How much money do you need to retire? A savings and income guide

How much money you need to retire depends on your timeline, lifestyle goals, and how you plan to generate income. When you know how to determine a realistic estimate, you’re more likely to create a plan that helps you confidently retire and avoid surprises. 

‍

{{key-takeaways}}

‍

Read on to learn how to calculate your retirement target. We’ll show you how to define your income needs and choose an appropriate savings strategy.

What is a good retirement income?

A steady retirement income helps you maintain your lifestyle, even after your working years are behind you. Many financial experts recommend planning to replace roughly 70% to 80% of your pre-retirement income. For example, if you earn $100,000 a year today, you’ll likely want about $70,000 to $80,000 per year in retirement to feel just as comfortable.

Keep in mind retirement income rarely comes from a single source. Instead, most retirees use a mix of Social Security, personal savings, and pensions to create dependable income.

How to calculate your ideal retirement savings

Financial planners use several methods to help determine if clients have saved enough to retire: 

• Setting age-based goals: To monitor progress throughout your career
• Following the 4% rule: To convert income needs into retirement savings goals
• Using income multipliers: To provide quick savings estimates

Understanding how each of these approaches works and how retirement calculators apply them can help you fine-tune your plans.

Set age-based goals

The idea behind age-based goals is to save money more aggressively as your income grows while giving your investments time to compound. 

Common savings goals by age include:

• By 30: Save 1x your annual salary
• By 40: Save 3x your annual salary
• By 50: Save 6x your annual salary
• By 60: Save 8x your annual salary
• By 67: Save 10x your annual salary

If you earn $100,000 a year, that means you’d want to save $100,000 by 30, $300,000 by 40, and $1 million by retirement age. 

Use this method to measure retirement milestones, but be aware that these are simply benchmarks, not pass/fail targets. 

Follow the 4% rule

The 4% rule looks at how much you’ll spend each year in retirement to estimate how much you need to save. It’s based on the idea of a 30-year retirement and a balanced mix of investments — typically 50% stocks and 50% bonds.

With this method, you withdraw 4% of your total savings in your first year of retirement. After that, you increase the withdrawal each year to keep pace with inflation.

If you retire with $500,000 saved, a 4% withdrawal would give you $20,000 in your first year. If inflation is 3% the following year, that withdrawal would rise to $20,600 so your spending power stays the same.

Use this method when you’re closer to retirement, but know that it remains vulnerable to market fluctuations and inflation.

Calculate your income multiplier

Income multipliers use your current salary to estimate how much you’ll need to save for retirement. Instead of starting with expenses, this method compares your income to a recommended savings multiple.

The basic formula is: annual income x target multiple = retirement savings goal.

It’s recommended you save 10 to 12 times your annual income by retirement. So if you earn $100,000 per year, your target falls between $1 million and $1.2 million. 

‍Use this method for early planning or when you want a high-level estimate of your savings goal. 

3 factors influencing retirement needs in 2026

Three factors have the biggest impact on how much money you’ll need in retirement: age, preferred lifestyle, and investment growth. 

Retirement age

Retiring early means your savings have to last longer, so you’ll need a bigger nest egg. Working a few extra years shortens the time you rely on your savings. It also increases Social Security benefits by about 8% per year until age 70 if you delay past your full retirement age. 

You also need to plan for longevity risk, as living longer can increase the chance of running out of retirement savings. A long retirement often brings higher health-care expenses and greater exposure to inflation. These pressures make it necessary to create a plan that supports 30 years or more of income in retirement.  

Preferred lifestyle

Travel plans, hobbies, or even where you live can change your retirement budget. For example, the average retiree household income ranges from $20,500 in Indiana to more than $43,000 in Washington, D.C. Choosing a more affordable location or downsizing your home can free up tens of thousands of dollars annually.

Investment growth

A balanced mix of stocks and bonds has historically returned 6% to 7% annually, but market downturns (especially in early retirement) can reduce your nest egg faster than expected. This challenge is known as sequence-of-returns risk and can force you to withdraw more during these periods. 

