How Much Do You Need for a Comfortable Retirement?

A retired couple sit back on their sofa with their feet up.

(Image credit: Getty Images)

You may have heard you need at least $1 million to retire — and that may or may not be true. At the end of the day, how much you need to retire depends on your specific situation. Let’s walk through some scenarios and concepts to understand if you are prepared to retire and how much you’ll need to live comfortably.

When determining how much money you need to have saved for retirement, we need to start with how much income you’ll need on an annual basis. Some people may be frugal and need only $50,000 each year to live comfortably. Others may need $100,000 or $200,000.

Your annual income needs will determine how much you need to have saved. For example, if you need only $50,000 per year and your Social Security benefits are over that amount, then you could be fairly comfortable as long as you stay within your monthly budget. But if you need $100,000 a year to cover your expenses, and Social Security will cover only half that amount, it won’t work unless you have some investments to cover the deficit.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

A pension could also fill the gap if needed. Pensions can be great for retirement planning because of the guaranteed and predictable income they provide. However, less than 20% of workers have a pension available to them when they retire. If you find yourself in this 20%, then you may be able to save less for retirement because of those guarantees.

A hypothetical scenario

Let’s look at a person who needs $100,000 per year in income. Their projected Social Security benefits are $60,000 annually, so they have 60% of their income covered. The question becomes where to get the remainder of their income to fill the gap. They don’t have a pension, so the money must come from their savings and investments.

How much will they need to have saved? We start by planning for 30 years of living in retirement and use the 4% withdrawal rule, which is the rule of thumb for how much you can take out without running out of money. (Side note: Some say this rule is great, and others say it isn’t. I’m not here to argue for or against the rule. I’m just using it here as a starting point to find out how much you might need to save for retirement.)

So, we’ll plan to take out 4% from their investments every year for the next 30 years. We know they need $40,000 to supplement the $60,000 from Social Security and get them to their desired $100,000 in annual income. Doing some quick math, we see that they’ll need $1 million saved to generate the required $40,000 annually.

Guarding against the unknowns is critical

This math comes with some caveats. If you have $1 million saved, it can be easy to think, “Hey! I’m good to retire.” But you need to provide some cushion to guard against the unknowns. What if inflation rises more quickly than the average? What if health care costs increase? What if you need long-term care and have to spend $50,000 a year to cover it? What if you lose some of your investments when the market drops? That’s why it’s important to have a personalized, complete financial plan to mitigate risks and ensure you have enough saved to live the lifestyle you prefer in retirement.

These are all hypothetical, high-level numbers. I’d recommend working with a professional to do much more detailed work to ensure you’re not missing anything. I’d also encourage you to work with someone who can update these numbers on an ongoing basis. He or she can help set you up for success and guard against unknowns such as high inflation, lower-than-expected returns, or rising costs. Find a financial professional who can help you determine how much you need to live on, how much income you can count on from Social Security and a pension and then help you figure out how much you need to have saved to retire comfortably.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

TOPICS

Joe F. Schmitz Jr., CFP®, ChFC®, CKA®, is the founder and CEO of Peak Retirement Planning, Inc., which was named the No. 1 fastest-growing private company in Columbus, Ohio, by Inc. 5000 in 2025. His firm focuses on serving those in the 2% Club by providing the 5 Pillars of Pension Planning. Known as a thought leader in the industry, he is featured in TV news segments and has written three bestselling books: I Hate Taxes (request a free copy), Midwestern Millionaire (request a free copy) and The 2% Club (request a free copy).

Investment Advisory Services and Insurance Services are offered through Peak Retirement Planning, Inc., a Securities and Exchange Commission registered investment adviser able to conduct advisory services where it is registered, exempt or excluded from registration.