The Short Answer
I hate to sound like every other financial advisor, but... it depends.
You'll find plenty of rules of thumb that tell you how much you should have saved at different ages, or how many times your annual income you should have invested by the time you retire. Those can be useful starting points, but they're just that... starting points.
Retirement is never going to go exactly according to plan. Life is going to happen, markets are going to move, priorities are going to change, and the things you want to do in retirement may look very different 20 or 30 years from now than they do today.
That's why I think about financial planning a little more like coaching.
A good coach isn't trying to predict exactly how every game will play out. Sure, they might script the opening drive or have a handful of trick plays in their back pocket… But at the end of the day, they're looking at the team in front of them, understanding its strengths and limitations, considering the opponent, and figuring out how to put that team in the best possible position to succeed.
Financial planning works much the same way. Our job isn't to tell you exactly what your retirement will look like decades from now. It's to understand what you're trying to accomplish, identify the constraints you're working with, and build a plan that gives you the best shot of getting there.
And if the numbers tell us you're not quite on track? That's okay. There are usually several levers we can pull. You might save more today, work a little longer, spend a little less in retirement, adjust your investment strategy, or some combination of those things.
It's rarely an all-or-nothing decision.
Therefore, the real question isn't simply, “How much money do I need to retire?” it’s “what do I want my retirement to look like, and are the resources I have today putting me in a position to make that happen?”
Start With the Life You Want to Live
When we begin working with someone on their retirement plan, one of the first questions we ask is simple:
“Paint me a picture of what your dream retirement looks like.”
Then we shut up and let them talk.
Most people start with the obvious things. Maybe they want to travel more, spend time with their grandkids, move somewhere cooler (we all know Texas is hot enough), or simply stop working and enjoy a little more freedom. But if you give someone enough time to think, the conversation often goes much deeper.
You might discover that charitable giving is important to them, that they're concerned about maintaining their health as they age, or that they want to pass certain values along to their children... especially when it comes to money.
Those details matter. Retirement isn't just about having enough money to stop working. It's about having the resources to support the life you want to live and the things that matter most to you.
Of course, knowing what you want and knowing what it will cost are two different things. You probably have no idea what a trip across the country will cost 25 years from now, and that's okay. If you tell us you'd like to take two or three domestic trips each year while you're physically able, we can start with what those trips might cost today, make reasonable assumptions about inflation, and build that goal into your plan.
The same approach applies to just about anything else you want to accomplish. The more clearly we understand what's important to you, and why, the better we can estimate what it will take to get there.
From there, the numbers help guide the conversation in both directions.
Some people have spent decades saving for retirement and then have a hard time giving themselves permission to spend what they've accumulated. In those cases, a financial plan can help demonstrate that they may be able to spend more each year while still maintaining a reasonable margin of safety.
Others have big dreams that their current resources may not realistically support without some significant changes. That doesn't automatically mean those dreams are off the table, but it may mean adjusting the timeline, saving more, or deciding which goals matter most.
That's the point of building a retirement plan: connecting the life you want with the financial reality of getting there. Sometimes the numbers help you see what you can do more confidently. Other times, they help you understand what needs to change. More often than not, it's a little bit of both.
Your Retirement Number is Not Just an Account Balance
Once you have a clearer picture of what you want retirement to look like, the next step is figuring out what it will cost. You've probably heard that you'll need somewhere around 70–80% of your pre-retirement income to maintain your lifestyle. It's a useful starting point, and in our planning, we often use a more conservative estimate of around 85%.
That said, that percentage is a yardstick… not a rule.
For some people, replacing 70–80% of their income may be more than enough. For others, it may fall well short. If we work through someone's goals and expected living expenses and find that their retirement income is nowhere near that range, we need to understand why. Maybe we've missed an important expense or goal. Maybe their current income doesn't accurately reflect the lifestyle they're trying to maintain. Or maybe we simply need to revisit some of our assumptions.
Current income alone doesn't tell the whole story, either. Consider someone earning $300,000 a year who saves half of it. They're living on roughly $150,000 today, not $300,000. Looking at a retirement target based on their full salary could give us a misleading picture of what they actually need. On the other hand, that same person might be saving aggressively because they want to travel extensively, leave money for their children, or support causes they care about after they pass. They may be willing to make sacrifices today to afford a much different lifestyle later.
That's why we need to look at the bigger picture, including the expenses that may change once someone retires.
The mortgage might finally be paid off. Children may no longer depend on their parents financially. Someone might relocate to another state, changing their cost of living and potentially their taxes. Meanwhile, healthcare costs, travel, hobbies, and long-term care can become increasingly important. These details can make a meaningful difference in how much income you'll need, which is why we account for them when building a financial plan.
