Retirement this year? Here’s how much monthly income you should aim for to achieve stability

As you prepare for retirement, you may be wondering, Will I have enough?? To answer this question, you’ll need to know some basic numbers. First, how much money will you need per month in retirement? Then, what is the total amount you will need to save? Read on to learn how to crunch these numbers and get the answers you’re looking for.

How much do you need per month in retirement?

First, we need to calculate how much money you will need each month in retirement.

If you want to continue the lifestyle you have now, simply multiply your current income by 75%.

This is because your retirement costs will likely be about 75% of the costs you have now.

So, if you currently make the median U.S. income per year ($83,730), plan to spend about $62,800 per year, or about $5,230 per month, in retirement.

How much do you need to save for retirement?

Now that we know how much you’ll need annually and monthly in retirement, we can calculate how much you’ll need to save in total.

There is a basic rule called the 4% rule. The law states that for a 30-year retirement, you can safely withdraw 4% of your retirement savings annually, adjusted for inflation each year.

Let’s use the numbers we used above. A person with a median income in the United States ($83,730) can plan to spend about $62,800 annually in retirement. Using the 4% rule, we divide $62,800 by 4%, resulting in about $1.57 million. This is the amount you will need to save in total.

If we use 3.7% instead of 4%, we divide $62,800 by 3.7%, resulting in about $1.7 million. This is a more conservative estimate of how much you’ll need to save in total.

Factors that affect your spending in retirement

Your income needs may fluctuate as you transition into retirement. You may spend more in early retirement because you will be relatively active and enjoy your new lifestyle. However, at some point, you may stabilize. During this middle stage of retirement, your spending may decline. In late retirement, your spending may increase as you face various medical bills and the cost of care.

Your spending will also depend on your location and lifestyle. For example, if you dream of traveling after retirement, you will likely spend more than others would prefer to stay close to home. Retirees who live in certain metro areas are likely to pay more for housing and care, meaning they will need more income in retirement than someone who lives in a more affordable area.

Bottom line

Planning for retirement requires a little math. First, assume that you will spend about three-quarters (75%) of your current monthly income on retirement. Then use the 4% rule to figure out the total amount you’ll need to save for retirement. Adjust the formula to fit your needs and take into account your retirement goals, as well as the cost of living in your area. The more prepared you are, the sooner you can sit back and enjoy your retirement.