How Much Do I Need for Retirement? A Complete Planning Guide

10.20.2025 | Category: Navigating Your Retirement

Professional Reviewer: Adam Olson, CFP®, LUTCF, FSCP, RICP
Wealth and Retirement Strategist

Summary: How much you should own at your retirement can be a difficult question to answer. However, with proven strategies such as income replacement rules and setting age-based savings benchmarks, one can build diverse income streams by the time they retire.

Whether you are in the initial stages of your life or midway to retirement, a retirement savings guide can help you decide and plan how much money you need to retire. While there’s no universal retirement savings guide you can rely on, curated strategies and rules may help you stay on track and plan for retirement.

Understanding the retirement income replacement rule

Financial professionals recommend taking a look at your pre-retirement expenses, rather than your pre-retirement income to determine what you might need in retirement. Your expenses in retirement will probably be different, but not necessarily lower than today.

You might need less income for:

Mortgage payments (if you’ve paid off your home loans)
Commuting and work-related expenses
Professional development costs

However, you might need more for:

Health care expenses
Travel and leisure activities
Home maintenance and modifications
Long-term care needs

Certified Financial Planner and Mutual of Omaha Financial Advisor Adam Olson says that before estimating your retirement income, you should start by separating your needs from wants. He continues, “Build a guaranteed income floor using sources such as Social Security, pensions, annuities, or even a reverse mortgage to cover essential expenses, or your needs. Then use variable market withdrawals to fund discretionary spending. This approach reduces anxiety and ensures your cash flow aligns with your lifestyle.”

The 25x rule: A simple retirement calculation

The 25x rule suggests you need 25 times your annual retirement expenses saved by retirement. This assumes a 4% annual withdrawal rate that many financial professionals consider sustainable.

Example calculation:

Annual retirement expenses: $50,000
Total needed: $50,000 x 25 = $1.25 million
Annual withdrawal: $1.25 million x 4% = $50,000

While helpful, this rule is based on assumptions about market performance and life expectancy, and does not account for inflation. Olson explains, “Simple rules of thumb can overlook sequence-of-returns risk, where poor market performance early in retirement can derail plans. A bucketed strategy, keeping near-term funds conservative and long-term funds in growth investments, plus 12 to 18 months of cash helps cushion downturns and prevents panic selling.”

To adjust your savings and create a retirement guide that works for your unique needs, you must use a sophisticated retirement calculator.

Age-based retirement savings milestones

Setting age-based savings targets can help you stay on track with your retirement goals. Here are commonly recommended milestones for how much to save for retirement by age:

By age 30: 1x your annual salary
By age 40: 3x your annual salary
By age 50: 6x your annual salary
By age 60: 8x your annual salary
By age 67: 10x your annual salary

These benchmarks assume you start saving around age 25 and consistently contribute to retirement accounts. If you’re behind these targets, don’t worry. There are strategies to catch up.

It’s important to note that the “retirement red zone,” which is the five to eight years before and after you retire, is the most critical period for avoiding portfolio mistakes. Decisions made during this window carry lifelong consequences, so plan carefully and deliberately.

Factors that influence your retirement needs

Olson says you can plan your retirement spending around three phases: Go-Go years with higher activity and spending, Slow-Go years with moderate expenses, and No-Go years with lower activity but potentially higher care costs. Align your withdrawal strategy by front-loading buckets to match these real-life stages.

But overall, your personal retirement number depends on several key factors, such as:

Lifestyle expectations

Consider how you want to spend your retirement years. Do you plan to travel extensively, pursue expensive hobbies, or live a more modest lifestyle? Your retirement dreams directly impact how much you’ll need to save.

Healthcare costs

Medicare doesn’t cover all health care expenses, and long-term care can be a considerable expense. According to recent estimates, a 65-year-old couple may need $600,000 or more to cover health care costs in retirement². Long-term care insurance can help protect your retirement savings from these expenses.

Find out how much you’ll need to save for long-term care. Calculate your long-term care needs today.

Geographic location

Where you live in retirement significantly affects your cost of living. Retiring in a high-cost area requires more savings than relocating to a region with lower expenses.

Debt situation

Entering retirement debt-free puts you in a much stronger financial position. Paying off your mortgage and other debts before retiring can substantially reduce your retirement income needs.

Family circumstances

Will you be helping to support adult children or aging parents? Do you want to leave an inheritance? These factors influence how much you need to accumulate.

Retirement savings guide: Creating multiple income streams for retirement

Successful retirement planning involves building multiple income sources rather than relying solely on savings:

Social security benefits

Social security benefit provides a foundation but typically replaces only about 40% of pre-retirement income for average earners³. You can calculate your social security retirement income by adding your and your spouse’s date of birth and annual income. You can also consider phasing into retirement or working part-time to delay claiming Social Security. This strategy can increase your guaranteed lifetime income and reduce strain on your investment portfolio.

Employer-sponsored retirement plans

Employer funded retirement saving plans such as 401(k)s are a great way to start your retirement planning in the early stages of your career. However, a 401(k) alone may not be enough to accelerate your retirement savings. Therefore, you must pair the retirement plan with other strategic options for post-retirement living.

Individual retirement accounts

IRAs offer additional tax-advantaged savings opportunities. Traditional IRAs provide tax deductions now, while Roth IRAs offer tax-free withdrawals in retirement.

Personal savings and investments

Taxable investment accounts provide flexibility and additional retirement income. These accounts don’t have required minimum distributions, giving you more control over your withdrawal timing. Consider working with a financial professional to develop an appropriate investment strategy.

