# How Much Do I Need to Retire (simple guide + real life story)

Updated on: Aug 18, 2024

You really want a number? Okay, here it is: \$1.8 million. That’s how much you and your partner need to comfortably retire.

Of course, there’s nuances to everything, so in this post, I’ll walk you through the math behind that number and show you how to start saving for your retirement today.

## How much retirement savings do I need?

Taking into account the following:

• Retirement age: Let’s say you retire at 65.
• How long you’ll live: As of writing this, American women will live, on average, 14 years beyond 65, and men will live 8 years beyond 65—to ages 79 and 73, respectively. (Now you see why I want you to live your Rich Life now.)
• Income: Assume you make the median household income of \$70,784 and want to continue your lifestyle in retirement.
• You need: \$1.8 million (\$1,770,100, to be exact).

That number isn’t random. It’s based on financial advisor Bill Bengen’s “4 percent rule,” which says that you can safely withdraw 4 percent of your portfolio every year of retirement—including increasing your withdrawals based on inflation—and not run out of money within 30 years. (To simplify the actuarial science, we use 30 years because you want to protect yourself from running out of money before you die.) Some bozos claim you can safely withdraw 8 percent per year (and “easily” make 12 percent in the market), but 4 percent is much more realistic. I cover this in more depth in I Will Teach You to Be Rich.

If you have \$1.8 million in your portfolio, you can safely withdraw \$72,000 per year—which, in this example, is exactly the current income you’re living on. You wanted to know the number, so there you go.

For a lot of people, that’s terrifying. So I want to add some nuance. That number assumes you keep spending the same amount in retirement, which won’t necessarily be the case. You might spend far less because you’re no longer commuting or you’ve downsized. Do you plan to travel a lot? You might spend more! What if one of you gets sick? Suddenly, you might not travel at all (but have huge medical bills).

If you’ve paid off your house, you won’t need to spend nearly as much. If you’ve invested in tax-advantaged accounts, you’ll pay less in taxes.

And there are even more factors we didn’t consider. We haven’t accounted for your social security benefits, any pensions you may have, your asset allocation, or the more technical aspects of “spending flexibility” (such as cutting spending if the stock market performs poorly).

## How does the 4% rule work?

In a nutshell:

Amount you need to retire = Average annual expenses x 25

Following the 4% rule should allow you to withdraw 4% of your savings each year when you retire without touching the principal. This rule is based on a study from Trinity University that determined 4% is a good rate to withdraw per year for 30-year retirements.

To find out how much YOU need to retire with The 4% Rule, you simply need to:

1. Find out how much you spend yearly. This includes everything that you might possibly spend in a year including rent, utilities, groceries, gas, etc.
2. Multiply it by 25. (Or however many years you anticipate being retired)
Annual Expenses How much you need to save
\$20,000
\$500,000
\$30,000
\$750,000
\$40,000
\$1,000,000
\$50,000
\$1,250,000
\$60,000
\$1,500,000
\$70,000
\$1,750,000
\$80,000
\$2,000,000

Again, given that the median household income is \$70,784 and assuming you want to maintain a similar lifestyle while retired, we can find the safe withdrawal rate by multiplying that number by 25, which will get us \$1,769,600. (This is pretty much the \$1.8 million I mentioned earlier in the post)

Despite the 4% Rule being a widely known guideline for retirement savings, remember that it’s just a rule of thumb. While many are quick to point out its flaws, the rule can still provide a rough estimate of how much you need to save for retirement.

## Do I have enough savings for retirement?

Here’s a quick table to see how you’re faring by age group:

Age Average Retirement Savings
Less than 35
\$49,130
35- to 44-year-olds
\$141,520
45- to 54-year-olds
\$313,220
55- to 64-year-olds
\$537,560
65- to 74-year-olds
\$609,230

The average balance in retirement accounts by age, as of 2022 according to the Federal Reserve

Like a good yoga instructor, all these numbers are flexible. This means your plans will probably change as the years pass by. You could get sick and have to take time off from work. You could win the lottery. (It probably won’t happen … but I’ve got your back if you do.)

What matters is that you roll with the changes and adjust your plan accordingly — even if that means your retirement plans are pushed back a bit. Knowing your monthly savings rate removes the guesswork when life throws you a curveball.

If you follow my Conscious Spending Plan, you’ll know that I recommended you save 5-10% of your income for long term investments (a.k.a retirement)

## Real life story of a couple planning retirement

In our conversation, we dig into their Conscious Spending Plan to reveal a massively successful investment strategy that remains shrouded by deep lingering fears, \$3 questions, and hard-to-break bad habits with money.

Rob is still plagued by his fears about spending money despite the both of them already having \$2million in net worth. Adrienne has bigger visions of a rich life and they both struggle to communicate that with each other.

