How Much Do You REALLY Need To Retire

Do you know how much money you'll need to retire? One million dollars? Two million dollars? Or is it even more? Guys, I am so excited because helping our clients understand the path to financial independence is what I get to do every single day here at Abound Wealth. And today I get to share that with you. So let's talk about how much you really need to retire and what it takes to get there. When it comes to calculating your retirement needs, there are two big things that folks often completely disregard. But before we get to those, let's see what retirement looks like for the average American. The median net worth for Americans in their 60s right now is $290,000 according to Empower's most recent data. If someone retires with this amount, how much annual income would they actually have? At a 4% withdrawal rate, it would yield a little over $11,600 per year. That's clearly not a lot of income, but it's also not the whole picture because it doesn't take into account one of the two big things that people often forget to consider when calculating their retirement number. And that thing is social security. It's understandable why someone might not factor this in. Not counting it can be a way to ensure you're not under-saving or counting your chickens before they hatch, so to speak. And some people assume it won't even be around by the time they retire. But for now, if you want an accurate number, we think it's wise to include it in your calculation. How much will your social security benefit be? Like most things in personal finance, it depends. You have some options about when you get to take it, and this can impact how much you receive. At age 62, it's the earliest you can start receiving your benefits. But at this age, you'll only receive about 70% of the benefit that you would receive at full retirement age. At your full retirement age, which for most folks is around age 67, you'd receive 100% of your benefit. And if you wait until age 70, you would actually receive about 124% of your full retirement benefit. We know right now that the average social security benefit in 2026 is $2,017 a month, or a little over $24,200 a year. Based on that number, taking your benefits early at 62 would mean you'd receive about $1,400 a month or about $16,900 per year. If you wait until 70, your benefit would be a touch over $2,500 a month or just around $30,000 a year. When we factor that into our prior example, we see that taking social security at age 62 would yield a total annual cashflow of right at about $28,500. If you took social security at full retirement age of 67, that's about $35,800. Or if you waited until age 70, it could produce about $41,600 of annual retirement income. It's very unlikely that that level of income would sustain a comfortable retirement in the long term. Even with a paid off home, things like healthcare costs or just general upkeep or living expenses are going to take a big chunk out of your nest egg. If you're someone who lives very frugally and you live in a very low cost of living area, or perhaps you have other sources of income, this could eke out a modest retirement. For the average American though, we'd suggest saving well beyond this amount. So let's see what it looks like to retire with some higher numbers. By the way, we have a resource covering social security benefits available at moneyguide.com slash resources. And after you've watched this video and made sure to hit that like and subscribe button, go check it out. Let's see what it looks like to retire with $1 million invested. In this case, a 4% withdrawal rate gives you $40,000 per year from your portfolio. If you add social security in the mix, the numbers change a bit. If you take social security at 62, your annual income would be about $56,900. At 67, it's about $64,200. And if you wait all the way till 70, it could be an annual income of $70,000 a year. At this level, you're getting closer to what most would consider an average middle-class retirement lifestyle. You'll have enough to cover your basic needs comfortably, especially if you have a paid off home. But this probably isn't the retirement where you're taking luxury cruises every year or eating at high-end steakhouses all the time. You'll have some breathing room, but you'll still need to be mindful of your spending and make thoughtful choices about how you use your money. Think modest travel, occasional treats, and a generally comfortable but not extravagant lifestyle. But this is where we run into the second big thing that people generally forget about when it comes to retirement, inflation. $1 million now is not the same as $1 million 20, 30, or even 40 years from now. If you're nearing retirement, this isn't a huge concern. But if you're young and just starting out, it is a much bigger deal. Let's say that you're 35 years old today and you plan to retire at 67 with $1 million. If we assume a 3% inflation rate over that 32-year span, that would bring your total annual retirement income number to under $40,000 in today's dollars. Remember, we were assuming that it would be $64,000 today, and that's including your Social Security benefit. So keep that in mind as we talk through these numbers and make sure you take inflation into account when thinking about your own retirement number, especially if you've got a long investment horizon ahead of you. With that said, what does it take to build a $1 million nest egg? Well, if we use the rate of return from our wealth multiplier, which you can go check out at moneyguy.com slash resources, here's what you need to save and invest in order to get to $1 million. If you're 25 years old, you need to invest about $152 a month. Starting at 35, that number's 505 per month. And if you're beginning your journey at age 45, you'll need to set aside $1,495 a month to reach this goal. So now let's look at what it looks like if you retire with a $1.5 million nest egg. A 4% withdrawal rate would give you $60,000 a year just on the portfolio. If we factor in Social Security and you began benefits at age 62, your total annual income would be about $76,900. If you wait until age 67, your annual income would be about $84,200. Or if you wait all the way until age 70, you're actually looking at a $90,000 a year income. Again, you want to make sure that you factor in inflation based on your timeline, but things are definitely a little more comfortable at this level. You'd likely be able to afford some nice vacations, help out with the grandkids here and there, and generally live without having to worry too much about every expense. This is where retirement really starts to feel less like just getting by and more like actually enjoying the fruits of your decades of hard work. You'll have the flexibility to splurge on experiences that matter to you while still maintaining a solid financial foundation. What kind of savings does it take to build a $1.5 million nest egg? If you're starting at age 25, you need to invest about $227 per month. At 35, about $757 per month. And if you're waiting until age 45 to start on your savings journey, you would need to save about $2,243 each month to reach this goal. What happens if we move up to a $2 million nest egg? At a 4% withdrawal rate, your portfolio alone could generate about $80,000 per year before we even think about Social Security. And when you do factor it in, the picture gets even brighter. At age 62, your total income could be about $96,900. At age 67, it could be a little over $104,000. And if you were to wait all the way until age 70 with that size portfolio, your annual income could potentially be over $110,000 a year. With around $100,000 in annual income and ideally no mortgage payment hanging over your head, you're entering into what many would consider a genuinely comfortable, perhaps even cushy retirement. At this level, you have the freedom to take nicer vacations each year, you can help children or grandchildren with their expenses, and you can even donate meaningfully to causes you care about. This affords you the ability to live life on your own terms. You're able to enjoy your retirement years with real financial peace of mind and flexibility, thanks to the decades of discipline and hard work you put in. What does it take to accumulate $2 million? Starting at age 25, you need to save about $303 per month. At 35, a little over $1,000 a month. If you wait until age 45, you would need to be saving about $2,990 each month. These numbers are not all one size fits all. If the lifestyle that you're looking for requires a bigger nest egg, you may need more than $2 million. Personal finance is personal. So let us know in the comments what number you're shooting for. And if you want to know if you're on track, check out this video to see money milestones that you should hit at every decade. And as always, keep building toward your great, big, beautiful tomorrow.