How Much Do I Need to Retire?

Updated: Feb 13

Retirement is a financial milestone that many people look forward to, but it can also be a source of stress and uncertainty. One of the biggest questions people have when planning for retirement is, "How much do I need to retire?" They might also be wondering:

How Much do I need to retire at 55
How much do I need to retire at 60
and so on

How much should I have saved by 40
How much should I have saved by 50
and so on

Or even

How much does a married couple need to retire
How much should a couple have for retirement
How much do I need to retire in Florida

The answer to all of these questions is not a one-size-fits-all solution and depends on a variety of factors. However, there are some general guidelines that can help you determine how much you need to retire.

Let's learn more about retirement!

What are the 3 types of retirement?

Traditional retirement, where an individual stops working at a certain age, usually 65.
Early retirement, where an individual retires before the traditional retirement age, often in their 50s or 60s.
Phased retirement, where an individual reduces their work hours and gradually transitions into full retirement.

Traditional retirement

Traditional retirement is used to describe the process of stopping work at a specific age, typically 65, and transitioning into retirement. The concept of traditional retirement has been in existence for a long time, and it has played a crucial role in shaping the current retirement landscape (think financial advisors, social security, assisted care living, retirement communities, etc.).

Early retirement

See traditional retirement above and then think of anything before the age of 60.

Phased retirement

This can be described as "partial retirement". You may retire from a career you have had for a long time and pull your hours back to 20 or less. You may shift to some simple consulting, or an easy part-time job to keep you busy. You don't spend your day golfing and/or traveling, but you also are no longer working 8 to 5.

At what age should I retire?

The age at which you should retire is a personal decision that depends on various factors such as financial stability, personal health, and personal interests. However, the full retirement age set by the Social Security Administration is 67 for those born in 1960 or later.

To help determine your own ideal retirement age, you can use online retirement calculators like SmartAsset and PocketSmith. These tools can help you assess your current financial situation and make projections for the future, allowing you to make informed decisions about when to retire.

What is a good retirement salary?

A good retirement salary varies from individual to individual, depending on their lifestyle, spending habits, and other factors. It is estimated that you will need 70-90% of your pre-retirement income to maintain your standard of living during retirement. Therefore, a good retirement salary can be considered one that allows you to comfortably cover your expenses and save for unexpected costs.

To help determine your own ideal retirement salary, tools like SmartAsset and PocketSmith can be useful. These tools can help you create a budget for retirement, estimate your expenses, and determine how much income you will need to sustain your desired lifestyle.

Why retiring at 62 is a good idea?

Retiring at 62 has its advantages, including the option to start collecting Social Security benefits early and having more time to pursue personal interests and travel. Additionally, retiring at 62 may also provide relief from work-related stress and the opportunity to enjoy a long retirement.

To assess whether retiring at 62 is a good idea for you, consider using retirement planning tools like SmartAsset and PocketSmith. These tools can help you determine your eligibility for Social Security benefits, estimate your future expenses, and project your retirement income.

Do you pay tax when retired?

Yes, you may still be required to pay taxes on your retirement income, depending on the source and amount of the income. For example, Social Security benefits may be subject to federal income tax, and pension income may be taxed at your marginal tax rate. It's best to consult a tax professional for more information on your specific situation.

To help plan for taxes in retirement, consider using a tool like PocketSmith, which can help you estimate your future tax liability and plan for any necessary payments.

What is the 70% rule for retirement?

The 70% rule is a guideline that suggests that in retirement, you should aim to have a stream of income equal to 70% of your pre-retirement income in order to maintain your standard of living. This takes into account that expenses such as work-related costs and commuting may decrease in retirement, offsetting the need for a full 100% of pre-retirement income.

To help ensure you are on track to meet the 70% rule, consider using retirement planning tools like SmartAsset and PocketSmith. These tools can help you estimate your future expenses and project your retirement income, allowing you to make informed decisions about your retirement planning.

Calculate your annual expenses

The first step in determining how much you need to retire is to calculate your annual expenses. This includes all of your necessary expenses, such as housing, food, utilities, and transportation, as well as your discretionary expenses, such as entertainment and travel.

It's important to be realistic and honest when calculating your expenses, as underestimating your needs can result in a shortfall during retirement.

Determine your retirement income sources

The next step is to determine your retirement income sources. This includes any Social Security benefits you will receive, any pension income, and any income from investments or other sources.

It's important to note that Social Security benefits may not provide all of the income you need during retirement, so you may need to rely on other sources of income.

Calculate the gap

Once you have calculated your annual expenses and determined your retirement income sources, you can calculate the gap between the two. This is the amount of money you will need to save in order to retire comfortably.

Consider your retirement age

The age at which you retire will also impact how much you need to retire. If you retire earlier, you will need to have more saved up in order to support yourself for a longer period of time. On the other hand, if you retire later, you may be able to save less because you will have a shorter retirement period.

Factor in inflation

Inflation, or the steady increase in the cost of goods and services, can also impact how much you need to retire. It's important to factor in the impact of inflation on your expenses when calculating how much you need to retire.

Consult a financial professional

Determining how much you need to retire can be a complex process, and it's always a good idea to consult a financial professional for personalized guidance. A financial professional can help you develop a retirement plan that takes into account your unique circumstances and goals.

I hope this article helps to provide some guidance on how much you need to retire. Remember, the amount you need will depend on your individual circumstances and goals, so it's important to carefully consider all of the factors and consult a financial professional for personalized advice.