How Much Will I Need to Retire?

Find out how much you will need to save for retirement and if you're on track to meet your retirement savings goal
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How Much Will I Need to Retire?‚Äč

How much do you need to retire? And, equally important, how do you reach that goal? These questions baffle many American savers, and it’s no wonder. Financial experts throw out retirement savings numbers ranging from $1 million to $5 million, along with confusing rules about how much you should save, what your retirement living expenses will look like, and how much you can withdraw from your portfolio each year.

Let’s try to clear up that confusion right now with real-life numbers. The table below shows estimated retirement income, savings targets, and required monthly contributions for different salary levels and time frames.

Understand Compound Interest

The big standout in this retirement chart is the contribution rate, and how it changes based on your savings timeline. If you have 20 years until retirement and no savings, your target contribution rate is 36% of your pay. That’s likely unrealistic. The next best thing is to contribute whatever your budget allows now, and raise that contribution with every salary increase. Plan on putting any cash windfalls into your IRA or long-term savings account, too.

A second big takeaway is the size of the saving balance you’ll need. Social Security will keep you out of poverty, but it will not fund the lifestyle you’re used to. To avoid a big lifestyle downgrade, most people need seven figures in the bank at retirement. You can only reach that goal by taking your retirement savings seriously. Either you make tough choices now to save and invest, or you spend your senior years just scraping by.

Finally, you have to invest in the stock market to reach your savings goals. These projections use a 7% growth rate, which is seven times higher than what you’d earn in a high-yield savings account. Stocks come with a risk of loss, but staying out of the market guarantees you’ll have to downsize once you stop working.

Putting it Into Action

The big standout in this retirement chart is the contribution rate, and how it changes based on your savings timeline. If you have 20 years until retirement and no savings, your target contribution rate is 36% of your pay. That’s likely unrealistic. The next best thing is to contribute whatever your budget allows now, and raise that contribution with every salary increase. Plan on putting any cash windfalls into your IRA or long-term savings account, too.

A second big takeaway is the size of the saving balance you’ll need. Social Security will keep you out of poverty, but it will not fund the lifestyle you’re used to. To avoid a big lifestyle downgrade, most people need seven figures in the bank at retirement. You can only reach that goal by taking your retirement savings seriously. Either you make tough choices now to save and invest, or you spend your senior years just scraping by.