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Retire Early

Want to retire early? If you want to live comfortably, here’s a detailed retirement guide to help your estimate your income and expenses.

How Much Do I Need to Retire?

It’s inevitable. There will be a time when you have to ask yourself, “How much do I need to retire?” The thing is, when it comes to retiring, there are a few rules of thumb to consider. ‌

The‌ ‌most‌ ‌commonly used is an exact figure. Often, this is somewhere around‌ ‌$1‌ ‌million. ‌‌‌These days, a million bucks doesn’t go all that far. ‌If your retirement depends on $1 million, you could be in for a rude awakening.

Alternatively, some‌‌ ‌‌experts‌‌ ‌‌suggest‌‌ ‌‌that‌‌ ‌‌you‌ ‌should‌ ‌be‌ ‌able‌ ‌to‌ ‌afford‌ ‌12‌ ‌times‌ ‌your‌ ‌salary‌. ‌Or‌, around ‌70%‌ ‌to‌ ‌90%‌ ‌of your‌ ‌pre-retirement‌ ‌income. ‌In other words, if you make $100,000 a year at retirement, you will need at least $80,000 per year to maintain a comfortable lifestyle.

What is the best option ‌‌for‌‌ ‌‌you? ‌‌‌How do you know if you are on the right track?

Well, there are several ways to answer those important questions.

U.S. households headed by people 65 and older spend on average $47,579 a year. These are the latest data from the federal government on consumer spending‌ ‌for 2020. In comparison, the average household expenditure‌ ‌is‌ ‌$61,334.

While inflation has driven up prices, these figures can at least give you a ballpark figure on what you need to retire comfortably. More importantly, though, you’ll need to factor in:

  • Current age
  • Age at which you plan to retire
  • Based on your family history, how long do you expect to live
  • What‌ ‌you‌ ‌plan‌ ‌to‌ ‌spend‌ ‌in‌ ‌retirement
  • Retirement income sources
  • Overall net worth

As you can imagine, this makes saving for retirement difficult. Thankfully, you can use the following strategies to make this less daunting.

The 4% Rule of Retirement

A financial planner named William Bengen developed the rule in his 1994 paper on the subject. ‌This rule has become one of the most popular strategies for withdrawing money from retirement accounts.

Why? ‌Well, it’s really easy to use. ‌Divide your ‌retirement income‌ ‌by‌ ‌4% — this ‌is‌ why it’s ‌known‌ ‌as‌ ‌the‌ ‌4% rule.

You would need a nest egg of approximately $2 million at retirement in order to generate the $80,000 mentioned above. The exact formula would be $80,000 / 0.04. ‌After taxes and inflation, this strategy assumes a 5% return on investment. ‌Additionally, it ‌presumes no additional retirement income like Social Security and a lifestyle similar to that you would have at retirement.

If you want the 4% rule rate to be sustainable, consider your life expectancy. ‌As a general rule, the 4% rule assumes that you will live ‌another‌ ‌30‌ ‌years‌ ‌in‌ ‌retirement. When you’re older, you’ve got higher medical costs and other expenses, so retirement portfolios need to last longer.

Another drawback to this rule is “that you could deplete your account balance too quickly and run out of money before your retirement,” writes Catherine Collins Alford, author of Mom’s Got Money. “Another risk is that you could be forced to take a lower standard of living in retirement if your investments do not perform as well as you expected.”

Retirement Savings by Age

It’s important to know what amount you should save for retirement at different stages of your life if you want to answer, “How much should I save for retirement?”

According to the Federal Reserve’s SCF data for 2019-2020, the average retirement savings by age is:

  • 18-24: $4,745.25
  • 25-29: $9,408.51
  • 30-34: $21,731.92
  • 35-39: $48,710.27
  • 40-44: $101,899.22
  • 45-49: $148,950.14
  • 50-54: $146,068.38
  • 55-59: $223,493.56
  • 60-64: $221,451.67
  • 65-69: $206,819.35


An average household saves $131,631.40 for retirement. But, a more generous estimate‌ ‌comes‌ ‌in‌ ‌at‌ ‌$282,554.50.

As‌ ‌you‌ ‌can‌ ‌see,‌ ‌there‌ ‌are‌ ‌some‌ ‌huge gaps in these dates. ‌‌‌‌‌The following formulas can help you determine your retirement savings goals based on your current age.

Percentage of Your Salary

Saving a certain percentage of your income can be a good way of estimating how much you need to accumulate as you progress through your life.

Fidelity‌ ‌Investments‌ ‌recommends saving 15% of your income starting in your 20s and lasting till retirement. ‌Your retirement account savings, as well as employer contributions, if you have access to a 401(k) or similar plan through your employer, are included.

How Much to Save for Retirement by Age

Additionally, Fidelity recommends that you should save the following amounts by the time you reach the following ages in order to have sufficient retirement savings:

  • 30: 1x annual salary
  • 40: 3x annual salary
  • 50: 6x annual salary
  • 60: 8x annual salary
  • 67: 10x annual salary

Alternate‌ ‌Formula

As you enter your 20s, another more heuristic formula holds that you should save 25% of your gross wage each year. ‌Such a large saving amount may seem impossible to achieve. ‌Remember that it covers more than just 401(k) holdings and matches contributions from your employer.

You will be able to accrue your full annual salary by the age of 30 if you follow this formula. At the same savings rate, you should achieve by age:

  • 35: 2x annual salary
  • 40: 3x annual salary
  • 44: 4x annual salary
  • 50: 5x annual salary
  • 55: 6x annual salary
  • 60: 7x annual salary
  • 65: 8x annual salary


To help you reach your goal of saving enough for retirement, you can also use online calculators in addition to the methods mentioned above. ‌‌‌If your savings and withdrawal rates change, they can explain the impact on your nest egg.

Many different online retirement savings calculators are available, but T. Rowe Price Retirement Income Calculator and MaxiFi ESPlanner stand out.

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Table of Contents


Retire Early

The‌ ‌idea‌ ‌of‌ ‌taking a long, non-working break at the end of your life goes back‌ ‌to‌ ‌1880s‌ ‌Germany (then‌ ‌Prussia). ‌During Otto von Bismarck’s presidency, the Prussian government-funded old-age pensions for those 70 or older.

Bismarck’s proposal was quite innovative. ‌You couldn’t end your “working life” while you were still alive before it. ‌In other words, work was expected of you as long as you were alive.

It was Bismarck who popularized the idea of a time off after working most of your life. And, this concept eventually spread across the globe. ‌U.S. Social Security, for example, was introduced in 1935 to assist workers when they left‌ ‌the‌ ‌paid‌ ‌workforce‌ ‌at‌ ‌age‌ ‌65.

In the following decades, retirement became more popular. ‌A defined-benefit pension plan and other employer-sponsored retirement savings plans, including 401(k)s, have been added to some Americans’ benefits packages. Unfortunately, these are decreasing in popularity. As such, it’s important to take charge of your retirement.

Understandably, this can be overwhelming. Because of this, we’ve put together the following retirement guide to guide you in designing your retirement plan.

