$1 million may not last you in retirement—here's how to figure out how much you need

Zeek Braverman and Camille Braverman, the grandparents on NBC's "Parenthood"
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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.

Retirement in America is changing rapidly
Retirement in America is changing rapidly

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:

  • By 30: Have the equivalent of your salary saved
  • By 40: Have three times your salary saved
  • By 50: Have six times your salary saved
  • By 60: Have eight times your salary saved
  • By 67: Have 10 times your salary saved
Here's how much you should save at every age
Here's how much you should save at every age

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.

How this average 38-year-old became a millionaire and retired early
How this average 38-year-old became a millionaire and retired early

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":

  1. Determine how much money it takes to maintain your lifestyle. "To clarify, this is not how much you earn, but how much you spend," Robbins notes on his blog. For example: "If you make $100,000 but live off of $80,000, then this number would be $80,000."
  2. Multiply that number by 20.

Once you have a number in mind, you can start working towards reaching that goal.

The simplest starting point is to invest in your employer's 401(k) plan, a tax-advantaged retirement savings account, or other retirement savings accounts, such as a Roth IRA or traditional IRA.

The definitive guide to retirement savings plans
The definitive guide to retirement savings plans

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:

  1. Contribute as much of your income as you can. If you're funding a 401(k), the contribution limit for 2018 is $18,500 for workers under age 50. If you're funding a Roth IRA or traditional IRA, the maximum yearly contribution is $5,500 for workers under age 50.
  2. Automate your contributions. Have your employer do a payroll deduction or have your money taken out of your checking account and sent straight to your retirement account. After all, you can't spend money you never see.
  3. Get in the habit of upping your savings consistently, either every six months, at the end of each year or whenever you get a raise. Again, if you make this automatic by setting up "auto-increase," you won't forget to up your contributions, or talk yourself out of setting aside a larger chunk.

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