How Much Income Do You Need in Retirement?

While a 70% income replacement ratio is the industry standard, it’s important to determine how much of your income you need to save in retirement.

How To Determine Your Income Replacement Ratio

There are two major questions you need to answer.

Curved Arrow

What Costs Will Go Away During Retirement?

Childcare costs. It’s no secret that having children is expensive

Mortgage payment. If your mortgage is fully paid off by the time you retire, your housing costs will drop by the amount of your mortgage.

Saving. Once you retire, you no longer need to save for retirement.

What Costs Will Increase During Retirement?

This is much more difficult to forecast as it depends entirely upon your lifestyle.

How Much You Need To Save To Fund Your Retirement

To determine how much, you need to save each month to fund your retirement you only need to know the following variables.

Curved Arrow

An Example

Scenario 1: No workplace pension or retirement plan.

Scenario 2: No workplace pension but a matching retirement plan

Scenario 3: Defined Benefit (DB) pension plan

The Bottom Line

– Years to retirement.

– How much of your current income do you want to replace in retirement?

– Current retirement savings.

– Whether or not you have a workplace retirement plan and what type of plan it is (matching contributions, or DB pension).