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How much do I need to retire?

Wondering how much to save for retirement? It's a common question, and the answer depends on several factors.
7 minute read
July 11, 2024

There are various approaches when it comes to saving for retirement. Some experts say to have at least 8­–10 times your annual salary available to you once you enter retirement. Others say you need at least 65%–80% of your pre-retirement income available to you for each year you spend in retirement.1 Ultimately, your retirement savings amount depends on the lifestyle you want, your retirement date, and the other sources of income you'll have.


How to determine your retirement date?

Two factors weigh heavily on your retirement savings needs: how many years you're going to spend in retirement and how much you're going to need to withdraw each year.

Plan to spend at least 30 years in retirement—longer if you think you'll retire early. Medical advances are consistently extending the average lifespan, which may mean you need to save more than you expected.

Even if you don't plan to retire early, illness or other responsibilities could prevent you from working as long as you expected, extending your retirement on both ends.

Figuring out how much you're going to withdraw each year can also be a little tricky.

Calculate your anticipated retirement income

The amount you need to save for retirement is closely tied to your anticipated retirement income, which includes any pensions, Social Security benefits, rental income, or earnings from investments you expect to receive. Understanding the relationship between your anticipated income and your retirement savings goals is crucial for ensuring you can maintain your desired standard of living once you stop working.

  • Fixed income sources. These are predictable and often include Social Security benefits, pensions, or annuities. Calculate how much you can expect to receive from these sources monthly or annually.
  • Variable income sources. These might include rental income, dividends, interest from investments, or part-time work. Since these sources can fluctuate, estimating an average expected income from these sources is important.
  • Withdrawals from savings and investments. This is the portion of your retirement income that comes from withdrawing money from your retirement accounts like 401(k) plans, IRAs, or other investment accounts.

Plug your figures into our retirement income calculator to see how close you are to your retirement goal and what changes you might need to make.

Consider your lifestyle and expenses

The lifestyle you envision for your golden years heavily influences the amount you need to save for retirement. Whether you dream of globe-trotting adventures, a cozy cottage by the sea, or simply maintaining your current lifestyle without financial stress, each scenario has different financial implications.

  • Luxurious vs. modest living. If you aim for a retirement filled with luxury travel, fine dining, and high-end hobbies, you'll need a significantly larger savings pot compared with a more modest lifestyle. On the other hand, if your plan is to enjoy simpler pleasures, like gardening, reading, and spending time with family, your required savings could be lower.
  • Location choices. Where you decide to live in retirement affects your savings goals. Retiring in a city with a high cost of living, like New York or San Francisco, will require more savings compared with living in a smaller town or a country with a lower cost of living.
  • Housing needs. Will you downsize, relocate to a more affordable area, or stay in your current home? Will you pay a mortgage or rent? Consider the costs of property taxes, maintenance, utilities, and possible homeowners association fees.
  • Health care costs. As you age, health care becomes a critical consideration. Medicare doesn't cover all health expenses, and long-term care isn't typically covered by standard health insurance policies. Estimating potential out-of-pocket costs for medical care, prescriptions, and possibly long-term-care insurance is essential.

After you estimate your expected budget—which will depend on the lifestyle you expect to live in retirement—you'll need to consider other income (like Social Security and any pensions or rental income you're expecting, for example) and calculate the difference.

How to save for retirement

Now that you're closer to knowing how much you might need to save, here are some helpful strategies to help you get there.

Automated investing. If you're saving in a workplace plan, your contributions  will likely be deducted automatically from your paychecks. You can automate your other retirement savings too. For example, setting up monthly or weekly automatic bank transfers to an IRA can help you save consistently by taking the money out of your account before you have the chance to spend it.

Regular contributions. Look for other ways to automate your savings as well. For example, see whether your workplace plan offers "step up" contributions, which automatically increase your savings contribution percentage once a year until you reach your target.

Since your salary will likely grow at the same time your contributions do, chances are you may not even miss the money.

Setting a goal. At some point, other uses for your money will probably start to compete for your attention. But keep in mind that as far as financial goals go, experts agree that saving for retirement should be number one.

You might think there's no harm in putting your savings on hold for a little while but remember that time is what makes your savings so powerful—and you'll never get that time back.

Learn more about retirement accounts at Vanguard

Preparing for retirement requires careful planning and consistent effort. By calculating how much money you should save and taking advantage of compound interest, you can establish a solid financial base for your future. Don't forget to regularly assess your investments and make any needed changes to stay on course.

Vanguard provides different retirement accounts for various financial goals and life stages. We also have tools like retirement income calculators to help you plan your savings. 

Decide which account may be right for you

1CBS News. How much money do you need to retire? Here's what experts recommend. February 2024. 

All investing is subject to risk, including the possible loss of the money you invest.