What it Means to Retire

Defining what retirement means to you is just as important as having a clear financial goal. ‌While the federal government has a standard for retirement, your vision may differ. Finding out what kind of lifestyle you want can help you create a solid plan to get there.

The Government’s Definition of Retirement

So, how does Uncle Sam define retirement?

Several income sources are likely to be available to you in retirement, including Social Security. ‌The earliest age at which you can claim‌ ‌Social‌ ‌Security‌ ‌retirement benefits‌ ‌is‌ ‌62. ‌However, taking benefits as soon as you’re eligible – either on your own or through spousal benefits – can decrease your monthly benefit.

The Social Security Administration calls your full retirement age your “normal retirement age” before you can receive the full amount of your benefits. ‌The full retirement age is 66 for people born between 1943 and 1954. ‌For people born between 1955 and 1959, the full retirement age is 66 years and 2 months to 66 years and 10 months. ‌The full retirement age increases to 67 for those born after 1960.

To put it simply, the government defines retirement as ‌the age ‌you‌ ‌can‌ ‌claim‌ ‌full benefits. Uncle‌ ‌Sam‌ ‌doesn’t take into account your health, finances, or life expectancy. ‌Aside from that, he doesn’t consider what your retirement plans and goals are.

Retirement Types

By contrast, the dictionary defines retirement as the act of ceasing to work and relying on savings and investments for income. ‌In general, this is a time for leisure pursuits. ‌However, the meaning of retirement varies considerably from person to person.

The most well-known type of retirement? This would a traditional retirement. Typically, this is when you quit the daily 9-to-5 grind. Usually, this is around age 62 or 65. The reason is that you have enough saved for retirement, can no longer work, or just want to enjoy your golden years.

But, there’s also early retirement. Here, you can have the financial freedom to retire in your 30s, 40s, or 50s. How is this possible? Well, that depends on your specific financial situation. In most cases, though, this could involve;

  • Living off the income of one spouse while allocating the other’s income to savings‌ ‌and‌ ‌investments.
  • Earning more money by working a second job or starting a side hustle.
  • Adapt your standard of living so that you require less income to live a happy, fulfilling‌ ‌life.
  • Investing in passive income sources. These include dividend stocks, index funds, real estate, or annuities.

And, there’s also semi-retirement. Here you would leave your job and work part-time in order to be fulfilled or generate a retirement income source. Maybe this could be turning a passion into a side business or babysitting your grandkids.

Create Your Own Definition of Retirement

As far as retiring is concerned, there is no right or wrong approach. ‌What‌ ‌one person finds to be effective may not be applicable to‌ ‌another. ‌Ultimately, the important thing is determining which arrangement will give you and your family the most happiness now and in the future. ‌That decision is up to you alone.

But, if you’re stuck, here are some pointers to help you create your own retirement definition:

  • Decide‌ ‌what is most important to you. Defining retirement begins with determining what you will do with the extra time you have available. ‌Consider traveling the world, trying out a new hobby, or starting your own business.
  • Calculate the cost of retirement. ‌By estimating how much you’ll need to save for your retirement and when it might arrive, you can ‌make‌ ‌it‌ ‌a‌ ‌reality. You should compare your retirement income and outgoing expenses once you’ve estimated your budget. ‌Included are Social Security benefits, pensions, 401(k) withdrawals, IRA withdrawals, cash savings, and CD earnings, as well as inheritances and annuities.
  • Analyze your progress so far. ‌Take‌ ‌stock of your savings and investment accounts. Perhaps your 401(k) contributions or portfolio allocation need to be increased?
  • Have a contingency plan. ‌Sometimes, things don’t work out as planned. As such, you should have an emergency fund so that your retirement plans aren’t ‌compromised. With a year or two’s worth of expenses put in high yield savings accounts, you’ll have money on hand and won’t have to exhaust your retirement funds.
  • Talk to a financial advisor. ‌You need to make retirement as personal as possible to make it work. ‌Your financial adviser can assist you in doing exactly‌ ‌that.

Why Do People Retire?

Why is retiring a good idea? Well, that depends on your values and goals. ‌For many, however, the main reason is that you’ve reached full retirement age.

“Full retirement age is the age when you can start receiving your full retirement benefit amount,” explains the Social Security Administration. “The full retirement age is 66 if you were born from 1943 to 1954.” ‌For those born from 1955 to 1960, the retirement age increases gradually until ‌67.

But, that’s far from the only reason that people retire. Here are the ten main reasons why people retire.

1. You’re financially set.

The transition from one stage of life to the next ‌can‌ ‌be‌ ‌‌‌frightening. ‌Despite this, you have been preparing for this moment all your working life.

It makes sense to retire, however, after you have run the numbers, double-checked your 401k, and gotten the go-ahead‌ ‌from‌ ‌your‌ ‌financial‌ ‌advisor. ‌Financially speaking, if you’re prepared for retirement, you’re part of a small ‌minority.

According to a GoBankingRates study, 30% of people 55 and older have no retirement savings. ‌Approximately 26% of respondents ‌saved‌ ‌less‌ ‌than‌ ‌$50,000. ‌The result is that 54% of older Americans do not have enough money for retirement. ‌In general, retirees in good shape are those who have a solid financial foundation.

Retirement-age folks often have the means but lack the motivation to take action. ‌As with any major transition in life, retirement is an emotional journey. By putting off retirement, you’re missing out on many things. Consult with friends, family, and former colleagues to discover what you’re missing. And, ask for their advice on how to prepare for a smooth retirement transition.

2. Health conditions.

Another reason to retire is health issues. ‌Rather concerning, you might find out that your health is declining as you age and that you are unable to work as a result. ‌

In cases like these, it’s crucial to consult your doctor and employer before deciding if retirement is right for you. ‌Other options may also be available to you. For example, if your job is labor-intensive, and arthritis interferes with your performance and health, maybe you could be put in a less physically tolling position. Or, maybe you could reduce your hours or work remotely.

3. Maintain good‌ ‌health.

Improved health is a big reason people‌ ‌retire. ‌A growing number of people suffer from work-related health issues such as burnout. According to the World Health Organization, “Burn-out is a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed.

Changing your lifestyle during retirement can help you feel more fulfilled in your life and improve your health. And, without this long-term stress you’ll be less likely to develop unhealthy symptoms like;

  • Anxiety
  • Depression
  • Heart disease
  • High blood pressure
  • Obesity
  • Stroke

4. Live without regrets.

“When questioned about any regrets they had or anything they would do differently,” says Bronnie Ware, ‌an‌ ‌Australian‌ ‌palliative‌ ‌nurse‌ ‌who‌ ‌spent‌ ‌years caring for dying patients, “common themes surfaced again and again.”

Was there a common regret she heard from each‌ ‌patient? ‌That they didn’t earn enough‌ ‌money? ‌Not enough hours worked? ‌Too little vacation time? ‌Not enough‌ ‌houses?

Not at all.

