Although some major retirement factors are unknown, it is still possible to estimate how much you may need to retire at 65. Several factors can affect how much you should have saved to support a comfortable and fulfilling retirement.
How Do You Plan to Spend Your Time?
The amount of money you may need depends on how you plan to spend your time in retirement. Traveling often will likely cost more than staying close to home. It is also helpful to think about the costs and savings tied to different lifestyle choices. For example:
- Will staying in your current home cost more or less than downsizing to a smaller home or condo?
- Do you have hobbies that may require ongoing expenses, such as golfing or woodworking?
- Do you plan to spend time volunteering?
A helpful way to estimate your needs is to write out what your ideal day, month, and year could look like. From there, you can begin to estimate how much money you may need to support that lifestyle.
How Much Do You Already Have Saved?
Once you have a clearer idea of your retirement goals, review how much you have already saved. Add up your retirement accounts, pensions, and other investments. Ideally, your savings will match your estimated needs. However, if there is a gap between the two, you may need to adjust your expectations or increase your savings.
Tax Considerations
Taxes can still affect your income in retirement. If you have money in tax-deferred accounts, such as 401(k) plans or traditional IRAs, withdrawals are generally taxed as ordinary income. You may also need to take required minimum distributions (RMDs) based on your age, which can increase your taxable income.
In addition, up to 85% of your Social Security benefits may be taxable, depending on your total income. Understanding how taxes may affect your retirement income can help you estimate how much you may actually have available to spend for your retirement.
One way to manage taxes in retirement is to save in a Roth IRA or Roth 401(k), if available. Contributions are made with after-tax dollars, and qualified withdrawals are tax-free.
Health Care Costs
Although many retirees qualify for Medicare at age 65, health care can still be a significant expense. Estimates suggest that a 65-year-old couple retiring in 2026 may spend about $688,996 on health care premiums throughout retirement, even with Medicare coverage.1
If you have not included health care costs into your retirement savings estimate, it may be time to account for them.
So How Much Do I Need?
The amount you may need to retire at 65 will depend on your lifestyle, savings, and expected income sources. Start by estimating the cost of your desired retirement, then compare that number to your current savings and expected Social Security benefits. From there, consider taxes and health care costs.
If there is a gap between your savings and your estimated needs, you may need to adjust your spending expectations or increase your contributions. Speaking with a financial professional can also help you review your options and build a strategy that fits your goals.
Conclusion
Planning for retirement at 65 involves balancing your goals, savings, and future expenses. By taking time to estimate your needs and review your current progress, you can make more informed decisions and adjust your approach as needed over time.
Sources
- Health Cost Growth Expected to Outpace Social Security. https://www.psca.org/news/psca-news/2026/2/health-cost-growth-expected-to-outpace-social-security/.