Diversifying your investments becomes more important as retirement approaches. Growth-oriented investments and conservative holdings can protect your savings while still allowing them to expand.

Common retirement savings benchmarks (and when they fall short)

Retirement planning usually starts with benchmarks. But relying on these estimates alone can be risky. Without context, they can mislead and leave you unprepared for real-world expenses. 

The “Magic Number” approach

Many articles tout a “magic number” for retirement savings, often $1 to $2 million. These headlines are easy to digest because they offer a simple way to think about the amount needed to retire at 65. But in reality, the right amount depends on your income, location, and lifestyle. Someone living in a low-cost area with modest travel plans may need far less than a retiree in a major city who plans to travel extensively. 

Savings multiples by age

Financial planners might suggest saving a multiple of your salary by a specific age, such as 1x your salary by age 30 or 3x your salary by age 40. These guidelines assume steady income growth and consistent saving, making them a useful framework for tracking progress. But they aren’t one-size-fits-all. Late savers and career changers may not fit neatly into this model. 

The 4% rule and income-based planning

The 4% rule translates total retirement savings into an annual income target, giving you a better idea of how much you can withdraw each year. If you save $1.25 million, withdrawing 4% annually provides $50,000 in retirement income. 

This works well when you have a diversified portfolio and a retirement horizon around 30 years. However, it breaks down under certain conditions:

• Market volatility: Early in retirement can shrink your savings.
• Longer retirements: Run the risk of outliving your savings.
• Rising healthcare costs: Might call for higher withdrawals.

Luckily, combining the 4% rule with income-based planning can balance portfolio drawdown risk with reliable income.

Benchmarks alone might not be enough

Benchmarks can guide your savings goals, but they often assume favorable market conditions and predictable expenses. These conditions don’t always occur. Planning for retirement requires flexibility and a mix of income sources. To strengthen your plan, you’ll need guaranteed income sources like Social Security or annuities.

How guaranteed income can support retirement planning

The following sections highlight how guaranteed income strategies are useful for converting assets and managing financial risk.

Turning savings into retirement income

Many retirees focus on account balances, but what really matters is monthly income. This allows you to turn a portion of your savings into recurring payments, which you can use to cover basic needs like housing and everyday essentials. Guaranteed income protects your retirement accounts and reduces the need to withdraw large amounts during market downturns.

Reducing longevity and market risk

One of the biggest retirement worries is the possibility of outliving your savings. Drawing only from market-dependent investments exposes you to sequence-of-returns risk, where downturns early in retirement can damage your nest egg. 

Guaranteed income provides lifetime or term-based payments, independent of market swings. It doesn’t maximize returns, but it manages risk no matter how the market performs. This stability helps you maintain your preferred lifestyle in retirement.

Coordinating guaranteed income with Social Security

Guaranteed income works best when it complements existing sources like Social Security and pensions. You can use it to:

• Fill income gaps before Social Security benefits begin.
• Supplement or replace shrinking pension coverage.

By combining multiple income sources in this way, you build a resilient retirement plan that blends predictable payments with the ability to adjust.

When guaranteed income may or may not make sense

Guaranteed income can anchor your retirement plan and make it easier to pay for housing and healthcare without constantly worrying about the market. But it’s not the right fit for every goal, especially if you require funds for travel, hobbies, or legacy planning.

When you pair guaranteed income with other savings and investments, you create a well-rounded retirement strategy that balances security and growth.

Take the next step in retirement planning with Gainbridge

As you save for retirement, remember these key takeaways:

• The 4% rule and income multipliers offer guidance, not certainty.
• Retirement planning is most effective when you diversify income sources.
• Reviewing your plan regularly helps you adjust for life changes and keep goals realistic.

Understanding how much you need to retire is just the beginning. Explore Gainbridge to see how modern fixed annuities are structured and find out how guaranteed income can complement your broader retirement plan.

‍

This article is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. The Gainbridge® digital platform provides informational and educational resources intended only for self-directed purposes.

‍