The 5 Greatest Regrets of the Dying:

  • I wish I’d had the courage to live a life true to myself, not the life others expected of me
  • I wish I hadn’t worked so hard
  • I wish I had the courage to express my feelings
  • I wish I had stayed in touch with my friends
  • I wish that I had let myself be happier

Obviously, retirement, especially when done early, ensures that you have zero regrets.

5. Spend more time with family and friends.

One study says Americans spend just 37 minutes a day with their family. Why? Because we’re too busy hustling around and working to spend time with our friends and family.

If‌ ‌you’ve spent more time working than spending time with your family, retirement might be the perfect solution.

Give your spouse, children, and longtime friends the attention they deserve by starting today. ‌You’ve already got a lifetime of career accomplishments to look back on, so start making more memories that will last a lifetime.

6. Have the time to do what you love.

There’s no need to slow down just because you’re retired. ‌When you close the book on your career, you have more time to pursue projects you are passionate about. This could be anything from entrepreneurial hobbies, travel, or whatever else puts a smile on your face.

7. Give back to the community.

When‌ ‌you’d like to spend more time volunteering in your community, retiring can be a good idea. ‌Finding more happiness is connected to volunteering, which creates fulfillment in life. Some ideas include:

  • Food banks, homeless shelters, and women’s shelters in your area
  • Humane‌ ‌societies and animal rescue organizations
  • Schools, hospitals, and nursing homes
  • Politics and activism
  • Serving in the religious community

8. You’ve fallen out of love with your job.

Over the past 25 years, you have worked for the same company. And a lot has changed. You feel just not part of the company‌ ‌anymore.

Does this sound‌ ‌familiar? A lot of people nearing retirement experience this. ‌They lose interest in or love their job as time goes by.

A person who does not love their job and is close to retirement age should consider retiring. ‌After all, life is too short not to enjoy what you are doing.

9. Reorganization.

If you’ve spent years at the same company, chances are you have survived numerous‌ ‌reorganizations. ‌As markets change, companies must also change their working structures to stay competitive. ‌Nevertheless, when you’re close to retirement, you may not want to drastically change your work style. ‌It may make sense to retire at this point.

You can discuss retirement options with your boss when your company undergoes a reorganization. ‌Your benefits may still be preserved if you resign a little earlier as planned. ‌Many companies are willing to talk about reducing their salary budget — especially if you give them an easy way‌ ‌to‌ ‌save‌ ‌money.

Before making a decision, talk to your financial advisor and keep your retirement budget in mind.

10. Avoid unforeseen changes.

There is no way to predict what will happen next. Just look at the COVID-19 pandemic to hammer that point home.

You may be at risk of having your nest egg destroyed by economic and political change.

You can sell or downsize your home while prices are high if you plan on selling or downsizing. ‌A single ‘black swan’ event can undermine even seemingly stable markets.

In short, don’t wait until the market bottoms out if you’re secure financially now. Invest in safer investment strategies that will work in your favor long-term by consulting a financial planner.

Why you shouldn’t retire.

In‌ ‌general,‌ ‌retirement is not a good idea when you are not financially prepared. Or, maybe you aren’t at full retirement age. ‌You might even still love your job too much to quit.

Many people choose not to retire, even when they are financially ready and have reached retirement age. ‌Mainly because they’re scared. However, many people find that working part-time is fulfilling. ‌For instance, as part of their transition to retirement, they take on the role of mentor or coach for younger, less experienced colleagues.

How Much Should I Be Saving to Retire

“Aim to save at least 15% of your pre-tax income1 each year, which includes any employer match,” advises Fidelity. “That’s assuming you save for retirement from age 25 to age 67.” This, along with other steps, should give you the income you need in retirement to maintain your current lifestyle.

How did Fidelity, and other experts, come up with 15%? “First, we had to understand how much people generally spend in retirement,” they explain. “After analyzing enormous amounts of national spending data, we concluded that most people will need somewhere between 55% and 80% of their preretirement income to maintain their lifestyle in retirement.”

The money, however, doesn’t have to all come from your savings. ‌Social Security may play a role as well. “So, we did the math and found that most people will need to generate about 45% of their retirement income (before taxes) from savings,” they add. “And saving 15% each year, from age 25 to age 67, should get you there.” ‌If‌ ‌you‌ ‌have a pension, it’s probably even less.

At the same time, saving for retirement isn’t a one-size-fits-all deal. As mentioned previously, your future will probably depend on a variety of factors, including:

  • Life‌ ‌expectancy
  • How much do you currently spend and save
  • How you plan to live‌ ‌in‌ ‌retirement

The good news? You can figure out how much to save for retirement by following these four steps.

1. ‌Calculate your future needs.

I know this is the hardest step. ‌Keep going, the rest will be easy. ‌And, if you already have a loose budget, then you’ve already got a head start.

But, where exactly should you start? Well, the first step to projecting future income requirements is to examine current expenditures.

Simply put your typical monthly spending is in the first column of a spreadsheet. Or, if you prefer, jot it down on a piece of ‌paper.

Next, consider whether each expense will remain the same, decrease, or increase. You may even have some expenses that ‌vanish. Examples could be the gas spent commuting, work attire, or your mortgage. ‌In‌ ‌a‌ ‌second‌ ‌column,‌ ‌write‌ ‌down what your estimated retirement expenses will be. Go ahead and add all of those up.

In addition, don’t forget to budget for things you want to buy later but may not be budgeting for. It could be anything from travel to pickleball supplies to‌ ‌language ‌lessons. ‌If you do so, you will have an idea of what your future monthly spending needs will be. ‌The amount of income you’ll need to meet those expenses in retirement is multiplied by 12.

This is called a replacement ratio, which you can compare to your current income. ‌That is, in other words, how much income you need to replace when you retire.

2. Focus on income.

Robin Hartill, CFP®, explains that determining your retirement “number” involves more than just figuring out how much you need to save. ‌‌The average American, for example, wants a million-dollar nest egg for retirement. ‌‌This, however, is incorrect.

“The most important factor in determining how much you need to retire is whether you’ll have enough money to create the income you need to support your desired quality of life after you retire,” adds Hartill. ‌‌Would a $1 million savings account be sufficient to sustain a comfortable retirement? ‌‌Maybe.

What is your actual income requirement? ‌In most cases, it’s not 100% of what you earned before retiring. ‌That’s because these expenses probably won’t be a problem;

  • You’ll no longer have to save for retirement.
  • The cost of transportation might be less if you don’t commute to work.
  • You may have paid off your mortgage by the time you retire.
  • In the absence of dependents, life insurance may not be necessary.

“But retiring on 80% of your annual income isn’t perfect for everyone,” says Hartill. ‌If you expect a range of expenses in retirement you might need to adjust your target.

If you plan to travel frequently in retirement, you may want to aim for 90-100% of your pre-retirement income.

Also, if you plan to pay off your mortgage before retiring or downsizing, you might be able to live comfortably on less than 80%.

“Let’s say you consider yourself the typical retiree,” says Hartill. ‌‌Between you and your spouse, you earn $120,000 annually. ‌‌If you follow the 80% rule, your annual income after retirement should be $96,000, or $8,000 per‌ ‌month.

