How much money do I need to retire?

Most financial advisors recommend saving 10-12× your final salary. For an average retirement spending of $55,000/year, you need approximately $1.4 million saved using the 4% rule.

What is the average cost of retirement per year?

The average retiree spends $52,000-$58,000 per year. However, costs vary significantly based on location, health, lifestyle, and whether your home is paid off. Healthcare costs alone average $7,000-$12,000 annually in retirement.

Average Cost of Retirement in 2026 (How Much You Need)

The average retiree needs $50,000-$70,000 per year, requiring approximately $1.25M-$1.75M in savings for a 25-30 year retirement. Here’s how to calculate what you’ll need.

Average Retirement Spending

Category	Monthly	Annual	% of Budget
Housing	$1,500	$18,000	33%
Healthcare	$650	$7,800	14%
Food	$550	$6,600	12%
Transportation	$500	$6,000	11%
Utilities	$300	$3,600	7%
Entertainment	$300	$3,600	7%
Personal/misc	$350	$4,200	8%
Insurance	$200	$2,400	4%
Gifts/donations	$200	$2,400	4%
Total	$4,550	$54,600	100%

How Much You Need Saved

Using the 4% Rule

Annual Spending	Savings Needed (25×)
$40,000	$1,000,000
$50,000	$1,250,000
$60,000	$1,500,000
$70,000	$1,750,000
$80,000	$2,000,000
$100,000	$2,500,000

The 4% rule: Withdraw 4% of savings in year one, adjust for inflation each year.

Gross Need	SS Benefit	Savings Needed
$50,000	$20,000	$750,000
$60,000	$24,000	$900,000
$70,000	$28,000	$1,050,000
$80,000	$32,000	$1,200,000

Savings needed = (Annual need - Social Security) × 25

Retirement Spending by Age

Age Group	Average Annual Spending
65-74	$58,000
75-84	$52,000
85+	$46,000

Spending typically decreases with age (less travel, activity) but healthcare increases.

Retirement Cost by Location

Location Type	Annual Cost	Savings Needed
LCOL (Midwest/South)	$45,000	$1,125,000
Average US	$55,000	$1,375,000
HCOL (Coastal metros)	$75,000	$1,875,000
VHCOL (SF, NYC)	$95,000	$2,375,000

Healthcare Costs in Retirement

Expense	Annual Cost
Medicare Part B	$2,100
Medicare Part D	$500
Medigap/supplement	$2,000
Out-of-pocket	$2,500
Dental/vision	$1,200
Total	$8,300/year

Lifetime Healthcare Costs

A 65-year-old couple will spend approximately $315,000 on healthcare throughout retirement (Fidelity estimate).

Key Retirement Income Sources

Work History	Monthly Benefit	Annual
Minimum (low earner)	$1,100	$13,200
Average	$1,900	$22,800
Above average	$2,700	$32,400
Maximum (age 70)	$4,873	$58,476

The 3-Legged Stool

Source	% of Retirement Income
Social Security	30-40%
Retirement savings	40-50%
Pension (if available)	10-20%
Part-time work	Variable

Retirement Savings Benchmarks

Age	Savings Target	If Earning $75K	If Earning $100K
30	1× salary	$75,000	$100,000
40	3× salary	$225,000	$300,000
50	6× salary	$450,000	$600,000
60	8× salary	$600,000	$800,000
67	10× salary	$750,000	$1,000,000

Safe Withdrawal Rates

Withdrawal Rate	Success Rate (30-yr)	Risk Level
3.0%	98%+	Very conservative
3.5%	96%	Conservative
4.0%	92%	Standard
4.5%	82%	Moderate risk
5.0%	70%	Higher risk

Lower withdrawal rate = money lasts longer but requires more savings.

Early Retirement Considerations

Retire At	Years in Retirement	Savings Multiplier
65	25-30	25×
60	30-35	30×
55	35-40	33×
50	40-45	35×
45	45-50	38×

Early retirement requires more savings and bridging before Medicare (65) and Social Security (62/67/70).

Housing Options in Retirement

Option	Monthly Cost	Considerations
Own (paid off)	$500-$1,000	Taxes, insurance, maintenance
Own (with mortgage)	$1,500-$3,000	Principal + taxes + insurance
Rent	$1,500-$2,500	No maintenance, no equity
Downsize	Varies	Free up home equity
Move to LCOL area	20-40% savings	Away from family

Long-Term Care Costs

Care Type	Monthly	Annual
In-home aide (part-time)	$3,000	$36,000
In-home aide (full-time)	$6,000	$72,000
Assisted living	$5,000	$60,000
Nursing home (semi-private)	$8,000	$96,000
Nursing home (private)	$9,500	$114,000

70% of people over 65 will need some long-term care.

Retirement Expense Changes

Expense	Retirement Change
Commuting	Eliminated
Work clothes	Reduced
Retirement contributions	Eliminated
Healthcare	Increased
Travel/leisure	Varies
Taxes	Often reduced
Insurance	Often reduced
Housing	May reduce (paid off)

The Replacement Ratio

What % of pre-retirement income you need:

Lifestyle	Replacement Ratio
Frugal	60-70%
Moderate	70-80%
Comfortable	80-90%
Maintain lifestyle	90-100%

Most people need 70-80% of pre-retirement income.

Tax Considerations

Income Source	Taxation
Social Security	0-85% taxable
Traditional 401(k)/IRA	100% taxable
Roth 401(k)/IRA	Tax-free
Pension	Mostly taxable
Investment gains	Capital gains rates
Rental income	Taxable

Mix of account types provides tax planning flexibility.

Retirement Readiness Checklist

☐ Calculate target number (25× annual expenses)
☐ Estimate Social Security benefit
☐ Plan for healthcare costs
☐ Consider long-term care insurance
☐ Understand pension options (if applicable)
☐ Plan debt payoff before retirement
☐ Diversify account types (pre-tax, Roth)
☐ Create retirement budget

Bottom Line

Metric	Amount
Average annual cost	$54,000
Healthcare (65+)	$8,000+/year
Savings needed (25-year retirement)	$1.1M-$1.5M
Social Security (average)	$23,000/year
Recommend savings target	10-12× salary

Key principles:

Save early — compound growth is powerful
Maximize employer 401(k) match
Plan for healthcare costs (biggest wildcard)
Consider location — geography matters
Delay Social Security if possible (8%/year increase)
Have multiple income sources

The “right” amount depends on your lifestyle goals, health, and location. Run your numbers with realistic assumptions.

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