How to Calculate Your Retirement Number

Imagine waking up every day without the pressure of a paycheck, free to travel, pursue hobbies, or simply relax with loved ones. That's the dream of retirement—but turning it into reality starts with knowing your retirement number, the total savings needed to sustain your lifestyle. For Americans, calculating this figure involves factoring in Social Security, 401(k)s, IRAs, and personal expenses, all adjusted for 2026 realities like inflation and rising costs.

In this guide, we'll walk you through a step-by-step process to calculate your retirement number, tailored to U.S. savers. Whether you're 40 and just starting or 60 and fine-tuning, these actionable steps will help you build a secure future.

Why Knowing Your Retirement Number Matters

Your retirement number isn't a one-size-fits-all figure like the old "25 times annual expenses" rule. In 2026, with inflation hovering around 2-3% and healthcare costs climbing, personalization is key. It ensures you don't outlive your savings or retire too soon, balancing income from Social Security, pensions, and investments.[1]

Average Social Security benefits in 2026 are projected at about $1,927 per month for retired workers, but that's just part of the picture. Most Americans need 70-80% of pre-retirement income to maintain their lifestyle, according to financial experts.[2]

Step 1: Estimate Your Annual Retirement Expenses

Start by projecting what you'll spend each year in retirement. Track current expenses using tools like the Bureau of Labor Statistics Consumer Expenditure Survey, then adjust for changes like no commuting costs but higher travel or healthcare.

• Housing: 30-40% of budget—mortgage-free? Factor property taxes and maintenance at $12,000-$18,000 annually.
• Healthcare: Medicare premiums average $185/month in 2026, plus supplements and out-of-pocket costs totaling $315,000 lifetime for a couple.[3]
• Food and Groceries: $7,000-$10,000 per person.
• Travel and Leisure: Add $5,000-$15,000 if you're adventurous.
• Miscellaneous: Inflation buffer—use 2.5% annual rate.

Practical Tip: Create a Retirement Budget

Use free tools like the IRS withholding estimator or AARP's retirement calculator. For a couple aiming for $80,000/year today, inflate to $100,000 in 10 years at 2.3% inflation: multiply by (1.023)^10 ≈ $98,200.[4]

Step 2: Subtract Guaranteed Income Sources

Identify reliable income streams to reduce the savings burden. In the U.S., Social Security is the cornerstone.

• Social Security: Check your statement at ssa.gov/myaccount for personalized estimates. Average 2026 benefit: $23,124/year. Delay to 70 for up to 8% annual boost.[5]
• Pensions: If you have a defined-benefit plan, get a projection from your employer.
• Annuities or Rental Income: Factor in steady streams.

Example: If expenses are $80,000 and Social Security covers $30,000, you need $50,000 from savings annually.

Step 3: Account for Taxes and Inflation

Retirement taxes hit 401(k) and traditional IRA withdrawals at ordinary income rates. Roth accounts are tax-free. Use the 4% safe withdrawal rule as a baseline, but adjust for 2026 realities—aim for 3.5% if markets are volatile.[6]

Inflation erodes purchasing power: A $50,000 need today becomes $67,000 in 15 years at 2.3% (formula: Future Value = Present × (1 + rate)^years).

U.S.-Specific Adjustments for 2026

• Secure 2.0 Act: 401(k) catch-up contributions up to $10,000 for ages 60-63.
• Medicare Part B premium: $185.00/month, income-adjusted.[7]
• Required Minimum Distributions (RMDs) start at 73.

Step 4: Calculate Your Savings Gap

Divide annual need by safe withdrawal rate. Formula: Retirement Number = (Expenses - Guaranteed Income) / 0.04.

Example Calculation:

1. Annual expenses: $80,000
2. Social Security: -$25,000
3. Gap: $55,000
4. Retirement Number: $55,000 / 0.04 = $1,375,000

Inflation-adjust if years away: $1,375,000 × (1.023)^10 ≈ $1,700,000.[8]

Advanced Tools for Precision

Leverage free U.S. calculators:

• SSA Quick Calculator: ssa.gov/OACT/quickcalc/
• Vanguard Retirement Nest Egg Calculator
• Bankrate Retirement Plan Calculator

Step 5: Build and Track Your Plan

Maximize contributions: 2026 401(k) limit $23,500 (+$7,500 catch-up over 50). Open a Roth IRA if eligible ($7,000 limit).[9]

Invest wisely: 60/40 stock/bond mix historically yields 6-7% returns. Rebalance annually.

Actionable Savings Strategies

• Automate transfers to retirement accounts.
• Downsize home equity into investments.
• Work part-time or delay Social Security.
• Review annually—life changes like health or family needs adjust the number.

Common Mistakes to Avoid

Don't underestimate healthcare ($300,000+ for couple) or overestimate returns. Ignore sequence-of-returns risk by keeping 2-3 years' cash. Always stress-test for longevity—50% chance you'll live past 90.[10]

FAQ

What is the average retirement number for Americans in 2026?

Around $1.5 million for comfortable living, but varies by lifestyle—$1M for modest, $2.5M+ for luxury.

Can I retire with $1 million?

Yes, if expenses are $40,000/year post-Social Security, using 4% rule yields $40,000 safely.

How does inflation affect my retirement number?

At 2.3%, it doubles needs every 30 years—always project 20-30 years ahead.

Should I delay Social Security?

Yes, to 70 for max benefits if health allows—boosts 76% over age 62 start.

What if markets crash early in retirement?

Use bucket strategy: Cash for 3 years, bonds next, stocks long-term.

Are Roth conversions worth it in 2026?

Often yes—pay taxes now at lower rates to avoid RMDs later.

Next Steps to Secure Your Retirement

Grab your latest statements, plug numbers into a calculator today, and consult a fee-only fiduciary advisor via NAPFA.org. Start small—boost savings by 1% monthly—and watch compound interest work magic. Your future self will thank you. Track progress yearly and adjust as needed for a worry-free retirement.

Sources & References

1. Social Security Trustees Report Summary — ssa.gov
2. BLS Consumer Expenditure Survey — bls.gov
3. Fidelity Retirement Healthcare Costs — fidelity.com
4. BLS Inflation Calculator — bls.gov
5. SSA COLA Information — ssa.gov
6. IRS IRA Contribution Limits — irs.gov
7. CMS Medicare Rates — cms.gov
8. NerdWallet Retirement Calculator — nerdwallet.com
9. IRS 401(k) Limits 2025/2026 — irs.gov
10. AARP Longevity Calculator — aarp.org
11. Transamerica Retirement Survey — transamerica.com
12. SSA Claiming Strategies — ssa.gov