Quad Cities, IL/IA

Working with the community... for a healthier community.

How Much Money Will I Need In Retirement?


By Heidi Huiskamp, Founder and CEO of Huiskamp Collins Investments, LLC


It’s THE big question. You might hate your job and yearn to retire, but feel overwhelmed by all the articles you see that tell you you’ll need $1 million or more to comfortably turn in your company keys. Unfortunately, most pre-retirees in the U.S. haven’t saved anywhere near that. In 2022, Clever Real Estate surveyed a large cross-section of Gen X folks (43 to 58 years old) and discovered that 56 percent had less than $100,000 saved for retirement that would be right around the corner. Even more disturbing, Prudential last year surveyed the same age demographic and found out that 35 percent of Gen X’ers had less than $10,000 saved for retirement. I talk to seniors and pre-retirees every week and there is a huge disconnect between reality and what they are expecting to happen. Many actually think that if they fall short of retirement savings, the government will “rescue” them and prop them up with extra funds so they can make ends meet. When I probe and ask them where this money is going to come from, they wave their hands and just say that the government will be forced to help them. If you’re reading this and only take one thing away, please make it this: the U.S. government does not have the inclination or the means to rescue seniors who didn’t save enough for retirement. You are on your own. According to David McKnight’s book The Power of Zero, you will receive a portion (there will be a haircut) of the social security benefit you counted on, but the rest is up to you. Consumers need to change their behavior and start saving more and retiring at a later age.

How much of your pre-retirement income will you need when you finally pull the trigger and stop working?  It will look different for most retirees based on their savings, age, general health, family circumstances, and preferred lifestyles. There are some general rules of thumb, though. Most experts estimate you’ll need 70–80 percent of your old income level to start your retirement journey. Some expenses will be lower or will go away entirely: you’ll no longer be paying employment taxes or contributing towards retirement plans at work, you’ll spend less on commuting, lunches, and dry-cleaning and probably spend less on clothes. On the other hand, you might spend more money on travel and leisure activities like golf, pickleball, tennis, and the like. To be conservative and play it safe, use the 80 percent rule to start when you’re estimating your first year of spending and then use the numbers you glean from that first year as a template to adjust for future years.

Michael Stein’s 1998 book, The Prosperous Retirement, has a lot of lessons for all of us about the phases of spending in retirement. He holds that there are three distinct spending periods in retirement, that each lasts about 10 years and that total spending will drop about 10 percent when consumers move from one phase to the next. The first period is the “go-go years.” The newly retired are at their youngest and healthiest and spending is highest. They want to travel, spend money on grandkids, eat out, and enjoy life to the fullest. Sometimes, retirees at this stage of the game spend just as much money as they did in their peak earning years or even more. Next up is the “slow-go years.” Retirees are slowing down on their traveling and “doing” outside their homes as they have been on all their “bucket list” trips and health issues are starting to impact how they feel and how much they do. Lastly, the “no-go years” are those years in the mid-80s and beyond in which people are content to stay at home more, partially as they’re just slowing down and partially as health conditions are hindering how much outside activity they can do and want to do. During this phase, many couples lose a spouse, and that in itself can contribute to a 20 percent drop in household expenses. The guideline about expenses decreasing about 10 percent with the reaching of the next phase is not a hard and fast rule, though. Yes, you will almost certainly spend less on travel and leisure activities in your 80s than you did in your 60s, but you will also spend more on healthcare or even long-term care for one or both spouses. According to the 2022 Fidelity Health Care Cost Estimate, the average retired couple at age 65 can expect to spend about $315,000 on healthcare expenses during retirement. Please make sure you keep that in mind when mapping out how much you will need to responsibly quit working.


Would you like to have a complimentary conversation about retirement or financial planning for retirement?  I’d love to get together!  Please call 563-949-4705 or email me at heidi@hhcinvestments.net.


Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisory, Inc. (JWCA). Huiskamp Collins Investments, LLC and JWC/JWCA are non-affiliated entities.