How Much Money Do You Need in Retirement?

By K. Bridget Schneider, CFP®, CRPC®

how much money you need in retirement

Have you asked yourself how much money you need in retirement? That’s a great question! I have read some rules of thumb that suggest five hundred thousand up to one million dollars, but that is such a wide range. How do you know which end of that range is right for you? Or even if the top of that range will be enough?

The amount you need in retirement depends heavily upon your individual goals, your lifestyle, and how long you may live. Even if you feel financially savvy and are diligently saving for retirement, you may be uncertain about how much you need to save for your retirement. Rather than trying to answer this question for everyone, it might be helpful to consider a hypothetical example.

Estimating How Much Money You Need in Retirement

You may recall from my last blog that I commented on how difficult it is for young adults to start saving. To reinforce the importance of saving for retirement, let’s start with an example of Julie, a 30-year-old woman who wants to retire at age 65. Julie estimates she will live to be 90. That means she needs to plan for a retirement lasting 25 years. Her only source of retirement income is Social Security which estimates approximately two thousand dollars a month in today’s dollars if she waits until full retirement age.

After considering current expenses, Julie estimates she’ll need $4,000 per month in retirement to pay bills and have some fun. But that’s in today’s dollars. Considering the effect of a potential 3% annual inflation, she can expect an annual living expense of $48,000 today to grow to $135,065 in her first year of retirement (2053) and to $282,797 in her last year (2078). This is the step that many forget. They use the same withdrawal amount each year in their calculations. However, due to inflation, that withdrawal may purchase less with each passing year.

So, the total amount Julie needs to fund her retirement for 25 years and allow for increases to compensate for inflation is over five million dollars! Assuming her savings will grow at a hypothetical rate of 5.5% after she retires, she needs about three million dollars when she retires at age 65 to meet her total potential needs.

The Reality of How Much Money You Need in Retirement

Julie’s hypothetical example is quite a bit more than the one million dollars I mentioned earlier! So, how much money will you really need in retirement, and how can you get that amount saved? It may seem too big to tackle, but it can be done. For ideas on how you might manage that goal, contact us here. We’ll be happy to provide some options to help you work towards your own goal.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

Recent Posts

4 Financial Planning Excuses You Might Be Using

By K. Bridget Schneider, CFP®, CRPC®October is National Financial Planning month.  I’ve written various blog posts discussing the importance of developing a financial plan and even how that plan may differ for special groups like women.  Unfortunately, you...

Is Financial Planning for Women Different?

By K. Bridget Schneider, CFP®, CRPC®The observation of American Business Women’s Day on September 22nd got me thinking about how my female clients’ financial planning needs differ from those of my male clients.  How does the financial planning advice I...

The Biggest Life Insurance Mistakes and How to Avoid Them

By Joe Globensky, RFC® September is Life Insurance Awareness Month.  And while we don’t limit our life insurance conversations to just this month, we want to share some of the biggest life insurance mistakes that we see and help you avoid them.Life...

How Do Insurance and Financial Planning Work Together?

By K. Bridget Schneider, CFP®, CRPC®Risk management is at the heart of any financial plan.  Being prepared for the unexpected can help you stay on track to reach your financial planning goals if you incur a loss or are injured in an accident, become sick,...

The Pros and Cons of Deferred Compensation

By Joe Globensky, RFC®At some point in your career, you may be offered participation in a nonqualified deferred compensation (NQDC) plan. Currently more than 90% of public companies offer some sort of NQDC plan and nearly half (44%) of eligible employees...


Office: 217.605.8130
Toll-Free: 844.305.7670
Fax: 217.666.4188

604 N Union St Ste 1
Lincoln, IL 62656

Email Us


Sign up to receive the latest news, tips, outlooks and more: