Certified Safe Money Admin


Certified Safe Money Admin


Savings – How Much Should I Save for Retirement?

Saving and investing throughout your working or “accumulation” years is an important step towards financial security in retirement. Yet, while you may be wondering how much you should save for retirement, working towards a specific dollar figure isn’t necessarily the best way to go about planning.

One reason for this is that everyone’s retirement needs and goals and risk tolerance, and time frames are different. So, the amount of money that is ideal for one person or couple can differ significantly for another. 

With that in mind, it can help if you work together with a retirement income planning specialist to customize a strategy. This person or investment firm can oftentimes differ from your current financial advisor because saving and growing assets differ from converting assets into an ongoing retirement income stream. 

What is the Right Amount of Money to Have for Retirement?

Several factors need to be considered when you are determining how much money you should save for retirement. These include your:

  • Risk tolerance
  • Age
  • Time frame until retirement
  • Sources of retirement income generation  
  • Marital status (and possible income sources generated by your spouse)
  • Expense needs (and wants)
  • Life expectancy
  • Health (and anticipated future health condition or long-term care needs)
  • Intended retirement lifestyle


One of the first steps is to create a retirement budget. This should ideally include both essential and non-essential expenses. Your essentials will encompass housing, utilities, food, transportation, healthcare, clothing, and other personal items. These are “must-have” items, and it would be difficult to live comfortably in retirement without them.

The amount of retirement income that you have coming in, then, should equal or exceed the total amount of your day-to-day living expenses. Given this, your monthly income “floor” should be at least this much.

Retirement is also a time to enjoy life, though. So, you will likely want to have more income for items that are considered non-essential, such as travel, entertainment, and fun. If you don’t have enough income for these items, though, you’ll still be able to sustain a comfortable lifestyle.

Where Will Your Retirement Income Come From?

In many cases, retirement income will be generated from more than just one single source. These may include:

  • Employer-sponsored pension plan
  • Social Security
  • Dividends or interest from personal savings
  • Rental income from investment property
  • Reverse mortgage

In the past, retirees would oftentimes receive enough income from a traditional pension plan and Social Security. Knowing that they would obtain a set amount of incoming cash flow every month allowed for more of a worry-free retirement. This, in turn, allowed them to focus on other important things, such as spending time with family and friends.

These past retirees could also use their personal savings and investments on “extras,” or non-essentials, like travel, entertainment, and fun. Even when a retired worker passed away, income from their pension would often continue for the remainder of their surviving spouse’s lifetime.

Today, however, things have changed. Many employers have done away with defined benefit pension plans. Because it was up to the employer – not the retired employee – to continue making income payments, the traditional pension required a significant expense on the part of the employer. 

Therefore, most businesses have “replaced” defined benefit pension plans with defined contribution plans – with the most popular of these being the 401(k). Although defined contribution plans can provide some nice tax-related perks, they also put the responsibility of generating enough retirement income on the individual. So, if these plans’ investments perform poorly, it could require the worker to remain in the workforce longer or downgrade their desired retirement lifestyle.

Another retirement income source, Social Security, is on shakier ground today than it was a few decades ago. This is due largely to fewer current workers paying into the system and more retirees receive benefits. 

Even if you receive Social Security retirement benefits, this program was never intended to replace your pre-retirement wages entirely. It is estimated that for an average wage earner, Social Security replaces roughly 40% of these earnings – and less for higher-income earners. 

Today, many retirees are having to fill in income “gaps” with their personal savings and investments. In these cases, though, it is essential to have a good, solid income-producing strategy in place. Otherwise, there is the risk of running out of money while it is still needed.

Are You Saving Enough Money for a Comfortable Retirement?

Knowing whether or not you have saved enough for retirement can be somewhat difficult to determine. This is because the value of your portfolio can change over time, based on stock market performance, interest rates rising or falling, and even your personal investment decisions. 

According to the EBRI (Employee Benefit Research Institute) 2020 retirement confidence survey, less than one-third of retirees feel very confident that they have enough saved for their retirement. Further, approximately 23% do not feel confident at all about this.

A key component of confidence in retirement savings has to do with participation in employer-sponsored plans like 401(k)s and defined benefit pension plans (although the latter plans are quickly disappearing due in large part to the expense to the employer). 

In this case, the EBRI survey found that workers and/or spouses who have a retirement savings plan through their employer are nearly twice as confident as those without access to this type of plan. 

Taking the Next Step Towards Saving Enough Money for Retirement

Numerous factors are involved with generating enough income in retirement. A key part of this is knowing that you have saved enough money during your working, or “accumulation,” years.

If you’re unsure whether or not you’ll have enough saved before you retire, it can help discuss your short- and long-term financial objectives with a retirement income planning specialist.

So, feel free to contact us and talk with an experienced advisor. You can reach us via email at [email protected]. We look forward to helping you achieve your retirement goals.

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