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How Much Money Do I Need to Retire? Save & Live Comfortably at 55 or 65

Jordan Beaumont
Financial Guru
Updated: 6/2019
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How Much Money do You Need to RetireRetirement is something that all people should plan for, and you should look at retirement as an opportunity. One of the biggest factors in retirement is maintaining a source of income during this time. This will allow you to live comfortably, and it will allow you to accomplish things that you have always wanted to do such as travel.

Some of the steps involved with saving for retirement include estimating how much money you will need, how much you will get from social security, and how much income you can expect to get from investments.

Table of Contents

Estimate How Much You Will Need In Retirement

As a general rule, people will need eighty percent of their final income to support themselves during retirement. This is because most retirees will not have to pay for expenses associated with being young and working. This will include such things as:

– Commuting

– Debt Servicing

– Mortgage Payments

– Supporting Children

This can allow you to get a quick idea of how much income you will need. An example of this would be an average American household income of $59,039. This household would need an annual income of $47,231 during retirement.

Estimate Income From Social Security

Most people receive the majority of their retirement income from social security. Social security is determined by averaging out your income from the thirty-five years that you earned the most. You will then receive a portion of that amount with it also being based off of when you chose to retire.

A person who waited to retire until the age of seventy and earned $118,500 would receive the maximum amount of $3,501 per month.

A more representative example would be a person who earned sixty thousand dollars per year and retired at the age of sixty-five. This person would receive $1,196 in monthly social security checks.

Determine Shortfall Between Social Security And Needed Money

You should now compare the amount you will get from social security to what you will need in retirement. The average American who earned sixty thousand dollars per year would need $4,000 per month in order to meet eighty percent of their income.

This person is estimated to earn $1,557 from social security, and so they would need $2,443 in additional monthly income to meet their needs.

How Much Money do You Need to Retire

Look At Other Forms Of Income

There are other ways for you to get regular income during retirement. This will generally be things such as a pension. It is important to remember that pensions have a reputation of not being honored, and there is the very real possibility that your employer will not be around to make pension payments.

You should look at the details of your pension in order to determine how likely it is to be honored. This will allow you to determine if you can trust it as a reliable source of income.

In general, you should consider a pension to be an extra source of income that is meant to supplement your income from social security. This will allow you to use your pension as a way of making yourself comfortable during retirement, and you can use it as a way of not depleting your savings during your early years of retirement.

Estimate How Much You Will Need To Match This Difference

The idea of being able to match the difference between what you will need and social security can seem daunting. Most people will not know how much they will need to save with others being daunted by the amount they will need to save.

This amount you will need to save can be even higher when you consider the effects of inflation, and the possibility that you may live into retirement for thirty or more years.

The 25 Times Rule

A simple way to estimate how much you will need is to take the shortfall between needed income and social security and times that amount by twenty-five. This will let you have your needed income for twenty-five years of retirement with you being able to earn additional money from investments.

The average American with a sixty thousand dollar per year income would need $2,114,400 according to the twenty-five times rule. This amount is achievable when you consider the possibility of saving on a longterm basis. However, it does highlight the importance of saving, and how retirement is a major issue that you should be concerned about.

Use The Four Percent Rule

Another estimator is to use the four percent rule. This rule states that you should be able to withdraw four percent from your retirement savings per year in order to not run out of money. This rule is a decent estimate as most safe investments will be able to provide you with four percent gains.

The average American with sixty thousand years should divide their income by .04 according to this rule. This shows that the they would need to save a million and a half dollars for retirement.

The 70 Percent Rule

The seventy percent rule is another rule of saving for retirement. This rule simply states that you will need seventy percent of your income during retirement. This rule demonstrates that there is some disagreement over how much you will need to save for retirement. You can use the seventy percent rule in combination with other techniques to estimate how much you will need to save.

The 15 Percent Rule Of Retirement

The fifteen percent rule is a good saving metric that is best used by young people in their twenties and thirties. This rule states that you should start saving fifteen percent of your income at a young age. This rule has the benefit of getting young people to start saving for retirement. The rule also has the benefit of allowing you to adjust your savings as you get older.

Consider Goals And Expenses During Retirement

One important thing about saving for retirement is that it should match your goals and lifestyle. Most people consider retirement to be an opportunity to finally do what you want. This may include such things as travel, hobbies, and spending time with friends and family.

You should consider the expense of these goals when planning for retirement. For example, you may want to take an annual vacation during retirement. You should consider saving enough so that you can accomplish this goal.

