how much to save for retirement Archives - ROI TV

9 Factors That Determine Exactly How Much You Need to Save to Retire

Hillary Mendes — Sun, 22 Jun 2025 12:22:47 +0000

If you’ve ever wondered, “How much do I really need to save for retirement?”—you’re not alone. The answer isn’t a flat percentage or one-size-fits-all number. Instead, it depends on nine key factors: your timeline, lifestyle, spending habits, retirement age, income sources, health, longevity, dependents, and legacy goals.

Let’s break it down.

1. Retirement Age

The earlier you want to retire, the more years you’ll need to fund without earned income—and that means higher savings. Retiring at 60 instead of 67 could mean needing hundreds of thousands more. On the other hand, delaying retirement gives your investments more time to grow and reduces your required annual savings rate.

2. Annual Spending

Forget replacing your income—what you really need is to replace your spending. If you’re spending everything you earn, you’ll need to replicate that level in retirement. But if you’re a super saver, your needs may be far lower. That’s why a custom retirement budget is more helpful than guessing based on averages.

3. Withdrawal Rate

This is the rate at which you safely draw from your savings in retirement. A 4% rate means you’ll need 25 times your annual spending. So if you need $60,000 per year, you’ll want $1.5 million. Prefer a safer 3% rate? Now you’re aiming for $2 million. Choose a more aggressive 5%, and $1.2 million might do the trick—but with more risk.

4. Other Income Sources

Pensions, Social Security, annuities, and rental income reduce how much you need to save. For example, $2,000/month in Social Security can offset nearly $500,000 in savings. Make sure to factor in all guaranteed income when calculating your savings target.

5. Longevity

How long you live affects how long your money must last. Planning for 25–30 years in retirement means keeping withdrawal rates conservative—perhaps 3.3% instead of 4%. That increases the amount you need saved but helps guard against running out of money.

6. Inflation

A 3% annual inflation rate means your $60,000 spending today could balloon to $145,000 in 30 years. Investing for growth is essential to keep pace. The good news? A safe withdrawal strategy like the 4% rule typically builds in inflation adjustments to maintain your purchasing power.

7. Healthcare Costs

Healthcare costs tend to rise as you age. Retiring before Medicare kicks in at 65 means covering 100% of your insurance. Even after 65, Medicare doesn’t cover everything—think dental, vision, hearing, and long-term care. A dedicated healthcare fund or HSA can help fill the gap.

8. Dependents

Supporting aging parents, adult children, or grandchildren? These added financial responsibilities stretch your retirement dollars. Whether it’s tuition support, caregiving, or living assistance, planning for others adds complexity—and cost—to your retirement equation.

9. Legacy Goals

Do you want to leave something behind for loved ones or donate to a cause? That goal increases your savings needs too. You’re not just saving to support yourself—you’re building a financial legacy.

Bottom Line:
There’s no shortcut to figuring out how much to save. But with these nine factors in mind, you can create a plan that reflects your real needs—not generic advice. Start early, stay intentional, and don’t compare your journey to anyone else’s. Your retirement is your destination.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

The post 9 Factors That Determine Exactly How Much You Need to Save to Retire appeared first on ROI TV.

The Formula for Retirement

Joe Anderson — Tue, 27 May 2025 11:54:26 +0000

When it comes to retirement, there are few things more important than having a plan—and the earlier you start, the better. In a recent episode of Your Money, Your Wealth, financial pros we walked viewers through key retirement planning strategies, formulas, and tax moves to help secure long-term financial goals.

The Power of Compound Interest and the Rule of 72

We kicked things off by highlighting compound interest, famously referred to by Albert Einstein as the “eighth wonder of the world.” Unlike simple interest, compound interest grows your money exponentially over time by earning interest on both your initial investment and accumulated interest.

They broke down the Rule of 72, a simple formula to estimate how long it takes for an investment to double. Divide 72 by your expected rate of return: a 7% return means your money will double in about 10 years. But at 2%, it takes a staggering 36 years. Clearly, rate of return and time are your biggest allies.

Start Early, Save Consistently

To drive home the importance of starting early, they compared saving $100 a month beginning at age 25 versus age 35. That 10-year head start could result in an additional $100,000 or more in savings over a lifetime thanks to compounding. Even modest annual increases in savings can have a profound impact on retirement outcomes.

Calculating Retirement Spending and the Shortfall

Next, we explained how to calculate retirement needs. Start with your current expenses and adjust for 3% inflation. Subtract expected income like Social Security, then multiply the annual shortfall by 25 to find your target retirement savings. For example, someone expecting $144,000 in annual expenses with $55,000 from Social Security needs to fund an $89,000 shortfall. Multiply by 25, and you get a $2.2 million savings goal.

Understanding the “Retirement Smile”

Spending in retirement isn’t linear. I want to introduce you to the “retirement smile”: higher spending in early retirement (“go-go years”), a dip during the “slow-go” years, and a rise again due to healthcare costs in the “no-go years.” Many retirees spend more in retirement than they expected, making accurate planning crucial.

Applying the 4% Rule

The 4% rule remains a helpful benchmark. If you retire with $1 million, withdrawing $40,000 per year (4%) gives you a strong chance of not outliving your money, assuming a 6% return. However, the duo stressed that withdrawals should be adjusted dynamically based on market performance and personal needs.

