How Much Money Do You Really NEED For Retirement


ways to make more moneyEstimates of the amount of money needed for retirement vary by source but one thing is clear no matter which formula you use – it is a LOT. In fact, it is so much money that many people have absolutely no hope of ever saving and investing enough. That’s right – NO HOPE. But wait! There actually IS hope!

While retirement calculations have a place, they are certainly not the final word. With estimates ranging from “Well, maybe I can save that much…” to “Are you kidding me? I might as well die young!” it can be unnerving to contemplate the future. The reality is that many people will never be able to save what the estimates project is required for retirement. So where is the hope?

The fact is that how much money you actually NEED in retirement depends on just one thing – how much your expenses are. It’s as simple as that…really! If you have few expenses, you won’t need much money. Would it be nice to have extra cash? Of course. But we’re talking about needs here, not wants.

Needs vs. Wants 101

All a person really needs is air, water, food, and maybe shelter, depending on the environment. Everything else is optional. Think about that for just a minute. For personal survival, everything but air, water, food, and maybe shelter, is optional.

Now consider that meeting true needs is relatively cheap or even free. Let’s start with air. Although the quality can vary based on locale, it’s free. What about water? Some places free, some places not – but you can usually get a free drink of water from a fountain or faucet, even if someone else paid to have the water delivered. Again, quality varies by locale. And food and shelter? Well, these are a little more complicated but it needn’t be expensive to provide the basics.

The Key To Having Enough For Retirement

Cutting expenses to a minimum is the key to having enough money during retirement. Remember – if you don’t have expenses, you don’t need money. Shelter, health care and food are the big three when it comes to necessary expenses for retirees. Consider how you can reduce costs in these areas.

Start with shelter, which is usually the biggest day-to-day necessary expense. What can you do now to ensure that your housing is affordable after you retire? Pay off your mortgage? Relocate? Downsize? There is no right answer here and a lot depends on whether you’re close to retirement or just thinking ahead. Keep in mind that your retirement “home” doesn’t have to be a house or apartment – it could be an RV, a single room, or even a yurt. The idea is to start brainstorming how to meet your shelter needs with minimal expense.

Another huge expense for many retirees is health care. Although it’s not included in the necessities listed above, over time, health care may take the largest bite out of your retirement budget. The key to minimizing health care expenses is to stay healthy. And start NOW. Don’t wait until retirement or it may be too late. Think about what you need to do to improve your health. Are you overweight? Lose a few pounds. Do you smoke? Quit. Are you out of shape? Start exercising. Easier said than done, I know, but right now is the time to take action to avoid unnecessary health care expenses in later years.

Food is the necessity that allows you the most control day-to-day over costs. To cut expenses, consider whether you can grow some of our own food or barter with folks who do. Shop the sales and stick to the perimeter of the grocery store to find basic fare such as fresh produce, meat and dairy products. Cook and bake from scratch rather than buying expensive packaged foods. Use leftovers in another meal rather than throwing food away.

Fewer Expenses Equals Freedom

But isn’t the point of retirement to enjoy life? How can you enjoy anything when barely getting by financially? Please be clear – I’m not suggesting that bare subsistence living is desirable – in fact, quite the contrary. The point is that the less money you need to live, the freer you are – free from worry, free to enjoy the life that you create.

The bottom line is that needing less to cover your basic expenses provides a level of security and peace of mind that cannot be bought at any price. In addition, the less money you need to meet those basic expenses, the easier it is for you handle a decrease in income or spending power due to factors outside your control, such as a market downturn or inflation.

So How Much Money Do You Really Need?

As you can now clearly see, the answer to how much money you really NEED for retirement ultimately depends on your expenses. If your monthly expenses exceed your available income, it doesn’t matter how much that income is – you’re in the red. If your income exceeds expenses, however, you have the freedom and luxury of choosing how you maximize your enjoyment of your available time and money.

10 thoughts on “How Much Money Do You Really NEED For Retirement”

  1. Matt @ RamblingFever Money

    A specific amount of money may not be needed at all! If one could create a passive income source that will last all through retirement, a certain savings goal would not be necessary. This is something I’ve known for a long time, but only recently decided to get serious about implementing.

    Very nice insights here. Kind of reminds me of the minimalist way of thinking. Turns out, there is a whole movement of minimalists out there. I’ve heard of, but haven’t visited, their blogs.

    1. You have hit on the bottom line. Retirement shouldn’t be about saving while working and spending those savings later when not working. It should be about cash flow and finding assets that can deliver the amount of cash you need to keep living and paying for your expenses.

    2. Rather than focusing on saving, I’ve focused on developing a few streams of (at least mostly) passive income that are independent of one another so that if one disappears, all is not lost. Keeping expenses low allows me to dabble here and there to see what works.

  2. When determining how much you need for retirement, many think that their expenses will decrease since they aren’t traveling to work everyday. But, your expenses might stay the same or increase. Just because you aren’t driving to work everyday doesn’t mean you aren’t going to drive places during the day. Also, you might take up new hobbies which cost money.

    You are right though, you have to figure out how much you need, not want.

    1. I know that I want to do some travelling so I don’t expect them to go down dramatically. I just hope to be able to spend a little more on myself versus watch all my money go to VISA.

    2. You’re right – some expenses do increase in retirement. We travel more and tend to sightsee rather than marathon drive to our destination, so a more fuel-efficient car was in order. As for hobbies, look for ways to turn them into a money maker. I now create custom memorial quilts, which gives me a creative outlet as well as a small income.


    Ah but needs and wants are the kicker -we are so conditioned to believe in what we should “have” that I think most people don’t even sit down to work out what their “needs” and “wants” are.

    OK – right now I “need” a house that I can raise my kids in – but once they are gone that might not be my choice at all.

    I “need” a car to get them to school – but when they go to High School I don’t need one at all.

    Better that we keep asking and answering these questions than living life on auto-pilot.

    1. You’re right, Elaine – your housing needs will change once the kids are on their own. When our kids grew up, we sold the big family home and paid off our rental property, which consists of five small cottages. We took over one for ourselves and have income from the other four. Free housing AND a little cash each month – it doesn’t get much better than that!

  4. Thanks for bringing up some important aspects of retirement planning. In assessing wants and needs I think it is important to determine why a person considers something a need. For example; beyond necessity, how does a new car, a new coat, or the latest gadget contribute to my overall well being, and peace of mind?

    As a retiree, I find many of the things that seemed necessary years ago, are now just superfluous “stuff” that clutters up my life. Sometimes, indeed, less is more!

  5. Thanks for pointing out some of the important aspects of retirement planning. It seems that flexibility and self-assessment are keys to successful retirement.

    In retirement, the way we have always lived, spent our days, used our time, earned or spent our money, may not suit us anymore. Retirement is a time when we can choose again.

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