Don’t Overlook Your Income
Here's another common mistake: focusing too much on the amount in your investment accounts and not enough on the income those assets need to cover.
Imagine two retirees who each have $1 million invested. One also receives a substantial pension, while the other relies almost entirely on their investment portfolio. Despite having the same account balance, they're in very different financial positions. The pension provides income that the first retiree doesn't have to generate by selling investments or withdrawing from savings. That means their portfolio may not need to work nearly as hard to support their lifestyle.
Social Security plays a role here, too. We generally account for expected Social Security benefits when building a retirement plan, with the assumptions adjusted to reflect how close someone is to claiming benefits and how much uncertainty remains. For someone decades away from retirement, it can be prudent to consider the possibility of changes to future benefits rather than simply assuming today's projections will hold.
We also consider other sources of retirement income when appropriate, although we're careful about relying too heavily on things like future rental income or part-time work that may not materialize as expected.
The goal is to understand how much of your retirement spending will be covered by reliable income sources and how much will need to come from your investments.
So, How Much Does Your Portfolio Need to Provide?
Let's say you expect to spend $120,000 a year in retirement and anticipate receiving $40,000 from Social Security and a pension combined. That leaves $80,000 a year that needs to come from your investments or other resources.
A common starting point is the 4% rule, which suggests withdrawing roughly 4% of your retirement portfolio in the first year of retirement, then adjusting that dollar amount for inflation in subsequent years. Using that rule of thumb, an $80,000 annual withdrawal would imply a portfolio of approximately $2 million. It’s a useful benchmark, but it isn't guaranteed that your money will last forever. The amount you can reasonably withdraw depends on factors such as your retirement timeline, investment performance, inflation, taxes, and life expectancy.
And the longer your retirement could last, the more careful you need to be about those assumptions.
Someone retiring at 55 may need their portfolio to support them for several decades. Someone who continues working into their 80s may have a much shorter period to fund from their investments, although other risks still need to be considered.
The same principle applies to pensions. If a retirement system or insurance company provides $100,000 a year in lifetime income, that can represent a substantial financial resource beyond the balance of someone's investment accounts. At a hypothetical 4% withdrawal rate, generating $100,000 annually from a portfolio would require about $2.5 million in assets. A pension can provide that income without necessarily requiring the retiree to accumulate that same amount in an investment account.
Of course, the details matter. Pension benefits, annuities, and investment portfolios have different risks, guarantees, tax treatment, and flexibility. They aren't interchangeable in every respect. But the comparison illustrates why looking at an account balance alone can be misleading.
Remember that question we started with? “Paint me a picture of your dream retirement.”
Your answer to that question is the picture. Your savings, pensions/annuities, Social Security and other financial resources are the frame that hold it together.
One Foot in Front of the Other: Keep Moving Forward
One of the biggest mistakes I see people make is assuming they've already missed their opportunity to retire comfortably.
Maybe they didn't start saving early enough. Maybe life got in the way. Maybe they spent years focused on raising a family, paying off debt, or simply making ends meet. Whatever the reason, it's easy to look at where you are today, compare yourself to where you think you should be (or where social media says you should be), and feel like you've fallen too far behind.
But feeling behind and being beyond help are two very different things.
Let's go back to another rule of thumb. A common starting point is to save around 15% of your income toward retirement and other financial goals. Of course, that's not a magic number, and what's realistic for you will depend on your income, expenses, and other priorities. But it can be a useful benchmark. Consider someone earning $150,000 a year who saves 15% of their income, or $22,500 annually, for 10 years. Assuming a hypothetical 7% annual return, if that person started saving at age 40, stopped making contributions after 10 years, and left the money invested until retirement age (let’s use 67 in this example), that balance would grow to right around $1 million.
Is that enough to retire? Who knows. It depends on the person's goals, expenses, other income sources, and the rest of their financial picture. But getting to a million dollars is a meaningful milestone for a lot of people. And the point isn't that everyone can follow this exact path and end up with the same result. It's that consistent saving, combined with time and investment growth, can make a substantial difference.
Small Steps Can Add Up
You don't have to take my word for it. Consider what happens when you invest $100 and let it grow.
The longer your money can grow, the more time compounding has to work in your favor. And regular contributions can make an even bigger difference because you're not relying on your original investment alone. Of course, saving $100 a year isn't going to fund most people's retirement. The point is to illustrate how time and consistency can work together.
What If You Are Starting Later?
If you're in your 40s, 50s, or beyond and haven't saved as much as you'd hoped, you may need to make some trade-offs. That doesn't mean giving up. It means figuring out what changes would put you in a better position.