3. Use a retirement calculator.

With accurate spending estimates and projections, a good retirement calculator will show you where you stand in your savings efforts. ‌For a comprehensive calculator, you will find that there are default assumptions: ‌inflation projections, life expectancy, return on equity, etc.

It is important to consider whether these assumptions are accurate given your specific situation so that you can obtain the best results. ‌Does your investment strategy meet the default return as calculated by a calculator, for instance? ‌You’ll also want to adjust your bond allocation if you’re skewed toward bonds. ‌If your grandparents lived to around 100 years of age, you may take those extra years into account.

4. ‌Regularly check in.

Your retirement needs will change as your circumstances change. ‌Whenever you change jobs, grow your family, or decide to travel more when you reach 65, you should review your retirement calculations. ‌The best course of action is to adapt along the way, rather than trying to catch up later.

How Much Social Security Will I Receive When I Retire

Social Security benefits are calculated based on your lifetime earnings. ‌Generally,‌ ‌higher-income ‌means higher benefits. ‌You’re entitled to a certain amount based on several factors, namely your age.

“For reference, the estimated average Social Security retirement benefit in 2022 is $1,657 a month,” explains the AARP. ‌If you apply for Social Security in 2022 at full retirement age (FRA), the age at which you are eligible for 100 percent of the benefit of your earnings history, you will get the maximum benefit of $3,345 a month. ‌FRA‌ ‌is‌ ‌66‌ ‌and‌ ‌4‌ ‌months‌ ‌for‌ ‌those born in 1956 and is gradually increasing‌ ‌to‌ ‌67‌ ‌for‌ ‌those‌ ‌born‌ ‌in‌ ‌1960‌ ‌or‌ ‌later.

“You’ll only know your own amount for sure when you apply,” states the AARP. ‌However, there are several ways to get an idea beforehand.

For the fastest and easiest way, use AARP’s Social Security Benefits Calculator or check your My Social Security account online. ‌The‌ ‌latter‌ ‌draws‌ ‌on‌ ‌your‌ ‌Social Security earnings records. But, you can use the AARP calculator if you have your average annual income on file.

Each tool shows what you could collect if you started Social Security at the earliest possible age, 62; full retirement age; and ‌70. ‌The payment you receive for filing early is reduced between age 62 and FRA, while the payment is increased between FRA and 70‌ ‌as‌ ‌a‌ ‌reward‌ ‌for‌ ‌waiting, they add.

Alternatively, you can contact Social Security at 800-772-1213 for an estimate of your benefits.

How Much Social Security Will I Receive When I Retire

Social Security benefits are calculated based on your lifetime earnings. ‌Generally,‌ ‌higher-income ‌means higher benefits. ‌You’re entitled to a certain amount based on several factors, namely your age.

“For reference, the estimated average Social Security retirement benefit in 2022 is $1,657 a month,” explains the AARP. ‌If you apply for Social Security in 2022 at full retirement age (FRA), the age at which you are eligible for 100 percent of the benefit of your earnings history, you will get the maximum benefit of $3,345 a month. ‌FRA‌ ‌is‌ ‌66‌ ‌and‌ ‌4‌ ‌months‌ ‌for‌ ‌those born in 1956 and is gradually increasing‌ ‌to‌ ‌67‌ ‌for‌ ‌those‌ ‌born‌ ‌in‌ ‌1960‌ ‌or‌ ‌later.

“You’ll only know your own amount for sure when you apply,” states the AARP. ‌However, there are several ways to get an idea beforehand.

For the fastest and easiest way, use AARP’s Social Security Benefits Calculator or check your My Social Security account online. ‌The‌ ‌latter‌ ‌draws‌ ‌on‌ ‌your‌ ‌Social Security earnings records. But, you can use the AARP calculator if you have your average annual income on file.

Each tool shows what you could collect if you started Social Security at the earliest possible age, 62; full retirement age; and ‌70. ‌The payment you receive for filing early is reduced between age 62 and FRA, while the payment is increased between FRA and 70‌ ‌as‌ ‌a‌ ‌reward‌ ‌for‌ ‌waiting, they add.

Alternatively, you can contact Social Security at 800-772-1213 for an estimate of your benefits.

Keep in mind.

Anywhere you get your numbers from, keep in mind that they are estimates, not guarantees. Your‌ ‌actual‌ ‌benefits might differ considerably depending on:

  • Earnings fluctuations
  • A cost-of-living adjustment
  • Working‌ ‌after‌ ‌claiming‌ ‌benefits
  • Social Security law changes

Also,‌ ‌Social Security caps the amount of your income it takes into account when determining your benefits. “In 2022 the cap is $147,000 (it’s adjusted annually to reflect historical wage trends),” states the AARP. “Any income above that is not counted in your benefit calculation (and is also not subject to Social Security taxes).”

Benefits (and Disadvantages) of Retiring Early

Early retirement has several advantages that make it a worthwhile consideration for some people, despite the financial risk involved.

It could be beneficial to your health.

‌Let’s be honest, it’s easy to see how getting rid of your‌ ‌office ‌stress ‌leads‌ ‌to‌ ‌healthier‌ ‌habits. You’ll have the time for physical activity, you get to sleep in, and no more eating at your desk.

This‌ ‌is not merely speculation either. ‌According to a 2002 study of British civil servants, retiring at age 60 had no detrimental effect on their overall health. ‌Higher-level workers, in fact, had better mental health, possibly because they didn’t have work-related stress (and had better pensions).

Exploring a new career or money-making hobby.

As people live longer and remain active long after retirement, one of the biggest advantages of retiring early is that it allows you to explore a new career. Or even turn your hobby into an income source.

It will be easier to start a new endeavor if you want to be your own boss. ‌For example, starting a business at age 50 could keep you cognitively challenged and out of trouble for ‌30‌ ‌years‌ ‌or‌ ‌more.

You will find opportunities to spend less.

“Many retirees don’t spend as much as they used to because they have more time to look for good deals,” writes David Ning for U.S. News. “It’s not difficult to find opportunities to save money when you have the time to look for bargains and negotiate.”

If you want something on sale, for example, you can simply wait. “You can also save on many events and attractions if you go during non-peak hours, which is easy to do once you no longer work,” he adds. “The same strategy works for travel.” ‌Traveling off-season will let you save a lot of money.

Enjoying‌ ‌leisure‌ ‌or educational activities.

When you retire early, you have the opportunity to do things like traveling the world, returning to school, and doing other things that might not be possible later in life.

The ability to spend‌ ‌more‌ ‌time‌ ‌with‌ ‌family‌ ‌or‌ ‌friends.

Last but not least, retirement early offers you the opportunity to spend time with family, build friendships, and build new ‌relationships.

Disadvantages of Retiring Early

It is important to consider those advantages. ‌Depending on how successful your business venture is during retirement, some of these might actually provide you with retirement income in later years (if you eventually run a successful business). ‌But, you also need to consider the cons.

You may suffer health consequences.