Have An Emergency Fund

You should also have an emergency fund. This will allow you to avoid dipping into your retirement saving for expenses. You should be able to estimate some of these expenses such as needing to repair the roof on your home. You should have enough saved into your emergency fund to cover several expenses.

You should also plan to have enough saved to refill your emergency fund during retirement. This will allow you to continually meet emergency expenses during the decades that you will spend in retirement.

How Much Money do You Need to Retire

Use An Online Calculator

A simple way to help you save for retirement is to use and online calculator. These calculators allow you to quickly estimate how much will need to save by entering in some basic information.

A major advantage of using an online calculator is that it allows you to continually check on your progress in regards to retirement saving. They also allow you to quickly try out different variables in your savings. You may want to look at factors such as:

– Changes In Your Social Security Benefits

– The Possibility Of A Pension

– Higher Interest Rates

– Increased Or Decreased Income

– A Sudden Windfall Of Money

– Increased Expenses

These calculators are very useful when you consider ways to invest your money, and as your lifestyle changes as you get older. You may want to consider investing in an apartment building. However, this will require you to compare the benefits of rental income vs having your money tied up in an asset that you cannot sell. Similarly, you may want to consider the possibility of getting a reverse mortgage for you rental property while knowing that you can no longer consider that money to be an asset.

Online calculators can give you an idea of how your savings will grow over time. This will allow you to see the benefits of saving early, increasing your savings by a certain amount per month, and how your savings will fair during retirement.

Finally, an online calculator is a good tool to use when you regularly check on your savings. It is important to regularly revisit your retirement savings. You may want to do this every couple of months, and many people benefit by having a reminder to check on their retirement savings.

Look At A Check Point Chart

Another good resources is a check point chart. These charts can be customized to your income and savings needs. You can use the chart to make sure that you are meeting your savings goals over the course of years. It is a good idea to save a particular savings chart and then look back at it as you regularly review your retirement savings.

Understand The Importance Of Saving Early

The most important thing to know about saving for retirement is that you should start saving as early as possible. This is because your savings will grow with interest, and it is possible to earn a massive amount in interest over the course of several decades. A hundred dollars invested at four percent interest over the course of thirty years will be worth $324.34. This savings amount can be even higher if you invest in higher yield options.

You should also consider how much you can save by setting aside even a few hundred dollars per month when you are young. You can receive the benefits of interest, and it also means that you simply have more months to put monthly payments into your retirement portfolio.

Young people have the advantage of taking increased risks with their retirement savings. This means that they can invest in more risky options such as the stock market. These investments will even out over the course of decades, and most people will get large gains from these types of investments. Young people can then move their investments over to safer forms of investments as they get older.

Stagger Your Investments For Retirement

Many people choose to invest their money so they will receive regular payments as certain investments mature. A good options to purchase treasury bonds on a regular basis. A thirty year treasury bond can mature into a large sum of money, and they are the gold standard in terms of safe investment options.

It is even possible to purchase treasury bonds that offer returns that are based upon the rate of inflation. This makes these investments safe from inflation. You can stagger your bonds so you receive a guaranteed sum of money on a monthly or annual basis.

Keep A Diverse Portfolio

You should make sure that your portfolio is diverse. You should have money invested in everything from certificates of deposit to stocks and bonds. This will ensure that your retirement savings are protected if one industry happens to fail.

You should adjust your portfolio as you get older. This will involve moving your money to safer investments, and you should also make sure that your investments are liquid so you can have access to your retirement savings.

How Much Money do You Need to Retire

Know About Different Investment Options

You should educate yourself on the many different kinds of investment options. This is because there are a variety of different investment options ranging from specific retirement funds to real estate.

The most popular ways to save for retirement is with the use of IRAs and 401ks. These investment funds are a good way for you to get relatively high yields in a safe manner. They also have the benefit of avoiding taxes with these funds. A 401k is a very good investment option as your employer will match the money you put in.

Other popular investment options include such things as index funds. These are funds that consist of investments in a large number stocks. These index funds have the benefit of protecting you if a single business happens to have financial troubles.

There is a massive selection of index funds. It is possible to invest in a general index fund that will feature as diverse of investments as possible. You can also invest in an industry specific investment fund in order to make money off an industry that you think is strong. There are even index funds that are designed for specific consumer interests. It is possible to purchase index funds in environmentally friendly companies, those owned by female CEOs, and companies that treat their workers well.

