This is the question that I am asked most often as a Financial Advisor. Unfortunately, it is not the same answer for everyone. A common guideline is that you should aim to replace 70-80% of your annual pre-retirement income. You can replace your pre-retirement income using a combination of savings, investments, Social Security, and other income sources (part-time work, a pension, rental income, etc.).

It's important to consider how your expenses will change in retirement. Some, like health care and travel, are likely to increase. But many recurring expenditures could go down: You no longer need to dedicate a portion of your income to saving for retirement. You may have paid off your mortgage and other loans. And your taxes are likely to be lower — payroll taxes, which are taken out of each paycheck, will be eliminated completely.

Be sure to adjust based on your retirement plans. If you know you won’t have a mortgage, for instance, maybe you plan to replace only 60%. If you want to travel every year, you might aim to replace 100% or even 110% of pre-retirement income.

But how much should I have saved to have enough for retirement?

Everyone has different needs, wants, and goals for retirement, so there isn't a one-size-fits-all plan that will work in any scenario. Thankfully, financial professionals have created a few rules of thumb over the years that can give more insight than "save as much as you can."

  • The Final Multiple: 10-12 times your annual income at retirement age. If you plan to retire at 67, and your income is $150,000 per year, then you should have between $1.5 and $1.8 million set aside for retirement.

  • A multiple of your annual income at your current age. At age 30, some financial advisors suggest accumulating the equivalent of your current annual income. By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10-12 times your income at that time to be reasonably confident that you'll have enough funds.

Even using one of these rules of thumb to calculate the amount you need to retire does not take your individual factors into consideration.  Having a plan in place is more important than having an exact amount saved.  Contact me and we can do an assessment of your situation and help you to form a more accurate picture of what you will need in savings to comfortably retire.

Melissa Talarico CRPC®, Financial Advisor


Direct: 585.340.2234