Retirement is associated with declines in mental health and mobility. ‌Another cause is the rise in diseases‌ ‌such‌ ‌as‌ ‌heart‌ ‌disease‌ ‌and‌ ‌stroke,‌ ‌according‌ ‌to‌ ‌a‌ ‌2008‌ ‌analysis‌ ‌by‌ ‌the‌ ‌National‌ ‌Bureau of‌ ‌Economic‌ ‌Research.

It is true that those problems aren’t inevitable but they can be avoided by delaying retirement. ‌In addition, the report stated that physically active and socially connected retirees were less likely to develop health problems.

Giving up employer-sponsored health care.

When you leave your employer-sponsored health insurance behind, the costs could be greater than you realize. Medicare coverage does not begin until you reach 66 years and two months of age.

There will be a reduction in your Social Security benefits.

As soon as you start taking Social Security, your benefits will be lower. ‌So for example, if you’re born in 1960 or later and decide to start taking Social Security benefits at age 62, the earliest you can qualify, your monthly check will be 30% less than if you wait until age 67, which Social Security calls‌ ‌your‌ ‌”full retirement‌ ‌age.”

Adding one year to your retirement age will increase your monthly benefit by eight percent. ‌The bonus ends when you reach the age of 70.

Getting‌ ‌fined and penalized for taking‌ ‌your‌ ‌retirement‌ ‌funds early.

Uncle‌ ‌Sam‌ ‌doesn’t want you to withdraw early from your retirement. ‌Instead, he wants you to contribute‌ ‌to‌ ‌society. ‌As a result, he imposes stiff penalties for accessing those funds before the age of retirement.

Savings for retirement ‌will‌ ‌have‌ ‌to‌ ‌last‌ ‌longer.

Say you retire at 62 and live to 90, your IRAs and other savings have to last‌ ‌28‌ ‌years. ‌Your savings, however, will have to last only 20 years if you retire at 70 and live that long. ‌If you work longer, your 401(k) or other retirement plans will‌ ‌have‌ ‌more‌ ‌time‌ ‌to‌ ‌compound.

Boredom and missing work might set in.

Transitioning from a full-time job to retirement can be tough for many retirees. In some cases, they might miss their former colleagues (or even their boss) and long for‌ ‌a return. ‌Once you’ve left the workforce, whether voluntarily or otherwise, it can be difficult to get back into it.

People over 55 typically need more time to find new jobs than younger workers, according to a 2012 report by the U.S. Government Accountability Office.

When Did Famous People Retire

Many celebrities don’t follow traditional retirement planning. ‌They often take early retirement due to their large salaries. On the other hand, some celebrities are so passionate about what they do that they work past full retirement age.

Michael Jordan

The Chicago Bulls star and player who is considered by many to be the one who made basketball a global sport announced his retirement abruptly in 1993, after winning three consecutive NBA championships between 1990 and 1993. ‌In the aftermath of his father’s murder by two teenagers, he no longer felt the desire to play. However, did give baseball a try.

He returned to the NBA and helped the Chicago Bulls win three straight ‌championships from‌ ‌1996‌ ‌to‌ ‌1998. He again retired in 1999. But announced that he would return to the court for the Washington Wizards in 2001. He finally retired from playing in 2003 at the age of 40.

Jack Nicholson

Hollywood legend Jack Nicholson had a career that spanned over 50 years. However, the multiple Oscar winner’s most recent role was in the 2010 movie How Do You Know when he was 72. The actor is reported to be ‌suffering‌ ‌from‌ ‌memory loss.


In 2011, the Oprah Winfrey Show concluded after 25 years. “I love this show, this show has been my life, and I love it enough to know when it’s time to say goodbye,” the then 57-year-old, said. “Twenty-five years feels right in my bones and it feels right in my spirit. It’s the perfect number. It’s the exact right time.”

However, Oprah says she doesn’t believe in retirement. And, since her show wrapped, she’s been she’s co-starred in high-profile films like SelmaThe Butler, and A Wrinkle in Time. She’s also hosted “Oprah With Meghan and Harry” and “Adele One Night Only,” as well as several business interests like Oxygen Media.


In 2011, Shaquille‌ ‌O’Neal retired at 39. His career included four rings, 28,596 career points, and dozens of nicknames. You’ve no doubt seen Shaq in ads or as a sports analyst on the television program Inside the NBA.

Daniel Day-Lewis

As of 2017, Phantom Thread marked Daniel Day-Lewis’ final film‌ ‌role. A statement issued to Variety by the now 65’s year-old team read, “Daniel Day-Lewis will no longer be working as an actor. He is immensely grateful to all of his collaborators and audiences over the many years. This is a private decision and neither he nor his representatives will make any further comment on this subject.”

However, he ended up saying more. ‌Later in 2017, in an interview with W, Day-Lewis said, “I didn’t want to get sucked back into another project. All my life, I’ve mouthed off about how I should stop acting, and I don’t know why it was different this time, but the impulse to quit took root in me, and that became a compulsion. It was something I had to do.”

Kobe Bryant

Citing physical decline, Bryant retired after the 2015–16 season at the age of 37. After retirement, the five-time NBA champ focused on sports-related ventures, notably the Mamba Sports Academy facilities in Thousand Oaks and Redondo Beach for current and aspiring athletes.

Rick Moranis

If you grew up in the 1980s and 1990s, Rick Moranis probably had you laughing with SCTVGhostbustersHoney, I Shrunk the Kids or other projects. But, in 1997, he retired from acting while only in his 40’s. But, this was because he was raising his children after the passing of his wife. He’s done voiceover work and appeared with Ryan Reynolds in a Mint Mobile ad in 2020.

Peyton Manning

In March 2016, Manning retired from professional football at the age of 39, having accumulated ‌71,940‌ ‌passing‌ ‌yards‌ ‌and‌ ‌539‌ ‌touchdowns. In 2021, Manning was inducted into the Pro Football Hall of Fame. The two-time champ hosts the ManningCast with his brother Eli.

Mary-Kate and Ashley Olsen

The twin sisters began acting at just 9-months old. Most well-known for Full House, the sisters also stared in a number of movies throughout the 90s and early 2000s. They quit acting in 2011 at just 25. Why? To focus on their careers in the fashion industry.

Drew Brees

After 20-seasons, the 13-time Pro Bowler and 2006 Walter Payton Man of the Year, and Super Bowl MVP retired at age 42. Following his retirement, he joined NBC Sports but left after just one season due to “lifestyle choice.”

Portia de Rossi

Despite briefly going back to acting for the second season of Arrested Development, Portia de Rossi has officially retired since 2017, when she starred‌ ‌as Elizabeth‌ ‌North‌ ‌on Scandal. ‌The actress mentioned the news on her wife Ellen DeGeneres’ show in 2018 when she revealed that she wanted to do something different. In this case, founding an art company called‌ ‌General Public.

“I was approaching 45 and I just kind of was wondering is there something that I could tackle now that I’ve never done before that would be really challenging and different,” the 48-year-old explained. “I kind of knew what acting would look like for me for the next 10, 20 years, so I decided to quit and start a business. I see a lot of women in their mid-40s thinking about the next stages of their lives, and I didn’t want to regret not trying something.”