Finally, bonds are one of the most popular forms of investments. Treasury bonds are a fantastically safe form of investment with you having the option of investing in everything from local governments to nations.

Consider Taxes And Avoid Them

Taxes can have a major impact on your retirement savings, and you should take steps to make sure that your savings are not eaten up in tax. An IRA or 401k is a good way for you to avoid having to pay regular taxes while making sure that your retirement savings grow.

You should also know how to avoid taxes when investing in real estate and the stock market. In general, you will not have to pay taxes on what are known as “capital gains”. This is money that you made from stocks and real estate increasing in value. You can avoid taxes by reinvesting your money in the stock market, and by purchasing another home with the money you made from selling a home.

Tax issues can be complicated with them becoming especially complicated in the cases of a diverse portfolio with a large amount of money in it. It is recommended that you research the tax code so you can keep as much of your money as possible.

Consult With A Professional

Saving for retirement is a complicated and important process. It will require you to set a budget, put money into savings, and invest your money smartly. This requires you to be knowledgeable of a variety of issues, and you will need to work on a goal over the course of decades.

This means that it a good idea for you to consult with a professional. It is possible to have a financial planner review your retirement plans for a low fee, and they can potentially give you advise that will save you thousands of dollars. A financial planner is a good person to take any questions or concerns to. They should be able to offer you advice with practical answers on how to address specific issues.

Similarly, you should use a variety of resources to educate yourself on retirement. You should know about different kinds of investment options, investment terms, and how to avoid paying tax. It is possible to use reputable online resources to educate yourself on these matters.

FAQ

Reaching retirement is a huge reward for every individual. Those long years of working have finally paid off. However, the biggest question that comes to mind before you retire is “how much money do I need?” Despite what some people say, there isn’t a magic number. After analyzing your expenses, life expectancy, and your employer’s retirement contributions, you can reasonably come with a comfortable amount needed for retirement. If you don’t know how much you need to retire, you’re not alone. In fact, around 81% of Americans don’t know how much they need to retire. To help you come up with a better plan for retirement, we have compiled an extensive list of questions that cover everything from how much you need to where you should save your retirement money.

The Amount of Money Needed For Retirement

How much you actually need for retirement depends on various factors. If you live a relatively modest lifestyle, you might only need 10x your current income to retire. Moreover, some people decide to retire abroad and need considerably less. To quantity how much you need to retire, you need to consider your current age, current expenses, and life expectancy. If you want to know how much you need to retire, take a look at the below questions:

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How much money do you need to retire?

While it depends on where you live, the general rule-of-thumb is that you need 10 to 12 times your income to retire at the age of 55. This number should be enough to live on 75 to 85% of your pre-retirement income. 

How much money do you need to retire at 55?

To calculate how much money you need to retire at 55, take your pre-retirement income, multiply that by .8, and then multiply that number of years you expect to live after retirement.

How much money do I need to retire at 65?

To comfortably retire at 65, you would need to save at least $1.5 million. This is an estimate provided you don’t have a lavish lifestyle and won’t blow through it all in a couple of years.

How much money do you need to retire comfortably?

The amount needed to retire comfortably varies on where you live in the United States. For example, in Mississippi, you can live off $37,750 per year. On the other hand, you’ll need just over $71,000 per year in Washington D.C.

How much money do you need to retire at 60?

To determine how much money you need to retire at 60, you can use an online calculator that takes into account your desired retirement age, current annual income, and your retirement savings to date. 

How much money do I need to retire at 50?

If you want to retire at the age of 50, you need to have at least $1 million dollars in your retirement savings. With an income of $40,000, you would need to invest around 35% of your salary to reach the $1 million mark.

How much money do I need to retire at 40?

Depending on your lifestyle, $2 million may be enough to retire at 40. To reach this goal, you really need to focus on saving a large percentage of your income and investing.

Do I have enough money to retire?

Vanguard has a handy retirement income calculator that will give you a good idea if you have enough to retire or not. It also gives you the option to include a pension and social security benefit. 

How much money should I have in retirement by 30?

By the time you are 30, you should have an amount saved equal to your annual gross salary. If you make $60,000 per year for example, you should have at least $60,000 saved.

How much money should I have in retirement by 35?

By the time you hit 35, you should have at least 2 x your salary in retirement savings. The best way to reach this amount is to put at least 15% of your income in a retirement savings plan.

How much money to retire at 45?

