How Much Money Will I Need in Retirement?

Start with the right mental model

When calculating how much money you’ll need in retirement, it can be helpful to think of retirement as a cash flow challenge instead of a savings total.

Saving for retirement comes down to answering one core question: How do I ensure my income in retirement is enough to cover my expenses?

To keep that focus, work across three threads:

1. Your baseline income floor (Social Security, pensions, simple income annuities)
2. Your portfolio withdrawals (how much you draw and how you adjust)
3. Your actual spending need after taxes (budget plus healthcare)

How to Size Your Number: two inputs that drive everything

Start with two assessments:

1. Income near retirement: what you expect to earn just before you stop working (helps with “income-multiple” benchmarks).
2. Spending in retirement: the budget you plan to support after taxes and premiums.

Many households target about 70%–80% of final pay, but needs vary by earnings level because Social Security replaces a smaller share for higher earners and a larger share for lower earners.

Understanding the 4% withdrawal rule

In 1994, Financial Advisor William Bengen published a paper titled “Determining Withdrawal Rates Using Historical Data” that analyzes several different methods of withdrawing money in retirement.

In this paper, Bengen proposes a strategy now commonly referred to as the “4% rule.”

Under this rule, retirees can safely withdraw around 4% of their retirement savings in the first year of retirement and then make withdrawals in subsequent years that track the pace of inflation.

By following this strategy, Bengen’s research predicts that almost all retirement accounts will last at least 30 years, with some accounts lasting 50 years or longer. Treat 4% as a starting rule built on historical U.S. returns. However, according to Morningstar, forward-looking research that uses today’s valuations and yields often points to ~3.7%–4.0% as a prudent initial range unless you’re willing to adjust spending.

In contrast, a withdrawal rate starting at 5% would result in more than half of portfolios running out of money in less than 50 years, with a chance for the worst-performing portfolios to run out after 20 years.

For example, imagine that you just entered your first year of retirement and have $1 million saved in an investment account.

In your first year of retirement, you withdraw 4% of your account, or $40,000, and at the time inflation is averaging 3%.

In your second year of retirement, you take your withdrawal amount from the prior year ($40,000) and adjust it based on the prior year’s inflation rate (3%). So, in your second year, you withdraw $41,200.

You would then need to adjust your withdrawals to keep up with inflation for the remainder of your retirement. Alternatively, with a guardrails method you might skip an inflation raise after a down market year and add a raise after a strong year—small, rules-based nudges that can extend portfolio life while preserving lifestyle.

Applying the 4% rule to your savings goals

Now that you better understand the 4% rule and how it works, you can apply this rule to your savings goals to estimate how much money you’ll need to retire.

Returning to the discussion from earlier, you should remember that retirement is a cash flow challenge, not a savings challenge. You should start by looking at how much money you’ll spend in retirement, then use that number to calculate how much to save.

As a rule of thumb, you can estimate that you’ll spend roughly 80% of your pre-retirement income on expenses every year during retirement. Ranges matter: many higher-income households need closer to 55%–70%, while lower-income households may need 75%–90% because of different Social Security replacement rates.

So, how do you reach this income number?

To begin, calculate how much money you (and your spouse) will receive from Social Security and other guaranteed payments (such as pensions and annuities) annually.

Subtract this number from your required retirement income to arrive at the amount of money you’ll need to withdraw from your retirement accounts each year. On average, Social Security provides about ~40% income replacement for a “medium earner” at full retirement age; claiming later (up to 70) increases benefits by about 8% per year from full retirement age and shortens the years your portfolio must fund.

Using our example from above, let’s assume that you and your spouse each receive around $20,000 annually from Social Security now that you’re retired.

Subtracting these amounts from the $80,000 estimate from earlier gives us a new income requirement of $40,000. Applying the 4% rule to this amount, we could divide $40,000 by 4%, resulting in a final savings number of $1 million.

Put another way, to have an income of $40,000 in retirement under the 4% rule (after factoring in Social Security), you’d need to save roughly $1 million in a retirement savings account.

You can then adjust this math up or down to look at how much money you’ll need in different scenarios. One powerful lever is when you retire: frameworks based on income multiples typically point to ~12× salary if you stop around 65, ~10× around 67 and ~8× if you work to 70.

Use these high and low estimates to build out a general range of how much you should save in your account. Then, use this range to inform your saving and investing goals. If your number feels out of reach, aim first to raise your savings rate (auto-increase by 1% each year) and capture every match; 2025 limits let many workers contribute up to $23,500 (or $31,000 if 50+) to 401(k)s, with a special $11,250 catch-up at ages 60–63 when available.

Alternative ways to estimate how much money you’ll need to retire

The 4% rule requires a bit of math, and some financial experts believe that the rule is too conservative and rigid for some situations since it assumes a minimum 30-year retirement and a 50/50 split between stocks and bonds.

For this reason, it can be helpful to check your math using a few other frameworks so you can build out a broad range of estimates for how much you’ll need to save for retirement.

Consider running both a fixed real plan (classic inflation raises) and a flexible plan (guardrails or percentage-of-portfolio) to see how much extra spending flexibility you gain when markets are strong—and how much you’d trim after weak years.

