Here's the Minimum Income Retirees Say They Need To Sleep Well (It's Less Than You Think)
There's no magic number for retirement savings, but many people focus on building a certain-size nest egg they hope will last through their golden years. However, for some retirees, the goal is simpler: having enough dependable monthly income to cover expenses and sleep well at night.
While everyone's retirement budget is different, many financial planners recommend replacing about 70% to 80% of your pre-retirement income, according to Towerpoint Wealth. The exact amount of what you’ll need for retirement depends on earnings, health and other factors, but here's how experts recommend determining your retirement income floor.
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How Much Monthly Income Do You Need?
Towerpoint Wealth said that most retirees don’t care about net worth because their monthly income is more important. Because every retirement plan looks different, the first step is understanding your own spending habits. Rather than starting with a specific savings goal, experts recommend looking at your expected monthly expenses and estimating how much income you’ll need to maintain your lifestyle in retirement.
“That could be a combination of travel, utilities, and hopefully, at this point, you don’t have a house payment or car payments,” said Jenny Groberg, founder and CEO of Booksmarts Accounting. Once you have a monthly estimate, you can calculate your annual retirement income goal and determine how long your savings may need to last.
“If you want $5,000 a month, multiply that over 12 months and you need $60,000 a year for retirement,” Groberg said. “Multiply that by 25 or 30 years, and that’s a rough estimate of how much you’re going to need.”
Where Does Retirement Income Come From?
The days of relying solely on Social Security are becoming more challenging. The average monthly payment is reportedly $2,071, and while the program is a part of retirement, most people need additional revenue streams. Other income sources include:
Investments
Rental property
Retirement accounts like 401(k), traditional IRA, Roth IRA
Pensions
Annuities
Building multiple income streams can give retirees more flexibility if expenses increase or unexpected costs arise.
Why Your Retirement Income Needs May Change Over Time
When planning retirement, nobody can predict the future. Unexpected healthcare costs, inflation and a longer lifespan can all impact how far your monthly income needs to stretch.
For many retirees, the biggest challenge is preparing for a retirement that could last decades. Groberg said people should consider their family history and potential longevity when estimating how much income they may need.
“Let’s say your parents are living well into their 90s and your grandparents did the same,” she said. “The odds are you’re probably going to need a longer retirement, and you might need 30 years’ worth of retirement.”
The Goal Isn’t the Biggest Account Balance
Having enough savings is vital, but Groberg said retirement security is not just about reaching a certain dollar amount.
“Retirement isn’t about having the biggest account balance,” she said. “It’s about having a low amount of debt and enough flexibility that, regardless of what happens, you can adjust.” To help create that flexibility, Groberg recommends focusing on a few key financial priorities:
Pay off high-interest debt before retirement to reduce monthly expenses.
Aim to pay off your mortgage before retiring, if possible.
Diversify investments to help balance growth opportunities and risk.
Ultimately, the retirement income floor that lets someone sleep well at night will look different for everyone. The goal is not reaching a specific number — it’s creating enough financial stability to handle life’s changes while enjoying retirement.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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