How Much Do I Need to Retire?

Joseph Johnson
Jan 25
3 min read

“How much money do you need to retire?” is one of the most common and important questions people ask when planning for the future. While there’s no one-size-fits-all answer, time tested strategies and guidelines in retirement income planning can help you calculate your retirement goal with confidence.

In this guide, we’ll walk you through how to estimate your retirement number based on your lifestyle, retirement expenses, income sources, and retirement age.

Why Estimating Your Retirement Number Matters

Knowing how much you need to retire allows you to:

Set realistic savings goals
Adjust your lifestyle or retirement age
Potentially reduce the risk of outliving your savings
Plan for healthcare, inflation, and unexpected costs

Without a clear target, you may either save too little or too much—both of which can lead to financial stress or missed opportunities.

Rule of Thumb: The 4% Rule for Retirement

A common guideline is the 4% rule for retirement, which suggests you can withdraw 4% of your retirement savings each year without running out of money for at least 30 years.

Based on this rule:

To generate $40,000 a year, you'd need $1 million saved
To generate $60,000 a year, you'd need $1.5 million saved

This is a hypothetical example and is not representative of any specific investment. Your results may vary.

While helpful, this rule isn’t perfect. It doesn’t account for taxes, investment performance, or long-term care costs. Use it as a starting point, not a final answer.

Step-by-Step: How to Calculate Your Retirement Number

1. Estimate Annual Retirement Expenses

Start by figuring out how much you’ll need per year in retirement. Consider:

Housing (rent/mortgage, taxes, maintenance)
Food, utilities, transportation
Travel and hobbies
Healthcare costs (Medicare, supplements, out-of-pocket)
Inflation (typically 2–3% annually)

2. Account for Other Income Sources

Reduce your savings target by factoring in income like:

Social Security benefits
Pension income
Rental income or part-time work
Annuities

3. Factor in Retirement Age and Longevity

The earlier you retire, the more you’ll need saved. Conversely, working longer gives your investments more time to grow and reduces the years you’ll be drawing income.

Use a tool like a “how long will my retirement savings last calculator”—such as the Living to 100 Life Expectancy Calculator—to estimate how long your retirement may last.

4. Adjust for Inflation and Investment Growth

Your money needs to keep up with rising costs. Consider using an average inflation rate of 2.5–3% and realistic investment returns (4–6% after inflation) when doing your projections.

Common Retirement Savings Benchmarks by Age

While individual goals vary, many experts suggest the following retirement savings milestones:

Age 30: 1x your annual salary
Age 40: 3x your annual salary
Age 50: 6x your annual salary
Age 60: 8x your annual salary
Age 67: 10x your annual salary

Source: Fidelity Retirement Planning Guidelines

Tips to Pursue Your Retirement Goal

Max out retirement accounts: Take advantage of 401(k)s, IRAs, and catch-up contributions after age 50
Invest wisely: Diversify your portfolio and adjust risk based on your timeline. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk
Avoid unnecessary debt: Enter retirement as debt-free as possible
Track progress annually: Reevaluate your goals and make course corrections as needed

Final Thoughts: How Much Do You Need to Retire?

Your ideal retirement number depends on your goals, lifestyle, and income sources. With proper retirement income planning and smart strategies like the 4% rule for retirement, you can build a plan that gives you confidence and flexibility.

For more comprehensive retirement guidance, check out our Retirement Planning page.

Need help calculating your retirement number or striving to optimize your investment strategy? Schedule a meeting with Sage Hills Financial for a personalized retirement roadmap.

Disclaimer: Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.