How Do I Calculate How Much I Need To Retire At 50? 55? 60?

How Do I Calculate How Much I Need To Retire At 50? 55? 60?

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Do you know how much you need to retire? Or how to calculate how much you need for retirement? If you answered no, there’s no need to worry. You are similar to most people and that’s okay. After reading this article, you will not only know how much you approximately need when you retire but also how much is a good benchmark at each age.

How do you calculate how much you need to retire?

There are multiple ways to calculate how much you need to retire. One is the ‘quick and dirty way’ which is just a basic multiple. A step up from there is the 4% rule or age-based rules. Finally, your last option is to use complex calculators where you can input dozens of different variables.

One of the questions on my Money Personality Quiz (click the picture below to take it yourself), is how much each person thinks they need to retire. The answers were all over the board.

Most answers were around $1M but also some as high as $25M and others as low as $250,000. That’s a huge difference. Along with some wildly different numbers, I also receive many “I don’t know”. In fact, 25% of the people who responded said they don’t know.

That’s a problem. But I’ll be completely honest with you, that’s a problem that I wasn’t surprised to see.

The Problem With Calculating How Much You Need To Retire

YD&NB is all about keeping it honest and I can’t tell you how to calculate your retirement needs without telling you this absolute fact. There is no way you can accurately calculate your retirement needs to the dollar. I don’t care if you have the most powerful computer program in the world it still won’t be accurate.


Simple, I can’t predict the future and unless you have a crystal ball, you can’t either.

What I mean specifically is that you never know what is going to happen with your life and your finances. While I wish I could sit here and tell you to save 25% a year and then you’ll retire a multi-millionaire, I can’t. Here are some examples of what I mean:

  • You come down with a life-threatening illness that racks up large medical bills.
  • A recession happens like the Great Recession in 2008 and your investment portfolio tanks.
  • You lose a loved one who you had planned your future retirement needs together with your joint incomes.

All of these examples were things no one can see coming and unfortunately that is life. The sad fact is there were people who were planning to retire in 2008/09 who are now still working. I can’t even start to comprehend saving your whole life only to see 50% of it gone in a matter of a month but that is what happened to thousands of people.

There are ways to plan against these events, such as diversification, but that is a topic outside of the scope of this article. My point is that you don’t know exactly how much you are going to need or how much you will have when you retire when you are 50, 55, 60, or older. What I want to help you do is be as prepared as possible.

The Quick and Dirty Method

The quick and dirty method isn’t exactly an attractive name for a way of calculating your retirement needs but it does fit. Why is it quick? Because it takes less time to calculate than it did to read this whole article. It takes less time than reading this one section. Seriously, it takes less time than reading this sentence.

Enough dancing around it, what is the quick and dirty method to calculate your retirement needs?

All you need to do is take your current pre-tax salary and multiply it times 20. For example, if you make $60,000 x 20 then you would need $1.2M to successfully retirement.

Obviously, this method is just a slightly (emphasis on slightly) educated guess and makes some major assumptions. Here are those assumptions:

  1. Your salary will stay the same your whole life.
  2. You keep the same lifestyle/expenses forever.
  3. You will average a 6% ROI on all investments over your lifetime.

Even with these overgeneralized assumptions, the quick and dirty method has been surprisingly accurate over the years. If you are looking for the 2-minute method of calculating your retirement needs whether you are 50, 55, 60, or whatever age you are, the quick and dirty method may be for you.

Age-Based Benchmarks

A couple of years ago, a Fidelity Bank article went somewhat viral when people were reacting to age-based benchmarks. The age-based method is similar to the quick and dirty but there is data behind it. You see, Fidelity is a HUGE bank. They employ thousands of people and many of those employees are a lot smarter than you and me.

Those people broke down more data than you and I could ever imagine and they landed on the numbers in the graphic below.

Graphic from

The key difference from the quick and dirty is that they set benchmarks at each age, rather than a standard multiplier. This is a great way for you to see how you are doing and if you’re on track to retire at your goal age.

I would highly recommend you take the table with a grain of salt. It’s a good metric but nothing is perfect. Personally, and I would suggest you do the same, I always try to go above and beyond. In the beginning, I mentioned how unpredictable and cruel the world can be to us. Because of that, I would take these numbers and multiply them by 1.5 or even 2.

I want to be a human who doesn’t have to worry about money when I’m 80. I would much rather be overprepared than still going to work when I’m elderly.

Using The 4% Rule

The 4% rule is one of the most popular ways to calculate how much you need for retirement. The 4% rule is different though because it doesn’t actually give you a set number. Instead, it’s a theory that you can withdraw 4% of your account per year and only pull from the interest and dividends that your account earns. Rather than the principal you invested.

By doing this, you can keep a steady stream of cash flow through retirement. Like the Fidelity age-based benchmarks, the 4% rule was developed by some incredibly smart people over a 50 year period of market returns. If you want to learn more about the history of the rule, then check out Investopedia.

Let’s talk through calculating how much you need for retirement using the 4% rule. All you need to do is take your desired annual retirement income and divide it by .04. For example, if I think I need $50,000 a year to sustain my lifestyle I would take it divided by .04 and get $1,250,000.

This rule can be used for any desired retirement age but life expectancy can have a major impact on this calculation.

Complex Calculators

The last and arguably the most accurate (still a guess though) method to calculating how much you need for retirement is to use a complex calculator. If you were feeling ambitious, I could give you the calculations to do this but most of you wouldn’t enjoy the math. Instead, we can leverage the power of the internet and the tools you can find on it. The best part? It’s all free to use.

I have considered building my own calculator on YD&NB but I have two issues. I don’t have enough money and it still would be inferior to the multiple tools already out there. Because of that, I’m not going to try and re-invent the wheel but instead, point you in the direction of people who have already done it and done it well.

If you want to check out some great calculators then click one of the links below:

All of these calculators take into account more than you think or have ever thought about. Age, income, tax rate, inflation rate, etc. all go into giving you a number.

The Bottom Line

What’s the best way to calculate how much you need to retire? I would suggest a combination of all of these. That’s right, do all the methods mentioned above and then take an extra step.

Again, we’re going to err on the side of caution and multiply all of the numbers by 1.5. Is this unreasonable? Maybe to some.

Have you ever heard the saying, “Shoot for the moon. Even if you miss, you’ll land among the stars.” Well, I apply that saying to my thoughts on saving for retirement. That’s why my retirement number is so extreme that I’ve only shared it with a few.

No matter what number you set as a goal, the good thing is that you are thinking about it. For that, I say congratulations. You are taking a step that most don’t and many never will.

If you have any questions about calculating your retirement needs or any other questions in general, then click the contact button on the bottom right side of this screen.

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