To help them, I pressed them on the importance of setting specific, quantifiable goals. Vague aspirations can perpetuate financial anxiety, while concrete numbers provide a clear target to work towards.

By nudging Adrienne for specifics, I wanted to show how being detailed with their desires could make their retirement planning more enjoyable.

[00:05:04] Adrienne: I would love to tip extra when I go out to eat with people. I would love to also– I don’t know. If I had to dream, like a dream, I would love to create, if I had the money, if this is actually real, to create a scholarship for some people that I know would love to take coaching programs that I love, or to take classes or things like that. I would love to be able to have that kind of generosity in the world. And also really support causes that mean a lot to us, like environmental causes and things like that. And we do give money to charity, but to give a little extra more money to charity.

[00:06:03] Ramit: Let me pause you there, Adrienne. I love what you’re saying. You know what I haven’t heard at all? Is any specifics. So you mentioned tipping. I don’t know how much. You mentioned a scholarship. I don’t know how much. Charity, I don’t know how much. If we’re talking about an extra 2% tip, let’s just say it and be done with it because that’s easy. Look at Rob’s face right now. Rob’s like, what the fuck numbers are you talking about? Just tell me the number. I have the calculation open right now.

[00:06:29] Rob: Fear was coming up as she was describing all of this stuff.

[00:06:32] Ramit: Hold on. Hold on. Hold on. Hold on. Hold on. This is very important. This is amazing. So Adrienne, you’re painting this beautiful vision. I love it. It’s powerful. It’s compelling, and it’s personal. That is a beautiful set of ingredients for a Rich Life.

[00:06:48] Rob did a great job. Rob, first you were clouded by fear. It’s like a cloud. That’s what I see. Fear, it’s a cloud, a poisonous gas you can’t see through, and you inhale. Look at me. And the toxin gets into you. It makes you unable to hear. It even makes you unable to see.

[00:07:13] It’s a noxious green gas cloud around you. That’s fear. That’s how I see it. But we cleared it away, and you were an excellent listener. So let’s try to ground this a little bit. Let’s start with the tipping. I love tipping. I love people who tip. I hate cheap tippers. What percentage do you have in mind in your Rich Life?

[00:07:37] Ramit: Love it. So do we all agree from now on you’re going to tip 25%? Is that the new rule?

[00:07:45] Rob: Yeah.

[00:07:47] Ramit: You’re sure? I don’t want to pressure anybody. It’s your money. It’s not mine. Tell me. If you’re worried, this is the time to speak up.

[00:07:53] Rob: I’m not worried. This is what I’ve been tipping mostly. So yeah, it’s fine.

[00:07:59] Adrienne: I feel good about it now that I know that I’m allowed to do it too.

[00:08:05] Ramit: Totally. What do you learn from that example, Adrienne, in describing your Rich Life?

[00:08:10] Adrienne: I learned that Rob and I don’t ask each other a lot of questions.

[00:08:15] Ramit: Correct. You two are not asking each other any questions, so it’s like one person’s just saying something, and then the ball just drops like dead. There’s dead silence here.

Most couples I talk to are often blinded by the numbers, they miss the bigger picture of what money can do for their lives. I also pointed this out with Rob and Adrienne.

[00:14:38] Adrienne: Well, we hired a coach actually, who’s really cool, someone from our community. And then we just decided to commit to this. It’s an emotional program that’s on Zoom. It happens every other Tuesday, where we get together with a whole entire community of people, and we talk about different issues. And then we also have private counseling as well on Zoom.

[00:15:10] So that’s what this year was dedicated to. I was a little bit surprised when Rob said that we weren’t doing anything that he wanted to do this year because I feel like we’re doing a lot together that I thought we both decided on together.

[00:15:29] Rob: Yeah.

[00:15:30] Ramit: That’s because in your relationship, the numbers eclipse everything else. You could go on an amazing vacation and all you remember about it are the numbers. You can be doing all these amazing things, but the only true central focus in your relationship as it relates to your Rich Life is the numbers.

[00:15:50] And that will not change no matter how much money you have. Your money’s going to double. You know the math. Rule of 72. It’s going to double. It will not change until you tackle the actual symptoms. I’m glad you’re doing this coaching class. I think that’s amazing.

[00:16:06] Adrienne: The rule of 72, though, does that apply even if you’re not putting money into the market?

[00:16:12] Ramit: Totally irrelevant to a more important point.

[00:16:17] Ramit: You’re proving my point, which is that in your relationship, numbers eclipse everything else. Do you see what I mean? And it’s hard. It’s easier to ruminate and spin, but it’s hard to be like, what’s actually going on in here?

[00:16:59] I love that you’re starting to tackle it, but in my opinion, of all the stuff you talked about, relaxing, using your heart, helping the planet, getting to have fun and relax, massages, trips, the only way you actually get to do this and enjoy it is if you learn to manage your fears, Rob. Nothing else matters.

