How much might I need to save
for retirement?

To assess how much you might need to save for retirementstart by considering your optimal age to retire and what your retirement expenses might be. Then, formulate strategies to help safeguard yourself from outliving your retirement savings. But perhaps the best way to prepare for retirement is to start saving now.


Jump to learn more about retirement planning:

Decide when to retire | Manage inflation
Start saving | Prevent outliving your savings

Or jump to explore common retirement expenses:

Health care | Taxes | Living expenses | Family member support


When will I be able to retire?

The definition of retiring “on time” has changed from 65 to whenever you’re ready. There are several factors to consider when estimating your optimal retirement age.

  • To determine when you can reasonably expect to retire, you may wish to consider both your sources of income and your monthly expenses.
  • Our guide to “Retirement Concerns” can offer useful suggestions.

How to estimate your retirement income

If you're 55 to 74, our CoRI® Retirement Indexes retirement calculator can help estimate how much retirement income your current savings may provide. Our CoRI tool takes into consideration your age and assesses factors such as your starting level, inflation, risk, interest rates, and life expectancy to give an instant estimation.

Pay your future self first

When it comes to taking action to save for your retirement, the more you focus on things you can control, the better.

  • If you are in mid-career or later, than you have some idea of how much retirement has changed over the last decades.

    In the past, retirees could rely on a traditional company pension and a generous social security income. Today, we're really on our own when it comes to building a secure retirement.

    At the same time, we're living longer and we expect to be more active in retirement than ever before. And that's really good news. But that increases the challenge: how do we pay for longer retirements in today's new world?

    Here's what you need to do. You need to understand that it's a new world of retirement, you need to define what retirement means to you, and, most important of all, you need to take action.

    The new world of retirement means living longer, being more active and relying on yourself to build a secure retirement. With that in mind, spend some time defining your retirement.

    Having a vision is about more than inspiration – it's the first step in forming a realistic financial plan, including how you plan to turn your savings into retirement income down the road.

    When it comes to taking action, the more you focus on things you can control, the better.

    You can't control the markets; but you can invest in a well-diversified portfolio that gives you age-appropriate risk exposure.

    You can't control the return on your investment, but you can control how much you save – and saving more may be the single biggest action you can take to improve your retirement security.

    Take a look at your savings rate. Are you stopping at the company match in your employer's 401(k) plan? Or are you saving the 10% or more that many retirement experts agree should be your target? Are you exploring all the retirement savings vehicles available to you, including IRAs and Roth IRAs?

    It's not enough to say you are going to save more – you need to take action. Research from a Harvard economist shows that out of every 100 employees surveyed, 68 say they aren't saving enough. But only 24 say they will raise their savings rate within the next two years...and only 3 actually follow through.

    That's why you need to do what you can to lock in your intention to save more by making it automatic. If you have a 401(k), ask your employer about using auto escalation to increase savings annually. If you use an IRA, set up an automatic transfer from your checking account each payday to "pay yourself first". In many ways retirement is about paying your future self so you can meet your future needs.

What are some common
retirement expenses?

Your retirement budget should include your anticipated expenses while still preparing for the unexpected. Make sure your upcoming expenses are covered by your savings and your retirement income. Here are a few major expenses you should consider in planning your retirement budget:

  • Health care
  • Taxes
  • Living expenses
  • Supporting family members

Health care

  • As your age increases, so will your health care costs.
  • Though you are eligible for Medicare beginning at age 65, it’s important to factor in the cost of Medicare’s monthly premiums, deductibles and co-pays. Additionally, there are services that Medicare won’t cover.
  • If you require prescription drugs later in life, you’ll incur additional costs.
  • If you're transitioning from an employer that helped cover part of your health insurance to shouldering all of the costs on your own, the added expense could take a chunk out of your savings.
  • A long-term care insurance policy carries a premium cost, but it can help defray future health-related spending.
  • Should you opt for a high-deductible insurance plan, you could benefit from a health savings plan (HSA) feature. HSAs allow you to save money today that you can withdraw without owing taxes—today or in retirement—if used for an approved medical expense.


  • Withdrawals from your traditional 401(k) and individual retirement account (IRA), combined with your Social Security benefits, all contribute to your retirement income. But these withdrawals may be subject to income taxes.
  • Here’s how it works: Even if you don't need the cash, you must take required minimum distributions (RMDs) from a traditional IRA when you turn 70 ½ years old. These withdrawals generally are taxed as ordinary income. Depending on the size of your RMDs, you might even find yourself bumped into a higher tax bracket.
  • Note: Roth IRAs don't have withdrawal requirements, and you may not have to make 401(k) withdrawals if you’re still working.
  • As for Social Security, if you have an income of more than $34,000, or if you’re part of a married couple filing a joint federal tax return with more than $44,000 in income, you’ll generally owe federal income tax on up to 85% of your benefits.
  • But there are strategies to help reduce your taxable income in retirement. For example, if you can save in a Roth 401(k), all withdrawals in retirement are tax-free, and Roth 401(k) assets rolled over to an IRA are generally exempt from the RMD rule.
  • You might consider converting some traditional retirement plan assets into a Roth IRA today. In this case, you’ll owe taxes today. But converted money is generally tax-free in retirement, and there are no required withdrawals.

