How Much Money Do You Need to Retire?

If you’re in your 50s or 60s, undoubtedly you’ve asked yourself this question at least once: “how much money do I need to retire?“. Maybe retirement is right around the corner, or maybe you’re looking years or decades out into the future. Either way, this question has crossed most peoples’ minds at some point in their life.

It’s not an easy question to answer. Is $500k enough? Do you need $1 million? $2 million? There’s no one-size-fits-all solution. There’s no magical number that grants everyone with the retirement of their dreams. How much money you need to retire is going to come down to your personal situation. 

That being said, here are 4 steps to help you figure out how much money you need to retire.

Retirement Calculator

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We realize this is a tough question to answer, but it makes a difference when trying to figure out how much you need to save for retirement.

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Enter the total balance of all your retirement accounts like 401(k)s, 403(b)s, TSPs, IRAs, Roth IRAs, etc.


Enter the amount you will receive from things like pensions, Social Security, part-time work, etc.

Do not include income from your investment portfolio, such as dividends, interest, capital gains, or IRA/401k distributions.

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Enter an estimate of what you think your basic living expenses will be in retirement.

If you're not sure, that's ok - just put down what your basic expenses are today.


If so, enter how much you want to reserve each year for these purchases (example - if you want to spend $5,000 per year on travel and $3,000 per year on your hobbies, you'd enter $8,000 in the above box).

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This calculator tool and the results presented are provided to you as a courtesy for informational purposes on an “as is” and “as available” basis. Use of this tool and the results presented is at your own risk. We disclaim all warranties with respect to its use or the use of the results presented herein. We will not be liable for any damages of any kind with the use of this tool or the resents presented herein. The use of this tool does not create an advisory client relationship between us, and the results presented herein should not be construed as personalized investment advice or recommendations. You should not use the results presented herein without first consulting your financial, legal, and tax advisors. The results presented herein are based upon information and assumptions provided by you. Any information contained herein is dependent on the quality and accuracy of data furnished by you. Any changes in, or inaccuracy of, the information you have provided to us may materially affect the information presented. The results are also derived using various assumptions. Among other things, the results assume an annual return on investments equal to three percent. Additionally, the assumed Federal tax rate is thirty percent. These assumptions may turn out to be materially inaccurate for your situation, which would materially alter the accuracy of the results presented, and therefore you should be guided accordingly.
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How Much Money Do You Need to Retire?

Step 1 - Get Organized

Step one is simple: map out your high level objectives.

For Baby Boomers and younger generations, today’s retirement is not like your parents’ or grandparents’ retirement. It’s not uncommon, in fact, for today’s “retirees” to not even be fully retired. Whether it’s cutting down hours at their current employer, picking up a part-time job, starting a new business, or simply volunteering their time – retirees today are on the go.

How Much Do You Need to Retire?

Step 2 - Take Inventory (Assets & Income)

The next step to figure out how much to save for retirement is to take inventory of how much you currently have saved, and what your fixed, stable income sources will be when you eventually retire (don’t include portfolio income like dividends, interest, or capital gains yet). This includes things like:

  • Current 401k, IRA, and investment account balances
  • Social Security benefits
  • Pensions
  • Part-time work
  • Rental properties
  • Annuities

Basically just count up all the money you’ll have coming in. Social Security is the main source of fixed, stable income for many of today’s retirees. A lot of older generations could rely on company pensions to get them through their golden years, but that is no longer the case: less than 30% of households have or will have a pension in retirement, according to a 2018 study by the Federal Reserve of St. Louis.

Use this free retirement calculator!

How Much Should I Save for Retirement?

Step 3 - Subtract Your Expenses

After you add up your income sources, the next step is to take a stab at what your expenses will look like in retirement. Things like your mortgage, car loans, basic living expenses, insurance, taxes, utilities, etc. etc. In a perfect world, you’d be debt-free entering retirement but that is not always possible.

Many people think their expenses will be drastically different (lower) in retirement than when they were working. This is not always the case! While you won’t be spending as much on transportation and new work clothes, you might start splurging in other areas like entertainment and fine dining. Unless you are certain, it is safer to assume your expenses will be about the same as they are today. If expenses up being smaller, consider it icing on the cake!

You should also add in a budget for “big picture” retirement goals, like major purchases (cars/boats/motorcycles), travel, hobbies, and health care. For example, if your average monthly expenses are $4,000 and you’d like to take a big family vacation worth $5,000 every year, you would want to budget for $53,000 in annual expenses…i.e. $48,000 for basic living ($4,000 x 12), plus $5,000 for travel. 

How Much Should You Save to Retire?

Step 4 - Calculate the Difference

The last step to figure out how much money you should have saved for retirement is to subtract your total retirement income from your total retirement expenses. If your expenses will be more than your income, you’re going to have to make up the difference somewhere. If you’re not willing or unable to reduce your expenses, then the difference will have to come from your retirement nest egg – investment accounts such as 401ks, IRAs, etc. These accounts can produce income through dividends, interest, or capital gains.

Input your answers from Steps 1-3 in the simple retirement calculator on this page. It will give you an approximate answer on how much money you need to have saved for retirement, and how much you need to start saving each month to get there! 

Retirement Calculator

Start Here!




Previous
Next





We realize this is a tough question to answer, but it makes a difference when trying to figure out how much you need to save for retirement.

Previous
Next

Enter the total balance of all your retirement accounts like 401(k)s, 403(b)s, TSPs, IRAs, Roth IRAs, etc.


Enter the amount you will receive from things like pensions, Social Security, part-time work, etc.

Do not include income from your investment portfolio, such as dividends, interest, capital gains, or IRA/401k distributions.

