question is going to be different, and getting an accurate answer will likely require some careful planning. However, the experts at Fidelity offer a few easy rules of thumb that can help provide you with a quick answer.
One key recommendation is to have 7x your annual salary saved by age 55, 8x saved by age 60 and 10x saved by age 67. However, Fidelity recommends being even more aggressive if you plan to retire at age 65 by having 12x your annual salary saved.
For example, if your annual salary at retirement is $100,000, Fidelity suggests having $1.2 million saved by age 65. This approach helps ensure sufficient funds to maintain your lifestyle throughout retirement.
The 45% Rule
In addition, Fidelity advises that your retirement savings should be structured to replace approximately 45% of your pre-tax, pre-retirement income annually. This percentage, combined with Social Security benefits, is intended to sustain your standard of living after you stop working.
For instance, if you earned $100,000 annually before retirement, your savings should generate $45,000 per year. Assuming a 4% annual withdrawal rate, this would require a total savings of about $1.125 million.
Estimating Your Life Expectancy
When planning for retirement, it is important to estimate your life expectancy so you figure out how many years worth of spending and expenses you’ll need to cover.
According to the Social Security Administration’s most recent Period Life Table, males aged 65 have an average life expectancy of approximately 17 more years, while females can expect to live another 20 years. This means that, on average, males may live until 82 and females until 85.
These averages can help you determine how long your retirement savings might need to last. However, individual factors such as health, lifestyle and family history can influence your personal life expectancy. Planning for these factors can help you create a retirement savings plan that is tailored to your individual needs.
How Much Income Will You Need?
To determine how much money is needed to retire at age 65, begin with your expected spending. A pre-retiree should consider fixed expenses like housing, utilities, insurance and healthcare, as well as discretionary costs, such as travel, entertainment and dining. Some expenses, like commuting and work-related costs, may decrease, while healthcare and leisure spending could rise.
Experts suggest aiming to replace between 70% and 90% of pre-retirement income to maintain a similar standard of living. For example, someone earning $120,000 at the end of their career would look to replace between $84,000 and $108,000 with savings, Social Security and other sources.
T. Rowe Price recommends starting with a 75% replacement rate, meaning someone earning $120,000 before retirement might target $90,000 in annual retirement income. This percentage can be adjusted based on individual needs – higher if planning for increased travel or medical costs, lower if mortgage-free with minimal expenses.
What Sources of Income Will You Have?
After estimating how much income will be needed in retirement, the next step is to identify where that income will come from. Understanding available income sources helps determine how much savings are necessary to retire at 65. Some retirees may rely primarily on Social Security, while others draw from multiple sources, including retirement accounts, pensions and investments.
Social Security
Social Security provides a foundation of income for many retirees. The average Social Security benefit for a retired worker in January 2025 was $1,979 per month, but your benefit will depend on your career earnings and when you file for Social Security.
Claiming at full retirement age – 67 for people born in 1960 or later – provides the standard benefit, but delaying until 70 increases payments by up to 24%. That means claiming your benefits at age 65 will result in a benefit reduction. Checking estimated benefits through the Social Security Administration’s website or using a Social Security calculator can help in planning.
Retirement Accounts
Savings in 401(k)s, IRAs and other tax-advantaged accounts will likely form a significant portion of retirement income. Withdrawals should be planned strategically, as required minimum distributions (RMDs) and tax implications apply.
The 4% Rule is one approach to estimating sustainable withdrawals. This is when you withdraw 4% from a balanced portfolio in your first year of retirement and then adjust your withdrawals in subsequent years for inflation. While the approach is designed to preserve your retirement savings for 30 years, it is built on a fixed withdrawal rate and may not help you meet changing financial needs.
Pensions and Annuities
Traditional pensions provide guaranteed income, though they are less common today. Annuities can also create predictable payments, offering protection against longevity risk.
Other Sources
Non-retirement investments, such as brokerage accounts, rental income and personal savings, can supplement income. These sources offer flexibility, particularly for covering emergency expenses or early retirement years.
How to Plan for Retirement at Age 65
Suppose you plan to retire at 65 with a final salary of $150,000. Using Fidelity’s guideline, you would aim to have 12 times your salary saved, or $1.8 million.
Next, you estimate your retirement expenses, targeting a 75% income replacement rate based on T. Rowe Price’s recommendation. This means you need $112,500 per year. Social Security provides $30,000 annually, leaving an $82,500 gap to be covered by savings.
Applying the 4% rule, you would need about $2.06 million in savings to sustainably withdraw $82,500 in your first year of retirement. Since this is slightly above Fidelity’s 12x Rule, you might adjust your target based on spending plans.
If you expect higher medical costs, you may save more. If you own your home outright, you may need less. When you refine your estimates to include investments, pensions and other sources, you can create a plan that aligns with your financial needs in retirement.
Bottom Line
Retirement at age 65 comes with many considerations, from estimating future expenses to calculating income sources like savings, Social Security and pensions. While general guidelines suggest savings targets, your individual circumstances, spending habits and life expectancy all play a role in determining financial readiness. Adjusting expectations, planning for longevity and diversifying income can help create a stable financial foundation well into retirement.
Retirement Planning Tips
- Taking full advantage of employer 401(k) matching is essentially free money that boosts retirement savings. Individuals 50 and older can also make catch-up contributions to retirement accounts, increasing the annual contribution limits for 401(k)s and IRAs. Starting in 2025, people between ages 60 and 63 can save up to $11,250 extra in their 401(k) or a similar workplace retirement plan thanks to a provision known as “super catch-up contributions.“
- A financial advisor can help you build streams of income for retirement and make critical decisions, like when to claim Social Security and how much to withdraw from your 401(k) each year. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted 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.
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