How Much Money Do You Need to Retire in the USA?
The real numbers, simple formulas, and honest talk about what retirement actually costs in 2026.
By CashSmartGuide Editorial Team - Last updated: January 2026 | 8 min read
Everyone wants to know the magic number. How much money do you actually need to retire and never worry about running out? A million dollars? Two million? Can you retire on less if you're frugal?
The truth is, there's no single answer that works for everyone. Someone retiring in rural Mississippi needs far less than someone retiring in San Francisco. Someone who travels constantly needs more than someone who gardens and reads. Your number depends on your life, not some financial guru's rule of thumb.
That said, there are proven formulas and realistic ranges that help you calculate your personal retirement number. In this guide, I'll show you three different approaches, break down actual retirement budgets, and help you figure out whether you're on track or need to adjust course.
The Quick Answer
Most financial experts suggest you need 25 times your annual expenses saved to retire safely. If you spend $50,000 per year in retirement, you need about $1.25 million. If you spend $80,000 per year, you need $2 million.
This is based on the 4% rule—withdrawing 4% of your portfolio annually, adjusted for inflation, which historically lasts 30+ years without running out of money. Add Social Security on top of this, and most people can retire comfortably with less than they think.
Three Ways to Calculate Your Retirement Number
Different methods work for different people. Pick the one that resonates with how you think about money and retirement.
Method 1: The 4% Rule (25x Your Expenses)
Most popular and scientifically tested approach
The 4% rule says you can safely withdraw 4% of your portfolio in the first year of retirement, then adjust that amount for inflation each year. Historically, this approach has a 95% success rate over 30 years.
The Formula
Annual Retirement Expenses × 25 = Your Target Number
• Spend $40,000/year in retirement → Need $1,000,000
• Spend $50,000/year in retirement → Need $1,250,000
• Spend $60,000/year in retirement → Need $1,500,000
• Spend $80,000/year in retirement → Need $2,000,000
Why 25x Works
If you have $1 million and withdraw 4% ($40,000) in year one, your remaining $960,000 continues growing. In a balanced portfolio earning 7-8% annually, growth typically outpaces your withdrawals plus inflation. That's why the money lasts 30+ years.
Real Example: The Johnsons
The Johnsons estimate they'll spend $65,000 annually in retirement (mortgage paid off, kids independent). They need $65,000 × 25 = $1,625,000 saved.
They'll receive about $45,000 combined from Social Security, meaning they only need to withdraw $20,000 from savings ($65,000 - $45,000). At 4%, they actually only need $500,000 saved since Social Security covers most expenses.
Method 2: Income Replacement (70-80% Rule)
Based on your current income, not expenses
This approach assumes you'll need 70-80% of your pre-retirement income to maintain your lifestyle. It's simpler because you don't need to estimate future expenses—you just use your current salary.
The Formula
Current Annual Income × 0.80 × 25 = Your Target Number
• Earn $60,000/year → Need $1,200,000 (80% × $60k × 25)
• Earn $80,000/year → Need $1,600,000 (80% × $80k × 25)
• Earn $100,000/year → Need $2,000,000 (80% × $100k × 25)
• Earn $150,000/year → Need $3,000,000 (80% × $150k × 25)
Why Only 70-80%?
In retirement, you're not saving 15% for retirement anymore, you're not paying FICA taxes (7.65%), and you're not commuting to work. These expenses disappear, reducing your income needs by 20-30%. That's why 70-80% of pre-retirement income typically maintains your lifestyle.
Method 3: Detailed Budget Approach
Most accurate but requires more planning
Build your actual retirement budget line by line. This takes more work but gives you the most accurate number, especially if your retirement will look very different from your current life.
Sample Retirement Budget
Using the 4% rule: $63,600 × 25 = $1,590,000 needed
Don't Forget Social Security (It's Bigger Than You Think)
Most retirement calculations overlook Social Security, but it dramatically reduces how much you need to save. Social Security replaces 30-40% of pre-retirement income for most people.
