Retirement

How Much Money Do I Need to Retire?

Two people with the same savings can have very different retirement prospects. One may have a pension, modest housing costs, and flexible travel plans. The other may support family, carry debt, and rely almost entirely on investments. A round-number target cannot capture those differences.

The more useful question is how much savings would be needed to support your spending after reliable income, taxes, and realistic uncertainties are considered. That estimate should evolve as your plans and circumstances become clearer.

This may be worth discussing if…

You are deciding when to stop working or reduce hours
Your spending estimate is based mainly on your current salary
You have a pension choice, variable income, or family support commitments
You want to understand what could make the plan more resilient

Start with spending you can explain

Build a retirement budget from actual expenses rather than assuming a fixed percentage of salary. Separate recurring essentials—housing, food, utilities, insurance—from choices such as travel and gifts. Include irregular expenses like replacing a car or repairing a roof; they may be infrequent, but they are not necessarily unexpected.

Some working-life costs may end, while others begin. Healthcare coverage before Medicare, out-of-pocket medical bills, hobbies, and helping relatives can change the picture. Distinguish spending you would be willing to reduce from commitments that would be difficult to change. A budget is more useful when it reflects how you would actually respond to pressure.

Identify the income floor and the remaining gap

Review Social Security estimates using your earnings record and potential claiming dates. Include pension income, survivor terms, and any inflation adjustments. Rental income and part-time work can help, but allow for expenses, vacancies, or the possibility that work stops sooner than expected.

Subtract expected spendable income from projected spending. The difference is the amount savings may need to provide. Use after-tax figures consistently: a pre-tax pension and a bank deposit are not interchangeable amounts. For couples, also examine what happens to income and expenses after one spouse dies.

Why a withdrawal rule is not a retirement guarantee

A withdrawal percentage is a starting assumption, not a promise. Outcomes depend on the investments, fees, taxes, time horizon, inflation, and the order in which market returns occur. Historical studies cannot establish a guaranteed safe rate for your circumstances or future markets.

Sequence risk matters because withdrawing during early losses leaves fewer assets available for later growth. Two retirements with similar average returns can therefore have different outcomes. Long-term purchasing-power risk matters too: relying only on assets that feel stable today may leave income struggling to keep up with expenses later.

Stress-test the decisions, not just the balance

Model a longer retirement, higher healthcare costs, and a care expense rather than assuming every year follows the initial budget.
Examine an early market decline and persistent inflation. Ask which expenses could change and which resources would be available.
Compare different retirement dates or part-time work periods. Extra saving and fewer withdrawal years can change the result, but work availability is not guaranteed.
Review taxes, account types, major purchases, and the surviving spouse's position. A projection that ignores those details can overstate flexibility.

Common questions about a retirement target

Is there a dollar amount everyone should reach?

No. Spending, income sources, taxes, household obligations, and retirement length determine what the money needs to do. A target should come from those inputs rather than a headline figure.

What if a projection says I am close but not quite there?

Compare manageable changes: a different retirement date, lower discretionary spending, phased work, or a revised housing plan. Evaluate trade-offs before assuming that taking more investment risk will solve the gap.

Can I spend more early in retirement?

Possibly, but distinguish a planned temporary expense from a permanently higher lifestyle. Test how extra early spending affects later needs, especially if markets are weak at the same time.

Things to consider

Both sides of the decision, laid out plainly.

A projection is conditional

Planning results depend on assumptions, not knowledge of future returns or lifespan. Ask what is assumed and which changes would require action.

Flexibility has a practical value

A household that can postpone a large purchase has different options from one with fixed obligations. Define realistic adjustment choices before they are needed.

Review actual experience

Once retired, compare spending and income with the plan. Updating the estimate is more informative than continuing to rely on an old target.

Questions to ask Rob

What spending gap would our savings need to fill?
Which assumptions have the greatest effect on our target?
What adjustments could we make after a difficult market period?

Questions to discuss with your tax or legal professional

What would our after-tax income be under different withdrawal plans?
How could our filing status or healthcare eligibility change?
Are our estate documents consistent with the resources we intend to preserve?

Key takeaway

Retirement readiness is a relationship between spending, income, savings, and flexibility. Build a target from your household's needs, test it under less favorable conditions, and revisit it as life unfolds.

Still have questions?

Every situation has details a general guide can't cover. A short conversation is usually the fastest way to sort out what applies to you.

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Sources: Social Security Administration; Investor.gov; Medicare. The planning framework is general educational discussion, not an official retirement sufficiency calculation.

This material is provided for general informational and educational purposes only and should not be construed as individualized investment, tax, accounting, or legal advice. Individual circumstances vary, and strategies discussed may not be appropriate for every investor. Wealthspan Investment Management, LLC does not provide legal or tax advice. Clients should consult their attorney, tax professional, and financial advisor regarding their individual circumstances. Investing involves risk, including possible loss of principal.