Planning for retirement shouldn’t feel like a shot in the dark. Having a clear savings target can help you build a secure financial future.
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If your goal is to generate $60,000 per year in retirement income, here’s how much you’ll need to save — and how to make your money last.
Understanding Retirement Income Needs
For many retirees, about $60,000 per year is a reasonable target to cover living essentials, like housing, healthcare and food, with extra cushion for unexpected expenses. According to the U.S. Bureau of Labor Statistics (BLS), in 2022, retirees spent an average of $54,975 per year on living expenses, though actual needs vary based on location, lifestyle and health costs.
Sources of retirement income such as Social Security or pensions can help reduce the total amount of savings needed. According to the Social Security Administration (SSA), the average monthly Social Security benefit for retired workers in January 2025 was approximately $1,975, or about $23,700 per year. This means many retirees still need to supplement their income with personal savings to reach $60,000.
The 4% Rule: A Simple Way To Estimate Savings
The 4% rule has been a go-to strategy for retirement planning since William P. Bengen introduced it in 1994. He analyzed decades of stock and bond performance and found that retirees could withdraw 4% of their savings each year, adjust for inflation, and still have their money last at least 30 years. His research, published in the Journal of Financial Planning, helped shape the way many people approach retirement withdrawals.
The key to the 4% rule is that it assumes your money is invested in a diversified portfolio of stocks and bonds, historically earning an average annual return of around 7%. This return is not guaranteed every year — markets can fluctuate — but over time, stocks have tended to grow faster than inflation, helping preserve your purchasing power.
Using this rule, if you want $60,000 per year in retirement from just your savings, you’d need:
$60,000 ÷ 0.04 = $1,500,000
In other words, a $1.5 million nest egg should, in theory, support that level of spending without running out too soon. But times change, and so do market conditions. A recent Morningstar study suggested that future investment returns might not be as strong, meaning retirees could need to withdraw a little less each year to make their money last. In fact, the study found that a “safe withdrawal percentage” this year would be 3.7%.
It’s a good reminder to stay flexible and adjust your plan as needed.
Adjusting for Other Income Sources
If you expect to receive Social Security or pension income, the total savings required to reach $60,000 per year can be lower. For example, if you expect to receive $23,700 annually from Social Security, you only need to generate $36,300 per year from your savings:
$36,300 ÷ 0.04 = $907,500
In this example, your Social Security income reduces the amount of savings needed from $1.5 million to around $907,500. To estimate your expected Social Security benefits, the SSA provides an online calculator that projects future payments based on your earnings history.
Accounting for Inflation
Over time, inflation reduces the value of money, making everyday expenses more costly. Data from the U.S. Bureau of Labor Statistics indicates that inflation has averaged between 2.5% and 3% annually over the last three decades. If this trend continues, someone requiring $60,000 per year today would need approximately $108,000 in 20 years to afford the same lifestyle.
Luckily, the 4% rule already accounts for inflation, assuming your investments grow enough to cover both your withdrawals and rising costs. This means you don’t need separate inflation calculations — your portfolio’s growth is designed to keep pace.
To stay ahead, invest in assets that outpace inflation, like stocks, and review your retirement plan regularly to adjust as needed.
Factors That Influence How Much You Need
Several factors can affect the amount you need to save for retirement:
- Retirement age: Retiring earlier means your savings must last longer, which will require a larger nest egg.
- Investment returns: Higher returns may reduce the total savings needed, and lower returns or can require a more conservative withdrawal rate.
- Spending habits: A more frugal lifestyle can help savings last longer, while luxury spending increases financial needs.
- Healthcare costs: According to Fidelity, the average individual can expect to spend approximately $165,000 on healthcare costs throughout retirement.
How To Start Saving for $60K per Year
Starting early is key to building a sufficient retirement fund, as it allows you to take advantage of compound interest. Here are practical steps to help you reach your goal:
- Max out retirement accounts: Contribute as much as possible to your 401(k) and IRAs. If your employer offers a match, take full advantage.
- Invest for growth: Stocks historically provide higher returns than bonds, but balancing risk is important. The S&P 500 has averaged about 7% to 8% annual returns after inflation.
- Monitor and adjust: Life changes, markets fluctuate, and your plan should evolve with them. Regularly review your retirement strategy to stay on track.
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This article originally appeared on GOBankingRates.com: Here’s How Much You Need Saved To Have $60K in Retirement Income Every Year
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