Barry Sanders

After only ten years in the league and only 31, Sanders shocked the sporting world by announcing his retirement on July 27th, 1999. According to Forbes, the decision was made even more difficult by the fact that Sanders was just yards short of breaking Walter Payton’s record for most career rushing yards.

Jack Dorsey

Dorsey‌ ‌announced‌ ‌his retirement from‌ ‌Twitter‌ ‌in‌ ‌November‌ ‌2021‌ ‌when‌ ‌he was‌ ‌45. ‌Having been forced to leave the company in 2008, he returned in 2015 following Dick Costolo’s departure. ‌However, things didn’t go smoothly on his return.

In 2020, Elliott Management recommended he step down from both Twitter and Square due to concerns that he wouldn’t devote enough time to what was needed. ‌The company made a deal with Dorsey that included a $2 billion stock buyback, but Dorsey never stayed.

Gene Hackman

It’s unlikely that the actor will be making a comeback since he’s in his 90’s and his last film credit was 2004’s Welcome to Mooseport. ‌According to an interview with Empire in January 2020, he retired due to health reasons.

“The straw that broke the camel’s back was actually a stress test that I took in New York,” he said. “The doctor advised me that my heart wasn’t in the kind of shape that I should be putting it under any stress.”

In the time since he retired, Hackman has published three novels as an author.

Cameron Diaz

Cameron Diaz starred in several hit movies, including My Best Friend’s WeddingThere’s Something About Mary, and Charlie’s Angels, during‌ ‌the‌ ‌’90s‌ ‌and‌ ‌early‌ ‌’00s. However, she has been absent from the screen since she appeared in the remake of Annie in 2014.

In a recent appearance on Kevin Hart’s Hart to Hart talk show, Diaz (now 49) expressed her desire to take more control of her life as she turned 40 and be more independent.

David Letterman

“I’m 68,” said the former host of The Late Show in 2015. “If I was 38, I’d probably still be wanting to do the show. When Jay was on, I felt like Jay and I are contemporaries. Every time he would get a show at 11:30, he would succeed smartly. And so I thought, ‘This is still viable — an older guy in a suit’. And then he left, and I suddenly was surrounded by the Jimmys.”

However, three years after leaving CBS, Letterman returned with a new Netflix series titled My Next Guest Needs No Introduction.

Kevin Systrom

One of Facebook’s most successful acquisitions was Instagram, the photo-sharing app created by CEO Kevin Systrom and Mike Krieger in 2010. In 2018, it was estimated that there were 1 billion monthly users and that it would be worth $100 billion. ‌The pair reportedly resigned from Facebook that September in response to tensions with Mark Zuckerberg. At the time, Systrom was around 34.

John Madden

The Hall of Fame coach spent over 30 years announcing football games. But, his final telecast, when he was 73, was the Super Bowl in 2009.

“You know at some point you have to do this — I got to that point,” Madden said at the time. “The thing that made it hard is not because I’m second-guessing, ‘Is it the right decision?’ But I enjoyed it so damn much.

“I enjoyed the game and the players and the coaches and the film and the travel and everything.”

Eva Mendes

Eva‌ ‌Mendes hasn’t‌ ‌acted‌ ‌since 2014’s Lost‌ ‌River. ‌Since then, she and Ryan Gosling have welcomed two daughters. As‌ ‌it‌ ‌turns‌ ‌out,‌ ‌they’re‌ ‌a‌ ‌huge reason for her decision to take a step back from acting.

In‌ ‌2020,‌ ‌a‌ ‌fan‌ ‌asked‌ ‌Mendes, then 47, why she hadn’t been in a movie for a while, and the star replied that motherhood‌ ‌has‌ ‌‌forced her to rethink her career path. “As a mother now, there are many roles I won’t do. There are many subject matters that I don’t want to be involved with, so it limits my choices and I’m fine with that,” she said, via Hola. “I have to set an example for my girls now. But no worry, I got some side hustles.”

Grace Slick

It turns out that the former Jefferson Airplane lead singer retired for a much less depressing reason after the 1980s. ‌According to her, “all rock-and-rollers over the age of 50 look stupid and should retire.” While‌ ‌some would certainly disagree with her, looking‌ ‌at‌ ‌you Mick, and Keith, ‌I‌ ‌applaud‌ ‌her‌ ‌decision. ‌Since then, she’s kept busy as an artist.

Robert Redford

It makes sense that Robert Redford would be ready to retire after a career that began more than 60 years ago. ‌After starring in The Old Man & the Gun in 2018, he told Entertainment Weekly that it was his last film.

“Never say never, but I pretty well concluded that this would be it for me in terms of acting, and [I’ll] move towards retirement after this ’cause I’ve been doing it since I was 21,” ‌said the star, 85. “I thought, ‘Well, that’s enough.’ And why not go out with something that’s very upbeat and positive?”

After that, the former actor lent his voice to several‌ ‌projects,‌ ‌including his‌ ‌grandson Dylan‌ ‌Redford’s‌ ‌movie, Omniboat:‌ ‌A‌ ‌Fast‌ ‌Boat‌ ‌Fantasia.


As a 33-year-old hip-hop legend, Jay-Z retired at the height of his power in 2003. ‌After retiring in 2006, he became the CEO of Def Jam Recordings, but in 2007, he released‌ ‌a‌ ‌new album,‌ ‌“Kingdom‌ ‌Come.” ‌When asked about his retirement in 2006, Jay-Z replied, “It was probably the worst retirement in history.” He has released multiple albums and has become‌ ‌an‌ ‌avid‌ ‌investor.

J.D. Salinger

“I am a kind of paranoid in reverse; I suspect people of plotting to make me happy,” said The Catcher in the Rye author J.D. Salinger. ‌In 1965, he published his final novella in the New Yorker. After, he protected ‌his‌ ‌privacy‌ ‌in‌ ‌a‌ ‌small‌ ‌town‌ ‌in‌ ‌New‌ ‌Hampshire. After his death in 2010 at the age of 91, it was found that he had been writing and publishing many manuscripts.

Where, When, Why, and How to Retire

Best states to retire.

“The majority of baby boomers have no retirement savings, and 40% plan to rely solely on Social Security for their income after retirement,” Albert Costill writes in a previous Due article. “What’s worse, most Americans have no idea how much they’ll realistically need for retirement.” ‌This makes saving for retirement more important than ever before.

What can you do to ‌put‌ ‌your‌ ‌mind‌ ‌at‌ ‌ease? ‌As for saving for retirement, you could start now and develop‌ ‌multiple‌ ‌retirement‌ ‌income sources. ‌These will both result in a better quality of ‌life. ‌Additionally, you might be able to stretch your budget if you move to one of these‌ ‌twelve‌ ‌states.

1. Mississippi

  • Median Home Cost: $140,818
  • Medicare Advantage Monthly Cost: $48.87
  • The average cost of living index: 85.1

While planning your retirement and looking for a place to settle down, you may want to consider moving to the Magnolia State. ‌The winters are mild, and living costs are lower than the national average. ‌It also has one of the best retirement systems in the nation.