If you want to retire at 45, you should save at least 30% of your income since the age of 20. The exact amount needed depends on your expenses, location, and lifestyle.

How much money do I need to retire at 70?

A general guideline is that you should save 8x your final income (what you were making when you retired) if you want to retire at age 70. With that said, the amount can vary depending on your lifestyle changes.

How much money will I need to retire in 2025?

That depends on how old you will be in 2025. Edward D. Jones has a retirement calculator that lets you put your expected age (at 2025) and define multiple other factors that contribute to the amount you need saved.

How much money will I need to retire in 2037?

While it varies on your lifestyle, you generally need enough in savings to produce roughly $40,000 in year. To figure out how much you need in 2037, multiply 40,000 by the years you expect to live after that year.

How much money to retire in Mexico?

Those who wish to retire in Mexico need a yearly income of around $25,000 to live comfortably (for a couple), about half of what is needed in the United States.

How much money do I need to retire in Thailand?

The Thai government requires retirees to have an income of at least $2,000 per month to be eligible for a retirement visa. In fact, some claim you only need as little as $200,000 to retire in Thailand.

How much money I need for retirement in India?

To retire in India, you need a bare minimum monthly income of around $500. If you double that and earn $1,000 per month, you can live quite comfortably.

Retiring Early or With Little Money

Retiring a 30 and never working another day in your life sounds like a dream, right? Fortunately, it’s possible if you can manage to save a large chunk of your salary each year. Even if you don’t have much money saved up, you still could receive social security benefits (provided that you paid in during your career). Those who are tight on cash may need to come up with creative ways to make money online if they want to retire anytime soon.

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How to retire at 55 with no money?

Think about your current assets like your car and house and determine whether or not you can downgrade. In addition, you should cut down on other areas of your budget and try to supplement your income.

How to retire early with no money?

Without money, it’s not easy to retire comfortably. You’ll need to focus on creating a small stream of income. This could be from a business, investment, and so forth. 

What is a reasonable amount of money to retire with?

Anything between $1 and $1.5 million is considered a reasonable amount to retire with. Of course, if you have an expensive mortgage to make or other debt, you could easily need more than this.

How to live in retirement with no money?

Even if you don’t have much in savings, you can still receive a social security benefit if you paid into it during your career. The Social Security Administration has an online retirement estimator to help you determine your benefits. 

How to survive retirement with no money?

You can look to your spouse to see if she or he can support you during your retirement. If you your spouse has a limited amount of money as well, it might be best to become expats and move out of the country.

Where to Save and Invest Retirement Money  

From Roth IRAs to 401 (b) accounts, there are many options when it comes to saving for retirement. Most people don’t use a traditional savings account to hold their retirement money because they don’t come with tax advantages. Not to mention, employers typically contribute a portion of your salary in what is called a defined contribution plan. Here are a handful of questions covering where to save and invest retirement money:

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Why save money for retirement?

It’s crucial to save money so you can live a life similar to pre-retirement. And since life is full of uncertainties, having a decent amount of cash saved up is a cushion for possible emergencies.

How to invest my retirement money?

The safest way to invest your retirement money is to put it in a 401(k), 401(b), or an IRA. Not only do you get tax advantages, but employers match contributions for some of these instruments.

Why is it important to save money for retirement?

It is important to save money for retirement because you can’t just rely on social security benefits. The average individual only gets just above $1,400 per month in social security when they retire.

How to invest PF money after retirement?

You can invest your PF money in a conservative portfolio with a mixture of different instruments. This includes stocks, mutual funds, and short-term and long-term bonds.

How much money should you save a month for retirement?

The amount of money depends on your age and desired goal for retirement. If you’re 20 years old and want to reach $2 million, you need to save $639 per month.

Where to put my retirement money?

The best place to put your retirement money is in a 401(k) that your employer matches. Most employers will match between 3 to 6% of your salary. 

What to do with lump sum retirement money?

Don’t let your lump sum sit in a retirement account. Instead, put the money in CDs, bonds, or stocks. You should consider meeting with a financial advisor if you don’t know what to do with your money.

Can the IRS take your retirement money?

Yes, the IRS can legally garnish funds from a retirement account if you owe them money in back taxes. In fact, they can go after your retirement funds both before and after you retire.

Withdrawing Retirement Funds

While you don’t have to be 59 ½ to withdrawal from your retirement accounts, you will face a hefty penalty if you decide to take money out early. Moreover, once you reach retirement age, you need to know how to actually start using your retirement money. For example, do you want a lump sum? Or do you want to receive monthly payments? The below questions will help you learn how to actually withdrawal your retirement funds:

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How to find my retirement money?

