What is a good amount to retire with?

Retirement is inevitable; so you must prepare for it, whether you are getting big paychecks or not!

However, many Americans aren’t saving enough for retirement if they’re even saving at all. Research shows that 22% of Americans have less than $5,000 saved for retirement, and 15% have absolutely no retirement savings, in 2022.

Most people stress over questions like; How much do I need to retire? At what age should I retire? How should I live after I retire? There’s no right or wrong answer to these questions. In reality, the amount of money needed for retirement depends heavily on the lifestyle you plan to live after you quit, among other factors.

People assume they need $1.5 – $1.7 million, but they’re not always correct. Everyone plans to have different lifestyles, so trying to estimate a total cost is difficult. 

In this article, we’ll provide you with a detailed, comprehensive guide to help you determine exactly how much you should have saved to retire comfortably in the US, depending on your goals.

What is the average amount needed to retire in the US?

How much money is needed for retirement? According to a survey from Charles Schwab, Americans believe they need $1.7 million, on average, to retire. So people think $1.7 million is the magic number. 

But aside from what Americans think, what do experts say?

According to financial experts, the amount of money you need to retire comfortably depends on several factors, including your spending habits and the type of lifestyle you want.

A recent survey by GoBankingRates found that the average person expects to spend $60,000 every year during retirement (not including travel or vacations). The survey also found that 27 percent of respondents expect to retire with $1 million or more in savings.

For example:

Let’s say you’re 45 years old right now, you’re making $100,000 per year, and want to retire in 20 years, which would put you at age 65. With bonds paying 4%, an investment return of 7%, and a withdrawal rate of 3%, you’ll need $1 million in savings to live comfortably during your retirement years (in addition to Social Security).

What percentage of income do you need to save for retirement?

Your question: “What’s the minimum amount in savings I need to retire?” When saving for retirement, it’s important to start early and maintain a consistent savings rate.

The rule of thumb, developed by financial planners, states that you should be saving 10-15% of your salary each year to ensure a comfortable retirement. If you’ve started saving later in life (say in your 40s), don’t despair. It’s never too late to start saving more.

If you’re just starting, here’s a tip to help you get on track:

Consider using tax-advantaged accounts like 401(k)s or IRAs for the bulk of your retirement savings — they offer tax advantages over taxable investments (tax-deferred growth and tax-free withdrawals). Take advantage of employer match programs that are available out there.

What Is the 4% Rule?

The 4% Rule is a guideline that says you can withdraw 4% of your 401k accounts each year, and not run out of money. It’s a rule of thumb that’s been around since the early 2000s, but it doesn’t work for everyone. It’s based on the idea that you can safely withdraw 4% of your savings in the first year, and then adjust for inflation every year after that.

Note! Experts disagree about whether a 4% withdrawal rate is the best option. Many people, including the inventor of this rule, believe that 5% is a better rate for everyone, but the worst-case scenario. In today’s interest-rate environment, others argue that 3% is a safer bet.

How much do you need to save for retirement at every age?

The amount you should have saved at each age is entirely dependent on your current and future lifestyle. Ideally, you should talk to a registered retirement consultant for better guidance.

According to one of the most popular retirement-plan providers, Fidelity Investments, you should save 10x on your current income if you’d want to retire by 67. If you want to retire earlier, then step up that savings number.

Let’s break down how much you need to have saved at every age (40s, 50s, 60, and 70s), to make a comfortable retirement package by age 70. 

1. Age 30: You should have saved the equivalent of your annual salary by age 30. If you currently earn $65,000 a year, you should have saved $65,000 by the age of 30. 
2. Age 40: Saved 3x your current income
3. Age 50: Saved 6x your current income
4. Age 60: Saved 8x your current income
5. 67: Saved 10x your income

Milestone amounts to be saved by age group, to retire comfortably at age 67 in the US.

How much do I need to retire at 40?

Have a goal to retire at 40? You need to save with far more ambition. If you need $50k a year for 45 years after retirement, you’d need to save $2.25 million – unless you get a side job. Say you’re 25, with an annual income of $100k, if you save 70% (70K) a year, you’ll have a little over $1 million.

How much do I need to retire at 45?

Say you want to get $50k to cover your annual expenses for 40 years from the year of retirement; you would need to save at least $2 million. 

Assuming you’re 25 years old today, with an annual income of $100k. You’ll have to save 70% ($70K) of your income every year to have $1.4 million when you retire at age 45.

How much is enough to retire at 50?

For retirement at 50, you may want to get $50k a year for the next 35 years after retirement. For this, you’ll need to save $1.75 million – unless you get a side job. Say you’re 25 years old today, with an annual income of $100k, saving 70% (70K) of your income a year should give you $1.75 million. Just what you need!

How much do I need to retire at 55?