Average Social Security Benefits in 2026
• Average monthly benefit: $1,976 ($23,712/year)
• Maximum monthly benefit at full retirement age: $3,822 ($45,864/year)
• Married couple (both claiming): $35,000-$60,000/year combined (typical range)
Real Impact on Your Retirement Number
Let's say you need $70,000 per year in retirement. If you receive $30,000 from Social Security, you only need to cover $40,000 from savings.
Without considering Social Security: $70,000 × 25 = $1,750,000 needed
With Social Security: $40,000 × 25 = $1,000,000 needed
Social Security just reduced your savings target by $750,000!
When to Claim Matters
You can claim as early as 62 (with reduced benefits) or wait until 70 (with increased benefits). Every year you delay from full retirement age to 70 increases your benefit by about 8%.
For most people, waiting until at least full retirement age (67 for those born in 1960 or later) makes financial sense, especially if you have other income sources or savings to draw from.
How Much You Need by Lifestyle
Your retirement number depends heavily on the lifestyle you want. Here are realistic ranges for different retirement lifestyles in the USA.
Bare-Bones Retirement ($30,000-$40,000/year)
Target savings: $250,000-$500,000 (with Social Security covering most expenses)
Living very frugally in a low-cost area. House paid off. No travel. Few luxuries. Relying heavily on Social Security. This works for some people but leaves zero room for emergencies or unexpected expenses.
Realistic for: People with low current expenses and paid-off homes in rural or low-cost urban areas.
Modest Comfortable Retirement ($50,000-$65,000/year)
Target savings: $750,000-$1,200,000
Comfortable but not extravagant. Mortgage paid off. Some travel (one or two trips per year). Hobbies and entertainment. Ability to help kids/grandkids occasionally. Room for unexpected expenses.
Realistic for: Middle-class Americans who saved consistently throughout their careers.
Comfortable Retirement ($70,000-$90,000/year)
Target savings: $1,200,000-$1,800,000
Living well without major sacrifices. Multiple vacations per year. Nice dinners out regularly. New car every few years. Supporting family when needed. Healthcare fully covered with room for long-term care insurance.
Realistic for: Upper-middle-class professionals who maxed 401(k)s and IRAs for 20+ years.
Affluent Retirement ($100,000-$150,000+/year)
Target savings: $2,000,000-$3,500,000+
Luxury lifestyle. Extensive travel. Second home. Expensive hobbies. Fine dining. Supporting adult children significantly. No budget concerns for day-to-day expenses.
Realistic for: High earners who saved aggressively, business owners, or those with significant inheritance/windfalls.
Location Drastically Changes Your Number
Where you retire matters as much as how much you save. The same retirement lifestyle costs twice as much in San Francisco as it does in Nashville.
Same Lifestyle, Different Costs
Geographic Arbitrage
Some retirees move from high-cost to low-cost areas specifically to make their savings stretch further. Retiring in Tampa instead of Boston could reduce your retirement savings target by $500,000+ while maintaining the same lifestyle. No state income tax in Florida is another bonus.
What If You're Behind on Savings?
If you're 50 or 55 and nowhere near these numbers, don't panic. You still have options that don't require winning the lottery.
1. Work a Few Extra Years
Every year you delay retirement has triple benefits: more time to save, more time for investments to grow, and fewer years needing to fund. Working from 65 to 68 could reduce your retirement savings target by $200,000+.
2. Downsize Your Lifestyle
If you need $75,000/year but only have $1 million saved, adjust your plans to spend $60,000/year instead. Smaller house, less travel, fewer luxuries. Not ideal, but better than running out of money at 80.
3. Move to a Lower-Cost Area
Relocating from a high-cost to low-cost state can cut expenses by 30-40%. That million-dollar retirement that's tight in California becomes comfortable in Arizona or North Carolina.
4. Plan for Part-Time Work in Early Retirement
Earning $15,000-$20,000 annually from part-time work in your 60s reduces how much you withdraw from savings. Even a few years of modest income dramatically extends portfolio longevity.
5. Maximize Catch-Up Contributions Now
If you're 50+, you can contribute $31,000 to your 401(k) and $8,000 to your IRA in 2026. Ten years of maxing these could add $500,000+ to your nest egg even with modest returns.
