How Much Do I Need to Retire – The Complete Guide for 2021

Do you want to know how much you need to retire?

It’s only natural; everyone wants to retire and have a comfortable life. And further, I couldn’t blame you if you asked, “How long will my money last in retirement?” Indeed, knowing the amount you need to retire is tricky because it goes beyond simple math. But, by the end of this article, I expect you’ll have a closer understanding.

When I was in my 20’s, I already knew I didn’t want to work all my life. However, I had very little understanding of how much I’d need to retire, let alone anything else about financial education. Frequent credit limit increases, and the constant “keeping up with the Jones’s” mentality kept me from ever getting ahead. But, I was credit rich! Sure, I’ve always had a knack for making money. Still, my financial situation didn’t change until I learned how to make a budget and spend less than I earn.

Determining How Much One Needs to Retire

If you were to poll 1000 people and ask them, “How much do I need to retire,” you’d probably get a range from 5 million to 100 million or more. The reality is, many of these same folks hope they can retire at 62 with 300k. Knowing when you can retire depends mainly on your cost of living, less your expenses.

How Much Income Should I Have in Retirement?

According to a Federal Reserve report on the Economic Well-Being of people, only 36% of working individuals claim to have their retirement savings on track. It, therefore, means that about 64% are worried as they are falling behind.

Most experts agree that retirement income should be no less than 80% of one’s pre-retirement salary. So, if your pre-retirement income is $100,000 a year, if you trust the experts, you’ll need $80,000 a year to have a comfortable retirement. I say you can retire when you have more than enough income to cover your expenses in retirement. Your situation will likely sit somewhere in between. Admittedly, you may have expenses before you retire that you wouldn’t have in retirement.

For example, consider your mortgage. Will it get paid off by retirement? What about health insurance premiums? And, do you expect to be traveling more in retirement? Also, don’t forget any pensions so social security income you might receive. A retirement calculator can also help you with figuring out how much you need to retire.

Unfortunately, millions of Americans say that their retirement savings are not on track. Perhaps it’s due to a lack of education on the subject, or maybe it’s because retirement savings wasn’t a priority. One thing is sure, the more time one has to save, the easier it will be to retire. The good thing, at least, is that you’re here, learning how much you need to retire! And, knowing the amount you need to “live happily ever after” gives you a goal to work up to.

The 4% Rule

Schwab’s recent study examined a portfolio that comprises 50% stocks, 50% bonds and assumes a 5% annual return. The retiree could withdraw 4% of the portfolio per year, plus an additional inflation adjustment for 30 years. Indeed, this is known as the 4% rule. But, what does it mean?

If you have ,000,000 invested half in a broad range of stocks (or perhaps an S&P500 Index ETF), and the other half in bonds, a retiree could expect to withdraw $40,000 a year, plus inflation, for 30 years.

Where Should I Invest My Money?

To make the best of your retirement, experts agree, start young.

Doing so helps you build your wealth over time, and the amount you target to spend after retirement will be easy to raise. And you can invest in real estate, stocks, or even a small business.

If you invest in stocks with an adviser, one metric they will report is their performance vis-a-via the S&P 500 Index. Indeed, most funds’ performance gets compared against the S&P 500. For example, if the S&P 500 gained 16%, and the fund gained 14%, it means an investor holding a low-cost S&P 500 Index ETF would have done better than investing with the adviser. And a recent study determined that 80% of fund managers underperform the S&P500. Even Warren Buffet agrees!

“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.” — Warren Buffet

Factors That Affect the Amount You Need To Retire

The sooner you start saving to retire, the more comfortable life you’ll have. Therefore, knowing the amount you should save for retirement in advance gives you the edge. Sure, you might be saying, “That’s easier said than done.” I say, to achieve what you need to retire depends on various factors. They include:

Your Spending Habits

I couldn’t blame anyone for thinking that retiring is about how much money they get in retirement. But, the best financial plans emphasize controlling expenses. Income is secondary.

Expenses can get split into two categories: Needs and Wants. Needs are things that you need to live. For example, mortgage payments, insurance payments, and food (but not restaurants) are all examples of needs expenses. On the other hand, shopping, subscriptions (think Netflix and gym memberships), and travel are all examples of wants.

