What’s a Reasonable Goal for an Average Retirement?

Many of us wonder how we are doing when it comes to retirement savings. It can make us money hungry, not because we are greedy but because we just want a comfortable, average retirement.

Well, is an average retirement possible for the average person?

We need to understand that this is a numbers problem, and so we need to answer it with numbers.

average retirement

Money can be a cruel mistress in the sense that it’s very definite, you either have enough or you don’t. But, money can grow in fantastic ways through investing and compound interest– and the amount you need to save and invest to enjoy an average retirement might be much less than you think.

With so much worry around saving enough for retirement, there isn’t much discussion on how much an average person actually needs for retirement.

Let’s run some numbers and try to figure out the average retirement. I’m going to use numbers like average income, average mortgage, etc.

According to the 2017 Retirement Confidence Survey, only 41% of people have calculated how much they’d need for retirement. After this blog post, you’ll be on the other side of that statistic– and have a much better idea on what to do next.

A Basic Average Retirement Calculation

Take the median income in U.S. right now: $64k (take home pay of $52,344). If we can live off that kind of income now, we should be able to live off that much in retirement.

Now, hopefully by the time you retire you’ve paid off your mortgage. So if we take off the mortgage payment (which is now around $1,030 per month), then our “income for average retirement” would be $52,344 – (12 x 1,030) = $39,984.

You also should get social security, which would drop how much you need to save for a comfortable retirement. In June 2018, the average social security benefit was $1,413 per month, dropping our required income for average retirement to $39,984 – (12 x 1,413) = $23,028. Let’s call it $23k per year.

The most ideal retirement situation would be one that could continue indefinitely. It’d be like receiving golden eggs without killing the goose– one where you make withdrawals from your nest egg while it maintains an adequate size over time.

To do this, you need to keep some money invested so that it can grow while you take out some money to spend.

The standard safe withdrawal rate is 4% (known as the 4% rule). That means that by taking 4% of your retirement savings out each year, you should make enough from the 96% of your untouched savings in stocks and bonds investments to keep your nest egg alive throughout your retirement.

The next calculation tells us how to reach that specific amount. At a 4% withdrawal rate, you need to multiply the “average retirement income” by 25. When we do that, we get $23,000 x 25 = $575,000.

Alright, to summarize…

Our goal for retirement is $575,000– to live at a median income level and maintain that indefinitely.

It sounds like a lot, but let me show you how possible it is and how little needs to be invested for this to happen. Dare me to prove it to you. The next part will require quite a bit more calculations and numbers, but paints a very rosy picture.

How to Invest for an Average Retirement

We need to consider inflation. A dollar today probably won’t buy you as much as a dollar in 20 years, if inflation continues like it has for over 100 years.

Let’s consider 3 hypothetical situations.

  • 45 year old at median income: 20 years to retirement
  • 35 year old at median income: 30 years to retirement
  • 25 year old at median income: 40 years to retirement

Remember each person needs $575,000 for the ideal, average retirement. Taking inflation into account, each person will actually need (using this inflation calculator):

  • 45 year old: $892,000
  • 35 year old: $1.229 million
  • 25 year old: $2.230 million

Again those numbers look intimidating, but we have a huge asset on our side: the stock market and its ability to compound capital into extraordinary amounts of wealth.

To figure out how much we need to invest in order to attain these dollar goals, we can use a compound interest calculator to project returns out into the future.

Historically, the stock market has returned about 10% a year for many decades. So in the calculator we want to input a hypothetical 10% return, and input monthly dollar deposits and calculate some final results. I played with some numbers already, and got close to the minimum required for each dollar value. Here’s what I found:

  • 45 year old: $1300/ mo for 20 years –> $893,489.99
  • 35 year old: $650/ mo for 30 years –> $1,283,053.38
  • 25 year old: $425/ mo for 40 years –> $2,257,222.03

Again, some of those seem high especially for the 45 year old. But it’s actually not that bad and very attainable because…

…we can also take a 401k match into consideration. The median 401k match was recently reported as 3%. For the person with the average take-home pay, that amounts to $1,570 a year– or $130 a month, lowering monthly requirements to:

  • 45 year old: $1,170/ mo [27% of take home pay]
  • 35 year old: $520/ mo [12% of take home pay]
  • 25 year old: $295/ mo [6.7% of take home pay]

You can see– the earlier you start the easier it is to attain the ideal average retirement.

One last consideration can perhaps be the biggest one. Say we have a comfortable lifestyle now with the median take-home pay in the US, and would be willing to take a hair cut of 10%.

cutting expenses for retirement

Meaning… can we slash expenses by 10% and still enjoy a great lifestyle? Turns out, being able to do that turns all of these equations upside down, making the whole thing even easier.

So say that instead needing $52k in retirement, we can comfortably live on $47,109 (10% less).

Using the same calculations as above, that means needing only $444k instead of $575k. For someone in the worst case scenario of the 3, they would only need $1025/ mo earning 10% for 20 years to reach that $444k goal adjusted for inflation.

Taking out the average 401k match again, the investing requirements drop to:

  • 45 year old: $895/ mo [21% of take home pay]
  • 35 year old: $370/ mo [8.4% of take home pay]
  • 25 year old: $195/ mo [4.4% of take home pay]

Again it’s kind of high for the 45 year old but very attainable for the 25-35 year old. If we take the “haircut” down to a 15% decrease in lifestyle for the 45 year old, the minimum requirement drops to 745/ mo or $17% of take home pay.

While perhaps disappointing for the person starting from scratch with a late start into the investing and retirement world, these examples are a conservative estimate of the most ideal average retirement.

A person with a late start can very well save close to that amount and have the nest egg last comfortably for 20-30 years instead of indefinitely.

A person with a late start could also do other things to reach the goal, such as the investor archetypes I wrote about who can aggressively slash expenses [Archetype C] or work harder than the average person for extra income [Archetype B].

For the investors on the other side of these calculations, the opportunities can feel extremely liberating.

As you can see, it doesn’t take all that much to really accumulate a nice sum for retirement and enjoy all of the benefits that it brings. It takes learning about basic investing principles such as diversification and buy and hold, but the average investor can make this all happen through simple stock market investing.

That’s everything that this site is about. I try to teach these principles in a very simple and easy to understand way, because the possibilities are endless for many of us.

While the concepts may be tough to grasp at first, the results can be rewarding for the rest of your life. So take the time and invest in your education, then invest your money, and watch the ideal retirement be something you enjoy rather than envy.

“I Have No Money. How Can I Make Money FAST?”

Along with planning for this kind of stuff comes the temptation to “catch up” by taking shortcuts or making money fast and easily. Unfortunately there can be a lot of problems with this that hinder the growth of your capital.

Let me showcase a couple emails I got regarding this, and give you specific strategies to counter those temptations:

“Andrew, my biggest frustration is I want to get into day trading do get me out of factories along with long term investing so I can quit being two paychecks away from homeless.”

“The frustration is that i dont have 25000 to start and im not getting any younger.”

Have you ever heard the adage “it takes money to make money”? Unfortunately, this rings true in the stock market.

You see… the stock market isn’t a place you go if you can’t afford to save more than $0. In that case, I’d say go improve your career through skills, education, or a job change. Or if you’re making a lot of money but can’t save it, go over and listen to Dave Ramsey’s podcast and learn how to create and stick to a budget.

I’m not into day trading. I’m not into turning investing into a full time job.

Frankly, I think day trading consists of a whole lot of work and only works in certain markets. Historically it hasn’t been reliable.


Because it’s bypassing the whole foundation of the stock market. That the market is a place for the common people to become partial owners of these businesses, and for their wealth to grow with the business over time.

Look around. It takes a long time for even the most successful businesses to grow and expand, open stores, product lines…

So we must approach things as an owner if we want to succeed. That means investing for the long term, diversifying, and adding to our capital over time.This is the cold, hard truth. Unfortunately there’s no magical secret that I hold the key to.

But what I do recommend is this.

–Start small: Utilize a 401k match and Roth IRAs
–Stay consistent: Dollar cost average into new stocks
–Hold long term: Have specific rules on when to sell
–Be patient: Track performance with reasonable expectations

Start small. Find room in your budget and invest a set amount. But STAY CONSISTENT. Learn about WHY you need to hold long term, and do it. Pick stocks that are reasonably priced and are strong financially. Be PATIENT.

You can do it. More money for your future is in reach. Take these calculations, set reasonable goals for yourself, and learn as much as you can along the way.

You may just find that the journey along the way is as enjoyable as the coveted destination.

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