Recommended Savings Before Retiring

The average retirement age for U.S. men increased from 62 to 64 in the 1990s.

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How much money you need in savings before you retire might be the $64,000 question, but the answer is probably more than $64,000. Conventional wisdom says you need an annual income equal to about 70 percent of your pre-retirement income to live comfortably during your golden years, but since everyone's situation is different, there really isn't a one-size-fits-all answer. Two things are certain; you will need savings for your retirement, and the sooner you start, the more money you will have.


The lifestyle you want to enjoy during your retirement years plays a significant part in determining how much money you need in savings. If you are in good health, your mortgage is paid off and you don't have plans to travel or pursue expensive hobbies, 70 percent of your preretirement income might be sufficient, according to CNN Money's Ultimate Guide to Retirement. If you are still making monthly payments on the homestead, or if want to see the world, you might need even more than 100 percent of your preretirement income.

Your Retirement Needs

Before you can determine how much you need in savings when you retire, you have to determine what your retirement costs will be. This is not the time for wishful thinking or remembering the good old days when gas was 50 cents per gallon. Get a clear picture of how you want to live, and honestly assess how much that life will cost on a per-month or per-year basis.

Other Retirement Sources

Your retirement is probably not totally on your own shoulders. You might have a pension plan or 401k plan at work. If you have earned income, you've probably paid into the Social Security system or some other government-sponsored retirement program. The Social Security Administration provides benefits calculators and your retirement plan administrator can usually give you a pretty good idea of how much your retirement will be worth. Chances are your Social Security benefits combined with your pension plan won't be enough to meet your projected needs, but at least they will take off some of the load.

Factors to Consider

Factors that will affect how much you need in savings include the age you plan to retire and how many years you have before you reach that age, how long you expect to live, whether you want to leave any of your savings behind for your heirs and what other sources you can draw from, such as equity in your home. A good goal to shoot for is the Retirement Savings Multiple, according to AARP. This refers to the multiple of your current income that you should have in savings at a particular age. AARP pegs the multiple at 0.4 if your are 30 years old. 40 year-olds should have two times their income in savings. The multiple grows to four once you hit 50 and nine by the time you reach 60.