How Much Do I Need to Retire? Planning for Your Unique Retirement Needs

By Craig Lemoine, Ph.D., CFP®, Director of Consumer Investment Research

“How much do I need for retirement?” It’s a question I often hear, and one that seems straightforward enough to tackle. Unfortunately, the answer isn’t quite so simple.

Your financial needs in retirement can depend on dozens of factors – some known and some unknown. Among these are your longevity, lifestyle, comfort with market performance, sequence of return risk, current health, housing plan, proportion of fixed to variable expenses, proximity to children and so much more. One or two million dollars may seem like a lot of money to have set aside for retirement. But if a retiree faces some rough initial returns and health care costs, they may soon find themselves unable to live their planned retirement.

A Retirement Reality Check

The concept of retirement continues to evolve with the world around us. We’re not likely to have the retirement that our parents or grandparents have had. Fewer Americans will receive a steady pension than in the past.1 We tend to live longer than a generation ago. Housing costs have hit all-time highs.2 And the market has seen unprecedented volatility in the past few years. Inflation continues to eat away at our real spending power, creating new and dynamic retirement challenges.

Even with all known and unknown retirement factors answered, “How much I need to retire” last year may be wildly different from “How much do I need to stay retired?” in tougher conditions.

Retirement has multiple factors and requires in-depth analysis. Simple heuristics – such as planning on spending 70% of your current income or being able to spend down a fixed percentage of your portfolio annually – fall short when life gets in the way. Answers to questions surrounding “Can I retire on a million dollars?” or “Can I retire with two million dollars?” often fail to consider sequence of return, housing, longevity, health or family risks faced in retirement.

Focus on Your Retirement Plan Rather Than a Magic Number

A better question than “What’s my magic number?” would be “How do I plan for retirement?“ Working with a qualified financial advisor to develop a holistic retirement plan can help prepare you for the road ahead.

Your financial advisor can help you plan for challenges you may face in retirement, such as spending, efficient savings, taxes, inflation, debt management, Social Security and Medicare. They can help you determine your risk tolerance and build an investment portfolio you will be more likely to tick with when times get tough. They can also help you balance your savings with your spending and work through the trade-offs that come with retirement.

Consider these five steps when developing a customized and meaningful retirement plan:

1.     Create a cash flow statement. A cash flow statement should show dollars in and dollars out of your personal finances. Consider tracking your actual expenses for a few months to get a concrete handle of how you live today. Income should include money earned from your job, interest from a bank, dividends from stocks, coupons from bonds and any gifts or other sources of cash.

When tracking expenses consider two categories: fixed and discretionary. Fixed expenses are those you’re required to pay as well as those that provide basic needs, such as where you live, what you eat and how you get around. Examples of fixed expenses include rent or mortgage payments, insurance premiums, groceries, heating and electric bills. Discretionary expenses include money spent on travel, dinners out, savings and retirement plan contributions or occasional future purchases and upgrades.

Your expenses will certainly change in retirement but documenting them today will give you an idea of how much your family spends. And spending helps open conversations about the amount needed to comfortably retire.

2.     Build a personal balance sheet. A personal balance sheet should record assets (items you own, use or enjoy) and liabilities (amounts you owe institutions or other people). Consider breaking assets into three columns: cash, investment assets and personal property.

Cash includes checking, savings, money market accounts, CDs, physical currency and other banking or credit union products. Investment assets include retirement plans, investment or savings accounts, annuity or insurance cash values, or any other asset you may use towards a financial goal. Personal property would be any asset not previously mentioned such as real estate for personal use, home furnishings, vehicles, and possessions you would not consider using towards a financial goal.

Liabilities can be broken into secured and unsecured categories. Secured liabilities are tied to assets (such as car loans and mortgages) while unsecured liabilities are the type of debt you owe but would not result in an immediate asset forfeiture. Unsecured liabilities include credit card debt, student loans or any personal loans. Payment terms should be footnoted on a balance sheet, including number of payments remaining, monthly liability and interest rate information.

Your balance sheet helps inform your ability to retire by painting a picture of resources and debt obligations. This sheet will almost always change during retirement but creating it ahead of time will empower you to make wiser decisions.

3.     Get a copy of your Social Security statement. Social Security is a federal retirement plan originally created under the Social Security Act of 1935. Most Americans are covered by Social Security.

The amount of estimated Social Security benefits available at different ages can help inform your retirement decisions. To get an estimate of your future retirement benefits, you can visit the Social Security Administration’s website.

Social Security planning can be quite sophisticated. Your starting age is a function of types of assets, family longevity, marital status and your current health. At five years from retirement, an estimate of Social Security will help you plan for the next few decades.

4.     Calculate your Medicare premiums. Health care may be one of your largest expenses in retirement. It’s important to understand the costs and plan for how to pay for health care after you retire.

Medicare is the health care plan offered to most retirees when they turn 65. Plan ahead by getting an idea of the coverage offered and possible premiums and co-pays you may face. You can check your Medicare eligibility and calculate the potential premiums you might pay on the Medicare website.

5.     Identify your retirement income streams. Taking inventory of future income streams will help inform retirement decisions as you get closer to the big day. Get updated statements of any future pension, defined benefit or annuity payments you will receive in retirement. Benefit amounts may change based on current interest rates, employer investment performance, divorce or other life events.

Talk to a Financial Advisor Today

Meet with a qualified financial planner to develop your plan for retirement. Consider your current level of savings, comfort with investment risk, lifestyle goals and ability to retire before leaving the workplace. A Certified Financial Planner (CFP®) professional or Investment Advisor can work with you to build a plan before you reach retirement. A wealth management team can build your investment and insurance strategy, helping to eliminate any health care and spending gaps before you retire.

A professional can help navigate tradeoffs between spending today, safety for tomorrow and bequest motives. They can help develop a housing plan in retirement and work with you to find meaning and purpose in retirement. Creating a financial plan before pulling the retirement lever will boost your confidence and give you a path of savings and spending for the future.

If you’re not currently working with a financial advisor, we can help. Contact us today and we’ll help you find a qualified professional in your area.


1 Economic Policy Institute, “The State of American Retirement Savings.” 12/10/2019.

2 Forbes Advisor, “Housing Market Predictions in 2022: When Will Prices Drop?” 7/1/2022.

Craig Lemoine is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig Lemoine is in no way related to Cetera Advisor Networks LLC or its registered representatives.

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