According to a 2020 survey by FinanceBuzz, one in three Americans say they haven’t saved anything for retirement. In addition, the National Retirement Risk Index reveals that 50% of households might not be able to maintain their current living standards when they retire. That’s why it’s so important to understand your retirement spending needs as early as possible.

How much you need to save will depend on your individual circumstances. And there are many ways to calculate what you’ll need. While this is by no means comprehensive, here is a good place to start.

Determine Your Monthly Expenses

You won’t know how much you’ll be spending in retirement if you don’t know how much you’re spending now and what you’re spending on. Take the time to figure that out with a deep dive into your expenses rather than a cursory glance.

“It’s easy to overlook some bills, whether they’re recurring costs like real estate taxes and insurance premiums; medical costs like dentistry, eye care, and hearing aids; or one-time costs like house maintenance and auto repairs,” says Imani Francies, a personal finance expert with

Technology can help with this.

“My advice is always to use a budget tracker like Mint for three months, then go in and manually adjust each of their budget categories for life and lifestyle changes they expect in retirement,” says retirement coach Jeri Karges.

For example, you might pay off your mortgage between now and then or spend less on clothing and transportation costs when you stop going to a workplace.

When you’re confident you have an accurate monthly expense estimate, multiply that by 12 for your annual expense total. Then multiply that by the number of years you expect to live post-retirement. (According to the Centers for Disease Control, at age 65, you can expect to live another 19.6 years on average.) That calculation yields your retirement spending amount before taxes and inflation.

Factor in Taxes and Inflation  

You will almost certainly have to pay taxes in retirement unless Social Security is your sole source of income, says Francies. She recommends calculating based on a 25% tax rate.

“Tax projection is crucial if you have mortgage interest, rental properties, or if the bulk of your retirement income will come from investments outside of a retirement plan,” she says. Add that calculation to your spending amount.

In addition, “Don’t assume your money will be worth the same and get you the same amount as it does now to the end of your retirement,” adds financial blogger Stacy Caprio.

Caprio recommends using an online inflation calculator. This will tell you how much you need to save to support your desired lifestyle.

Tally Income Sources

After you know how much you expect to spend, calculate your income from Social Security, pensions, part-time employment, and retirement account distributions.

Regarding the latter, TD America reports that one in five people in their seventies has less than $50,000 saved while roughly one-third of those ages 50 to 79 have $100,000 to $500,000 in retirement savings.

“Trying to nail a specific number to save for retirement is a tricky endeavor primarily because nobody knows how long they will live and we can’t predict what the markets will do,” says investment advisor Cornelius Davis Jr. He recommends using an online retirement calculator to determine what your retirement savings will look like by the time you retire or how long that money will last.

Calculator options include:

  • Vanguard: Takes into account how your money is invested.
  • US News & World Report: Unlike Vanguard’s, it factors in income sources.
  • Bankrate: Predicts how much money you’ll have left at the end of retirement.
  • NerdWallet: Determines how much you’ll need to have saved to retire at age 67.

Compare Expenses with Income

Compare your total expenses with your total income from all sources. If the numbers show a deficit because you expect to spend more than you’ll have, consider changes that include:

It’s never too soon to calculate retirement spending so you know how much to save and how long you’ll need to keep working. A little planning now can prevent big surprises later.

This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.