Maybe you increase your savings rate. Maybe you work a few years longer. Or maybe you adjust your retirement goals or find ways to reduce expenses. The right answer depends on what matters most to you.
For example, if you enjoy your job and don't mind working another five years, delaying retirement might be a relatively easy decision. But if you're staying in a job you can't stand simply because it pays well, the conversation gets more complicated. You might need to increase your savings to give yourself more flexibility, reconsider your career, or find a balance between the income you need and the life you want to live today.
There isn't one answer that works for everyone. That's exactly why a plan matters.
The first step is understanding where you stand today, what you're saving, and what those resources could reasonably grow to over time. From there, we can compare that picture with the retirement you want and start identifying your options.
Maybe you're closer than you think. Maybe reaching your goals will require some adjustments to your savings, timeline, or expectations. Either way, you don't have to figure that out on your own, and you certainly don't need to have all the answers before asking for help.
Build a plan. Build a plan. Build a plan.
My team and I would love the opportunity to help you build that plan, but at the end of the day, what matters most is that you're working with someone who can help you understand where you stand and what options you have. Whether that's with us at Himelick Financial Group or another financial professional you trust, I'd much rather see you take that step than put it off because you feel like you're too far behind.
You can't change when you started saving. But you can make decisions today that can improve your tomorrow.
Your Financial Plan Should Evolve with You
A financial plan shouldn't be a one-and-done exercise. Life changes, priorities shift, and sometimes the retirement you originally envisioned starts looking a little different. Your plan needs to keep up.
As a general rule of thumb, we try to update our clients' financial plans every two to three years. That's usually enough time for circumstances and assumptions to change, without waiting so long that we're essentially starting from scratch.
Of course, some things can't wait for a regularly scheduled update. Getting married or divorced, moving to another state, receiving an inheritance, experiencing a significant health change, or approaching retirement in the next six to twelve months are all good reasons to revisit the plan sooner.
Think of your financial plan like a GPS. It helps map the route from where you are today to where you want to be. But anyone who's driven around Texas knows that even the best route can change. Maybe there's an accident on I-35, your car breaks down, or you discover that your destination has changed altogether. You don't throw away the GPS. You adjust the route and keep moving. Retirement planning works the same way.
We've had clients who could comfortably retire for years but chose to keep working because they genuinely enjoy what they do. We've also worked with clients who expected to work much longer but decided to retire earlier when circumstances changed. Neither decision is right or wrong. What matters is understanding how those decisions affect the rest of the plan.
That's also why we build in reasonable assumptions and test plans against a wide range of possible outcomes. For example, we generally use a relatively conservative assumption of 5%-6% average annual investment returns in our planning. We also test how plans might hold up across literally thousands of different market scenarios, including historical periods like the 2008 financial crisis.
None of that can tell us exactly what the future holds. But it can help us understand where a plan might be vulnerable and adjust before a potential problem becomes an immediate concern.
Ultimately, the goal isn't to create a plan today and hope everything goes according to schedule. It's to have a framework you can return to as life unfolds, helping you make informed decisions along the way.
Your financial plan should be a living document, not something that ends up in the proverbial junk drawer or filing cabinet. Keep it front and center, revisit it regularly, and make sure it continues to reflect the life you're actually trying to live.
Putting Your Plan into Action
There's no magic number that guarantees a comfortable retirement. But there are a few things worth keeping in mind:
- Start with your goals. The retirement you want to live should help determine how much you'll need to save.
- Look beyond your account balance. Your expected expenses, Social Security, pension benefits, and other income sources all factor into the equation.
- Don't underestimate the value of time and consistency. Consistent saving and compounding can make a meaningful difference, even if you're getting a later start than you'd hoped.
- Keep your plan current. Your circumstances and priorities will change, and your financial plan should change with them.
Most importantly, don't assume you're on track or off track based on a rule of thumb or a number you saw online. Take the time to understand your own situation and what it means for your future.
If you'd like help figuring out where you stand and what your next steps might look like, we'd be happy to talk. At Himelick Financial Group, we work with people to understand their goals, evaluate their options, and build a plan for the retirement they're working toward.
Use the calendar below to schedule a complimentary, no-obligation conversation with our team. We'll talk through your situation, answer your questions, and help you get a better sense of where you stand and what steps you might consider taking next.
These examples are hypothetical only, and do not represent the actual performance of any particular investments. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested. Guarantees are based on the claims paying ability of the issuer. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Because dollar cost averaging involves continuous investment in securities regardless of fluctuating prices, the investor should consider his or her financial ability to continue purchases through periods of falling prices, when the value of their investments may be declining. Dollar cost averaging does not ensure a profit or protect against loss. Cetera Wealth Services, LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.