Annuities for guaranteed income

Annuities can provide steady, predictable payments throughout retirement, helping protect against market volatility and longevity risk. We offer both deferred annuities for growth and income annuities for immediate payments. A detailed understanding of how annuities work helps you create your own personal pension.

Olson says, “Use annuities strategically to fill gaps in your income floor, but never go all-in. Only consider them after carefully reviewing fees, liquidity, and credit quality.”

Strategies to Boost Your Retirement Savings

If you’re behind on your retirement savings goals, these strategies can help:

Increase your savings rate gradually

Start by increasing retirement contributions by 1% annually. This gradual approach makes the change less noticeable while significantly boosting long-term savings.

Take advantage of catch-up contributions

If you’re 50 or older and you need to catch up on your retirement savings, you can make additional contributions to your existing retirement accounts.

Reduce expenses now

Every dollar you don’t spend today can be invested for tomorrow. Review your budget for areas where you can cut back and redirect those savings toward retirement.

Consider working longer

Delaying retirement by even a few years could improve your financial well-being after retirement. You’ll have more time to save and potentially receive higher Social Security benefits.

Maximize tax-advantaged accounts

Prioritize contributions to accounts that offer tax benefits, such as 401(k)s, IRAs, and Health Savings Accounts (HSAs).

Common retirement planning mistakes to avoid

Avoid behaviors like anchoring, overconfidence, or moving entirely to cash during market downturns; using formal guardrails such as bucket strategies, regular rebalancing, and outside accountability can help keep you on track. Learning from these other common mistakes can also help you stay on track:

Underestimating life expectancy

Many people underestimate how long they’ll live, leading to insufficient savings. Plan for a longer retirement than you might expect.

Ignoring inflation

Over 20-30 years of retirement, inflation can significantly erode purchasing power. Therefore, you should always consider inflation when determining how much to save for retirement.

Withdrawing too much too early

Taking large withdrawals early in retirement can deplete your savings faster than expected. Develop a sustainable withdrawal strategy by coordinating your retirement withdrawals with tax brackets and Medicare rules to avoid surprises. Use years when you’re in a lower tax bracket for Roth conversions and keep an eye on your modified adjusted gross income (MAGI) to prevent higher Medicare premiums and protect your net income.

Neglecting health care planning

Health care costs often increase with age, and Medicare doesn’t cover everything. Consider supplemental insurance and long-term care planning.

The Role of Professional Guidance

While online calculators and rules of thumb provide helpful starting points, working with a financial professional can help you create a personalized retirement strategy. When choosing a financial professional, ask structured questions about their investment philosophy, services, compensation, coordination with your CPA, review schedule, and succession plan. Look for a team that goes beyond managing your portfolio to also handle taxes, Medicare, and behavioral guidance, ensuring your entire financial life is supported.

Here are few things a financial advisor can help you with:

Analyze your current financial situation
Project your future needs more accurately
Optimize your investment allocation
Plan for tax-efficient withdrawals
Coordinate various retirement income sources
Explore life insurance options that can supplement retirement income

Professional guidance becomes particularly valuable as you approach retirement and need to transition from accumulating wealth to creating sustainable income.

Taking action on your retirement plan

Now that you understand how much you might need for retirement, it’s time to take action. Start by calculating your current savings rate and comparing it to recommended benchmarks. If you’re behind, don’t let that discourage you. Instead, use it as motivation to implement positive changes.

Review your current retirement accounts and make sure you’re maximizing available benefits. Consider automating your savings to make consistent contributions easier. Explore our retirement planning resources that can help you stay on track. Most importantly, start today. Time is your most powerful ally in building retirement wealth.

Remember, retirement planning isn’t a set-it-and-forget-it process. You must review and adjust your strategy regularly as your life circumstances change.

Frequently asked questions (FAQs)

How much should I save for retirement each month?

A good starting point is 10–15% of your gross income, including any employer match. If you’re starting later or want to retire early, you may need to save 20% or more. The key is to start with what you can afford and increase your savings rate over time.

Should I pay off debt or save for retirement first?

There are a few things to consider when deciding to pay off debt or save. You must contribute enough to your 401(k) to get any employer match first—that’s free money. Then focus on high-interest debt (like credit cards) before increasing retirement contributions. Low-interest debt (like mortgages) can often be carried while you save for retirement.

How do I know if I’m saving enough for retirement?

Compare your current savings to age-based benchmarks and use retirement planning tools to estimate if you’re on track. If your projections show you’ll have 70-90% of your pre-retirement income, you’re likely in good shape. Consider consulting with a financial professional for a detailed analysis.

What’s the best retirement account to use?

The best account depends on your situation. If your employer offers 401(k) matching, start there. Traditional IRAs and 401(k)s provide immediate tax deductions, while Roth accounts offer tax-free withdrawals in retirement. Many people benefit from having both types of accounts for tax diversification. A financial professional can help you determine the right mix for your situation.

Professionally Reviewed by: Adam Olson, CFP®, LUTCF, FSCP, RICP

Wealth and Retirement Strategist

Adam is a Certified Financial Planner, author and podcast host with a deep passion for helping clients navigate all aspects of personal finance, from financial planning and investment management to life and health insurance. His goal is to empower individuals and families with the knowledge and tools they need to make confident financial decisions. He resides in Norfolk, Nebraska with his wife, Katie, where they are raising their four boys.

Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc. Mutual of Omaha Advisors is a division of Mutual of Omaha Insurance Company.

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.

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