[00:17:22] Rob: Part of it is a lack of vision, and part of it is fear. I feel like the fear is almost like the fog you’re talking about. It’s a general fear. I don’t know if I have a specific–

[00:17:34] Ramit: I guess what I’m saying is, Rob, we can see that this is costing you a lot. It’s costing you trips. Most importantly, your fear is costing you the ability to connect with Adrienne over a Rich Life vision, one that you’ve both worked incredibly hard for.”

To give them more perspective, I also walked them through several tangible options they could consider.

[00:39:27] Ramit: Assuming you stop working this year, you keep your expenses where they are, at 4,900 a month, no wiggle room. You continue to travel for coaching retreats, etc. \$30,000 a year, and you live until 95. We’re assuming that because you’re in good health. And again, you don’t want to run out of money before you die. What do you notice on screen, Rob?

[00:39:57] Rob: When I’m 90 years old, I’m still going to have \$1.2 million.

[00:40:01] Ramit: Mm-hmm.

[00:40:57] Rob: At the end of life, we end up with over a million dollars doing it that way.

[00:41:02] Ramit: Yeah. And remember, that’s if you live until 94, 97. It continues to grow. It grew last year, but I felt like because the market was doing so well last year, that was the only reason it grew last year. For the next seven years or eight years, it has the balance growing as opposed to leveling off so early.

[00:41:30] Adrienne: It seems more relaxing to know that everything is going to be okay, I guess.

[00:41:40] Ramit: Okay. I love that comment. How do you know this chart is more relaxing?

[00:41:48] Adrienne: Because there’s not a negative sign on it.”

Helping Rob and Adrienne open up about their retirement dreams revealed just how deeply fear can take hold, even when you’re financially successful. By gently pushing for specifics and digging into those underlying beliefs, I wanted to show them how getting crystal clear on what they want is the key to actually enjoying their success.

## How to start saving for retirement today

There are two main retirement vehicles:

• Company-matched 401k. This is a powerful retirement account offered to you by your employer. With each pay period, you put a portion of your pre-tax paycheck into the account. Your company might match your contribution up to a certain percentage.
• Roth IRA. A Roth IRA uses after-tax dollars to give you an even better deal. That means you put already taxed income into stocks, bonds, or index funds and pay no taxes when you withdraw it.

Within each account, you can invest in a variety of different funds that’ll earn money for you. Which do I suggest? I’m glad you asked…

The world wants you to be vanilla...

…but you don’t have to take the same path as everyone else. How would it look if you designed a Rich Life on your own terms? Take our quiz and find out:

### Where should I focus my retirement investing?

How much you should actually be investing each month depends on a system I call the Ladder of Personal Finance. It looks at three areas:

1. Your employer’s 401k match. Each month you should be contributing as much as you need to in order to get the most out of your company’s 401k match. That means if your company offers a 5% match, you should be contributing AT LEAST 5% of your monthly income to your 401k each month.
2. Whether you’re in debt. Once you’ve committed yourself to contribute at least the employer match for your 401k, you need to make sure you don’t have any debt. If you don’t, great! If you do, that’s okay. You can check out my system for eliminating debt fast to help you.
3. Your Roth IRA contribution. Once you’ve started contributing to your 401k and eliminated your debt, you can start investing in a Roth IRA. Unlike your 401k, this investment account allows you to invest after-tax money and you collect no taxes on the earnings. As of writing this, you can contribute up to \$7,000/year. (updated 2024)

Once you’ve contributed up to that \$7,000 limit on your Roth IRA, go back to your 401k and start contributing beyond the match.

Remember, you can contribute up to \$23,00/year on your 401k if you’re under 50. So you should have no issue continuing to invest in your 401k.

“But Ramit, why would I max out my Roth IRA before my 401k if it’s so good?”

There’s a lot of nerdy debate in the personal finance sphere about this very question, but my position is based on taxes and policy.

Assuming your career goes well, you’ll be in a higher tax bracket when you retire, meaning that you’d have to pay more taxes with a 401k. Also, tax rates will likely increase in the future.

Once you have your accounts set up, it’s time to start investing — and there’s no better way to do this than with an automated system. Automating your finances is a system that allows you to invest passively instead of you constantly wondering if you have enough money to spend.

And it’s simple: At the beginning of the month, when you receive your paycheck, the money is immediately sent to where it needs to go through automatic systems that you have set up already. If you want to find out more about how to automate your finances to properly save for retirement, check out my video below:

## Earn more money for retirement

Knowing how much you need to retire is just the first step to saving for your future. If you really want to ramp up your investing you need to earn more money.

Doing so will put you in the best position to retire comfortably. That’s why I have a gift for you: The Ultimate Guide to Making Money.

In it, I’ve included our best strategies to:

• Create multiple income streams so you always have a consistent source of revenue