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How Much Do I Need to Retire?

Wondering how much you need to retire? Good! You’re a step ahead of the game because, sadly, too many folks don’t even bother to think about retirement.

Sure, most workers say they have some sort of financial strategy for saving for retirement, but only a third of them (33%) have that strategy written down.1 And then there’s nearly 1 out of 4 workers (24%) who have no plan for retirement savings at all.2 It’s time to get serious, people! If you haven’t thought through your retirement goals and written them down, then you don’t really have a goal—what you have is just a wish.

If you aim at nothing, you’ll hit it every time. And that’s the last thing you want when it comes time to retire.

So let’s talk about it! What do you need to plan for now so you know exactly how much you’ll need to retire?

How Much Do You Need to Retire?

There’s no one-size-fits-all approach to retirement planning! How much you need in your nest egg will probably look a lot different than Harry and Sally who live down the street from you.

Some folks will need $10 million to have the kind of retirement lifestyle they’ve always dreamed about. Others can comfortably live out their golden years with a $1 million nest egg. There’s no right or wrong answer here—it all depends on how you want to live in retirement!

The trick is this: You want a nest egg that’s large enough that you can live off the growth it creates each year without ever touching the principal amount.

For example, let’s say you have $3 million in your nest egg, and it’s invested in mutual funds that average a 10% annual rate of return. That means your accounts would average $300,000 in investment growth each year. The question is can you live off of $300,000 in retirement each year? Only you can answer that, and we have a free tool that can help you find your retirement number

But here’s what we can tell you: If you do what we teach—if you follow the Baby Steps in order and consistently invest 15% of your gross income in tax-advantaged retirement accounts like a 401(k) and Roth IRA—then you will have more than enough money saved for retirement.

Let’s run through some numbers to show you how that all works out. The average household income in America is about $67,500.3 Let’s say you invested 15% of that from age 30 to age 70 in good growth stock mutual funds. Do you want to guess how much money you’d have in your nest egg? You would have more than $7 million saved for retirement!

Maybe you want to retire 10 years earlier at age 60? No problem! You would still have a cool $2.3 million in your retirement accounts to work with.

The people who have enough money in their nest egg are the ones who actually save money in their retirement accounts. If you save money in your retirement accounts month after month and year after year, do you know what you’ll end up with? Money! Don’t get so caught up in investment theories and the latest trends that you end up not doing anything at all.

Dave's new book, Baby Steps Millionaires, will show you the proven path that millions of Americans have taken to become millionaires—and how you can become one too!

5 Factors That Will Impact How Much You Need for Retirement

As you work to create your retirement plan, there are five key factors you need to consider before deciding how much money you’ll need in retirement.

1. Inflation

Inflation is the gradual rise of the general cost of living over time. It hovers around 3% every year, and it affects everything from the price of a gallon of gas to how much it costs to order a pepperoni pizza.


How much will you need for retirement? Find out with this free tool!

Now, this might not seem like a huge deal after a couple of years, but it does add up over time. And if you’re planning to live 20 or 30 years in retirement, inflation can take a huge bite out of your nest egg if you don’t plan for it. Based on the average inflation rate, if you spend $3,000 every month today, you would need more than $7,000 to work with each month 30 years from now to have the same purchasing power!

Inflation is one of the main reasons why you need to invest your money. You can’t just stuff it in a cookie jar and hope for the best! You need your money to actually grow so you can stay ahead of inflation.

2. Cost of Living 

Cost of living is about where you want to spend your dream retirement. You’ll need a lot more money if you’re going to retire in Manhattan versus Little Rock, Arkansas! Most of the time, retirees want to move closer to family or just be somewhere that’s more affordable. If you’re planning to relocate when you retire, check out our cost of living calculator to get a good sense of what to expect.

Here are the top costs you’ll need to consider when making your monthly retirement budget:

  • Giving
  • Housing
  • Transportation
  • Food
  • Taxes
  • Health care

And speaking of health care . . .

3. Health Care Expenses

Here’s the main big-ticket item you need to plan for in retirement: health care costs. According to Fidelity, a couple retiring today will need about $300,000 to cover their health care expenses during retirement.4 If you spread that out over 25 years of retirement, that comes to $12,000 a year!

Here are several ways you can prepare for high health care costs in retirement:

And if you’re planning to retire before you can claim Medicare benefits, save up lots of cash in an HSA (if you’re eligible) and make sure you have a good private insurance plan by the time you retire.

4. Social Security

You can calculate your Social Security benefits and include that number in your budget.5 But hear us on this: Social Security benefits are like the icing on the cake, not the cake itself. And by the time you retire, there might not be any icing left! Unless we see some major changes in policy, Social Security will only be fully funded until 2033.6

You can start collecting Social Security benefits at age 62, but the longer you wait to claim them the more you’ll get. Whether you decide to start taking benefits as soon as possible or wait as long as you can so you can receive the full benefit, make sure you’ve got enough saved through your other retirement investments to take care of yourself. Don’t wait on Uncle Sam to swoop in and save the day. Grab your own cape!

5. Your Lifestyle

Spend some time dreaming about what your lifestyle will be like in retirement, then calculate how those choices will impact your nest egg number. If you want a simple, stay-at-home lifestyle, go for it. If you want to live it up on Caribbean cruises and eat at five-star restaurants, then you’re going to adjust how you save for retirement.

Here are a few questions that will help you start dreaming: 

  • How much do I plan to spend on travel every year?  
  • How much will I spend on family (kids and grandkids)?
  • Will I help pay for my grandkids’ college?
  • How much do I plan to spend on entertainment?
  • Will I donate time and money to churches or nonprofits that I care about?

And by the way, if you’re married, this is a conversation that you need to have with your spouse. Get on the same page about your retirement dreams so you both know where you’re headed!

Find Out Exactly How Much Money You’ll Need in Retirement

Everyone’s nest egg is different because everyone’s dreams are different. This isn’t about keeping up with the Joneses—it’s about getting a crystal-clear picture of what your golden years will look like.

An investment professional like one of our SmartVestor Pros can help you figure out how much you'll need for retirement and guide you throughout your financial journey. 

Find your SmartVestor Pro today!

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This article provides general guidelines about investing topics. Your situation may be unique. If you have questions, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros. 

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About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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