How much will I need in retirement?
Hint: It's not just about a big number.
How do I get started?
If figuring out how much money you’ll need in retirement feels hard, you are not alone. But knowing where, and how, to start thinking about it can help you build the right plan to reach a secure retirement.
TIAA estimates that people will need anywhere from 70% to 100% of their annual income, each year of retirement. To reach this goal, experts recommend saving between 10% and 15% of your annual salary, including any employer contributions.1
How do I make a retirement vision and budget?
Start with what you spend now. Make a list of your monthly expenses: rent or mortgage (including property taxes), utilities, groceries, health insurance, and entertainment. You’ll also want to include things like gym memberships, personal grooming, and animal care.
Here are a few things to consider if you have a spouse or partner:
How will your financial roles and responsibilities change?
How much "togetherness" do you want and need—and how might that impact the size of your living space?
What healthcare and medical needs can you anticipate?
Where, geographically, do you want to live? Will it change?
How could my expenses change my choices?
Based on your planning, you might find you're closer to retirement than you thought. However, a healthy retirement account balance isn’t the only factor. For example, if you plan to retire early, you may need to pay for your health insurance until you’re eligible for Medicare at 65. Even if you're covered under a spouse's policy, costs like deductibles and out-of-network services can add up. Unexpected expenses like supporting an adult child or an aging parent can also impact your savings.
How can I estimate the income I'll receive in retirement?
You're likely to receive income in retirement from a few different places. Social Security and employer pension plans, considered guaranteed sources of income, have fixed payments that you can plan around. Ideally, your guaranteed retirement income would be enough to cover your essential expenses each month.
The amount of your monthly Social Security payout will depend heavily on when you start claiming your benefit. Because Social Security takes cost-of-living adjustments into account, your benefit should increase as well.
While traditional pensions are rare, they do still exist. If you have one, include it in your calculations. Your plan administrator can provide you with an estimated benefit analysis.
The rest of money you receive in retirement will come from the savings you've built up.
What about retirement savings?
IRAs and 401(k) and 403(b) accounts are dedicated retirement savings accounts. Their balances depend on the investments' performance, which means they'll fluctuate in value and are less dependable than guaranteed income.
You'll begin to make withdrawals from these accounts during retirement, and a minimum amount is required by the IRS in the tax year after you turn 73.
Looking at your balance and making a plan for when and how to use those savings are an important part of your retirement planning.
How do I know if I can convert savings into guaranteed lifetime income?
Having guaranteed income in retirement can give you peace of mind in an unpredictable time. If your employer offers a pension, you'll be able to convert that into lifetime income. You may also consider converting a lump sum of money—such as IRA, 401(k), or 403(b) balances—into a steady stream of regular payments with an annuity. Annuities offer different distribution methods, including an option for lifetime income option.
This calculator can give you an idea of what lifetime income might look like.
Add that estimated income to your guaranteed "income floor" to see if it brings you closer to creating the retirement you want.
The importance of planning
Everyone's vision for retirement is unique. Whether you want to travel, explore a new career or hobby, or enjoy time with grandchildren proper planning can help you feel secure in your retirement. Explore digital tools to keep you on track or speak to a financial advisor to see the best next steps for your plan, and your future.
1. These Points of View are provided for educational and illustrative purposes only. They are a starting point for consideration and do not constitute investment advice under ERISA, a securities recommendation under federal securities laws or an insurance product recommendation under state insurance laws or regulations. The information provided in these Points of View is not individualized and does not take into account your specific objectives or circumstances or suggest any specific course of action. Investment, insurance product purchase or contribution decisions should be made based on your own objectives and circumstances.
For personalized advice online, visit TIAA’s Retirement Advisor or schedule an appointment with a TIAA financial consultant.
This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision. Investment products may be subject to market and other risk factors. See the applicable product literature or visit TIAA.org for details. Retirement check refers to the annuity income received in retirement.
Investment products may be subject to market and other risk factors. See the applicable product literature or visit TIAA.org for details.
Retirement check refers to the annuity income received in retirement. Guarantees of fixed monthly payments are only associated with TIAA's fixed annuities.
Investment decisions should be made based on the investor's own objectives and circumstances. Advice is obtained using an advice methodology from an independent third-party.
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