Option 1: Save around $1 million in an investment account

Historically, when asked how much money Americans should save for retirement, financial experts would throw out broad numbers such as $1 million or $2 million as a quick, general goal.

These amounts allow for a healthy withdrawal rate of 4–5% per year (accounting for appreciation and inflation) while still giving you enough income to live comfortably in most areas across the United States.

As outlined above, if you save $1 million in an account with a 50/50 split between stocks and bonds, you could withdraw $40,000 each year to fund retirement without worrying too much about running out of money.

Accordingly, saving $2 million would result in a withdrawal income of $80,000 in your first year of retirement.

Combined with Social Security, these numbers mean that the average American could comfortably retire with around $1–2 million in a retirement account. Delaying Social Security up to 70 materially boosts the guaranteed piece of that income, lowering what your portfolio must supply.

Option 2: Save a multiple of your pre-retirement salary

Another common shorthand rule is to take your pre-retirement salary and multiply this number by eight, 10 or 12 to arrive at a final range for how much money you should save.

For example, let’s say you expect to make $100,000 in the year before you retire.

Using the multiples from above, and assuming a 4% withdrawal in your first year of retirement, we would arrive at the following numbers:

As you can see, these numbers closely match the estimates from the 4% rule above and the general “around $1 million” approximations in the previous section.

Option 3: Factor in other sources of income

Finally, remember that retirement is solely a question of cash flow—where your income must always remain higher than your expenses.

Any additional sources of income in retirement (or any drastic reductions in your expenses) will change the estimates for how much you’ll need to save.

Many retirees choose to take on a part-time job or find another source of income to pad their retirement budgets, such as purchasing and renting real estate.

Others choose to live with their younger family members to cut housing costs out of the equation, either entirely or in part.

Still others choose to put their money into an annuity, which will pay out a consistent amount of money for either a set period or the rest of their life. If you use annuities, consider simple income annuities (SPIAs/DIAs) to cover essentials—and fund the nice-to-have spending from markets, which are easier to flex.

The key thing to remember is that—no matter your strategy—your goal should be to ensure you

have enough money to cover your expenses throughout your retirement years.

Running out of money too early can lead to financial insecurity, especially for individuals with high health costs in their old age. Budget explicitly for healthcare: the standard Medicare Part B premium is $185/month in 2025, Part D’s national base is $36.78 and higher earners can face IRMAA surcharges. HSAs (if eligible) help pre-fund these costs with triple tax advantages.

On the other hand, saving too much money for retirement can also be unwise, as it may limit opportunities to enjoy life in your income-earning years.

Finding the right balance between saving money and living in the moment can be difficult, which is why it’s important to find a retirement savings number that works for you. To keep taxes from eroding that balance, map withdrawals by account type (tax-deferred, Roth, taxable) and watch for RMDs starting at age 73 and IRMAA thresholds in retirement.

After you factor in other sources of income such as real estate or an annuity, your final savings number should reflect the amount of money you’ll need to meet your financial obligations in retirement.

What are retirement savings age benchmarks?

While personalized planning is essential for a precise retirement figure, various rules of thumb offer convenient initial estimates and benchmarks to assess progress. These guidelines can serve as helpful starting points for individuals beginning their retirement planning journey.

For example, if you have an income of $100,000, Fidelity suggests that you should have $100,000 in your retirement account at age 30, $300,000 by age 40, $600,000 by age 50, $800,000 by age 60 and $1 million when you retire at age 67. If you’re behind: levers by age band.

If you’re below these income-driven multiples, it may be wise to consider increasing how much you save to get back on track for your retirement goals.

2025 Contribution Quick Reference Guide

Claiming Social Security: 67 vs 70 (why timing matters)

Delaying from full retirement age to 70 earns delayed-retirement credits and reduces the income your portfolio must provide.

Alternative ways to estimate and manage risk

Consider these options to calibrate your savings goal, test worst-case paths and keep cash flow steady through good and bad years.

Income multiple: Aim for 8×–12× of final pay as an endpoint, then tailor for taxes, healthcare and retirement age.

Fixed-real vs guardrails: Pair a classic “inflation raise” plan with a guardrails version to see how small, rules-based adjustments change sustainability and lifestyle.

Other income sources and cost controls

• Work part-time or monetize skills for flexible cash flow.
• Real estate income can offset housing costs.
• Simple income annuities (SPIA/DIA) can cover essentials, letting market assets fund “nice-to-haves.”
• Healthcare planning: budget premiums, out-of-pocket costs and possible IRMAA surcharges.
• Tax-aware withdrawals: coordinate taxable, tax-deferred and Roth accounts to manage brackets and RMDs.

Comprehensive retirement planning solutions built for you

Answering the question of how much money you should be saving to retire with any certainty can be difficult. Financial professionals use several shorthand formulas to estimate a general target for how much money you’ll need to retire.

Our financial experts are available to help you understand the basics of planning for retirement.

If you’d like to speak with a financial professional about your retirement saving goals, give us a call at 800-236-8866, schedule an appointment online or stop in at any of our Associated Bank locations.

We’d be happy to help you build a retirement plan or investment strategy that can help you reach your financial goals now and into the future.