How Much Do I Need for Retirement?

A common question individuals have is, “How much do I need for retirement?” While there is no one-size-fits-all answer, some analysis and planning can help you lay the groundwork for your specific retirement goals.

Personalizing Your Retirement Planning

Asking yourself the following questions may help you estimate how much you need to save to live comfortably within your desired lifestyle.

  • Do you want to travel frequently in retirement, which can be costly, or do you want to maintain your current lifestyle?
  • Do you want a work-free lifestyle or plan to have a post-retirement career and earn supplemental income?
  • Have you considered the legacy you want to leave for your family or charity? If so, what portion of your retirement savings would you like to go towards creating that legacy?
  • What is your anticipated health outlook? Have you factored in the cost of continued health care after retirement?

3 Rules of Thumb to Help with Retirement Planning

With personal variables in mind, these rules of thumb may help you estimate how much to save to meet your individual retirement goals.

The End Goal: 10 to 12 times your annual earnings at retirement age

Multiplying your final working year’s income by 10 or 12 may give you a ballpark idea of how much to save for retirement. For example, if your salary were $150,000, then you’d probably want $1.5 to $1.8 million set aside for retirement to maintain the same lifestyle as when you were working.

Staying On Track: Have a multiple of your annual income saved based on current age.

Individuals around age thirty may want to start with savings that match one year of their annual income. Individuals around age forty may want to strive for 3 times the amount of their salary set aside for retirement. Finally, at retirement age, having 10 to 12 times the amount of their annual income is often suggested.

Plan a Smooth Transition: 60%-100% of your pre-retirement annual income

Having enough saved to replace 60% to 100% of your pre-retirement income may help offset different budget items. For example, while you may have lower work-related costs, you may have higher healthcare costs to budget for.

Stay on Track with Financial Health Checks

Financial health checks can help you monitor and stay on track with your retirement savings goals. Some markers to strive for include having the following:

  • Enough income to save at least 15% of your income in IRAs or other retirement plans.
  • The ability to increase your savings rate yearly.
  • Regular meetings with your financial planner to analyze and monitor your retirement savings.

Remember, your retirement savings estimate should be tailored to your unique needs. By considering the rules of thumb above, your personal goals, and insight from your financial planner, you can more confidently save and plan for retirement.

Learn More about Retirement Planning

Learn More about Larry Davis, Financial Advisor Near Rochester, MI 

About Larry Davis, Financial Planner for Retirement

Larry has been active in the financial planning field since 2004 and is the founder of Davis Capital Management. As a well-known financial planner in the Southeast Michigan area, he works primarily with small business owners, post-divorce planning, and people transitioning from their working years into retirement. Davis Capital Management is located in Shelby Twp, just minutes away from Rochester Hills.

Through his experience he has developed and refined wealth management processes including the PET FORMula™. He is an active member in the Financial and Estate Planning Council of Macomb County. Larry is also actively involved with the Rochester Chamber of Commerce. He resides with his wife and three children in Washington Township and feels very blessed to be a part of this community.