How Much Does the Average American Need for Retirement?

To maintain a comfortable retirement, save as much as you can now.
To maintain a comfortable retirement, save as much as you can now. (Image: Jupiterimages/Comstock/Getty Images)

The typical American spends 20 years in retirement, according to the Labor Department. Therefore, many people may find that the total amount of money they need to save for their retirement years is much higher than they anticipated, especially if they're mostly relying on Social Security benefits to supplement their retirement income.

Pre-Retirement Income

Americans will likely need at least 70 percent of the annual income they earned before retirement to maintain the same standard of living during retirement, according to the Labor Department. Therefore, people who make $50,000 per year may need to get at least $35,000 annually from investments, savings and retirement benefits during their retirement years. But people who earn low wages could need 90 percent of their pre-retirement income during retirement, the Labor Department notes. Americans generally receive about 40 percent of their pre-retirement earnings from Social Security benefits.


Financial planners generally recommend people ensure that the total of their retirement savings, pension or other benefits is large enough to cover 80 percent of their pre-retirement income, according to CNN Money reporter Chavon Sutton. Sutton reported that a Fidelity Investments vice president indicated that reaching the appropriate savings target means that most Americans need to save 6 to 10 percent of their salary during their working years.

Disposable Income

“Wall Street Journal” writer Brent Arends asserts that your current disposable income is your best estimate of how much you will need to maintain the same living standards in retirement. Your disposable income is the pay you receive after tax deductions. People usually have fewer expenses in retirement, but you may need the same amount of disposable income because other expenses rise. For example, many people typically have more medical costs as they age.

Estimating Savings

Several financial websites provide calculators that help users generate an estimate of how much they need in retirement savings. For example, the Kiplinger website allows users to insert the number of years they have before they plan to retire, and they can enter the amount they already have in retirement accounts. Using this type of calculator can be sobering, because it may reveal that you have to save much more, or work longer, to reach your retirement savings goal. The Employee Benefit Research Institute's 2011 Retirement Confidence Survey showed that 56 percent of about 1,300 survey respondents had less than $25,000 in savings and investments. That amount excluded the value of the respondents’ homes or pension plans.

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