How much do I need for retirement?

If you look up “How much savings will I need to retire,” you’re likely to find dozens of answers. Because every person’s vision of retirement is different.

So, instead of reading about how much others think you’ll need, why not take a few minutes to come up with your own estimate — based on your individual circumstances, needs, goals and desired retirement lifestyle. Once you have your number, you’ll have a more solid foundation on which to build a retirement savings plan. This article can help by spotlighting:

• A calculator that can help you pinpoint a ballpark retirement savings number

• Rules of thumb to help better understand your needs

• How to increase the chances of meeting your retirement goals

Start with an estimate from our retirement calculator

In just a couple of minutes, the Guardian retirement calculator can show how much you’ll need to live comfortably — based on your goals, income, and age.

Retirement planning rules of thumb

As you begin the retirement planning process, it helps to look at a few popular retirement planning guidelines, because they can help you understand the kinds of thinking and assumptions that go into retirement income planning.

• The 70-80% rule: Aim for a retirement income that replaces 70-80% of your pre-retirement income. Why the reduction? People often need less in retirement because their houses are paid off, there are no more work-related expenses, and they’ve already saved for retirement. Note: This guideline won’t be appropriate if you plan to “upscale” or improve your lifestyle in retirement.

• The 12X rule: Your savings should total 12X your annual income at retirement. So if you anticipate a pre-retirement income of $100,000 a year at age 66-67, you need $1.2 million. Note: This guideline assumes that your savings will earn a rate of return on par with historical averages. It also assumes a conservative annual withdrawal rate (around 4%).

• The 25 times rule: Try to accumulate savings equal to 25 times your planned annual expenses. Based on average rates of return, this may allow you to withdraw 4% each year, for 30 years or more.

• The 4% rule: This guideline suggests that a person can withdraw approximately 4% of their retirement savings every year without running out of money. For example, if a person has $1 million, they can withdraw $40,000 per year (adjusted for inflation). At this rate their savings could last for approximately 30 years. Note: There are risks this model doesn’t take into account, including the possibility of higher-than-average inflation or prolonged market downturns.¹

How to start the planning process

Still not sure exactly how to set and reach your goals? You’re not alone. In a recent Guardian Mind, Body, and Wallet webinar, David Chae, Clinical Instructional Designer at Spring Health, pointed out that a lot of us need help navigating feelings of anxiety around money. “There’s no finish line when it comes to money. That’s why it can feel so stressful.” But as Chae notes, you can help by “learning to focus on what’s in your control and let go of what isn’t.”²

That’s why it’s good to have an initial estimate of what you'll need to help ensure a confident retirement. To calculate a fairly accurate number, you'll want to consider several key items, including your expected retirement age, your desired retirement lifestyle, your estimated expenses, and what other sources of cash flow you'll have, such as your Social Security benefit. Once you have these answers, you'll be in a better position to home in on a more accurate estimate.

When will your retirement start?

First, think about when you’d like to retire. Will you aim for the 2024 median retirement age and retire at age 62³ or do you plan to continue working to age 65? On the other hand, are you thinking about early retirement at age 60? Obviously, nobody knows exactly what the future holds, but take a best guess.

How long will your retirement last?

A recent Guardian survey found that 51% of people are concerned about having their retirement savings last as long as they need — especially if they’re planning to retire early.⁴ Assuming you don’t want to run out of money in retirement, you also should consider how long your retirement might last. It can be a tricky calculation, but it’s important to have some idea of how many years you’ll have to rely on your savings. Think about the average life expectancy in your family, your current health status and the expected lifespan of people in the same socioeconomic group as yourself. You may also want to consider this data from the Social Security Administration: At age 62, a male can expect to live for another 19.6 years, and a female 22.5 years.⁵

However, it’s essential to remember that there’s a wide variation from that average — and in fact, the fastest growing age demographic in the US is the 85+ age bracket.⁶ That’s why most financial professionals say you should aim to make your retirement savings last at least 30 years.

What kind of lifestyle will you have?

Next, think about what type of lifestyle you’d like to have in retirement. Do you plan to stay in your current home and maintain your current lifestyle? Do you hope to move to a more upscale resort location where housing costs may be higher? Are you looking forward to extensive travel or pursuing costly hobbies? Alternatively, do you intend to downsize and cut back to minimize your financial needs? These are important questions. Your lifestyle in retirement will, in large part, determine your expenses in retirement. And your expenses in retirement will determine how much savings you’ll need.

Retirement lifestyle affects income needs

How to estimate how much savings you’ll need

Now that you have some idea of what’s involved in the process, why not sit down and actually estimate your retirement savings needs? It will take a little time, but it will be well worth it in terms of financial clarity and confidence.

STEP 1: Estimate how much will you spend during retirement

Drilling down to arrive at an accurate estimate of your retirement budget will take more than a few minutes, but it's central to the planning process. So be sure to go through the following steps. Keep in mind that this is not an exact science and that your goal is to come up with a ballpark estimate that you can "tweak" as you get closer to retirement.

• Start by recording your current monthly expenses.

• Think about the impact of inflation. Generally, it's advisable to assume an average inflation rate of about 3% per year.

• Consider any anticipated lifestyle changes — such as downsizing or relocating — and how they might affect your expenses.

• Add in healthcare costs, which tend to increase with age.

• Evaluate your outstanding debts — including mortgage payments — and figure out whether they’ll be paid off by the time you retire.

• Think about any plans you have for retirement — such as travel — and include these expenses in your calculations.

• Consider any other potential expenses, from helping an adult child to buying or leasing a new car.

Finally, assume that there will always be unanticipated expenses, and build in some sort of cushion in order to reflect this reality.

STEP 2: Add up sources of income other than income from savings

Think about what sources of monthly income you’ll have in retirement other than interest, dividends and earnings generated by your savings and investments. These might include pension benefits, rental income, part-time work, passive income, support from a family member, and, in most cases, social security retirement benefits.

The average monthly Social Security income for retired workers in 2024 was about $1,975/month.⁷ Those with higher-than-average incomes can expect to collect more, and those with lower-than-average incomes can expect to collect less. But regardless of your income, you should keep in mind that Social Security benefits are poised to be reduced substantially when the trust fund reserves run out, which is projected to happen by 2033. Unless Congress acts before then, cutbacks of 23-24% are expected for all recipients.⁸ That’s why many financial professionals tell their clients not to rely on Social Security benefits alone to fund their retirement.

STEP 3: Calculate how much income you’ll have to generate from your retirement savings

The next step? Simply subtract your non-savings income from your estimated expenses. For instance, if you estimate your living expenses at $90,000 per year and expect to earn a total of $45,000 from Social Security income and part-time work, you'll have to generate $45,000 (after taxes) from your retirement savings to make up the difference.

STEP 4: Estimate how much you’ll need in retirement savings

Finally, you’ll want to determine approximately how much retirement savings you’ll need to generate the required income. To do so, simply divide the amount of income required by the percentage return you anticipate earning on your retirement savings. For instance, if you need to generate $45,0000 a year and anticipate earning 5% on your money, divide $45,000 by 5%. The answer — $900,000 — is your estimate of how much retirement savings you’ll need.

How can you achieve your retirement savings goals?

By following the steps above, you should be able to arrive at a target retirement savings — approximately how much money you’ll have to save to help ensure the type of retirement you want. The next step is to develop a retirement savings plan that can help you reach your goal. Here are some basic tips:

• Start by setting clear retirement goals: Determine how much money you would like to have at retirement and the age at which you plan to retire.

• Set an annual savings goal: While there is no iron-clad rule, many financial professionals recommend that you save 15% of your gross income — starting around age 25.

• Estimate how much you can afford to save: Calculate how much money you can save each month. If you're unhappy with the number, consider where you might economize to free up additional funds.

• Take full advantage of employer-sponsored retirement plans: If your employer offers a 401(k) or other retirement plan, try to contribute the maximum allowable amount each year. And remember: Matching contributions offered by your employer add to your savings.

• Take full advantage of individual retirement accounts: If you’re self-employed or have the funds to supplement an employer-sponsored retirement plan, open an individual retirement account (IRA).

• Diversify your investments: Investing involves risk, but you can reduce that risk by allocating your retirement funds across a diversified portfolio of investment options, and remembering that past performance is not a guarantee of future results. Speak with a financial professional if you need help.

• Regularly review and adjust your plan: Review your retirement savings accounts —

  especially your tax advantaged retirement accounts — periodically. Adjust your contributions and investments as necessary. If you need help, speak with a financial professional or tax advisor.

Are you on track?

You’ll have to do some homework — or speak with a financial professional — to get a good handle on the answer. In the meantime, consider this suggested savings timeline from Investopedia:

• Age 30: One time your annual salary at the time.

• Age 40: three times your annual salary at the time.

• Age 50: six times your annual salary at the time.

• Age 60: eight times your annual salary at the time.

• Age 67 (full Social Security retirement age): ten times your annual salary at the time.⁹

Another way to look at the question is to compare your current retirement savings to others in your age group. According to Investopedia, the average balance for all 401(k) plans in 2024 was $148,153, but as you might expect, older savers tended to have significantly more than their young counterparts:¹⁰

Average 401(k) Plan Balances by Age

You may or may not be ahead of your age group in terms of savings, but again, the only retirement balance that really matters is the one that helps you achieve your goals. How do you get there? As David Chae of Spring Health explains, it’s important develop a “positive mindset” around money by “being honest without judgment — celebrating your wins while not beating yourself up for the losses.”¹¹

Guardian can help you figure retirement out

This information can help you estimate your retirement savings needs and develop a retirement savings plan. However, as you get deeper into the process, you may have financial issues and retirement planning questions that you’d like to discuss with a financial professional. If you don’t currently know such a professional, Guardian can help. A Guardian Financial Professional will listen to your needs, help define your goals, and work with you to make the right decisions. Here’s how to find someone near you:

Get more information on planning for retirement

Guardian can help.