One of the most common questions we hear from people approaching retirement is:
“How much money do I need to retire?”
Unfortunately, there isn’t one number that works for everyone.
Someone with $750,000 saved may be better prepared for retirement than someone with $1.5 million. It depends on spending, Social Security and other income, taxes, investments, and how long the money may need to last.
At CMC Wealth Management, we believe the better question is:
“Will my resources support the retirement I want?”
Start With Your Retirement Spending
The first step is understanding what your life will actually cost in retirement.
Consider your essential expenses—housing, food, insurance and healthcare—as well as lifestyle expenses such as travel, hobbies and dining. Don’t forget larger or irregular expenses like vehicles, home repairs and major purchases.
Knowing what you expect to spend is much more useful than simply choosing a retirement savings target.
Look at Your Reliable Income
Next, determine how much income you expect from Social Security, pensions and other reliable sources.
For example, if you expect to spend $90,000 a year and have $55,000 of reliable income, your portfolio may need to provide the remaining $35,000.
That gap is a much more meaningful starting point for retirement planning than simply saying, “I need $2 million.”
Your Portfolio Has to Do More Than Generate Income
Your investments need to provide income while also giving your money the opportunity to grow over a potentially decades-long retirement.
This creates an important balance between growth and risk management.
A significant market decline early in retirement can have a much greater impact than the same decline during your working years because you may be withdrawing money while your portfolio is falling.
That’s why retirement planning involves more than simply choosing an investment mix based on your age or risk tolerance.
Don’t Overlook Taxes, Inflation and Healthcare
The amount you have saved isn’t necessarily the amount you can spend.
Traditional IRAs, Roth accounts and taxable investments can have very different tax consequences. The timing of withdrawals and Social Security decisions can also affect your retirement income and taxes.
Inflation matters too. Over a retirement lasting 20 or 30 years, rising costs can significantly reduce purchasing power.
Healthcare is another major consideration. Medicare doesn’t cover every expense, and premiums, supplemental coverage, prescriptions and long-term care can all affect your plan.
There Is No Magic Retirement Number
You’ve probably heard rules such as:
“You need $1 million.”
“You need 10 times your income.”
“Just follow the 4% rule.”
These can be useful starting points, but they aren’t personalized retirement plans.
Your retirement number should reflect your spending, income, investments, taxes, goals and risk tolerance.
Retire With Confidence
Retirement planning isn’t about finding one perfect number.
It’s about understanding how your assets, income, spending, investments, taxes and goals fit together—and whether they can support the retirement you envision.
At CMC Wealth Management, we help individuals and families in Lexington, Chapin, Irmo, Columbia and the surrounding Midlands area answer the questions that matter most:
How much do I need to retire?
How much can I spend?
What should I be planning for?
If you’re approaching retirement and want to know whether you’re on track, a conversation can be a good place to start.
CMC Wealth Management
Personal attention. Transparent advice. Customized planning.