One of the most popular questions to ask during retirement planning is “How much money do I need to retire?” The question is an understandable one, but it may be easier to think about the income you’ll need to generate during retirement in order to meet your spending goals. Answering this question can help you determine the total amount you’ll need.
Retirement can look different from one person to the next, but many people aim to generate $100,000 in annual income. Here’s how to think about the amount of money you’ll need to generate $100,000, or other amounts, during retirement.
$100k in retirement income: 3 questions to consider
Retiring with a $100,000 income starts with financial planning that includes considering your retirement budget and your other sources of income. These questions can get you started.
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How much will you spend? One of the first steps in determining how much money you need to retire is to figure out your monthly or annual expenses. Keep in mind that once you’re retired, you won’t need to save for retirement anymore, which is often a big “expense” that goes away. Many people also spend less in general once they’re retired than they did when they were working.
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How much will you get from Social Security? You’ll also want to factor in the income you’ll receive from Social Security. Figuring out how much you’ll receive may lower the income you’ll need to generate from other sources. The average monthly Social Security benefit for retired workers was about $2,000 in May 2025, which translates to about $24,000 a year.
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How much do you need to save? Once you’ve determined the amount of income you’ll need in retirement, you can figure out how much you’ll need in savings to generate that income. Here are a couple of approaches.
Pick your withdrawal rate to set your savings goal
One common way to determine a safe withdrawal rate during retirement is called the 4 percent rule. According to the rule, you can withdraw 4 percent of your retirement savings in your first year of retirement and adjust that amount each year for inflation. The approach generally translates to your savings lasting about 30 years.
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If you want to generate $100,000 in annual income from your savings, the 4 percent rule means you’d need $2.5 million in savings, which could be in accounts such as an IRA or 401(k).
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However, if you factor in the average Social Security income for retired workers, the amount you need to generate from your own savings falls to $76,000. In this case, you’d need $1.9 million using the 4 percent rule.
The 4 percent rule isn’t perfect, and some financial advisors think it’s too aggressive. Meeting with a financial advisor can be a great way to understand your unique situation and determine the best retirement plan for you.
Get started: Match with an advisor who can help you achieve your financial goals
Set up reliable income with an annuity
Another way to generate a stream of income from your retirement savings is by purchasing an annuity. Annuities are insurance products that pay out income and are sometimes used as part of a retirement strategy. You can purchase annuities by contributing money over time or through a lump sum payment.
To be sure, annuities can be complex and may come with high fees, so you want to be careful before making a purchase. Make sure you understand the contract really well and pay attention to the fees you’re paying.
Using Schwab’s Income Annuity Estimator, a 65-year-old man looking to generate monthly income of $8,333 (~$100,000 per year) would need about $1.2 million to $1.4 million as of June 2025, depending on the type of annuity purchased.
Bottom line
Deciding how much money you’ll need to retire is one of the biggest questions you face when making a retirement plan. Think through what your monthly expenses will be and consider all sources of income you’ll have, including Social Security. Once you know how much money you’ll need to generate from your own savings, you can consider different strategies, such as the 4 percent rule or purchasing an annuity. A financial advisor can be a great resource to help you find the best options for you.
Learn more: These strategies can help you generate income in retirement
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
