Do I Have Enough Savings to Retire?

According to a study from the Employee Benefit Research Institute, there are four main factors Americans consider before they make the big retirement decision: affordability, lack of job satisfaction, a desire for more personal/family time, and health status. While the last three are more qualitative in nature, affordability is the one variable we can try and put a number on. Affordability is also typically the number one reason retirees give for actually making the decision to retire; in other words, money is typically the key factor in the retirement decision. So the question then becomes, how much is enough to enjoy a fulfilling retirement?

Another study by the Aon Consulting and Georgia State University gives us some real-life insight into the answer. This study has been ongoing for 20 years, and it draws data from the Bureau of Labor Statistics’ Consumer Expenditure Survey. In other words, the study’s conclusions come from real-live Americans, not from a theoretical model. So it’s worth paying attention to the guidelines generated by the study.

Let’s assume we have a married couple, with a husband age 65 and a wife age 62. After retirement, the couple will need to replace a certain percentage of their pre-retirement income. The study found the following ratios:

For example, let’s assume our couple earned $70,000 before retirement. Once in retirement, the study finds they would need about $54,000 for living expenses ($70,000 x 77%). The replacement percentages changed maybe just 1-2% for situations where both husband and wife worked, or where both spouses were the same age. For single individuals, the percentages changed by 3-6%. In other words, the percentages shown here are pretty consistent for most Americans in all types of situations.

In many cases, a large portion of that replacement percentage will be made up by Social Security benefits. But that still leaves the average American with a sizeable chunk of money coming from personal savings (including retirement accounts like 401(k)s and 403(b)s). So back to our original question: after factoring in Social Security benefits, how much do I need to have saved in order to make retirement affordable?

Let’s look at another table. In terms of personal savings, the table below tells us how much we need in personal savings to make retirement affordable. Using our example couple, they need retirement savings that will generate $24,500 per year for as long as they live in retirement ($70,000 x 35%).

Now we know how much our personal savings must provide each year in retirement, but we still don’t have our original question answered: how much in total do I need in savings to make retirement affordable? How much do I need “in the bank” before I can feel safe about actually retiring? To answer that, we need to look at one more table (sorry for all the tables).

Our hypothetical couple earned $70,000 a year before retiring. Since women tend to outlive men, let’s use the “female” column in the above table; this is the more conservative approach for a couple, as it will require a higher amount of savings. In this case, the couple needs $70,000 x 6.3 = $441,000 in personal savings so they can afford retirement. From that savings, they should be able to spend about $24,500 per year; combine that income with their expected Social Security benefits, and our hypothetical couple should have an affordable retirement.

You can use the tables from this study to generate your own retirement saving numbers. As always, remember that these are just guidelines. It’s always a good idea to get a professional evaluation of your personal situation before you make the “big” retirement decision, to help you maximize your retirement readiness.


About Mike Wilson

Michael L. Wilson, MBA, CFP®, CRC®, is the owner of Integrity Financial Planning. Prior to founding Integrity in 1998, he worked for two years as a faculty member at the College for Financial Planning in Denver, training other financial advisors. Mike has 10 years of experience in the mutual fund industry, having worked with Fidelity Investments and Invesco Mutual Funds. He holds an MBA in Finance from Baylor University. Learn more about his work at
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