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- Everyone knows retirement is expensive, but how much money do you really need to save?
- The calculation to figure out how much money you need to retire is [Your desired retirement income] ÷ 4%.
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Retirement can be an endless summer.
If Saturday beach trips and golf games have you dreaming about walking away from your 9-to-5 for good, there’s a simple way to calculate how much you need to save to make it happen:
Your desired retirement income ÷ 4% = How much money you need to retire
For example, if your perfect retirement salary is $80,000, divide it by 4% and you get $2,000,000. That’s your magic retirement number, and you can call it quits as soon as your account balances hit it.
Take a look at the chart below to see how much you need to save to fund retirement income ranging from $40,000 a year to $250,000 a year.
- Business Insider/Andy Kiersz
Here’s why this works: If you have enough saved up, you should be able to withdraw 4% each year to pay for your living expenses in retirement. Using the 4% withdrawal strategy requires earning at least a 5% investment return annually (after taxes and inflation) on your retirement savings.
Are you on track for retirement? Find out with this calculator from our partners: