The amount of savings needed for a comfortable retirement is different for each person. This goal will depend on a multitude of factors — like your income, desired retirement age, life expectancy and ideal retirement lifestyle — and it will likely change as your life evolves.
We can work with you to determine a specific retirement savings goal and create a long-term strategy that accounts for your priorities, time horizon and other goals.
Here are five steps to understanding how much you may need to retire.
In this article:
- Calculate your potential income needs
- Remember to account for inflation
- Don’t overlook health care costs
- Use retirement calculators to get an estimate
- Review your plan regularly
- Questions to discuss with us
1. Calculate your potential income needs
Figuring out your annual income needs in retirement is a good starting point. In general, most people need about 70% to 80% of their pre-retirement income to meet their living expenses in retirement. Assuming your retirement lasts 30 years, that means you’ll need to save approximately 10 times your pre-retirement income, adjusted for inflation, by the time you reach retirement.
However, this is just a guideline. For example, if you expect your spending to increase in retirement because you have big plans — such as extensive travel, building a family vacation home or early retirement — you’ll likely need additional savings to fund those goals.
Learn more: How to estimate retirement expenses
2. Remember to account for inflation
Even moderate inflation can add to your overall retirement expenses, so it’s important your retirement target reflects that reality. For example, assuming a 3% annual inflation rate, $242,726 in 30 years would have the same purchasing power as a $100,000 income today. As you calculate your savings goal, factor in these cost-of-living changes.
3. Don’t overlook health care costs
It’s easy to underestimate health care costs in retirement. While Medicare does provide more affordable medical coverage for retirees, it isn’t free and it doesn’t cover long-term care costs. Aging can come with increased health complications, and with Medicare, you will be responsible for paying the premiums and your share of prescription drug coverage, copays and other out-of-pocket costs. Further, the cost of long-term care is significant and rising, so you’ll want to account for these potential expenses as well.
4. Use retirement calculators to get an estimate
Keeping inflation, health care costs and your income needs in mind, use online calculators to get a preliminary idea of how much you will need to retire. Our retirement planning calculator can help provide an approximate figure. You’ll also be able to see how adjustments to your income, annual savings, rate of return and retirement age can impact your savings and monthly retirement income.
Retirement planner calculator
Use this calculator to gain insights into what your financial picture could look like in retirement.
Run the numbers5. Review your plan regularly
A lot can change over the course of your life. Work, family, caring for loved ones, new interests and goals may affect when, where and how you choose to spend your retirement years. This may mean you need more retirement savings than you originally planned. By regularly reviewing your savings targets, you can make the appropriate adjustments, better positioning you to reach your goals.
How much do you need to retire?
We are here to help you identify a retirement savings goal that’s personalized to your ideal retirement lifestyle, as well as create a savings strategy designed to help reach that goal.