How Much Do You Need to Comfortably Retire in 2026? A Simple Guide

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If you’re planning on retiring in 2026, you’ve probably asked yourself this question.

“How much do I need to comfortably retire?”

If you ask 100 people this question, you’ll get 100 different answers. That’s because so much of retirement planning is based on circumstances unique to each person. Some people will say $1 million, some will say $5 million. The truth is that there is no one right number that fits everyone, but there is a framework that I’ll share with you today on how to determine the answer to this question.

We specialize in helping retirees navigate the financial challenges of retirement so we get this question a lot. Usually it’s phrased as “am I able to retire?” The real question being asked is “do I have enough?”. Having enough in retirement is defined by not only your assets, but your income.

The three questions I think about when answering this question is:

1. How much do you need? In other words, what are your expenses? How much of your expenses are essential for home, health, and food vs. discretionary. Are there any one-off expenses that you anticipate coming up early in retirement, such as a home renovation, dream vacation, or tuition expenses for grandkids?

2. Where will your income come from? How much income can your portfolio generate? Will you be receiving a pension or Social Security benefits?

3. Is there a projected shortfall between your expenses and income?

Two people can have the same amount of assets, but very different expenses and income. That significantly changes the answer to the question of whether you can comfortably retire. One household may need $6,000 per month and another may need $12,000 per month. It paints a very different picture.

Expenses

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The first step is figuring out what retirement is going to cost. I ask this question to people who haven’t retired yet and the common answer is “Travis, I have no idea." A good rule of thumb is to start with what you’re spending currently. Between housing, utilities, food, travel, insurance, medical costs, and entertainment, you’ll get a pretty good idea of how much you’re spending.

Next, think about how that will change in retirement.

Some expenses will go down. If you’re no longer commuting to work, that could lower your car gas bill. Maybe the Macy’s bill goes down from not buying new clothes for work.

But other expenses could go up. For a lot of retirees, they’ll be traveling more. I’ve been told that it feels like summer vacation in that first year of retirement where you get to do all the things you didn’t have time for when you were working. Your new hobbies might cost more than you expected. You’ll have more time to look around your house and notice what needs repair or an upgrade. Of course, paying for healthcare becomes more of a factor in retirement.

The first step in creating your retirement plan is reaching a realistic estimate of what your expenses will be in retirement.

Income

The second step is determining how much income you’ll be able to generate. This is where most people get fixated on figuring out how much they need in their retirement account. They might hear a number like $1 million and believe they need to hit that balance in their 401k before they can retire, but the true number could be very different.

I think people make this step harder than it has to be. In most cases, the portfolio doesn’t need to cover your entire retirement lifestyle. This is a good time to take inventory of all your income sources in retirement. Things like Social Security benefits, having a pension, rental income, or even part-time work and consulting income can have a great impact.

For example, let’s say you want to have $10,000 per month in income.

Before we rush into calculating how much you need in your retirement account to retire, let’s look at income sources.

Let’s say you and your spouse will bring in $4,000 per month combined from Social Security benefits.

You have a pension that generates an additional $2,000 per month. Now your total fixed income is $6,000. That means your portfolio doesn’t need to generate the full $10,000 of income each month. It only needs to cover the gap in income, which is a big difference. That’s the number that really matters when deciding whether you can comfortably retire this year.

Portfolio Withdrawals to Cover the Gap

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That brings us to the third point in determining whether you can retire.

After doing the exercise of figuring out how much you need to budget for expenses and comparing it with your fixed income sources in retirement, you can determine how much in portfolio withdrawals you need to cover the gap in income.

If you’ve followed along with the steps above and have a surplus, you have some serious reflecting to do. It may not be necessary to be working at all for financial reasons. It’s one thing to truly enjoy your work and want to continue or enjoy the social aspect of your job. But if you’re looking forward to retirement and have other areas of life that you’d like to focus on, having a surplus of income vs. expected expenses may be a signal that it’s time to evaluate whether you can retire sooner than you thought.

On the other hand, if you’re like many people and find that you have an income shortfall after subtracting expenses from your guaranteed income, you’ll want to determine how much you need in your nest egg. One planning shortcut is to apply a safe withdrawal rate to your portfolio to find out how much you could be withdrawing in retirement every year and keep the portfolio sustainable. The common rule of thumb is the 4% rule, which is the study by Bill Bengen that suggests that a retiree could withdraw 4% of their portfolio in their first year of retirement and adjust it annually for inflation and have a high probability of not outliving their funds over a 30-year period.

That’s just one of the ways that retirees can think about a safe withdrawal rate. There are many different approaches to this - the best strategy is to line up your withdrawal rate with your financial goals. If you want to leave a legacy and inheritance for your heirs, you might start with a lower withdrawal rate. If you plan on spending most of your assets or have a shorter timeline, you might withdraw more of your nest egg each year.

Going back to our earlier example of your income need being $10,000 per month in retirement: If you and your spouse are able to bring in $6,000 each month from Social Security and your pension, there is a monthly shortfall of $4,000. For the year, that’s $48,000.

Let’s say you want to spend down your savings and don’t have plans to leave a large legacy, so you decide on a 5% withdrawal rate. By dividing the annual shortfall of $48,000 by 5%, you reach your rough target. This is the number that you were looking for initially, but now we understand the details behind how we came up with this number. It’s not simply a one-size fits all answer for everyone. It requires a closer look at all your income sources and expenses and how much flexibility you have in your spending. In this example, the rough target retirement savings is $960,000.

Additional Planning Considerations

Now even though you’ve calculated your number, your plan is not quite done. There are additional variables that can affect how much you need to retire comfortably.

Two of the biggest adjustments are for large upcoming expenses and taxes. It’s one thing to know you’ll need the same amount of money every month, but real life is unpredictable. You might need to take out more money to pay for a home renovation or a new car. You might have been looking forward to a vacation once you retired and it’s a bucket-list destination for you. These expenses should be accounted for and added into what you need to have in savings unless they’re being paid for in other ways.

Healthcare expenses are another unknown. Medicare may not cover everything you need and it doesn’t cover custodial Long Term Care. If you don’t have Long Term Care insurance, accounting for those expenses in some way needs to be a part of your retirement plan.

Taxes also get overlooked by retirees. Most people think in terms of gross income, but if you’re withdrawing that income from a pre-tax retirement account, taxes need to be planned for. How much are you really able to spend after taxes are taken out? If most of your retirement savings are in pre-tax accounts, you may be surprised to find that what’s left after taxes is lower than you expected. The type of account you withdraw from can impact your tax situation significantly each year and should be coordinated carefully.

In Summary

If you’re trying to plan your retirement in 2026, consider first how much you’re planning to spend each month, what income sources are available to you, and finally how much of the gap needs to come from your portfolio. Following this framework will get you closer to your actual retirement number than a basic one-size-fits-all estimate.

For most people, the real goal isn’t just to retire, but to retire with confidence in your plan.

Let us know how we can help. 

Travis

Investment advisory services offered through Andrews Advisory Associates LLC, a registered investment advisor.  This blog is not meant to give investment advice. Before investing in any advisory product please carefully read any disclosure documents, including without limitation, the firm’s Form ADVs. The information herein is provided for informational purposes only, and does not constitute an offer, solicitation or recommendation to sell or an offer to buy securities, investment products or investment advisory services. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit your financial status, risk and return profile or preferences. Investment recommendations may change, and readers are urged to check with their investment adviser before making any investment decisions.