When to Claim Social Security

Social Security claiming strategies also play a huge role. Claiming at age 62 could reduce benefits by 30%, while delaying until 70 can boost payments to 124% of your full retirement amount. We suggested evaluating factors like health, income needs, and whether you’re still working when making this decision.

Reevaluating the Rule of 100

The traditional Rule of 100, which suggests subtracting your age from 100 to determine stock allocation, was challenged. They argued that allocation should reflect individual risk tolerance, goals, and legacy plans. For example, a risk-tolerant investor may opt for more stock exposure, while others may want more cash for security.

Tax Planning and Roth IRA Conversions

One of the most actionable strategies they shared was Roth IRA conversions. With tax rates expected to rise in 2026, converting pre-tax retirement funds now could yield massive long-term savings. Converting in lower tax brackets (like 12% or 24%) today helps reduce your required minimum distributions (RMDs) and future tax bills.

Tax Allocation Across Account Types

Understanding how different accounts are taxed is another key strategy. Use tax-deferred accounts (like IRAs) strategically during low-income years, and prioritize Roth IRAs for tax-free growth. Taxable brokerage accounts provide flexibility but may generate capital gains.

Plan for Longevity

With life expectancy on the rise, couples have a 50% chance one partner will live to 92. We emphasized planning for a longer-than-expected life to avoid outliving your money, especially considering rising healthcare costs.

Use the Retirement Readiness Guide

Finally, the team encouraged everyone to download their Retirement Readiness Guide. It’s packed with practical tools to calculate savings targets, plan withdrawals, and optimize investments for a confident retirement.

Bottom line: Retirement success is about more than just saving—it’s about making smart decisions across the board. The earlier you start, the more prepared you’ll be to live your best retired life.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

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How to Catch Up on Retirement: Saving Smarter, Spending Wisely, and Planning Strategically

Joe Anderson — Tue, 06 May 2025 13:14:25 +0000

When it comes to preparing for retirement, the numbers don’t lie—and for many Americans, they paint a concerning picture. According to a recent episode of Your Money Your Wealth, nearly one in three people feel significantly behind on their retirement savings. That sense of falling behind isn’t surprising when you consider that the median savings for those aged 55 to 64 is just $185,000. At a 4% withdrawal rate, that provides only $8,000 per year—far below the $82,000 average annual pre-retirement income.

So how can you close the gap? The first step is understanding how much you’ll need.

Calculate Your Retirement Shortfall

Joe Anderson and Alan Copeland walk viewers through a practical formula: subtract your fixed income (such as Social Security or a pension) from your desired annual spending. Multiply that shortfall by 25—or divide it by 4%—to determine the total savings needed. For example, if you need $75,000 per year and expect $50,000 from Social Security, you’ll need $625,000 saved to cover the difference.

Don’t let that number intimidate you. Even starting at age 40 with zero savings, you can get there by saving consistently and investing wisely. Saving $10,000 annually with a 6% return could hit your target by age 66.

Supercharge Your Savings

If you feel behind, you’re not alone—but there are ways to boost your efforts. Aim to save at least 15%–20% of your income. If you’re starting late, you may need to hit closer to 26% of gross income to replace 80% of your earnings in retirement.

Here are a few tactical tips:

Max out your employer match.
Set aside 50% of any bonuses.
Automate your savings increases with every raise.
Pay yourself first before spending on anything else.

Get Smart About Social Security

Timing your Social Security claim is one of the biggest levers you can pull. While you can start at age 62, doing so means locking in a permanent 30% reduction. Waiting until age 70, on the other hand, boosts your benefit by 8% per year past full retirement age—maximizing your lifetime income.

Joe and Alan also highlighted Social Security’s diminishing role as your income grows. For someone earning $15,000 annually, benefits may replace 80% of income. For those earning $150,000, the replacement rate drops to just 30%. In other words, the more you make, the less you can rely on Social Security alone.

Minimize Taxes in Retirement

Don’t underestimate the impact of taxes on your retirement income. Required minimum distributions (RMDs) from traditional accounts, plus the loss of common deductions in retirement, can push you into a higher tax bracket than you expected.

Alan emphasized the importance of tax diversification. Spreading your savings across tax-deferred (like traditional IRAs), taxable brokerage accounts, and tax-free Roth IRAs gives you more flexibility—and more control—over your tax bill.

Consider Roth Contributions and Conversions

Roth IRAs provide powerful benefits: tax-free growth and withdrawals. For 2025, you can contribute $7,000—or $8,000 if you’re over 50. And even if you can’t contribute directly, you can consider Roth conversions. Moving money from a traditional IRA to a Roth IRA means paying taxes now but avoiding potentially higher taxes later.

This strategy can be especially effective in the years between retirement and RMD age, when your taxable income is lower.

Define Your Retirement Vision

It’s not just about the numbers. Joe and Alan encourage writing down your retirement goals—when you want to retire, how much you plan to spend, and whether you plan to relocate or downsize. Studies show that those who write down their goals are far more likely to achieve them.

A good retirement plan includes:

Savings benchmarks
Social Security strategy
Investment allocation
Contingency planning for health care or unexpected expenses

Use the Right Tools

To help you get started, Your Money Your Wealth offers a free Retirement Readiness Guide. It’s packed with worksheets and step-by-step instructions to calculate how much you need, how to save, and how to draw income efficiently.