Personal Finance

Here's How Much Boomers Think They'll Need to Retire. Are They Right?

Christy Bieber

Published: December 22, 2024 12:06 pm

Key Points from 24/7 Wall St.:

• Baby Boomers think they will need $600,000 to retire.
• This could be enough money for some, but it won’t be sufficient for everyone.
• It’s important to set individual retirement savings goals based on your needs.
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

While some Baby Boomers have retired already, others are still in the workforce and making plans for the future. For those preparing to quit their jobs for good, it’s important to have a specific savings goal to ensure your retirement plan produces enough income to support you.

So, what is that savings goal? While it will be different for everyone, a recent survey conducted by Transamerica Center for Retirement Research shows how much Boomers are expecting to need. Here’s what the survey shows.

Here’s exactly what the typical boomer believes they need to save

According to the Transamerica Center, Baby Boomers estimate they’re going to need a nest egg worth $600,000 to retire. This is the median estimate and it’s a little higher than the $500,000 overall estimate across all age groups.

Unfortunately, this isn’t a number many people have given a ton of thought to. Almost half of all workers, including 44% of Baby Boomers, simply guessed at the amount they would need for a comfortable retirement, rather than going through the process of doing the math and figuring out the actual amount.

Without an accurate calculation and a clear, concrete goal, Boomers risk finding themselves falling short in retirement — and that could be something they come to regret.

Will Boomers have enough with a $600,000 nest egg?

A $600,000 goal may seem like a good amount of retirement savings to aspire to, but the only way to really know if it would provide enough money is to look at the income it would produce and compare it to your spending needs.

Based on recent recommendations, experts believe it’s safe to withdraw 3.7% of your retirement account balance in your first retirement year, after which you’ll make annual inflation-based adjustments. If you follow this guidance, which is designed to make sure your money lasts at least 30 years, a $600,000 retirement account balance would provide $22,200 in income.

Whether this is enough or not depends on a few key factors including how much you were earning before retiring and how much you get in Social Security. If you were earning $60,000 before retiring and Social Security replaces 40% of that (which it’s designed to do), you’d end up with about $46,000 to live on after combining retirement benefits and money from investments.

Since you’ll usually need to replace about 70% to 80% of pre-retirement funds, you’d be in decent shape. However, if you made $90,000 before leaving work, you’d fall short.

How can you estimate your retirement savings needs?

Ultimately, it doesn’t really matter to each individual Boomer what amount their peers are planning to save.  Setting a personalized retirement goal is the best path forward.

A financial advisor can provide invaluable assistance in deciding how big your nest egg needs to be, as your advisor can take into account specific details like how big your Social Security checks are, what you earned at work, where you plan to live, and how you plan to spend your retirement.

You can also get a rough estimate by using basic rules of thumb like assuming you’ll need 10 times your final salary. This is an inexact measure since you may need less if you plan to be frugal and more if you plan to spend a lot of money seeing the world. Still, it can give you a jumping-off point to setting a goal.

The reality is that retirement is approaching very quickly, so there’s no more time to waste in determining how big your nest egg needs to be and working towards making it happen. Make your plans today and start saving because you’ll be retiring before you know it.