2. Alabama

  • Median Home Cost: $170,184
  • Medicare Advantage Monthly Cost: $64.27
  • The average cost of living index: 88.6

As it has some of the lowest property tax rates in the country, the Yellowhammer State is quite tax-friendly. ‌Additionally, Alabama is one of 38 states that do not levy income taxes on Social Security benefits. ‌The same goes for pensions.

3. Oklahoma

  • Median Home Cost: $150,754
  • Medicare Advantage Monthly Cost: $47.49
  • The average cost of living index: 88.2

Oklahoma exempts retirement benefits from Social Security ‌in‌ ‌full. ‌Additional retirement income is also allowed a deduction of $10,000. ‌Pension plans, IRAs, 401(k)s, 403(b)s, and 457(b)s are all included.

4. Arkansas

  • Median Home Cost: $149,120
  • Medicare Advantage Monthly Cost: $44.34
  • The average cost of living index: 92.1

Arkansans generally view the state as tax-friendly for retirees. ‌Social Security benefits aren’t taxed in Arkansas either. ‌If a senior has other retirement income, such as a pension or IRA, Arkansas allows him or her to deduct $6,000 as well.

5. Georgia

  • Median Home Cost: $245,778
  • Medicare Advantage Monthly Cost: $48.91
  • The average cost of living index: 89.8

Peach State residents are not required to pay Social Security taxes. And seniors 65 years and older can take advantage of a $65,000 deduction from their‌ ‌retirement‌ ‌income. ‌Those aged 62 to 64 can take advantage of a $35,000 deduction. ‌In addition, both the state’s sales tax and property tax rates are relatively low, and there are no inheritance or estate taxes.

6. Tennessee

  • Median Home Cost: $231,682
  • Medicare Advantage Monthly Cost: $58.17
  • Average cost of living index: 90.0

Apart from the mild climate, there are no income or property taxes in the Volunteer State. ‌In terms of state and local taxes, it ranks second to Alaska in terms of per capita tax burden.

7. West Virginia

  • Median Home Cost: $117,768
  • Medicare Advantage Monthly Cost: $59.74
  • The average cost of living index: 90.1

In general, the Mountain State is a tax-friendly state, but the degree of tax-friendliness varies by income level. ‌Sales and property taxes are low in West Virginia, for instance. ‌State and federal taxes range between 3% and 6.5% on Social Security retirement benefits.

8. Indiana

  • Median Home Cost: $185,805
  • Medicare Advantage Monthly Cost: $43.65
  • The average cost of living index: 91.1

In Indiana, as in the vast majority of states, Social Security income is not taxed. ‌Property taxes in Indiana are also fairly‌ ‌low. ‌However, Indiana taxes retirement income from pension plans and retirement savings accounts, such as 401(k)s‌ ‌and‌ ‌IRAs. ‌The rate is usually ‌around‌ ‌3.23%.

9. Kansas

  • Median Home Cost: $176,898
  • Medicare Advantage Monthly Cost: $38.56
  • The average cost of living index: 86.9

In the Sunflower State, retirees are subject to a moderate tax climate. ‌Seniors with an Adjusted Gross Income (AGI) of less than $75,000 are exempt from paying taxes on Social Security benefits. ‌Public pensions are also exempt. ‌In contrast, if you have a 401(k) or pension plan, or an IRA, your retirement income is fully taxable at a rate of 3.1% to 5.7%.

10. Iowa

  • Median Home Cost: $165,955
  • Medicare Advantage Monthly Cost: $49.07
  • The average cost of living index: 90.3

Hawkeye State taxpayers enjoy a relatively friendly tax climate. ‌Social Security benefits are not subject to state income tax in Iowa. ‌Other retirement income sources, however, are‌ ‌taxed. ‌The only thing seniors can deduct from that income is $6,000 if they file jointly.

11. South Carolina

  • Median Home Cost: $225,406
  • Medicare Advantage Monthly Cost: $38.38
  • The average cost of living index: 94.8

“Kiplinger ranks South Carolina as one of the most friendly states for taxes on retirees,” writes Bob Niedt. ‌First of all,‌ ‌Social Security‌ ‌benefits‌ ‌are‌ ‌not‌ ‌taxed in‌ ‌the Palmetto State. “The state also offers other generous exemptions on other types of retirement income.” ‌Taxes on property are low and inheritance and estate taxes are not applicable.

12. New Mexico

  • Median Home Cost: $248,670
  • Medicare Advantage Monthly Cost: $39.61
  • The average cost of living index: 90.6

The Land of Enchantment “has a lot of real benefits for people moving here,” says Charles Lehman, project coordinator for Retire New Mexico, a one-stop resource for those considering moving to the state. “You’ve got a great cost of living. The housing costs are reasonable. Good weather—probably better weather than anyplace else. We’ve got the culture, the food, the scenery, the landscapes, and the outdoor recreation. We’ve really got a lot of advantages here in the state.”

Honorable mentions:

  • Delaware
  • Florida
  • New Hampshire
  • Wisconsin
  • Hawaii

Key traits for the best retirement states.

Overall, there is a number of factors to consider when choosing a state to spend your golden years. Maybe you want to be close to your family, soak up the sun, or keep your expenses in check.

However, these are the key traits to look for when narrowing down your selection:

  • Social‌ ‌security‌ ‌income‌ ‌is‌ ‌not‌ ‌taxable.
  • Retirement income isn’t taxed.
  • A wide range of socio-economic programs and conditions are available to keep people healthy and happy.
  • Affordable cost-of-living and healthcare.

How old do you have to be to retire?

“The age at which you can retire and collect Social Security benefits and the age at which you should retire aren’t necessarily the same,” writes Daniel Kurt for Investopedia. “Though you become eligible for Social Security at age 62, you don’t actually qualify for your full monthly benefit amount until a few years later.” ‌

For‌ ‌those‌ ‌born‌ ‌from 1943 to 1954, it’s‌ ‌age‌ ‌66. ‌The age increases in two-month increments for anyone born after ‌1955. ‌Those born in 1960 or later can retire at the full retirement age of 66 plus two months up to the age of 67.

“If you claim benefits at 62, you only get 75% of the full amount, which makes up for the fact that you’ll be getting checks for a longer period of time,” adds Kurt. ‌Also, your spouse’s benefit gets cut. “They will only get 35% of your full retirement amount, compared to 50% if you wait until at least 66.”

“Chances are that you’ll need a large nest egg to supplement your Social Security funds,” he says. ‌This‌ ‌is especially true if you retire‌ ‌early. ‌The earlier you retire, the greater your nest egg needs to be. “Keep in mind, too, that you won’t be eligible for Medicare until you reach age 65, so you’ll almost certainly face steep out-of-pocket costs if you have to purchase health insurance on your own,” Kurt warns.

Why do some people retire and not others?

Everyone has their own reasons for either retiring or not. ‌Health is the biggest factor in early retirement, according to research. Next come layoffs or business closures, followed by familial ‌obligations. ‌Financial changes also play a smaller ‌role.

