Retirement Planning: How Much Do You Really Need?


As a retiree, you may have heard the common advice that you need 80% of your current salary in retirement. However, the question arises – is this 80% based on what you bring home or your gross salary? In addition, you may be wondering whether it is plausible for you to retire at age 60, given your current circumstances. Let’s delve into these questions and find out.

Determining Your Retirement Income Goal

The general rule of thumb suggests that retirees should aim to replace 80% of their gross pay in retirement. For example, if your annual salary is $50,000, ideally you would want to replace $40,000 of that amount. However, this guideline should not be relied upon entirely for your financial planning. Remember, retirement planning is highly personal and varies from person to person.

Instead, it is crucial to assess your monthly expenditure both now and during retirement, as well as where your income will come from. Consider all aspects of your finances, including discretionary expenses that you may not want to give up even in retirement. Take into account all potential sources of retirement income, such as savings, investments, and any pension plans.

Furthermore, you may also choose to factor in Social Security benefits when calculating your retirement income goal. However, it is essential to analyze various scenarios and develop multiple plans (Plan A, B, and C), depending on different assumptions and variables.

Can You Retire at 60?

Now, let’s address your specific situation. You are currently 58 years old, married with one child in her second year of community college. She plans to complete her final two years at a university. You have accumulated savings of $1.4 million and own a mortgage-free house.

While you have some outstanding debts for a condo and a cabin, the tangible value of these properties exceeds their remaining loan amounts. However, these debts result in monthly bills of $1,800 in total.

With a monthly take-home income of $4,400, it is natural to wonder if retirement at age 60 is feasible for you. To determine this, factors such as your desired lifestyle in retirement, expected expenses, and potential income sources need to be considered.


In conclusion, retirement planning is a highly individualized process, and there are no one-size-fits-all answers. While the 80% replacement ratio is often mentioned, it is essential to tailor it according to your specific circumstances. Assess all aspects of your financial situation, including current and future expenses, potential sources of income, and personal preferences regarding retirement lifestyle.

Remember, seeking professional financial advice can help you formulate a comprehensive retirement plan that aligns with your goals and aspirations.

Estimate your retirement needs

Planning for retirement involves estimating the expenses you’ll have, such as housing and healthcare. It’s important to use realistic figures that account for inflation and rates of return.

The cost of healthcare

Healthcare is a major expense during retirement. If your wife is a stay-at-home mom and you plan to retire before the age of 65, when you become eligible for Medicare, you need to figure out how you’ll get health insurance.

One option is to find a part-time job with an employer who offers health insurance. This not only keeps cash flow going, but also provides coverage for you and your dependents while you transition into retired life.

To get a good idea of whether you’re financially prepared, consider consulting a qualified financial planner or using retirement calculators. These tools can help you assess your savings and determine if you’re on track.

The fact that you’ve accumulated a significant amount of money and have real estate is a great achievement. Many people would say that alone means you’re ready to retire now.

However, not everyone gets to choose when they retire. Sometimes, circumstances like layoffs or illnesses force people into early retirement. If you have the opportunity to decide when to retire, make sure to thoroughly crunch the numbers.

You don’t want to find yourself depleting your savings too quickly or too slowly, and it’s important to account for big expenses you may have in the future, even 20 years from now.

Based on what you’ve shared, it seems like you’re on the right track.

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