Although $1 million is the oft-cited amount needed to retire comfortably, data shows it might not be enough. According to a new report from personal finance site GOBankingRates, depending on where you live, retirees could blow through $1 million in as little as 12 years.
And GBR notes that since the average person retires at age 63 and has a life expectancy of about 85, "Americans should plan to spend 22 years in retirement."
How do you know how much money is enough to last through your golden years? The answer is highly personal and depends on your lifestyle and spending habits, but there are a few basic guidelines to follow if you want to retire comfortably.
For starters, many experts recommend setting aside at least 10 percent of your income as soon as possible. A 2017 report from the International Longevity Centre — UK (ILC-UK) finds that people should be saving at least 11 percent, and ideally more like 20 percent, of your income if you want "to achieve an adequate retirement income," which it defines as 70 percent of your earnings throughout your working life.
There are a few more strategies that will help you assess your own retirement strategy.
According to retirement-plan provider Fidelity Investments, a good rule of thumb is to have 10 times your final salary in savings if you want to retire by age 67. Fidelity also suggests a timeline to use in order to get to that magic number:
There's also the 4 percent rule, which many early retirees use to know if they have enough money to settle down. The rule says that in most cases you can safely withdraw 4 percent a year from your retirement savings portfolio.
Flipping the 4 percent rule can help you figure out how big your portfolio needs to be, or what's called your "magic number." Simply divide your annual spending by 0.04 (or multiple it by 25) to get your target.
For example, financial blogger "The Money Wizard " — a Minneapolis-based millennial who goes by the pen name Sean and is on track to retire by age 37 — plans to live off of about $30,000 per year. Using the 4 percent rule, he estimates he'll need $750,000 ($30,000 / 0.04) in the bank to retire comfortably.
Madison-based Chris Reining also used the rule before retiring in his 30s. "It really came down to, once I have enough money where I can withdraw 4 percent, then I can walk away," he tells CNBC Make It. "I typically spend somewhere between $30,000 and $40,000 a year, meaning I needed to get to $1 million."
He did that at age 35 and officially left his information technology job two years later.
Determining how much you'll need all boils down to what you want your future lifestyle to look like and how much it will cost to fund it. Tony Robbins, best-selling author of "Money: Master the Game, " factors that into his simple, two-step formula for finding your "magic number":
Once you have a number in mind, you can start working towards reaching that goal.
No matter how you choose to save, the most important step is to open at least one account.
Next, follow these three steps so your money can grow over time:
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