Retirement: How much do you need to save?

Based on a report by the Employee Benefit Research Institute, over half of 259 American retirees surveyed have $25K or less saved for retirement.

The chart below shows the amount of savings that workers think they need for retirement, their “retirement number.” A thousand workers age 25 and over were surveyed. Their answers varied between under $250K and over $1.5 million.

Why do these retirement numbers vary so much?

Screen Shot 2013-07-26 at 2.30.11 PM

The media gives mixed messages on how much you need to retire.

An article from the New York Times published in June 2013 says that $1 million is definitely not enough for a retired couple. Here’s an article from the New York Times published in January 2007 suggesting that Americans are being told to save too much.

When I started doing research on my retirement number, I got very different numbers depending on the website or formula I used.

Then I found this tool from Fidelity. The tool makes transparent all of the assumptions that go into determining the amount you’ll need for retirement. I suggest you take a look and enter your best guesses. Using the tool finally made clear to me why I was getting such different retirement numbers:

The confusion around how much you need is due to all the assumptions that typically go into calculating one’s retirement number: age at retirement, tax rate, investment returns, inflation rate, number of years in retirement, current salary and future increases, expenses during retirement. (Did I miss anything?)

One example: Most retirement calculators (including the Fidelity one above) use the rule of thumb that we need at least 80% of our take-home pay during retirement. That means if I made $50K a year while working, I would need $40K a year during retirement. The 80% rule comes from assuming I’ll have less expenses during retirement. For example, I probably won’t have debt payments or have to save as much. But I don’t expect to spend as much as 80% of my current income during retirement. I don’t even spend that much now. I actually spend about 50% (and that includes taxes but not retirement savings).*

It’s impossible for a computer program to know all the numbers that are specific to you. And there are some areas where the best you can do is make an informed guess.

So here’s a retirement calculator from that lets you control those assumptions. 

Remember that personal finance is personal. Track and lower your expenses, increase your income, know the real cost and value of things (including yourself), have insurance, and save what you can as early as you can.

Next time, I’ll post an article about how to start saving for retirement.

Other resources:

  • Here’s a discussion on the Bogleheads forum about the June 2013 New York Times article.
  • *How do I know I spend 50% of what I earn? I track my expenses and you should too. I use a spreadsheet but there are apps for this. (I’d go for the free ones.)


  1. These are amazing resources, thank you!

    1. Thank you! Feels good to know others find it useful. (looking forward to reading your future posts)

  2. Great tools you’ve linked to and retirement is all too personal. You need to figure out yourself what kind of lifestyle you want and envision in retirement, and then plan a goal towards achieving it!

    That stat showing most millennials assuming that under $250,000 is enough for retirement is… scary.

    1. Agreed. I’m hoping those people have pensions or plan on working even past retirement age. In the U.S. the standard age is 65. Same in Canada?

      1. Yes 65 is still the normal age but interestingly, the government here had started changing the age for Old Age Security (I guess the equivalent of social security down there) to be 66 or 67 depending on what year you were born.

        I’m guessing by the time I’m at retirement age they will have pushed it to 70 or beyond.

      2. Thanks for the info. This will probably happen in the U.S. too. It’s always interesting to learn how things are in other countries.

      3. Well it makes sense that they raise the age as people didn’t use to have such a high life expectancy when they first set up the retirement system.

  3. […] much should I invest? Determining a precise amount for how much you need for retirement is a very personal thing. Your “retirement number” depends on details of your […]

  4. Wow this was helpful! I use for my saving and planning, but it looks like i can up the amount i stow a way!

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