How do I calculate my retirement income needs?
Estimate your expenses
Track your current spending for a few months to get a baseline. Then adjust for changes: you may spend less on commuting and work clothes, but more on travel, hobbies, and healthcare.
Don't forget irregular expenses like car repairs, home maintenance, and gifts. A retirement budget should include an emergency fund for unexpected costs.
- Housing: mortgage/rent, property taxes, insurance, maintenance
- Healthcare: premiums, out-of-pocket, long-term care
- Living: food, utilities, transportation, travel, entertainment
Subtract guaranteed income
Add up your expected Social Security, pension, and any annuity income. Social Security statements are available online at ssa.gov. For a rough estimate, the average retired worker benefit is around $1,900 per month in 2024.
The difference between your expenses and guaranteed income is the amount you need to withdraw from savings each year. Multiply that by 25 to get a rough savings target (based on the 4% rule).
- Create a My Social Security account for personalized estimates
- Include part-time work income if you plan to work in retirement
- Consider rental income or other sources
Common mistakes
- Using your current income instead of your expected retirement expenses.
- Forgetting to account for inflation, which reduces buying power over time.
- Overlooking taxes on withdrawals from traditional IRAs and 401(k)s.