You’ll need how much money to retire at 55? You could wish to set aside $50k per year for the next 30 years after you retire at 55. Unless you find a side work, you’ll need to save $1.5 million for this. If you’re 25 years old now and earn $100k per year, saving 50% (50K) of your income per year will net you $1.5 million.

How much do I need to retire at 60?

“How much should I have to retire at 60?” That’s Only 2 years shy of social security benefits. But let’s plan for you to receive 50k a year for 25 years after retirement. For this, you’ll have to save $1.25 million. If you’re 25 years old and make $100,000 per year, you’ll have $1.4 million if you save 40% (40,000) of your income each year.

How much do I need to retire at 65?

After you retire at 60, you might want to set aside $60k per year for the next 20 years. You’ll need to save $1.2 million without social security benefits into account. If you’re 25 years old and make $100,000 per year, you’ll have $1 million if you save 1x income by age 30, 3x by age 40,  6x by age 50, and 8x by age 60.

How much do I need to retire at 70?

You could wish to set aside $75k per year for the next 15 years after you retire at 70. Without considering social security benefits, you’ll need to save $1.25 million. You should save 1x your annual salary by the age of 30, 3x by the age of 40, 6x by the age of 50, 8x by the age of 60, and 10x by the age of 70, you will have $1.2 million.

How much money do you need in 401(k) to retire?

401(k) is a retirement plan. It’s a type of pension that allows you to save money for retirement with tax breaks.  Employees contribute a portion of their salary before taxes are taken out, and employers often match employee contributions up to a certain percentage.

The amount of money you’ll need in your 401(k) depends on how much you earn and how long you expect to live. The IRS has guidelines on this, but it’s best to talk with a financial professional or retirement planning agency to see what kind of nest egg you’ll need to retire comfortably.

How much money do you need for a comfortable retirement? The IRS says that if you’re 30 years old, earning $40,000 per year, and expecting to live until 85, then you should aim for about $1 million in assets by age 65.

How do you calculate retirement savings?

Speak to investment experts to help you figure out how to increase your retirement savings. Schedule a call with a top investment management consultant in Portland, Oregon today.

If you want to do the maths yourself, here’s a quick formula to calculate retirement savings:

Retirement Savings = Annual Income x Saving Rate

If you are saving for retirement in an IRA or 401(k) account, then your savings rate is the percentage of your paycheck that goes into the account each month. For example, if you earn $4,500 per month and are contributing 10% of your earnings into an IRA or 401(k), then your savings rate would be 10%.

Example – 

Say you earn $100K a year, your tax rate should be 24%. For a savings rate of 20%, Your annual retirement savings will be $20K. 

I.e. Retirement savings = ($100k * 20%)  = 20k

Seeking a financial advisor in Portland, Oregon? We’ve got you covered!

Is $150,000 a good retirement income?

First, let’s look at the facts. According to the U.S. Department of Labor, the average American spends about $38,000 per year on goods and services. That number is a bit higher for couples ($43,600) and those with children ($44,100). But even if you’re single and childless, you probably spend more than that each year.

So in less than 5 years, $150k is chewed up! Unless you only plan to live for 4 years after retirement, then $150k is not enough.

Next, let’s look at Social Security benefits. If you’re retiring at age 65 in 2029 and expect to get an average of $2,400 per month from Social Security (that’s what it was for seniors in 2018), that would add only up to about $30,000 per year—with no money coming in from your savings or investments.

So what do these numbers tell us? They confirm that $150,000 isn’t enough money to retire with if you don’t have any other sources of income or savings (and most people don’t).

How about $500K?

If you spend $60k – $75k a year and your nest egg is $500k, you’ll be able to fund your expenses for only 10 years. And if the goal is 20 years after retirement, then $500k isn’t going to be enough money to get you there. 

What about retirement benefits?

With retirement benefits reaching up to $30k a year, that should only account for only about 40% – 50% of your living expenses, including health insurance. This added to your $500k retirement savings gets you just across the 14-year mark. Still not enough for the 20-year goal!

Are a million dollars enough to retire comfortably? 

The $1 million retirement goal is a popular one. It’s been repeated in the media and has even become the default amount people are saving for retirement.

The average cost of living in the U.S. is $56,000 a year. That means if you’re retiring at 65, and you spend every dollar of your $1 million nest egg over the next 25 years, you’ll have enough money to cover your expenses until you’re 90.

Of course, many variables can affect how long your money will last — including inflation rates and health care costs.

How can a financial advisor help?

Retirement is a constant source of headache for many. How much money do you need for retirement, at what age should you retire, what should you do after your retirement, and how should you save for retirement? The key is to get your wealth planning right! 

That’s where financial advisors come in – to provide you with expert guidance on how to better prepare for retirement.

Seeking an experienced financial advisor today? Interactive Wealth Advisors are the perfect companions for your retirement journey. We’ll help you make the best retirement decisions for yourself and your family, because, in the end, it boils down to you and your happiness. 

Schedule a call with us today for a free session with one of our expert financial advisors.