Planning to Retire at 65? Here's How Much You Might Need Invested.

Key Points
If you're retiring at 65, you need to make sure you have enough saved.
You can claim Social Security, but doing so would likely lead to a benefits cut.
Medicare eligibility age means you don't have to worry about covering insurance costs.
- The $23,760 Social Security bonus most retirees completely overlook ›
The age of 65 is a popular time to retire, and in fact, it's the average age when men give up working for good.
Before you stop collecting a paycheck, though, you need to ensure that your finances are in order. Specifically, you want to feel confident that you have plenty of money to live on comfortably for the rest of your life. So, how much do you need? Here's how you can find out.
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How much money do you need to retire at 65?
There are several different factors to consider as you decide how much money you need to retire at 65. Here are some of the big ones:
- Will you claim Social Security right away? You're eligible to start receiving your Social Security checks at age 62, so claiming is possible. However, that doesn't mean it's a good idea. Full retirement age is 67 for anyone born in 1960 or later. A claim at age 65 would be an early one, so you'd be hit with early filing penalties that permanently reduce your checks. If you don't want to do that but still want to retire, you need to make sure your retirement plans can support you without Social Security for a while.
- How much money do you need to live on? Living on Social Security alone is typically impossible since benefits only replace roughly 40% of pre-retirement income. Think realistically about your budget so you can see how much income you must produce from other non-Social Security sources.
- What is a safe withdrawal rate? You can't just start draining your investment accounts because you risk running out of money later in life. Picking a safe withdrawal rate is one of the key retirement planning tasks. For many, the 4% rule makes sense. This rule says you have a good likelihood of your retirement money lasting for 30 years if you withdraw 4% of your balance in year one and adjust for inflation in each later year.
- What will you do about medical costs? Medicare kicks in at 65, so you don't have to worry about not having coverage. However, Medicare has a lot of gaps, so you'll likely want a Medigap or Advantage plan as a supplement. Find out how much that will cost and factor it into your spending needs.
Based on these factors, you can see exactly how much money you need to retire at 65. If you plan on claiming Social Security right away and that replaces 40% of your income, it's a good rule of thumb to replace at least another 40% so you'll be living on 80% of what you were making. If you were earning $100,000, your investments must produce around $40,000 per year in this scenario, assuming you were getting around $40,000 from Social Security.
If you'll be following the 4% rule, multiply your target income number by 25 to see how big your nest egg should be. If you require $40,000, you'd need $1 million in a 401(k) or other plan to be ready to retire at 65.
What if you don't have enough to retire?
So, what happens if you find out your target number is higher than your expected income? This means either scaling down your living expectations or working longer to save more. You'll have to decide which of those two options makes sense for you.
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