How Much Monthly Income You’ll Really Need to Retire Comfortably in 2025
Financial planners generally recommend aiming for about 75% of your pre-retirement income as a target monthly income during retirement. This is because expenses in retirement typically decrease to around three-quarters of your current spending.
To estimate your retirement income needs, start by multiplying your current annual income by 75%. For example, if your household earns the median U.S. income of $83,730 per year, you can expect to need roughly $62,800 annually, or about $5,230 per month, in retirement.
Once you determine your monthly retirement income goal, you can calculate your total savings target using the 4% rule, a common guideline for retirement planning.
The 4% Rule Explained
The 4% rule suggests you can safely withdraw 4% of your retirement savings each year without running out of money. To find out how much you need to save, multiply your desired annual income by 25 (the inverse of 4%).
“Using the 4% rule, that means that you'd need to save $1.57 million in total”
For example, to generate $62,800 per year, you would need total savings of approximately $1.57 million.
Key Numbers to Prepare For Retirement
- Monthly income needed: 75% of your current monthly income
- Annual income needed: 75% of your current annual income
- Total savings target: Annual income needed × 25 (based on the 4% rule)
By understanding these figures, you can better assess whether your current savings plan will allow you to retire comfortably.
Summary
Estimating retirement needs involves calculating 75% of your current income for monthly expenses and using the 4% rule to determine total savings, ensuring you maintain your lifestyle after retirement.