How much you need to retire depends on how much you intend to spend in retirement. If you can retire without any expenses, then you can retire today. Of course, that’s probably not the case. Perhaps you want to travel or save for your grandchildren’s education. Regardless, these expenses need to get planned and budgeted in advance.

Your Savings Habits

Saving plays an incredible role in one’s retirement plans. Naturally, the more you have in retirement, the more comfortable life you’ll have. According to Fidelity, they suggest having a savings goal of 1X your current income by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. When starting a savings plan, consider cutting the wants side of your budget by 50%. Doing so should free up 10-30% or more of your entire budget. And you can make that a starting point.


Age is a significant factor that will determine the amount you need to retire. Most people work for about 40 years before retiring at 65. For example, let’s assume that you need to retire with $1,000,000 in savings. And, considering the S&P500 grows at about 10% a year, the amount you’ll need to save each month will vary drastically, depending on when you start.

According to a recent CNBC report, only 39% of Americans claim to be saving for retirement in their 20’s. So, we can safely assume that most Americans start wondering about their retirement needs much later. Unfortunately, compound interest works against you the older you are. For example, if you want $1,000,000 in retirement and start saving at age 25, you’ll only need $188.28/mo, assuming a 10% AROR (Annual Rate of Return) from your investments. At age 35, you’ll need $506.60/mo for the same goal. And if you wait until age 50, you’ll need $2,622.81/mo – more than 10x what you would have needed at age 25.

Current Income

Until now, I’ve covered how much your need to retire, savings, and investment. But could you do something to boost your savings and investment rate by making more money? You bet! Increasing your current income gives you an instant dollar-for-dollar boost to the excess income at the end of the month.

For example, if you earn $3,000 a month and get a raise to $3,300 – you’ll have an instant $300/mo increase to your bottom line that you can use to invest for your retirement. Remember, at age 25, one only needs to invest $188.28/mo at 10% AROR to get to a million dollars at age 65.

Side Hustle

Today, the gig economy is thriving. And, thanks to the internet, millions of Americans can take advantage of their skills to improve their income. For example, the most common side hustles include teaching something you know and helping others with something they need.

For example, you might supplement your income by tutoring something you’re an expert on, on Skype or Zoom. Or, you can consider dog-walking or even a cleaning service. Whatever you do, your monthly surplus of income will increase dollar-for-dollar, and you can use it to invest for your future or pay down debt.


Debt is a four-letter word and almost always bad. Naturally, debt payments eat into the monthly income surplus. In other terms, more debt means less to invest. However, pre-retirement, there are two types of debt to consider.

Good Debt: Good debt is any debt that is secured by an asset. The most common example of good debt is one’s mortgage. The home is an asset that (usually) appreciates over time.

Bad Debt: High-interest debt is on the opposite end of the spectrum and should get avoided at all costs. Indeed, with credit card interest around 20%, carrying a balance on a credit card is often a poor financial choice that eats into the excess income at the end of the month. As a result, high-interest debt paydown should get priority.

Debt in Retirement: The less debt you have in retirement, the less money you’ll need to save to retire. Financial experts agree that being debt-free in retirement should be the goal. And that includes the mortgage!

Bonus: How to Boost Your Invest Income

One way to boost returns on your portfolio is selling covered calls for monthly income. The investment strategy works like this. You can sell a covered call against 100 shares of a single stock or ETF in your portfolio and collect an option premium against it. The option premium is guaranteed monthly income that you get to keep, and you can do whatever you like with it.

Covered Call Example

Say you own 100 shares of AAPL, and today, APPL is selling for $139. You could sell a $149 AAPL covered call that expires next month and collect $315 in cash. Fast forward next month; as long as AAPL sells for less than $149, your option expires worthless.

However, if AAPL sells for MORE than $149, you’ll get exercised and forced to sell 100 AAPL shares to someone (the option buyer) for $149 each. For this reason, to avoid a capital loss, it’s best to ensure the strike price is always higher than your average cost.

The Bottom Line on Saving for Retirement

Knowing how much you need to retire is about the number of years between now and retirement and saving enough to meet your goal. The earlier you start saving and investing, the more comfortable retirement you’ll have. It’s as simple as that!

This article originally appeared on Wealth of Geeks and has been republished with permission.

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