How Much Money Do You Need to Retire?

All told, the average couple will need $330,000 after taxes to cover medical expenses over the course of their retirement, excluding long-term care, according to Fidelity Investments’ 2025 Retiree Health Care Cost Estimate.

Finally, there’s the question of how much, if anything, you wish to leave to your children or charity. Some people want to leave their entire savings to their children or the church of their choice — which is fine, but it requires a much higher savings rate than a plan that simply aims to make your money last as long as you do.

Factor No. 2: Expected return on investments

No one knows what stocks, bonds or bank certificates of deposit will earn in the next 20 years or so. But we can look at long-term historical returns to get some ideas, and tools like investment return calculators can help.

According to Morningstar Direct, stocks have earned 10.50 percent a year, on average, since 1927 — a period that includes the Great Depression as well as the Great Recession. Bonds have earned an average 5.01 percent a year over the same time. Treasury bills, a proxy for what you might get from a bank deposit, have returned about 3.3 percent a year. Annual inflation has averaged about 2.95 percent over that period, Morningstar says.

Most people don’t keep 100 percent of their retirement savings in a single type of investment. While they might have part of their portfolio in stocks for growth of capital, they often have a portion in bonds to cushion the inevitable declines in stocks. According to Vanguard, a globally diversified portfolio of 60 percent stocks and 40 percent bonds has delivered a 10-year annualized return of 6.9 percent as of late 2024, reflecting both recent market volatility and long-term resilience.

Financial advisers often recommend caution when estimating portfolio returns. Gary Schatsky, a New York financial planner, aims for 2.5 percent returns after inflation, which would be about 5.5 percent today. That may seem modest, he says, but it’s probably better to aim too low and be wrong than to aim too high.

Source: Fidelity Investments

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Factor No. 3: Life expectancy and retirement age

With life expectancy for older Americans stretching into the mid-80s and beyond, retirement planning isn’t just about when you stop working — it’s about how long you’ll need your money to last. At 65, the average American man can expect to live 18.8 more years, to nearly 84, according to U.S. census data. The average 65-year-old woman can expect to live past her 85th birthday.

“Most people err on the shorter side of the estimate,” says Schatsky. However, that can be a big misjudgment: If you plan your retirement based on living to 80, your 81st birthday might not be as festive as you’d like.

Understanding how life expectancy affects your retirement planning is crucial because it directly affects how long your retirement savings need to last. You can incorporate life expectancy into your planning by using an actuarial table or consulting with a financial adviser to create a personalized financial plan that suits your needs. This approach helps ensure you’re prepared for a secure retirement.

It makes sense to think about how long your parents and grandparents lived when you try to estimate how long you’ll need your money. “If you’re married and both sets of parents lived into their late 90s, the only way you’re not getting there is if you don’t look both ways when you cross the street,” Bass, the Texas financial planner, says.

Even if you don’t have quite that level of confidence, if you’re in good health and have a family history of longevity, it’s best to build a financial plan that can provide for at least 25 years of retirement.

Factor No. 4: A safe withdrawal rate

A landmark 1994 study tried to find the most sustainable withdrawal rate from retirement savings accounts over various time periods. The study led to the development of what is now known as the “4 percent rule.” It found that an investor with a portfolio of 50 percent stocks and 50 percent bonds could support a 4 percent initial withdrawal, adjusted annually for inflation over a 30-year retirement horizon, with a high probability of success.

For example, if you have $250,000 in savings, you could withdraw $10,000 in the first year and adjust that amount upward for inflation each year for the next 30 years. However, the study found higher withdrawal rates above 7 percent annually greatly increased the odds that the portfolio would run out of money within 30 years.

Since then, financial planners and researchers have refined the rule. In 2025, many experts suggest that the 4 percent rule is a useful starting point but not a one size fits all solution.

Recent research by William Bengen, the original architect of the rule, suggests that with a more diversified portfolio — including small-cap and international stocks — retirees may safely withdraw 4.7 to 5.25 percent, depending on market conditions and flexibility.

More recent analyses of the 4 percent rule have suggested that you can improve on those results with a few simple adjustments — not withdrawing money from your stock fund in a bear market year, for example, or forgoing inflation “raises” for several years at a time.

At least at first, it’s best to be as conservative as possible in withdrawals from your savings, to reduce the risk of outliving your money.

Factor No. 5: Sources of income

When planning for retirement, it’s essential to consider all potential sources of income. While the 4 percent rule is very conservative for most people and requires a fair amount of money to generate adequate income, many people will need to combine this with other sources of income to maintain their lifestyle. For example, a $1 million retirement nest egg would generate $40,000 a year in income.

For many people, working a bit longer will help close the savings gap. Additional income sources, such as Social Security, pensions or part-time work, can help supplement this amount and close any savings gaps. Not only will you continue to bring in a paycheck but you’ll be better able to delay claiming Social Security benefits and reap bigger monthly payments.

“It’s a serious decision when you decide to retire, because you can’t turn the [income] spigot back on,” says Schatsky. “Every day you work gives you the ability to increase your retirement enjoyment later.”