How Much Money Do You Need To Retire?

We spend years saving and growing our nest egg to one day eventually retire, but do you have any idea how much money you’ll need to make that dream a reality? Experts toss around various numbers ($1 million, $2 million), but in truth, everyone’s situation is different. It can seem overwhelming to make this calculation, especially if retirement is still far off in the future for you, but essentially, how much you will need boils down to only 3 factors: (1) how much you will spend annually, (2) what age you plan to retire/how long you’ll need your money to last, and (3) the annual rate of return you will receive on your savings in retirement.

1. To estimate your annual retirement spending, calculate how much you’re spending now. It’s always a good idea to keep track of your current expenditures, and this can help you to guess how much you’ll spend in the future. You can use the spreadsheet I provide in Learn How To Budget In Microsoft Excel. If that’s too complex, you can simply use your current income. I’d recommend overestimating how much you will spend rather than underestimating to be safe.

2. Determining your retirement age is more difficult. Typically, retirement age is based on when people can receive their full social security benefits, which used to be 65 but has risen to 67. However, living only on social security can be quite difficult (you can estimate your social security benefits here). You will likely need your own savings to keep your current standard of living. I prefer to treat social security as a backup rather than as something to rely on. And if you manage to grow a sizeable nest egg before you’re in your 60s, why wait to retire?

3. The annual rate of return you’ll receive on your savings/investments in retirement can only be a guess, so I’d suggest underestimating. Once you retire, the traditional advice is to be more conservative with your money. You won’t be able to replace any losses with your wages. Thus, you likely will not be investing only in stocks. Most experts suggest increasing your allocation to fixed-income investments such as bonds in retirement. This means that your return will likely be lower than it was when your portfolio was more aggressive. Of course, if you’re planning to retire early but don’t mind being forced back into work if the market crashes, feel free to keep a more aggressive portfolio.

Below I’ve provided numerous tables showing an estimation of the minimum nest egg you’ll need to retire from age 30 to 65, assuming that you’ll be withdrawing $50,000, $75,000, $100,000, $150,000, or $200,000 per year and earning 1% to 10% annual returns on your investments over the course of your retirement. Values are calculated using an annuity formula, assuming that withdrawals are taken at the beginning of the year and that you’ll live to 100. Keep in mind that these are merely estimations and do not take into account taxes, inflation, or social security (I discuss ways to accommodate taxes and inflation at the end). Please consult with a financial advisor about the specifics of your retirement decisions.

1% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$2.6 M	$3.9 M	$5.1 M	$7.7 M	$10.2 M
35	$2.5 M	$3.7 M	$4.9 M	$7.3 M	$9.7 M
40	$2.3 M	$3.5 M	$4.6 M	$6.9 M	$9.1 M
45	$2.2 M	$3.2 M	$4.3 M	$6.4 M	$8.6 M
50	$2.0 M	$3.0 M	$4.0 M	$6.0 M	$8.0 M
55	$1.9 M	$2.8 M	$3.7 M	$5.5 M	$7.3 M
60	$1.7 M	$2.5 M	$3.4 M	$5.0 M	$6.7 M
65	$1.5 M	$2.3 M	$3.0 M	$4.5 M	$6.0 M

2% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$2.0 M	$2.9 M	$3.9 M	$5.8 M	$7.7 M
35	$1.9 M	$2.8 M	$3.7 M	$5.6 M	$7.4 M
40	$1.8 M	$2.7 M	$3.6 M	$5.4 M	$7.1 M
45	$1.7 M	$2.6 M	$3.4 M	$5.1 M	$6.8 M
50	$1.7 M	$2.5 M	$3.3 M	$4.9 M	$6.5 M
55	$1.6 M	$2.3 M	$3.1 M	$4.6 M	$6.1 M
60	$1.4 M	$2.1 M	$2.8 M	$4.2 M	$5.6 M
65	$1.3 M	$2.0 M	$2.6 M	$3.9 M	$5.1 M

3% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$1.5 M	$2.3 M	$3.0 M	$4.5 M	$6.0 M
35	$1.5 M	$2.2 M	$3.0 M	$4.4 M	$5.9 M
40	$1.5 M	$2.2 M	$2.9 M	$4.3 M	$5.8 M
45	$1.4 M	$2.1 M	$2.8 M	$4.2 M	$5.6 M
50	$1.4 M	$2.0 M	$2.7 M	$4.0 M	$5.4 M
55	$1.3 M	$1.9 M	$2.6 M	$3.8 M	$5.1 M
60	$1.2 M	$1.8 M	$2.4 M	$3.6 M	$4.8 M
65	$1.2 M	$1.7 M	$2.3 M	$3.4 M	$4.5 M

4% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$1.3 M	$1.9 M	$2.5 M	$3.7 M	$4.9 M
35	$1.2 M	$1.8 M	$2.4 M	$3.6 M	$4.8 M
40	$1.2 M	$1.8 M	$2.4 M	$3.6 M	$4.8 M
45	$1.2 M	$1.8 M	$2.3 M	$3.5 M	$4.6 M
50	$1.2 M	$1.7 M	$2.3 M	$3.4 M	$4.5 M
55	$1.1 M	$1.7 M	$2.2 M	$3.3 M	$4.4 M
60	$1.1 M	$1.6 M	$2.1 M	$3.1 M	$4.2 M
65	$1.0 M	$1.5 M	$2.0 M	$3.0 M	$3.9 M

5% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$1.1 M	$1.6 M	$2.1 M	$3.1 M	$4.1 M
35	$1.1 M	$1.6 M	$2.1 M	$3.1 M	$4.1 M
40	$1.0 M	$1.5 M	$2.0 M	$3.0 M	$4.0 M
45	$1.0 M	$1.5 M	$2.0 M	$3.0 M	$4.0 M
50	$1.0 M	$1.5 M	$2.0 M	$2.9 M	$3.9 M
55	$1.0 M	$1.4 M	$1.9 M	$2.8 M	$3.8 M
60	$1.0 M	$1.4 M	$1.9 M	$2.8 M	$3.7 M
65	$0.9 M	$1.3 M	$1.8 M	$2.6 M	$3.5 M

6% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$0.9 M	$1.4 M	$1.8 M	$2.7 M	$3.5 M
35	$0.9 M	$1.3 M	$1.8 M	$2.6 M	$3.5 M
40	$0.9 M	$1.3 M	$1.8 M	$2.6 M	$3.5 M
45	$0.9 M	$1.3 M	$1.7 M	$2.6 M	$3.4 M
50	$0.9 M	$1.3 M	$1.7 M	$2.6 M	$3.4 M
55	$0.9 M	$1.3 M	$1.7 M	$2.5 M	$3.3 M
60	$0.8 M	$1.2 M	$1.6 M	$2.4 M	$3.2 M
65	$0.8 M	$1.2 M	$1.6 M	$2.4 M	$3.1 M

7% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$0.8 M	$1.2 M	$1.6 M	$2.3 M	$3.1 M
35	$0.8 M	$1.2 M	$1.6 M	$2.3 M	$3.1 M
40	$0.8 M	$1.2 M	$1.6 M	$2.3 M	$3.1 M
45	$0.8 M	$1.2 M	$1.5 M	$2.3 M	$3.0 M
50	$0.8 M	$1.2 M	$1.5 M	$2.3 M	$3.0 M
55	$0.8 M	$1.1 M	$1.5 M	$2.2 M	$3.0 M
60	$0.8 M	$1.1 M	$1.5 M	$2.2 M	$2.9 M
65	$0.7 M	$1.1 M	$1.4 M	$2.1 M	$2.8 M

8% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$0.7 M	$1.1 M	$1.4 M	$2.1 M	$2.7 M
35	$0.7 M	$1.1 M	$1.4 M	$2.1 M	$2.7 M
40	$0.7 M	$1.1 M	$1.4 M	$2.1 M	$2.7 M
45	$0.7 M	$1.0 M	$1.4 M	$2.0 M	$2.7 M
50	$0.7 M	$1.0 M	$1.4 M	$2.0 M	$2.7 M
55	$0.7 M	$1.0 M	$1.4 M	$2.0 M	$2.7 M
60	$0.7 M	$1.0 M	$1.3 M	$2.0 M	$2.6 M
65	$0.7 M	$1.0 M	$1.3 M	$1.9 M	$2.6 M

9% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$0.7 M	$1.0 M	$1.3 M	$1.9 M	$2.5 M
35	$0.7 M	$1.0 M	$1.3 M	$1.9 M	$2.5 M
40	$0.7 M	$1.0 M	$1.3 M	$1.9 M	$2.5 M
45	$0.7 M	$1.0 M	$1.3 M	$1.9 M	$2.5 M
50	$0.6 M	$0.9 M	$1.2 M	$1.8 M	$2.4 M
55	$0.6 M	$0.9 M	$1.2 M	$1.8 M	$2.4 M
60	$0.6 M	$0.9 M	$1.2 M	$1.8 M	$2.4 M
65	$0.6 M	$0.9 M	$1.2 M	$1.8 M	$2.4 M

10% Annual Return

Age	Withdraw $50k	Withdraw $75k	Withdraw $100k	Withdraw $150k	Withdraw $200k
30	$0.6 M	$0.9 M	$1.1 M	$1.7 M	$2.2 M
35	$0.6 M	$0.9 M	$1.1 M	$1.7 M	$2.2 M
40	$0.6 M	$0.9 M	$1.1 M	$1.7 M	$2.2 M
45	$0.6 M	$0.9 M	$1.1 M	$1.7 M	$2.2 M
50	$0.6 M	$0.9 M	$1.1 M	$1.7 M	$2.2 M
55	$0.6 M	$0.9 M	$1.1 M	$1.7 M	$2.2 M
60	$0.6 M	$0.9 M	$1.1 M	$1.7 M	$2.2 M
65	$0.6 M	$0.8 M	$1.1 M	$1.6 M	$2.2 M

Taxes and Inflation

As I mentioned earlier, the numbers above do not factor in taxes, inflation, and social security benefits. However, we can approximate taxes and inflation relatively simply.

To account for the effect of taxes, consider your chosen annual withdrawal amount during retirement as a pre-tax amount. Since most people think about their yearly spending money as based on their before-tax income anyway, this shouldn’t make much of a difference.

To account for inflation, lower your expected annual return rate by however high you anticipate inflation will be. If you are unsure, just use 2%. The Federal Reserve aims to keep inflation at 2% per year over the long term. This means if you think your nest egg will grow at 5% per year in retirement, instead check the table for 3% (5 – 2 = 3).

Conclusion

As you can see in the tables, the amount you’ll need for retirement is heavily dependent on your annual rate of return and withdrawal amount. Retirement age also plays a factor, but much less so at higher rates of return on your investments.

Again, keep in mind that these are just estimates. Consult with a financial advisor about your own circumstances before making a major life decision like retirement. Personally, I would recommend saving up more than the minimum before retiring. If your withdrawal rate matches your annual investment return, your nest egg will remain constant in value and you won’t have to worry about running out of money. And if your withdrawal rate is actually lower than your annual investment return, your nest egg will continue to grow even as you live off of it. But to do that, you’ll have to save more money before retiring. Good luck everyone!