Living expenses

  • About one in four American homeowners aged 65 and older are still making mortgage payments.
  • What’s more: Housing-related costs account for about 40% of older Americans' spending. See the chart below.
  • Downsizing can be one way to reduce your housing expenses — especially if it means being able to pay off a mortgage.

How do household expenses vary by age?

As your age increases, your household expenses can change, too. Two cost categories you should consider are the costs of health care and supporting family members. Factor these in while planning your retirement budget.

Health care costs tend to increase
steadily after age 85*

As the chart below illustrates, after you turn 85, expect your health care costs to grow and keep growing. Plan ahead to help prepare for these added outlays.

Chart - Health care costs trends after you turn 85*

*Average share of different categories in total household expenditures, 2003-2011, across different ages.

How do I support family members through retirement?

  • With average lifespans increasing, some pre-retirees (often referred to as “the sandwich generation”) are in the unique position of providing financial support to their parents, their children and their grandchildren.
  • For example, one in five middle-aged Americans provide financial support for a parent who is at least 65 years old.
  • 48% of parents with adult children provide them with some amount of financial support on an annual basis.
  • Meanwhile, it’s not at all uncommon for grandparents to contribute to a 529 college savings plan or to help pay for other education costs.
  • If you find yourself in this position, you might consider using our retirement expense worksheet, which is designed to help you think through these and other expenses that you may face in retirement.

How can I manage inflation?

You may be on a fixed income, but thanks to inflation, there's nothing fixed about the expenses you'll pay throughout what can be a very long retirement. How far will your current savings really go?

Let’s take a simple example: If you wanted to buy a cup of coffee each morning every day of your retirement, how much money would you need? The following graphic shows the calculation for a $1.95 cup of coffee over a 30-year retirement.

The real cost of coffee - chart

For illustrative purposes only

  • As you can see, we’re left with a lump sum of $21,352.50. But that assumes that the cost of a cup of coffee will stay the same over the next 30 years.
  • Does that seem likely? Probably not. But how can you predict how the cost of a cup of coffee will rise or fall in the future?
  • If you're 55 to 74, try estimating how much your current savings may provide in retirement using our CoRI® Retirement Indexes retirement calculator.

How do I start saving
for retirement?

Here are some tips on how you can start saving for retirement:

  • Start today. How much can you put away right now? Analyze your budget and see how much you’ll have left over after expenses. Then consider placing all your surplus funds in a savings account.
  • Make saving a regular habit. Do it every week or every month. Your savings will accumulate. When you’re saving for your retirement, remember, money is power-economic power you’ll need later in retirement. You may want to set aside the cash now while you’re in your earning years.
  • Set a savings goal for yourself every week or month. Pledge to yourself: “I will put away x dollars a week or month.”
  • Learn about the tools and automatic savings features that can help you grow your savings.
  • Keep track of your savings. When you see how much extra wealth you can accumulate by saving regularly, it will give you a sense of the economic power you can wield over your future--and it will encourage you to save more.
  • If you want to build savings, invest early and often. Investing is the best way to grow your money. Consider consulting a financial advisor for guidance.

Use our retirement calculator to estimate how much you may need each year of retirement. Consider saving 15% of your pre-tax income every year. Let’s say you’re 25 and earning $54,000 a year. If your employer offers a 5% dollar-for-dollar match on your 401(k) contribution, you may need to set aside 10% of your income ($5,400) every year. By the time you’re prepared to retire at 67, assuming your income grows by 1.5% per year, you could be earning $100,000 a year. You may need approximately $45,000 a year, adjusted to inflation, to withdraw from your savings to maintain your preretirement lifestyle. Social Security and your other retirement plans (IRAs, pensions, 403(b)s) can act as supplemental income to help you meet your annual retirement budget.

What accounts do I need to save for retirement?

There are three basic retirement accounts that are widely used:

  1. 401(k)s: 401(k)s are workplace retirement savings accounts. Unlike IRAs, you can’t set one up by yourself. It must be sponsored by your employer.
  2. IRAs: IRAs are retirement savings plans. You can set up some by yourself, like a traditional or Roth IRA. Alternatively, your employer can establish a simplified employee pension (SEP) IRA and/or a savings incentive match plan (SIMPLE) IRA that you can use.
  3. Social Security: Social Security is the U.S. government’s pension plan, paid for by taxes.  You can decide when to start collecting your monthly benefits any time after age 62.

How do I prevent outliving my retirement savings?

If you have a retirement plan and you are married with dependents, you may fear outliving your money. The key: Put a plan into action now to stretch your money later.