Table of Contents

Average monthly expenses in retirement

Example of a typical retirement budget

Setting up a personal retirement budget

How much money do you need to retire by age 65?

The 4-percent rule

How much money do you need to retire earlier than age 65?

Savings vehicles for retirement

How to track progress

The bottom line

LearnSaving for RetirementHow Much Do I Need to Retire at 65?

How Much Do I Need to Retire at 65?

Sep 12, 2022


6 min read

How much investors need to retire at 65 will vary by individual. Knowing living expenses, and how to track progress may help them reach their savings goals.

Most people plan to retire between the ages of 65 and 67, according to Gallup. Those approaching this age may ask themselves the rather daunting question: Do I have enough money to retire? Tracking expenses and budgeting using a pre-retirement income are the first steps to planning for retirement. Armed with this information, investors can start figuring out how much money they’ll need to retire.

Average monthly expenses in retirement

No two retirees’ budgets will look alike, but most can expect to have recurring expenses like housing, transportation, food, and health care. Investors are also likely to spend less in retirement than when they were working. The Bureau of Labor Statistics (BLS) notes total annual expenditures averaged $49,279 among age 55 and older households. Those 55 to 64 spent $56,267, while the 75-and-older group spent $36,673.

Example of a typical retirement budget

Here’s what a typical retiree’s spending may look like, based on data from the BLS:


A bustling metropolis will be more expensive than a rural area, just as a home whose mortgage has been paid off will cost less than a rental apartment.

  • Mean amount spent annually:

    $17,151, or $1,429.25 monthly

  • Percentage of total spending:



Costs will vary by the number of cars owned and/or leased, and use of public transportation.

  • Mean amount spent annually:

    $6,618, or $551.50 monthly

  • Percentage of total spending:



Food costs will vary by dietary restrictions and needs, costs (and availability) of food, and meals out vs. cooking at home.  

  • Mean amount spent annually:

    $6,603 or $525.25 monthly

  • Percentage of total spending:


Health care

Health-care costs vary widely in the US, but even ordinary spending can eat into a budget.

  • Mean amount spent annually:

    $6,719, or $560 monthly

  • Percentage of total spending:


These numbers add up to about $37,000 per year in basic expenses during retirement. But these numbers don’t reflect individual lifestyles or non-recurring expenses like travel.

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Setting up a personal retirement budget

To move beyond the averages, people’s retirement budget should factor in how they’re used to living—that is, what their pre-retirement income affords them.

Experts say investors usually need about 80% of their pre-retirement income in retirement. So if they earned $100,000 per year pre-retirement, they’d need $80,000 per year in retirement. Investors who live well below their means will need less than 80% of their pre-retirement income when they leave the workforce.

How much money do you need to retire by age 65?

The answer really is, It depends. How long does the retiree expect to live, do they have health problems, what are annual living expenses and so on?

Retirement planners, as a rough rule of thumb, say people need about 80% of the income they earned while working in retirement. For someone who made $75,000 a year, that would be $60,000 a year. A conservatively managed investment portfolio of $2 million, yielding 3% a year, would generate enough to cover this, without requiring the retiree to dip into their principal.  

So what does it take in monthly savings to accumulate $2 million? Let’s say this person begins saving for retirement at age 25 and earns a 7% average annual return. They’d need to invest $1,000 to start, plus $776 per month for 40 years, to have $2 million in savings by age 65, according to’s savings calculator.

The 4-percent rule

Many retirees haven’t saved enough to live off their investment returns alone. This is where what’s known as the 4% Rule comes in, meaning that an investor withdraws 4% from their retirement portfolio the first year, then increases that amount annually to account for inflation. In theory this should ensure that retirement savings last 30 years. For the retiree who needed annual income of $60,000, this would require initial retirement savings of $1.5 million. However, many financial advisors say the 4% Rule, which was devised in the 1990s, relied on investment data from the last century and may no longer be valid.

It’s important to note that these numbers don’t account for other sources of income such as Social Security, a pension, real estate sales, or profit from side businesses or taxes.

How much money do you need to retire earlier than age 65?

So, how much money is needed to retire at 55?  Again, let’s say 80% of investors’ income during their working years is $60,000, and they would like to have retirement income last until they’re 95. In order to live on investment returns, they’d still need that $2 million, but would have to reach that goal earlier, by age 55.

To accumulate $2 million over a span of 30 years, one would have to save $1,633 a month, starting at age 25, assuming a 7% average annual return.

How much money is needed to retire at 60? To wind up with the same $2 million next egg, a saver would have to sock away $1,104 a month.

Savings vehicles for retirement

Once they’ve drafted a budget, investors may open a tax-advantaged retirement account like the ones listed below:

  • Traditional individual retirement account (IRA).

    A traditional IRA is a type of tax-deferred retirement account that isn’t tied to an employer. With a traditional IRA, pretax money is put into the account and investors pay income taxes on withdrawals later.

  • Roth IRA.

    A Roth IRA is a retirement savings account that lets investors contribute money after they’ve paid taxes on it, not before.

  • 401(k).

    Typically offered through an employer, a 401(k) is a common retirement account. Employees can designate a certain percentage of their salary to flow directly into the account before taxes are paid on the money.

  • Savings Incentive Match Plans for Employees (SIMPLE) IRA.

    Another traditional IRA option for the self-employed and small-business owners, SIMPLE IRAs offer higher contribution limits than traditional IRAs.

  • Simple 401(k).

    Designed for companies with 100 or fewer employees, a Simple 401(k) requires employers to make a matching contribution up to 3% of every employee's pay or a non-elective contribution of 2% of every eligible employee’s pay.

  • Simplified Employee Pension Plan (SEP) IRA.

    A SEP IRA is a tax-advantaged retirement available to self-employed people or small business owners and their employees.

  • Individual 401(k).

    Also known as a solo 401(k), employers and employees can make contributions with pretax dollars. Contribution limits with an individual 401(k) are higher than other options for self-employed people, such a SEP IRA.

How to track progress

Investors can use retirement calculators and other tools to track their savings progress. If there's a gap between their goal and their savings, they can figure out where they fell short. Some other ways to track progress include:

  • Finding net worth.

    To find their net worth, investors can tally up the cost of all assets—income, savings, pension, and so forth—then subtract debt or liabilities, such as personal loans. Investors can use an online net worth tracker, money management app, or basic Excel sheet to calculate.

Net worth = total cost of assets - total liabilities

  • Evaluating goals.

    Investors nearing retirement may have an easier time estimating their living expenses and tweaking their goals accordingly.

  • Hiring a financial advisor.

    A financial advisor may help investors track their progress, research decisions, and craft a custom plan to manage and grow their portfolio.

The bottom line

How much investors need to retire at 65 will vary by individual. Knowing living expenses, retirement plan options, and how to track progress may help them reach their savings goals.

And last but not least: Try Titan’s free Retirement Calculator to project how much you'll need in retirement.


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