How Much Money Do I Need to Retire?
Most financial planners suggest you need roughly 25 times your expected annual retirement expenses saved before you retire. If you plan to spend $80,000 per year, that means a savings target of approximately $2 million. However, your personal retirement number depends on your Social Security income, healthcare costs, lifestyle expectations, and when you plan to retire.
Retirement is the finish line that most of us are working toward — but knowing exactly how much you need to cross it comfortably is one of the most common questions we hear from clients across the Denver metro area.
The honest answer is: it depends. Your retirement number is personal. It is shaped by your lifestyle, your health, your income sources, your debt situation, when you plan to stop working, and where you plan to live. But there are proven frameworks that give you a useful starting point — and a fiduciary financial advisor can help you build on them with specificity.
Let us walk through the most important benchmarks, rules of thumb, and factors that will shape your personal retirement number.
The 4% Rule vs. The 25x Rule Explained
These two rules are two sides of the same coin — and both come from the same landmark research.
The 25x Rule
The 25x Rule states that you should save 25 times your expected annual retirement expenses before you retire. This gives you the total portfolio size you are targeting.
The math behind it: if your portfolio grows at a modest rate during retirement and you withdraw 4% per year, your savings should last 30 years or more.
Example:
Expected annual retirement spending: $70,000
Minus Social Security income: $24,000
Annual gap to cover from savings: $46,000
Multiply by 25: $1,150,000 needed in savings
The 4% Rule
The 4% Rule is the withdrawal side of the same equation. It suggests that retirees can withdraw 4% of their portfolio in the first year of retirement and adjust for inflation each year thereafter, with a high likelihood the money lasts at least 30 years. This rule emerged from the landmark "Trinity Study" using decades of historical market data.
Important caveats:The 4% rule was developed in the 1990s using historical returns and a 30-year retirement horizon. With people living longer and interest rates varying significantly, many financial planners today recommend a more conservative 3% to 3.5% withdrawal rate — especially for those who retire early. Your specific asset allocation, tax situation, and income sources all affect what withdrawal rate is truly sustainable for you.
Neither rule is a substitute for a personalized financial plan — but both provide an excellent starting framework for your retirement conversations.
Retirement Savings Benchmarks by Age
How are you tracking relative to where you should be? Here are widely used savings benchmarks by age:
These benchmarks assume you want to maintain roughly your current standard of living in retirement and plan to retire around age 67. They are useful checkpoints — not definitive targets.
If you are behind these benchmarks, do not panic. There are levers you can pull: increasing your savings rate, delaying retirement by a few years, optimizing Social Security timing, or adjusting your spending expectations. A retirement advisor can help you model these scenarios and find the right path forward.
How Much Do You Need to Retire in Colorado or Denver?
Colorado is a wonderful place to retire — but it is not an inexpensive one. If you are planning to retire in the Denver metro area, including communities like Greenwood Village, Cherry Hills, Highlands Ranch, or Castle Pines, here is what you should factor in:
Cost of LivingDenver's cost of living has increased significantly over the past decade. Housing, property taxes, ongoing maintenance, and potential HOA costs all factor into your retirement budget.
Colorado State Income TaxColorado has a flat income tax rate of 4.4%. Retirement income from IRAs and 401(k)s is generally taxable, though Colorado offers a retirement income deduction — $24,000 for those age 65 and older, and $16,000 for those age 55 to 64. Social Security benefits are fully exempt from Colorado state income tax.
Healthcare Costs in RetirementIf you retire before age 65 and are no longer covered by employer insurance, you will need to bridge healthcare coverage until Medicare eligibility. In Colorado, marketplace premiums for a 60-year-old can range from $500 to over $1,500 per month depending on the plan. This is a significant — and frequently underestimated — retirement expense.
Outdoor Lifestyle CostsColorado retirees often enjoy skiing, hiking, golf, and travel. Factor your intended lifestyle into your retirement spending projections — these costs add up meaningfully over a 20- to 30-year retirement.
A rough estimate for a comfortable retirement in the Denver metro area: plan for $80,000 to $120,000 in annual spending, depending on your lifestyle and healthcare needs. Using the 25x rule, that translates to a portfolio target of $2 million to $3 million— minus any guaranteed income sources like Social Security or pensions.
5 Factors That Change Your Retirement Number
Your retirement number is not static. Here are five variables that can significantly increase or decrease what you need to have saved:
1. Your Retirement AgeEvery year you delay retirement has a compounding effect: your savings grow longer, your portfolio has less time to deplete, and your Social Security benefit increases by up to 8% per year if you delay claiming from age 62 to 70. Retiring at 62 versus 67 can require hundreds of thousands of additional dollars in savings.
2. Your Expected LifespanAmericans are living longer than ever. A married couple aged 65 today has roughly a 50% chance that at least one spouse will live to age 90. Planning for a 25- to 30-year retirement is prudent.
3. Your Social Security StrategyDelaying your claim from age 62 to 70 increases your monthly benefit by approximately 77%. A well-optimized Social Security strategy can reduce the portfolio savings you need by hundreds of thousands of dollars over your lifetime.
4. Healthcare and Long-Term Care CostsThe average couple will spend well over $300,000 on healthcare costs in retirement. Long-term care — including home care, assisted living, or nursing home care — can add substantially more. Building a dedicated healthcare funding strategy into your plan is essential.
5. InflationEven at a modest 3% annual inflation rate, your purchasing power will be cut roughly in half over a 24-year retirement. Your portfolio and withdrawal strategy must be designed to outpace inflation over time.
When to Work With a Fiduciary Retirement Advisor
Rules of thumb are useful — but they are no substitute for a personalized retirement plan built by someone who knows your complete financial picture.
A fiduciary retirement advisor helps you:
Determine your true retirement number based on your specific lifestyle, tax situation, and income sources
Optimize your Social Security claiming strategy to maximize lifetime benefits
Build a tax-efficient withdrawal sequence across taxable, tax-deferred, and Roth accounts
Plan for healthcare costs and long-term care funding
Stress-test your plan against market downturns, inflation spikes, and unexpected expenses
Coordinate your investment plan with your estate plan, beneficiary designations, and overall tax strategy
The difference between a well-coordinated retirement plan and a disjointed one can be measured in tens — or even hundreds — of thousands of dollars over the course of your retirement.
At Paramount Associates Wealth Management, we are a fee-only fiduciary registered investment advisor based in Greenwood Village, Colorado. We work with individuals, families, and executives throughout the Denver metro area to build retirement plans that are comprehensive, tax-smart, and built around the life each client wants to live.
Ready to get clear on your retirement number?
Schedule a complimentary consultation with our retirement planning team. We will review your current situation, help you understand what you are on track for, and identify any gaps that need to be addressed — with no obligation.
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Call us at(720) 921-1000or visitparamountassoc.comto get started.
Paramount Associates Wealth Management 6400 S Fiddlers Green Cir, Suite 925 Greenwood Village, CO 80111 [email protected] | (720) 921-1000
Paramount Associates Wealth Management is a registered investment advisor. This blog post is provided for informational purposes only and does not constitute personalized investment, tax, or legal advice. Please consult a qualified financial professional regarding your specific situation.
