How Much Do I Need to Retire? Important Guidelines

The end of work doesn't mean the bills stop. How much should you save for a great retirement?

By Matthew Frankel, CFP – Updated Dec 11, 2025 at 2:06 PM EST

Key Points

Aim to replace 80% of your pre-retirement income to maintain lifestyle post-retirement.
Factor in income from Social Security and pensions, not just savings, for retirement funds.
Use the 4% rule to calculate the size of the retirement nest egg needed for sustainable income.
The $23,760 Social Security bonus most retirees completely overlook ›

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Image showing what you need to calculate how much money you need to retire — Image source: Getty Images.

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Pension

A pension is a type of retirement plan that promises workers a specific monthly benefit when they retire.

Continuing our example of a couple that needs a monthly income of $8,000 to retire, let's say each spouse expects $1,500 per month from Social Security, and that one spouse also receives a $1,000 monthly pension.

This means that, of the $8,000 in monthly income needs, $4,000 will come from guaranteed income. The remaining $4,000 will need to be sourced from investments and savings.

In summary, you can estimate the monthly retirement income you need to generate using this formula:

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We saw in the previous section that our couple would need $4,000 per month ($48,000 per year) from their savings. So, in this case, they should aim for $1.2 million in retirement savings accounts, such as a 401(k) plan or individual retirement account (IRA), to provide $48,000 per year in sustainable retirement income.

It's essential to acknowledge that the 4% rule has several limitations. It assumes you'll withdraw the same amount each year in retirement, adjusted for inflation. It also assumes that your portfolio will be split between stocks and bonds throughout your retirement.

In some circumstances, you may want to withdraw significantly more or less than the standard 4%. For example, as of mid-December 2025, the S&P 500 index was up almost 19% year to date, so you're replacing your 4% withdrawal rate plus a lot more. On the other hand, during a stock market correction or a bear market, you may want to limit your withdrawals to give your investments time to rebound.

Regardless of your retirement goals, recent stock market volatility shows just how essential it is for retirees to have some cash on hand. This can act as a buffer for your portfolio by helping you avoid selling investments while the market is still down.

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Expert Q&A

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

TMFMattFrankel

@MattFrankelCFP

The Motley Fool has a disclosure policy.

Things to consider when planning retirement goals

There is no perfect method of calculating your retirement savings target. Investment performance will vary over time, and it can be difficult to accurately project your actual income needs.

It's also worth mentioning that not all retirement plans are equal in terms of income. Money you withdraw from a traditional IRA or 401(k) will be considered taxable income. On the other hand, any money you withdraw from a Roth IRA or Roth 401(k) is generally not taxable, which may alter the calculation slightly.

There are also other potential considerations. Many workers have to retire earlier than planned. For example, approximately 3 million workers retired earlier than anticipated in 2020 due to the COVID-19 pandemic.

Older workers often have to retire early due to layoffs, health problems, or caregiving duties. Saving for a longer retirement than anticipated gives you a safety cushion.

It's also important to consider the impact of inflation on your retirement plans. Inflation has garnered significant attention in recent years, as it has only been a few years since we experienced the highest inflation in a generation.

Even when costs rise at a typical rate, inflation often hits senior households harder than working-age households. That's because seniors spend a higher portion of their income on expenses such as healthcare and housing, which tend to increase faster than the overall inflation rate.

While we're trying to present the broad strokes here, it's still a good idea to consult a financial advisor who can tailor a retirement savings goal to your particular situation and help set you on the right path with a savings and investment plan that ensures you reach your goals.

By using the methods discussed in this article, you can get a good idea of how much you'll need to save to retire comfortably. Keep in mind that this isn't designed to be a perfect method, but rather a starting point to help you assess where you are and any adjustments you might need to make to get where you need to be.

How Much Do I Need to Retire Comfortably?

The end of work doesn't mean the bills stop. How much should you save for a great retirement?

Key Points

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It's not about money, it's about income

How much income do you need to retire?

Social Security, pensions, and other reliable income sources

How much savings will you need to retire?

Things to consider when planning retirement goals

Related retirement topics

FAQ

How Much Do I Need to Retire Comfortably?

The end of work doesn't mean the bills stop. How much should you save for a great retirement?

Key Points

Pension

Related retirement topics

Working While on Social Security in 2025

Full Retirement Age for Getting Social Security

Choosing the Best Retirement Plan for You

Expert Q&A

David C. John, MA, MBA,AARP Senior Policy Advisor.

David C. John, MA, MBA,

About the Author

Our Guides

Premium Investing Services

Working While on Social Security in 2025

Full Retirement Age for Getting Social Security

Choosing the Best Retirement Plan for You

How much money do you realistically need to retire?

Can I retire at 60 with $500K?

What is the average 401(k) balance for a 65-year-old?

What is the $1,000-a-month rule for retirement?

It's not about money, it's about income

How much income do you need to retire?

Social Security, pensions, and other reliable income sources

How much savings will you need to retire?

Things to consider when planning retirement goals

Related retirement topics

FAQ