The amount of money you need to retire depends on various factors including your desired lifestyle, expected expenses, retirement age, life expectancy, and sources of income like Social Security or pensions. Here are key points to consider:
- Experts often recommend saving enough to replace about 70% to 85% of your pre-retirement income annually during retirement to maintain a comfortable lifestyle
- A common rule of thumb is to aim for a nest egg of around $1 million to $2 million, depending on your spending needs and retirement length. For example, assuming a 30-year retirement and annual expenses of about $60,000 to $70,000, you might need roughly $1.75 million to $2 million saved
- Retirement calculators can help estimate your specific target by factoring in your current savings, income, monthly contributions, inflation, investment returns, and expected retirement age. These tools typically assume a retirement age around 65-67, a 3% inflation rate, and a conservative 5-6% return during retirement
- Your monthly retirement budget is crucial; you can estimate it by reviewing your current spending and adjusting for changes in retirement (e.g., less commuting, possibly more healthcare costs)
- Social Security benefits and any pensions can reduce the total amount you need to save, as they provide a steady income stream during retirement
- To ensure your savings last through retirement, many calculators assume planning until age 90-95 or even 98, considering longevity risk
In summary, to determine how much money you need to retire, use a retirement calculator with your personal financial details and goals. Generally, aiming to save at least $1 million to $2 million or enough to cover 70-85% of your pre-retirement income annually through retirement is a solid target for many people
