How much money do you need to retire?
You know you need to save, but how much? Estimate your future retirement income.
Overview: A common guideline when asking "How much money do you need to retire?" is the 80% rule: you should aim to replace about 80% of your annual pre-retirement income each year during retirement. It may be important to think about the lifestyle you want in retirement. Your expenses might change. Longer life expectancies mean saving more today for a comfortable future.
Have you been saving for retirement without a clear idea of how much money you'll need to live on? If so, estimating your retirement income needs may be your next step.
The 2025 Retirement Confidence Survey by the Employee Benefit Research Institute found that 33% of workers are not at all confident they will have enough money for a comfortable retirement. That's a lot of people facing an uncertain stage at the end of their lives.
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Consider the 80% rule
When considering your retirement income plan, many retirees may want to maintain their standard of living during retirement. To accomplish this, financial experts say you'll need between 70-80% of your pre-retirement income.
For example, a couple earning $60,000 per year would need between $42,000 and $48,000 each year during retirement.
Why less? Retirement typically triggers a number of changes in spending patterns. Your retirement cost of living may change if you've paid off your mortgage and other loans, your children have finished college and moved away or you no longer have work- and business-related expenses. Plus, you'll no longer be contributing to retirement plans.
Plan to maintain your standard of living
Of course, your specific situation may dictate the amount of money you'll need to live on. You may need more money than you anticipate. Healthcare costs have increased, and you could possibly use up a greater portion of your income than you planned to help ensure your insurance needs are met.
Also, you'll have more time to do the things you love, so you may spend significantly more on leisure activities, such as travel, entertainment, volunteering and hobbies.
Consider your lifespan
In addition, you need to take into consideration how long you might live when retirement planning. People are generally in better health and living longer, more active lives than ever before once they reach retirement age. According to the Social Security Administration, a man reaching age 65 today can expect to live to 84, while women can expect to live to 87. Those are only averages, and one in 10 people might even live past age 95.
So how much money do you need to retire? With so many factors to consider, estimating retirement needs can be difficult. A retirement calculator may be a good place to start. To see if you're on track, answer a few questions about your goals, how much you're currently saving and your retirement income sources.
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The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.
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State Farm Life and Accident Assurance Company (Licensed in NY and WI)
Bloomington, IL