Other reasons why people retire? Well, they may have enough money saved to live comfortably. They may also want to pursue new business opportunities or activities like travel. And, they may just be tired of the daily rat race.

Alternatively, people may not retire at 65 for a variety of reasons. Some of these reasons are:

  • The need to maintain financial stability or build up a cushion for retirement. In other words, you don’t have enough money saved.
  • Keeping active and involved in the workplace. In some cases, working can keep you mentally and physically sharp. It also prevents getting bored.
  • There is no longer a barrier to working past the age of ‌65. Age-related discrimination in employment was abolished in 1986 by a federal amendment to the age discrimination in employment act‌ ‌(ADEA).
  • A desire to explore new forms‌ ‌of‌ ‌work. Maybe you can join the gig economy or finally start your own business.

Why it is important to plan for retirement?

In your youth, it’s fairly easy to put off retirement and worry about it later. ‌Surely, everything will work out. Well, that’s just wishful thinking.

Even if you love what you do, you can’t work forever. Besides, don’t you want to cross off items on your bucket list so that you don’t have any regrets?

As such, you need to devise a retirement plan sooner than later. When you do, you can take advantage of compound interest, protect yourself against market risk, and develop healthy financial habits. As a consequence, you’ll have enough money to live comfortably. And, more importantly, do so without the stress of relying on Social Security or your family, as well as leave them a legacy.

What is a good monthly retirement income?

There are a lot of factors that go into answering this question. ‌It has a lot to do with age, health, and lifestyle. But, from 2016 to 2020, the average American household headed by a 65-year-old spent $48,791 per year or $4,065.95 per month, according to the Bureau of Labor Statistics.

The general consensus is that you’ll‌ ‌need‌ ‌70-80%‌ ‌of‌ ‌your pre-retirement‌ ‌income‌ ‌to‌ ‌maintain‌ ‌your‌ ‌standard‌ ‌of‌ ‌living‌ ‌in‌ ‌retirement. Let’s say you earned $50,000 per year, or $4,167 a month, before retiring. ‌When you retire you’ll need $35-40,000 a year.

Obviously,‌ ‌this‌ ‌is‌ ‌just‌ ‌a‌ ‌‌‌basic ‌guideline. ‌It depends on your ‌circumstances. ‌You might be able to live on less income if you’re young and healthy, as opposed to someone who’s older or has health problems. ‌However, if you are an active person who travels a lot, you may need a higher income than someone who stays local.

Other factors to consider:

  • The retirement lifestyle you desire
  • Costs associated with‌ ‌healthcare
  • How much it would cost to live where you want to live
  • Estimated daily‌ ‌expenses
  • Life expectancy

How much does the average person have when they retire?

According to one survey, personal savings have grown ‌by‌ ‌10%‌ ‌from‌ ‌$65,900‌ ‌in‌ ‌2020‌ ‌to‌ ‌$73,100‌ ‌in‌ ‌2021. ‌Additionally, retirement savings are up by ‌13%,‌ ‌from‌ ‌$87,500‌ ‌to‌ ‌$98,800.

What is the average 401k balance for a 65-year-old?

The average 401(k) balance for those between 60-69 is $160,000. Meanwhile, the average contribution rate is 10%, which is a 2% jump from 40-49-year-olds.

These contributions suggest that many of these individuals ‌are‌ ‌taking advantage‌ ‌of‌ ‌the‌ ‌catch-up‌ ‌provision‌ ‌for‌ ‌401(k)s. ‌This‌ ‌provision allows people over the age of 50 to contribute more (an additional $6,500 in 2022) than the standard contribution.

However, Personal Capital reports that the average 401(k) balance is $255,151 for those 65 and older. And, the median 401(k) balance is $82,297

How much income does an annuity per month?

Well, that depends on the type of annuity you own. However, if you have a $100,000 annuity at 50 and stop making contributions, you should receive $774 a month for the rest of your life. ‌According to other research, a $100,000 annuity would pay you between $417 and $504 per month depending on the age at which the payment starts.

Furthermore, the average payout from an immediate annuity has risen by more than 11% for men and 13% for women since ‌2022. “I think we’re back where we were prior to Covid,” said Branislav Nikolic, vice president of research at CANNEX. “If interest rates go up, it’s expected annuities will pay out more.”

How much does the average retired person live on per month?

A variety of unpredictable factors determine the average monthly retirement income for retirees. Among them are investment returns, inheritances, and disparities in savings. ‌The average retirement income in the United States is however around $73,000, according to data from the US Census Bureau. However,‌ ‌the‌ ‌median‌ ‌retirement‌ ‌income, which is usually more indicative of the majority of cases, is just ‌$47,000.

With that in mind, for households aged 60-64, the median income is $63,919. That comes out to $5,327 per month. If you’re in the 65-69 bracket, the median income drops to $54,129, or $4,510 a month. The median income for those 70-74 is $46,797 or $3,900 per month. And, for households aged 75 or over, the median income plummets to $31,893 or just $2,658 a month.

We’re just looking at a granular comparison of median incomes per age range per month. ‌Your situation may differ.

What is the biggest expense in retirement?

Among retirees’ biggest expenses are housing expenses — approximately 35% of income is spent on housing to be exact. At the minimum, this includes mortgage payments, insurance, and maintenance. In fact, the average cost of housing for Americans 65 and older is $1,406.68 a month, or $16,880 annually.

The type of housing you have and where you live can obviously affect costs. ‌Housing costs in coastal California, for example, are much higher than in Wyoming, South Carolina, or Colorado.

However, retirees often overestimate housing costs. ‌For example, retirees may downsize, or relocate to cheaper areas of the country (or the world). Or, they may find other creative ways to reduce housing costs or pay off their mortgage, like listing a room on Airbnb.

“There are a number of housing decisions to consider as you transition from working to full-time retirement,” says Steve Feinschreiber, senior vice president of Financial Solutions at Fidelity. “Work with your advisor to develop a housing strategy—with several different options— as you project where you’ll plan to live over the next 20–30 years. Whether you plan to downsize, relocate, or age in place—or consider such options as cohousing or living with one of your children–you can expect your overall housing cost to decline as you age.”

Other retirement expenses to be aware of include:

  • Transportation — $11,910/yr
  • Healthcare — $4,976/yr
  • Food — $6,207/yr
  • Entertainment — $2,527/yr

How much do you need to retire if the house is paid off?

The average person needs 70 – 80% of their pre-retirement salary‌ ‌to‌ ‌live‌ ‌comfortably. ‌Having paid off your mortgage and being healthy when you retire this may suffice. ‌To build a dream house, travel the world, or become a golf pro, you may need 100% of your annual income.

Prepare a realistic retirement budget. ‌Consider how much you will need for retirement and make a plan. ‌Saving money for retirement can be tricky, but these estimates can help.

You can begin by identifying your current expenses and estimating how they will change as you retire. So, let’s say that you’ve paid off your mortgage. Since this was a 15-year fixed mortgage, this cost you $3,059 a month. Well, that expense can be deducted. However, you should plan for additional costs, such as health care.

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