When it comes time to retire, you'll want to make sure you have plenty of money in a 401(k) or a brokerage account. Social Security replaces about 40% of pre-retirement income, which just isn't enough in the majority of situations.
The exact amount you'll need will depend on your spending desires and your existing lifestyle. Many experts recommend you have around 10 times your final salary saved, but you may want more or less than this depending on whether you plan to be frugal or travel the world.
If you want your retirement accounts to produce $100,000 in income -- which is a pretty generous amount for most people -- this is the amount you would need to have invested in order to make that happen.
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Seek to invest this much
To figure out how much you must have invested in order to produce a certain income, you must consider your withdrawal rate. That's the rate at which you take money out of your account.
Remember, if you have money invested for your future, you don't want to take all of it out at once -- or even most of it. You need to leave a good amount invested to continue to earn returns so you don't just drain your account dry.
To make sure you don't run out of money, some experts recommend following the 4% rule. If you choose to listen to them, you'd withdraw 4% of your IRA or other retirement account balance the first year you leave work. Then, each year, you'd simply adjust your withdrawals to account for inflation.
The 4% rule isn't always perfect since it doesn't respond well to market fluctuations. But it's a good starting point to figure out how much you must have invested to produce $100,000 in retirement income (or any set amount of retirement income).
Basically, if you decide to follow this rule, you just multiply the amount of income you hope your retirement accounts produce for you each year by 25 -- and that's how big your account balance needs to be.
If you want $100,000, therefore, you'd multiply that amount by 25 to find out you need $2.5 million saved. That's a lot of money, but it's not necessarily out of reach if you start saving young and you're earning a good income throughout your career.
How to save enough for a secure future
If you want to save $2.5 million by the time you reach the age of 67, you have a lot of work to do.
The specific amount you must save will depend on your age and expected returns. The table below shows the monthly contributions to make to your retirement account to hit this target, assuming 10% average annual returns.
| If you invest for this many years | You must invest this much each month to end up with $2.5 million at 67 |
|---|
| 20 | $6,688 |
| 25 | $4,745 |
| 30 | $3,495 |
| 35 | $2,639 |
Data source: Author calculations.
This is undoubtedly a lot of money. But the good news is most people don't really need their investment accounts to produce $100,000 in income. You'll typically want to aim to replace about 70% to 80% of your salary in total upon retirement and, as mentioned above, Social Security replaces about 40% of it. So you need your investments to produce the other 40%.
Essentially, this means that the only way you'd really need $100,000 to come from your investment accounts is if you were making about $250,000 per year. At that income level, it wouldn't be beyond reach for you to invest around $4,100 per month -- especially if you took advantage of tax breaks for 401(k) contributions or received an employer match.
If you're not making near that much, consider how much income you will need to save for your own future by assuming you'll need to replace 40% of your earnings with your investment accounts and multiplying that amount by 25. If you discover you need $40,000 from investments, for example, your target goal should be around $1 million.
A calculator on Investor.gov can tell you the amount to invest each month to hit your personalized target based on years you have left to invest and expected returns. Once you've got the amount, set up automatic contributions to a 401(k) or IRA with your brokerage firm so you can ensure you stay on track and end up with an account balance that produces the retirement income you need.
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FAQs
Having a $100,000 retirement income would give you a good amount of money to spend. You'd need to make sure your retirement investment accounts had around a $2.5 million balance. With such a large balance, you could take out enough money to produce $100,000 in income without risking running out of money.
How much money do you need to retire with $100,000 a year income? ›
Financial planners often recommend replacing about 80% of your pre-retirement income to sustain the same lifestyle after you retire. This means that, if you earn $100,000 per year, you'd aim for at least $80,000 of income (in today's dollars) in retirement.
How much money do you need invested to make $100,000 a year? ›
To cut to the chase, if you want your interest to earn $50,000, $70,000 or $100,000 per year, you'll need to have approximately $1.25 million to $2.5 million in savings or retirement accounts. If you're aiming for somewhere in the middle, like $70,000, you'd want to have $1.75 million saved.
How much money will you need for retirement which answer is the most correct answer? ›
Many experts maintain that retirement income should be about 80% of a couple's final pre-retirement annual earnings. Fidelity Investments recommends that you should save 10 times your annual income by age 67.
What is the average 401k balance for a 65 year old? ›
Average and median 401(k) balances by age
| Age range | Average balance | Median balance |
|---|
| 35-44 | $91,281 | $35,537 |
| 45-54 | $168,646 | $60,763 |
| 55-64 | $244,750 | $87,571 |
| 65+ | $272,588 | $88,488 |
2 more rowsJun 24, 2024
How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.
What is the average nest egg in retirement? ›
The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.
What is the average amount of money needed to retire? ›
Average retirement savings by age
| Age | Average retirement savings (2022) | Median retirement savings (2022) |
|---|
| 45 to 55 | $313,220 | $115,000 |
| 55 to 64 | $537,560 | $185,000 |
| 65 to 74 | $609,230 | $200,000 |
| 75 or older | $462,410 | $130,000 |
2 more rowsMay 28, 2024
Spending Needs and Savings Longevity:
For a $3 million retirement fund, anticipate a monthly income of $6,250 over 40 years, barring investment growth or loss. Factors such as lifestyle choices, inflation, and healthcare costs will influence how long your savings last.
What is a realistic amount of money for retirement? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
Can I Retire at 62? You can retire a little early on $400,000, but it won't be easy. If you have the option of working and saving for a few more years, it will give you a significantly more comfortable retirement.
How many Americans have no savings for retirement? ›
Do You? 20% of adults ages 50+ have no retirement savings, 61% worry they won't have enough at retirement, as per new AARP survey. Plus six tips to start saving now.
How much debt does the average retiree have? ›
Unfortunately, it's a strain many people risk dealing with. A recent Nationwide study finds that Americans of retirement age have an average of $70,000 in debt. And that's not the most comforting piece of data. So if you're nearing retirement with debt, take these key steps to improve your situation.
How much income will 500k generate in retirement? ›
It may be possible to retire at 45 years of age, but it depends on a variety of factors. If you have $500,000 in savings, then according to the 4% rule, you will have access to roughly $20,000 per year for 30 years. Retiring early will affect the amount of your Social Security benefit.
How long will $1 million last in retirement? ›
A recent analysis determined that a $1 million retirement nest egg may only last about 20 years depending on what state you live in. Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you.
What percentage of retirees have $2 million dollars? ›
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
What percentage of retirees have $3 million dollars? ›
Specifically, those with over $1 million in retirement accounts are in the top 3% of retirees. The Employee Benefit Research Institute (EBRI) estimates that 3.2% of retirees have over $1 million, and a mere 0.1% have $5 million or more, based on data from the Federal Reserve Survey of Consumer Finances.
