How Much to Save For Retirement


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There is no magic formula to determine how much to save for retirement. Thoughtful retirement planning considers your current needs and future goals. EP Wealth Advisors provide custom retirement solutions.

The question “How much do I need to retire?” has prompted many a Google search, yielding various rules and formulas that are certainly useful for starting a productive conversation. Unfortunately, these simple calculations aren’t sufficient when it’s time to build an actionable plan. That’s because retirement planning, like all financial planning, is intensely personal in nature.

Also, the retirement landscape has changed considerably in the past few decades. According to the U.S. Census Bureau, the average life expectancy is expected to increase to 85.6 by the year 2060. While Social Security Benefits and pensions are valuable retirement tools, you should also be saving independently to keep up with inflation and maintain your current lifestyle in the years ahead.

Thoughtful savings strategies strike a financial balance for retirement between today’s needs and future security. Let’s explore how flexible retirement planning professionals at EP Wealth Advisors determine how much you need to make that happen.

Factors That Influence Your Retirement Savings Goal

This question of how much you should save for retirement actually has a simple premise, and it’s important to keep that in mind. You’re just trying to avoid running out of money or “have enough” to last your lifetime.

To address the many facets of this question, we need to spend some time considering the top four factors that can influence your retirement savings goal.



Let’s start with the retirement age considerations. Did you start saving in your 20s, or are you playing “catch-up” in your 50s? This matters because it determines how much time you have to build your nest egg. We also consider when you anticipate retiring and the average life expectancy to estimate how many years we need to save for.

Currently, if you’re 65, you’re expected to live to 85. And that’s just on average. We generally run our analysis to age 100, unless given direction with reasonable support to do otherwise.



We also calculate your current income. This includes the salary you earn through employment, and any short-term cash flow sources like stocks and other investments. Then, we project your expected retirement income needs.

A common rule of thumb is to budget at least 70% of your pre-retirement income, anticipating that some costs and everyday expenses will be reduced. Again, retirement planning is individualized, and as we’ll see, the amount you will need to retire can be higher depending on how you plan to spend your golden years.


How do you envision your retirement? Do you plan on downsizing and scaling back on spending and expenses? Or are you looking forward to taking those dream vacations and pursuing the hobbies and activities you had put on the back burner?

Your retirement plan should reflect your retirement goals and provide the income you need to make them a reality.



Once we have a number to aim for to save for your retirement, we adjust it for inflation. We review historical data of multiple rolling periods to figure in a real inflation number and then review and adjust along the way, as new data is available.

This allows us to average in the extremes, such as 1979-1980 on the high end, with the abnormally low inflation environment we have experienced these past few years. In addition, we will adjust inflation separately for costs related to health care, as we all have experienced the rapid increase of these costs over the past twenty years or so.

Retirement Savings Strategies and Tools

Today is the best day to start saving, if you don’t already have a retirement planning strategy in place. There are many resources and tools that can provide you options to potentially help you meet your goals.


Employer-Sponsored Retirement Plans

Employer-sponsored savings plans like 401(k)s and 403(b)s offer employees an automatic vehicle to save for retirement. These savings accounts offer several benefits.

First, they reward participating employees with “free money” because employers match their contributions. 401(k)s are tax-friendly because contributions go directly from the employee’s paycheck to the account before taxes are deducted. That means less of your income is taxed.

403(b) plans are similar to 401(k)s, but they are typically available for employees who work in public schools, charitable organizations, and other tax-exempt organizations. Some plans allow employees to funnel additional “catch-up” funds into their accounts once they reach a certain age (usually 50). This is one key way to maximize your savings if you’re starting later in life.


Personal Savings Vehicles

Personal savings vehicles are another important piece of the retirement-planning puzzle. These include Roth IRAs, and traditional IRAs. Roth IRAs offer after-tax contributions, and traditional IRAs offer pre-tax contributions. Whether you choose one or both depends in part on your tax bracket today and where you expect to be in retirement.

Simplified Employee Pension (SEP) IRAs are specifically designed for self-employed individuals and small-business owners. Savings Incentive Match Plan for Employees (SIMPLE) IRAs are retirement plans for small business owners. Both allow employers to contribute to employee retirement accounts.


Compounding to Build Wealth

Compounding is another way to build retirement wealth. Compound interest is the interest accrued on the initial savings funds as well as any interest previously accumulated. Think of it as “interest on interest.”

Compounding can add to your retirement accounts, which is also ideal for clients who are working to catch up on their retirement savings plan. The earlier you begin saving, the more you can put away through compounding. This is one more reason why starting now matters. Keep in mind that all investing is subject to risk and no investment strategy, including compounding, can guarantee a profit or prevent a loss.


Diversifying Investments to Manage Risk


All of these retirement savings vehicles have their own eligibility requirements, tax planning implications, and pros and cons. Your EP Wealth Advisor works to build a plan around your personal retirement needs and goals, always focusing on managing risk by diversifying your investments.

No financial advisor can guarantee a profit or protect against loss in any scenario. However, we can mitigate that risk by mixing stocks and other high risk and reward investments with bonds and other low risk and reward tools.

How to Calculate Your Personal Retirement Number

Now, let’s start crunching the numbers. Your current life gives you a good idea of what you will need in terms of projected expenses. From there, we anticipate how these numbers may change in the future to make appropriate changes in the calculations.

Some retirement savings variables to consider include:

  • Loans: including mortgage, student, business: Will you still have them?
  • Travel: Will you travel more or less after you stop working?
  • Dining out: Will you have more time to cook? Will you be dining out more?
  • Car and commute: Will you drive as much if you’re not working? Will you save on gas, tolls, and repairs?
  • Major expenses: Do you want to put money aside for a child’s wedding, a down payment on a home, or their college education?
  • Medical care: How will you pay for healthcare in retirement? Do you have a healthcare savings account (HSA), a dedicated IRA, or long-term care insurance?
  • Assets and income sources: What liquid and illiquid assets do you own, and do you plan to convert any into cash?
  • Current savings: Where are you starting and what can we add to reach your goal?
  • Retirement accounts: What do you have and/or need to reach your personal retirement number?
  • Social Security: What are your anticipated benefits, and what chunk of your retirement expenses will they cover?

Once we have a clear picture of your assets, expenses, and retirement lifestyle goals, we factor in inflation and arrive at your personal retirement number. Then, we develop a strategy to estimate your retirement lifestyle budget.

Maximizing Your Retirement Savings

Anyone can use an online calculator to come up with a percentage of their income to save for retirement. But EP Wealth retirement planning advisors can help you plan for retirement with tools and tips you may have overlooked.

These include making the most of employer matches and other plan benefits, utilizing catch-up contributions once you turn 50, and accounting for the impact of fees on long-term growth vehicles.

We are committed to help building your nest egg—so you can begin the next chapter of your life with the peace of mind that comes with planning and preparation. We continually monitor your retirement plan and make any necessary adjustments to help you stay on track.

The Role of Financial Advisors in Retirement Planning

There is a wide range of online tools for retirement income projections. And they may be a good starting point if you’re new to retirement planning. But simplistic formulas are no substitute for the personal guidance and tailored strategies available when hiring a retirement financial advisor.

At EP Wealth, we know that many clients are not fully prepared for retirement. We meet you where you are—right now. We provide practical retirement planning backed by experience and an understanding of the marketplace to help you potentially reach your goals and enjoy all of the things you have waited a lifetime to experience. 

Call or contact us online to learn more about personalized retirement strategies and find an advisor in your area.






Our breadth of coverage across the U.S. means we’re local—here to serve your needs at your convenience.