Common Mistakes When Calculating Your Number
Underestimating Healthcare Costs
Healthcare is often retirees' largest expense after housing. Even with Medicare, expect $5,000-$10,000+ annually per person for premiums, co-pays, prescriptions, and dental. Long-term care insurance or self-funding can add tens of thousands more.
Ignoring Inflation
A dollar today won't have the same purchasing power in 20 years. At 3% inflation, $50,000 in today's dollars will feel like $27,000 in 20 years. Your retirement plan must account for this. See our guide on how inflation affects retirement savings.
Planning to Live Only to 85
A 65-year-old today has a decent chance of living to 90 or 95. Women especially. Plan for 30 years of retirement minimum, not 20. Running out of money at 85 when you live to 93 is a nightmare scenario.
Forgetting Taxes
Traditional 401(k) and IRA withdrawals are taxed as ordinary income. If you need $60,000 to live on and you're in the 22% tax bracket, you actually need to withdraw $77,000 to net $60,000. Factor taxes into your calculations.
Not Accounting for One-Time Big Expenses
New roof, new car, helping kids with weddings or down payments, major medical procedures—these pop up. Build a cushion of 10-20% beyond your annual budget for irregular large expenses.
Quick Calculator: Find Your Number
Calculate in 3 Steps
Step 1: Estimate Annual Retirement Expenses
Use your current spending as a baseline, then adjust:
• Remove: retirement savings, work commute, work clothes, mortgage (if paid off)
• Add: travel, hobbies, healthcare premiums before Medicare, extra leisure spending
My estimated annual retirement expenses: $_________
Step 2: Subtract Expected Social Security
Check your estimated benefit at ssa.gov/myaccount or use these averages:
• Lower earner: $18,000-$24,000/year
• Average earner: $24,000-$36,000/year
• Higher earner: $36,000-$46,000/year
• Married couple: $35,000-$65,000/year combined
Expected Social Security (annual): $_________
Step 3: Calculate Your Savings Target
Formula:
(Annual Expenses - Social Security) × 25 = Your Target
($________ - $________) × 25 = $________
Need a More Detailed Calculation?
Use our interactive retirement calculator to factor in inflation, investment returns, and different withdrawal strategies: How to Use a Retirement Calculator
Are You On Track? Benchmarks by Age
Knowing your final target is only useful if you can track progress. Here are age-based milestones to help you gauge whether you're on pace.
Retirement Savings Milestones (As Multiple of Annual Income)
Example: If you earn $70,000 at age 40, you should have around $210,000 saved (3× salary) to be on track for retirement.
For a deeper dive into whether you're hitting these benchmarks, see our detailed guide: Retirement Savings by Age: Are You On Track?
The Bottom Line
How much money you need to retire depends entirely on how much you plan to spend, where you'll live, and what Social Security will cover. For most Americans retiring today, the target range is $1 million to $2 million, which covers a comfortable middle-class lifestyle.
The 4% rule remains the gold standard: multiply your annual retirement expenses by 25, subtract what Social Security covers, and that's your savings target. Someone spending $60,000 annually with $30,000 from Social Security needs about $750,000 saved. Someone spending $80,000 with the same Social Security needs $1.25 million.
If you're behind on savings, you're not out of options. Work a few extra years, downsize your lifestyle, move to a cheaper location, or plan for part-time work in early retirement. Even small adjustments can close surprisingly large gaps.
The worst thing you can do is avoid calculating your number because you're afraid of the answer. Know your target, track your progress, and adjust course as needed. The earlier you face the reality, the more time you have to fix it.
Related: Plan Your Retirement
Financial Disclaimer
This article provides general educational information about retirement planning and savings targets. It should not be considered personalized financial advice. Individual retirement needs vary significantly based on lifestyle, location, health status, family situation, and numerous other factors. Market conditions, Social Security benefits, tax laws, and healthcare costs are subject to change. The 4% rule and other withdrawal strategies discussed are historical guidelines, not guarantees of future results. Before making retirement decisions, consult with qualified financial advisors, tax professionals, and estate planners who can analyze your specific circumstances and provide personalized recommendations.