Your Retirement Number

The story: How much is enough for Lee?

Lee works out a retirement number at home: yearly spending, minus Social Security and a small pension, leaves a gap for savings to fill.

1. Narrator: Lee lives alone and wonders how much to save for retirement. A coworker said everyone needs a million.
2. Narrator: A number from someone else isn’t Lee’s number. Lee starts with spending instead.
3. Lee: Social Security should pay about $26,000 a year, and my old job’s pension will pay $4,000.
4. Narrator: That leaves an $18,000 yearly gap. Lee’s savings need to fill the gap, not the whole $48,000.
5. Narrator: A rough starting point is about 25 times the gap. For Lee, that’s about $450,000.
6. Lee: That’s far from a million. And it’s my own number, so I can plan for it.
7. Narrator: Spending minus guaranteed income equals the gap your savings fill.

What you’ll learn

1. Start with retirement spending

   Estimate what you’d spend in a year of retirement, in today’s dollars, meaning at today’s prices. Many people start from what they spend now, then drop costs that will end, like a mortgage or commuting, and add new ones, like more health care.

2. Subtract guaranteed income

   Social Security and any pension are guaranteed income. Social Security rises with inflation each year, and many pensions don’t. Spending minus guaranteed income is the income gap your savings fill.

   Example: spend $48,000, minus Social Security $26,000, minus a $4,000 pension = an $18,000 yearly gap.

3. A rough target: about 25 times the gap

   Multiply the yearly gap by about 25 for a rough savings target. It’s a rule of thumb, a starting point and not a promise. Markets, taxes, when you retire and how long you live all move the real number.

   Example: an $18,000 gap × 25 = about $450,000.

4. What matters when

   Early on, how much you save each month moves the number most. Closer to retirement, the balance is bigger, so your investment mix and returns matter more. Redo the number once a year and compare it with your own plan.

Key words

income gap

retirement spending minus guaranteed income

guaranteed income

income that keeps coming, like Social Security or a pension

today’s dollars

amounts at today’s prices, before inflation

rule of thumb

a rough guide that’s useful but not exact

Common questions

Where do I find my Social Security estimate?

Create a free my Social Security account at SSA.gov. It shows estimates at different claiming ages based on your earnings record.

What if my gap looks too big?

The catch-up lesson covers the levers people pull when the gap feels big: saving more, working a bit longer, planning lower spending and timing Social Security.

Remember this

Spending minus guaranteed income = the gap your savings fill.

Try it: Find your own retirement gap

1. Estimate a year of retirement spending in today’s dollars.
2. Get your Social Security estimate from your my Social Security account, and add any pension.
3. Subtract to find your yearly gap, then multiply by 25 for a rough target.
4. Add “update my retirement number” to your yearly check-up list.

No account needed: do it on paper, or try the free Retirement Calculator.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• Your personal Social Security estimate

  Source: SSA.gov (my Social Security)(opens in a new tab)