SHORT ANSWER: Experts say that to retire today, you need $1.5 million, but that depends on your current salary and what calculation method you’re using to determine the right amount.
Putting money away in a retirement account can feel like playing roulette — you take action and hope that it turns out for the best. It might lead you to wonder: How much do I need to retire? The dollar amount will vary based on your current income, lifestyle and expectations. But experts have found that the average American needs $1.5 million to retire comfortably today. Learn the factors that go into that calculation and see how you’re doing in meeting your goals.
Average Retirement Savings by Age
One aspect of calculating your retirement savings is seeing how you stack up to the average and median savings based on your age. Just before retirement, the average person has $555,000 in their 401(k) account. But that isn’t their total savings. They might also have IRAs, standard investment accounts, Social Security or pensions that will provide additional funds during retirement.
Empower Retirement found these average and median 401(k) balances nationwide broken down by the account holder’s age.
| Account Holder Age | Average 401(k) Balance | Median 401(k) Balance |
| 20s | $74,460 | $29,753 |
| 30s | $160,517 | $69,718 |
| 40s | $344,182 | $151,274 |
| 50s | $558,740 | $247,338 |
| 60s | $555,621 | $209,382 |
| 70s | $417,379 | $103,219 |
| 80s | $385,783 | $78,534 |
How Much Do I Need To Retire? 3 Guidelines to Follow
When you’re evaluating how much money you need to retire, you can use a variety of calculations to find how you’ll live comfortably. Here’s a look at some of the various recommendations.
1. The 4% Rule
Look at what you have saved for retirement and calculate how much 4% of those funds would be. That’s how much you should pull from retirement each year. So if you have $500,000 saved for retirement, you can withdraw $20,000 from the account each year. Evaluate other retirement income, such as Social Security, to see whether this would be a realistic amount for you.
Using this calculation should offer a safe and steady income stream. In most years, you’d only be pulling the interest or dividends on your investments if you were withdrawing 4%. That way, you never reduce the value of the account and will have savings for anything unexpected.
2. 10x Your Annual Salary by Age 67
Another way of calculating how much money you need to retire is to take your salary at the time of retiring at age 67 and multiply it by 10. That’s how much money you should have in your retirement accounts. So if you make $100,000 per year, you need $1 million to retire comfortably.
Experts estimate that you should be able to maintain your current lifestyle using that calculation.
3. 80% of Your Yearly Salary
At a minimum, you need 80% of your yearly salary at the time of your retirement to live comfortably. That means that your savings should provide a gross income that is 80% of your current income. So if you make $100,000 per year, you need $80,000 per year in retirement.
But there’s more to calculate to use this guide. You’ll need to decide at what age you hope to retire, then subtract that from the average life expectancy. If you plan to retire at 67 and the average life expectancy is 80, you’ll need $1,040,000 to replace your $100,000 per year salary.
How Much Do I Need To Retire? 6 Factors to Consider
While experts have studied retirement extensively to come up with the amount of savings you need to retire, they can’t account for various factors that might adjust your unique amount up or down.
1. Debt
Ideally, by retirement age, you won’t have any debt remaining. But if you do, you should look to pay it off with a lump sum if you can. Before retiring, pay down all credit card debt so that it won’t be a factor in your retirement budget.
Review how much longer you have on your mortgage and try to put extra toward it each month to reduce it faster so you can relax more in retirement.
2. Inflation
When calculating how much you need for retirement, don’t forget to consider inflation. Throughout your retirement, the cost of living and goods will continue to increase. You might want to pad your estimated retirement savings to account for that. Another strategy is to say that the investments in your accounts will make up for inflation but that is never guaranteed.
3. Health
Your overall health can also impact how much you need to retire. Those with chronic conditions might need to save more for retirement to manage those conditions, such as type 1 diabetes. While you’ll qualify for Medicare, which offers good healthcare coverage, you’ll still spend more to manage existing conditions than those retiring without any conditions.
4. Retirement Location
Where you retire will also have an impact on how much money you need. The cost of living can vary greatly from one city to another. If you plan to head south or change areas, be sure to factor that into your retirement needs before you stop working. A good way to catch up if you’ve recently moved to a more expensive area is to max out your contributions to all accounts for a few years.
5. Target Retirement Age
Some people are willing to work until age 70, others want to retire at age 55 or go part time. Your target retirement age will impact how much you need to retire comfortably. The longer you work and contribute to your savings, the less time you’ll draw from the accounts and the longer you’ll have to make the accounts grow. Evaluate your preferences and needs to see what is ideal for you and start saving toward that goal.
6. Lifestyle and Spending Habits
Perhaps you’ve always kept your finances tight, and you’re ready to let loose a bit more in retirement now that you have the means to do so. Or maybe you’ve traveled while you’re young and now you’re ready to sit back, explore your hometown and spend less on extravagant things.
Consider what parts of your lifestyle will stay, go or start when you retire. Maybe you plan to get a membership to your local golf club or enjoy another pricey hobby with more regularity now that you have the time. Regardless, build a budget that creates the ideal lifestyle and work from there to save toward that goal. You can always cut out unnecessary items if you decide it’s time to retire but don’t have the funds for the more extravagant or luxury items in life.
Enjoy Retirement with Savings that Are Right-Sized for You
No guide or estimation can tell you specifically how much you need before you retire. Guides and calculations are helpful, but your finances and lifestyle will impact the dollar amount that’s right for you alongside your investments and their performance.
Frequently Asked Questions
Can I retire at 60 with $500,000?
Many retirees find that $500,000 is adequate to retire. But that depends on whether you have additional income sources, such as Social Security or a pension.
What is the average 401(k) balance for a 65-year-old?
The average 401(k) balance for a 65-year-old is $230,000. Without additional retirement income, this likely is not sufficient to retire.
How long will $1 million last in retirement by state?
$1 million in retirement income would last the longest in Mississippi where it is estimated to last just shy of 23 years. In contrast, that same amount would last the shortest in Hawaii at just over 10 years.
About Rebekah Brately
Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.