How Big of a Nest Egg Do I Need for Retirement?

One million dollars used to be the savings goal for a well-funded retirement. But that number only works now if you can live comfortably on approximately $40,000 a year in today’s dollars, according to And it may not work for you at all if you're not scheduled to retire for three decades or more. If you don’t know how much money you will need to live the lifestyle you envision in retirement — or haven’t started saving at all – you’re not alone.

Although a majority of Americans feel better about their personal finances than they did a year ago, only 17 percent of respondents in the 2018 Retirement Confidence Survey said they feel "very confident" that they will be able to retire comfortably. About 36 percent of those polled reported that they were worried they wouldn't have enough to last them through retirement.

So, just how much DO you need? Well, the average length of retirement is around 22 years. Divide your current nest egg (minus taxes) by that number and you'll have the amount you'll be using each year. Is that actually enough? What about inflation? If planning for your golden years has become a priority, here are a few methods to help you with the math, and some recommended steps that are applicable to all.

How Are You Spending?

A good barometer for your retirement lifestyle budget is your budget now. According to Census data, the median household income for those 65 and older is $34,000, but that is almost half the $66,000 for ages 55 to 64. When calculating your retirement budget, be honest. Retirees most often forget to include items like real estate taxes, insurance premiums, medical expenses and periodic costs, such as home and auto repairs.

Don’t Forget the Tax Man

Your tax bill in retirement is affected by your income sources. Mortgage interest, rental properties and income from investments that are not inside of a retirement plan may mean lower taxes. However, if you have a pension income, your home is paid off and/or you will be relying on qualified retirement plans, like IRAs or 401(k), then your taxes might be higher. While there are some tax advantages to being retired, you'll need to keep potential withdrawal penalties in mind.

Arizona is an attractive retirement state due to its tax-friendliness. Great weather and golf notwithstanding, retirees are also drawn to the state’s low personal income tax rate. Social Security benefits are exempt, as is up to $2,500 of some retirement income. There is also no inheritance, gift or estate tax. Arizona’s affordable housing costs are one of the 20 reasons why The Huffington Post said the Grand Canyon State might be the best state to retire in.

Retirement by the Numbers

If all that math is too much for you, offers a simplified rule of thumb. The financial advisement site suggests saving at least 8x your ending salary to help increase the odds that you won’t outlive your savings during 25 years in retirement. By taking a stair-step approach of saving 1x your salary by 35 years old, 3x by 45, and 5x by 55, you can set guidelines throughout your working life. For more detailed advice, or if you're behind on your retirement savings, consult a financial advisor for advice.

8 Steps to Grow Your Nest Egg

Time Magazine reported that each day more than 10,000 baby boomers enter retirement. But only about 25 percent of workers 55 and older say they’re doing a good job of preparing for their “best years,” according to the Employee Benefit Research Institute. No matter what stage of life you’re in, these planning steps will help you reach your retirement goals:

  • Enroll in your workplace plan—the earlier, the better.
  • Put money in at the highest levels possible.
  • Increase your deferral rate periodically as your salary grows.
  • Keep a separate retirement account, typically a money market or savings account, in addition to employer plans.
  • Invest in a diversified asset mix, including 401(k), and Roth or Traditional IRAs.
  • Do not overestimate your salary growth or your portfolio returns on retirement investments.
  • As you approach retirement, envision the lifestyle you want, and estimate what you plan to spend.
  • Own your plan—stick with it, stay engaged, and avoid taking out loans or cashing out when you change jobs.

Retirement may be around the corner or many years away, but the road to a comfortable one starts in the same spot for everybody. By figuring out what kind of lifestyle you want to lead when you’re done working full-time, you can estimate how much and how often you need to save for great golden years.

Need help with your retirement plan or investment strategies? Our Raymond James Financial Advisors will help you create a financial plan customized for your individual goals. Schedule your free appointment today!

Need help planning your retirement?


The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.

Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., Member FINRA / SIPC | Legal Disclosures | Privacy Policy | Terms of Use

You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.