If you’re trying to track down your old 401 (k) accounts, the best way to do so is to contact your old employer or see if you have any old statement sitting around.

How to get my retirement money from an old employer?

The first step to getting your retirement money from an old employer is to simply call them and speak to the HR department. If they merged with another company, contact the successor.

How to take money out of 403b before retirement?

To take money out of a 403b before retirement, you need to contact both your employer and the investment company and apply for a withdrawal. Keep in mind that you could have to pay up to 10% in penalties.

Can you take money out of your 401k before retirement?

Yes, you can take money out of your 401k before retirement. However, you will have to pay a 10% early withdrawal penalty if you take money out before you’re 59 1/2.

How to withdraw money from 401k after retirement?

Once you hit retirement age, you can elect to take qualified distribution. It’s generally recommended that you take out 4% each year in distributions, so that you consistent flow of cash throughout your retirement.

Can I take money out of my retirement plan?

Yes, you can take money out of your retirement plan. However, if you decide to take out money before the age of 59 ½, you will have to pay a 10% early withdrawal penalty.

How to apply for social security retirement money?

You can apply for social security retirement benefits at a social security office, over the phone, or online. If you wish to apply in person, you will need to call and make an appointment beforehand. 

How to withdraw money from tsp after retirement?

For a full withdrawal, you will need to fill out a TSP-70 form. You have the choice to either withdrawal the funds as a lump sum or in a series of monthly payments. 

Can you withdraw money from an IRA before retirement?

Yes, you can withdraw money from an IRA before retirement. Keep in mind that should you decide to take money out prematurely, you will have to pay a 10% penalty.

Life After Retirement

So, you just received a whole lot of cash, now what? Some retirees just let their money sit there and don’t take advantage of investing options. While it’s recommended to be conservative after retirement, you can certainly still continue to make money. Since there’s a chance your money could dry up, it’s crucial to keep your finances in order. These questions will help clear up some doubts about what life is like after you retire:

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How long will my money last in retirement?

You can calculate how long your money will last in retirement by first determining your annual fixed and variable expenses. Once you get that number, divide your total savings by your total annual expenses.

How to invest retirement money after retirement?

A retiree can safely investment their money bonds, granted that they are low-risk. Moreover, retirees should consider meeting with a financial advisor and investing a portion of their capital into stocks.

Can I borrow money from my retirement annuity?

Yes, you can borrow money from your retirement annuity. Even though you’re “borrowing” money, you will still have to pay an assortment of fees associated with early withdrawal.

What is the average amount of money people retire with?

Those aged 55 to 64 have a median of $120,000 in retirement savings. Since this range covers the age nearing retirement, it’s safe to assume that most retirees are ending their careers at the amount.

How much money can I make at full retirement age?

That depends entirely on your social security benefit and retirement plan distributions. Moreover, some retired can certainly go back to work and earn a full-time salary.

How can I check my retirement money?

The investment company your employer utilizes for retirement plans should have a portal where you can view the amount you have in retirement savings. If not, you can call them to get your current balance.

How to make money in your retirement?

With a lot of free time on their hand, many retirees pick up a part-time job to make extra cash and stay occupied. Another option is to drive for Uber or Lyft and set your own schedule.

Can you use retirement money to buy a house?

Yes, you can use retirement money to buy a house. As a matter of fact, qualifying first-time homebuyers can deduct from their IRA without having to pay a 10% penalty.

How to make your money last in retirement?

The best way to make your money last in retirement is to live similar to how you did before. Don’t buy a brand new house, take lavish trips eat month, or eat out for every meal.

How to earn extra money in retirement?

Since you will likely have extra time during retirement, you can make extra money by walking dogs, housesitting, freelance writing, and a variety of other small tasks that will keep you occupied.

How to spend money in retirement?

Just because you’re retired, doesn’t mean you shouldn’t have a budget. Every retiree needs to create a spending plan and follow it to a T. If needed, use a financial advisor to help you manage your finances.

Jordan Beaumont

Jordan Beaumont

Financial Guru

Jordan's work focuses on helping people reach their financial goals so they can spend more time with family and friends and less time worrying about their budget. After finishing college with a degree in Accounting and Communication, he realized that these are the most important things in life and that people shouldn’t miss out because of money.

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