Previous
Next

Enter an estimate of what you think your basic living expenses will be in retirement.

If you're not sure, that's ok - just put down what your basic expenses are today.


If so, enter how much you want to reserve each year for these purchases (example - if you want to spend $5,000 per year on travel and $3,000 per year on your hobbies, you'd enter $8,000 in the above box).

Previous
Next
This calculator tool and the results presented are provided to you as a courtesy for informational purposes on an “as is” and “as available” basis. Use of this tool and the results presented is at your own risk. We disclaim all warranties with respect to its use or the use of the results presented herein. We will not be liable for any damages of any kind with the use of this tool or the resents presented herein. The use of this tool does not create an advisory client relationship between us, and the results presented herein should not be construed as personalized investment advice or recommendations. You should not use the results presented herein without first consulting your financial, legal, and tax advisors. The results presented herein are based upon information and assumptions provided by you. Any information contained herein is dependent on the quality and accuracy of data furnished by you. Any changes in, or inaccuracy of, the information you have provided to us may materially affect the information presented. The results are also derived using various assumptions. Among other things, the results assume an annual return on investments equal to three percent. Additionally, the assumed Federal tax rate is thirty percent. These assumptions may turn out to be materially inaccurate for your situation, which would materially alter the accuracy of the results presented, and therefore you should be guided accordingly.
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The Bottom Line

So how much money do you need to save for retirement? The answer will generally be different for everyone. The first step is to look at the big picture – figure out what you want retirement to look like in the first place! From there you can back-in to the income and savings you need to make it a realistic possibility. 

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Disclosures2:

1Taylor Hoffman is an SEC registered investment adviser with its principal place of business in the State of Virginia. Any references to the terms “registered investment adviser” or “registered,” do not imply that Taylor Hoffman or any person associated with Taylor Hoffman have achieved a certain level of skill or training. Taylor Hoffman may only transact business in those states in which it is registered /notice filed, or qualifies for an exemption or exclusion from registration /notice filing requirements. For information pertaining to the registration status of Taylor Hoffman or for additional information about Taylor Hoffman, including fees and services, please visit www.adviserinfo.sec.gov. The information contained herein is provided for informational purposes only and should not be construed as the provision of personalized investment advice, or an offer to sell or the solicitation of any offer to buy any securities. Rather, the contents including, without limitation, any forecasts and projections, simply reflect the opinions and views of the author. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change without notice. There is no guarantee that the views and opinions expressed herein will come to pass. This document contains information derived from third party sources. Although we believe these third party sources to be reliable, Taylor Hoffman makes no representations as to the accuracy or completeness of any information derived from such third-party sources and takes no responsibility therefore. The S&P 500 is a market capitalization weighted index of 500 leading U.S. companies and one of the most common benchmarks for the broader U.S. equity markets. The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The Nasdaq Stock Market. Launched in 1971, the NASDAQ Composite Index is a broad based Index. Today, the Index includes over 3,000 securities, more than most other stock market indices. The NASDAQ Composite is calculated under a market capitalization weighted methodology index. To be eligible for inclusion in the Composite the security’s U.S. listing must be exclusively on the Nasdaq Stock Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing), and have a security type of either: American Depositary Receipts (ADRs); Common Stock; Limited Partnership Interests; Ordinary Shares; Real Estate Investment Trusts (REITs); Shares of Beneficial Interest (SBIs); Tracking Stocks Security types not included in the Index are closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities. If at any time a component security no longer meets the above eligibility criteria, the security is removed from the Composite Index. The Stoxx Europe 600 is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 17 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. The Shanghai Composite Index is a market capitalization weighted index made up of all the A-share and B-shares that trade on the Shanghai Stock Exchange. Past performance is not an indication or guarantee of future results. Investing in securities involves risks, including the potential loss of all amounts invested. Taylor Hoffman makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any of the research contained herein or with regard to the results to be obtained from its use. In no event will Taylor Hoffman or any party associated with Taylor Hoffman be liable for any direct or indirect trading losses caused by any information contained in this report. Readers must conduct their own independent analysis of the information contained herein before making any investment decisions.
2Taylor Hoffman is an SEC registered investment adviser with its principal place of business in the State of Virginia. Any references to the terms “registered investment adviser” or “registered,” do not imply that Taylor Hoffman or any person associated with Taylor Hoffman have achieved a certain level of skill or training. Taylor Hoffman may only transact business in those states in which it is registered /notice filed, or qualifies for an exemption or exclusion from registration /notice filing requirements. For information pertaining to the registration status of Taylor Hoffman or for additional information about Taylor Hoffman, including fees and services, please visit www.adviserinfo.sec.gov. The information contained herein is provided for informational purposes, represents only a summary of the topics discussed, and should not be construed as the provision of personalized investment advice or an offer to sell or the solicitation of any offer to buy any securities. The contents should also not be construed as tax or legal advice.  Rather, the contents including, without limitation, any forecasts and projections, simply reflect the opinions and views of the author. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change without notice. There is no guarantee that the views and opinions expressed herein will come to pass. This document contains information derived from third party sources.  Although we believe these third party sources to be reliable, Taylor Hoffman makes no representations as to the accuracy or completeness of any information derived from such third-party sources and takes no responsibility therefore. Taylor Hoffman is not a Public Accounting firm, and the information contained herein should not be construed as tax advice. Rather the contents included are a reflection of the view and opinions of the author. There is no guarantee that the information provided fits every situation, and individuals should consult their tax advisor for more specifics. Taylor Hoffman is not a law firm, and the information contained herein should not be construed as legal advice. Rather the contents included are a reflection of the view and opinions of the author. There is no guarantee that the information provided fits every situation, and individuals should consult their attorney for more specifics.