4 Actionable Steps to Ensure You Save Enough to Retire

how much do you need to retireRetirement may feel like it is a long time away, and it seems to be this complicated overwhelming thing to save for.

Yet, time seems to go so quickly you may end up at retirement with a bigger problem than figuring out how much to save.

You could be figuring out what expenses to cut and what part time job to have because you never did save.

Before that happens, here are four steps to help you decide how much money to save right now.

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How to Figure Out How Much Money You Need In Retirement

Yearly Income

Most financial planners will recommend targeting a certain percentage of your income to replace during retirement. This is typically around 75% of your gross income.

I however recommend instead you focus on how much it actually costs you to live. If you will continue to spend $50,000 after retirement it makes no sense to plan on $40,000 because of a random percentage that is too general.  Know your expenses as they vary from your income and these will be more important.

Some research that I have read has actually indicated that you need 120% of your income during retirement especially once you start factoring in medical costs. These are continually growing and they are outpacing inflation.

How Much Of Your Portfolio You Can Spend

What percentage of your retirement portfolio can you access each year?

Most advisers will tell you that between 4 – 8 % is a good target. This advice also comes from generalized numbers that include average inflation of about 4% a year and growth in stocks of  about 12%.  Thus allowing your nest egg to remain fairly un-depleted as you can keep up with inflation and the market will continue to increase or replace your funds.

This is a tough one to make a big generalization. Why? Because everyone has a different risk tolerance, spending needs and it assumes that you get the same return each year, which never happens! Plus that 12% number for return has been knocked down over the past few decades – drastically!

You may want to pick a base line number, such as I will spend 4% of my nest egg a year and then be prepared to adjust on a yearly basis depending on what the market is doing, and what your needs are. This is typically called the 4% rule, but it does have problems. (For more on the 4% rule)

The other option is to not deplete your assets, but instead create a portfolio that creates enough income for you to live on. This eliminates many what-if cases, but does require more in assets. (I teach this approach in my financial coaching program.)

Planned Retirement Age

Retirement age will have a big impact on how much money you have at retirement. Why? The longer you wait the more you can invest, the bigger your social security amount will be and the more time your money will have to compound.

Remember our retirement ages were set when our life span was shorter. If you can physically work and you enjoy your work keep going past the 62 – 65 retirement age. This will greatly increase how much you will have in retirement and how much you need to get through retirement.

What if you don’t enjoy your work, but still want to keep saving and working? Redefine what retirement is; rename it to your enjoyment years. Take a less stressful job (that non-profit really could use your skills), work part time, start a new career (consulting with the old company?) just keep some income coming in and allow your nest egg to keep growing! (Learn the difference between retirement and financial independence.)

How Much Money You Need

How much should I have in my nest egg? Yet again, not an easy one to generalize. The ongoing advice is one – three million dollars. Yet it is hard to generalize a random number for everyone.  Why?  Because of the two issues we have all ready discussed.

First how much do you need in retirement? Not the guy down the street or the couple next door – but how much do you need. This will determine what your nest egg needs to be. Second, when are you going to retire? You will need less the longer you work and have earned money coming in.

This calculator gives you a very basic idea of what lump sum you need.  After you have figured that out you can use this calculator to figure out how much to start saving.

Hopefully this helped make retirement seem a lit less overwhelming. The key is to get started today so you can have what you need in retirement.

Need more personalized help?  Check out our Financial Coaching where we cover your goals, where you are now and how to get to where you want to go with your life – not generic numbers.


  1. When you start with a decent savings rate, say, 15%, and 7% off the top for social security, that forms a preconceived notion that 80% is the target for retirement spending.
    The better way is to to track spending, every last dollar, and see how much might fade away as retirement gets closer. 25% of income might go to the mortgage, but after retirement, that older house will need ongoing maintenance, so the expense doesn’t go away completely.
    Averages and rules of thumb are clever, and may be a good target for a 20-30 something, but retirement is different for each of us, and it’s important to do the math yourself.

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