
Understanding types of mutual funds
Target date and target risk funds are two popular types of mutual funds.
Target date and target risk funds are two popular types of mutual funds.
03/18/2025
RETIREMENT PLANNING
Use a calculation of today’s expenses to estimate what you need in your future.
Save enough in investments to potentially cover annual inflation increases to help your money last as long as you need it.
Among non-retirees, 28% of Americans don’t have any retirement savings (like an IRA, pension plan or other retirement savings account). And among those who had retirement savings, only 31% thought their retirement saving was on track.1
To start planning for the retirement you want or will be able to afford, you’ll need an idea of your current costs, what they’ll be in the future, and how much income to expect from your investments. From there you can adjust as needed.
Create a list of anticipated costs by category to get a better idea of what you may need to maintain your lifestyle in retirement. Measure them as monthly costs.
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Home
Other necessities
Lifestyle and hobbies
Children and grandchildren
Charitable giving
Health care
Extended care
Legacy funds
Would you like to leave some money for your heirs and your favorite charities? The extent of your generosity will depend largely on the size of the nest egg you build up during your working years and how wisely you manage it throughout your retirement.
Take the monthly values you calculated to arrive at a total value you may need for living in retirement monthly. The average monthly income for Americans ages 65 years and older is $5,000, according to the Bureau of Labor Statistics.4
Let’s conservatively say you will spend $5,000 a month ($60,000 a year) during your retirement—based on this average value.
The average annual rate of inflation for more than a century is 3.28%.5 Using only a rate of 3%, your costs would nearly double every 20 years.
This means that you may need:
This amount | By this age |
---|---|
This amount | By this age |
$5,000 a month ($60,000 annually) | 55 |
$9,303 a month ($111,636 annually) | 75 |
$16,802 a month ($201,624 annually) | 95 |
Remember, this is a hypothetical example and does not represent the actual inflation rate you may experience during that period. It’s purely for illustrative purposes.
Let’s say you have enough Social Security to cover half your $60,000 annual costs. If you have a lifetime stream of income from a pension, annuity or similar source, that could reduce your dependence on investment-only income.
While it is impossible to predict a future return on your investments, here’s a range of outcomes to consider:
However, unless the money is coming from a tax-exempt account, your actual income would be less after taxes.
A portfolio with a yield of 4% to 5% on a $1 million account would typically provide a before-tax income in the range of $40,000 to $50,000. Combined with your Social Security income ($30,000 in this example), you would hypothetically have enough to cover your current expenses and income taxes and add to your principal to help make up for the effects of inflation.
If, over the course of your retirement, you manage to live off your annual investment yield without tapping into your principal, your legacy would take care of itself. The balance left in your investment account (along with any other assets) could ultimately make up the legacy you leave behind for your heirs and favorite causes.
While your own situation will likely vary, there are ways to cut your expenses and focus more on your retirement savings. Using these steps of retirement planning as a starting point, you could potentially produce enough income to help keep your retirement lifestyle where you want it to be.
Learn more about retirement investment opportunities at Thrivent.
1 “Report on the Economic Well-Being of U.S. Households in 2022.” Board of Governors of the Federal Reserve System. May 2023. (August 2024)
2 Medicare.gov
3 Monthly Median Costs: USA – National (2023). Cost of Care Survey. Genworth. (August 2024)
4 Bureau of Labor Statistics. “Usual Weekly Earnings of Wage and Salary Workers Second Quarter 2024.” July 17, 2024.
5 “Historical Inflation Rates: 1914-2024.” US Inflation Calculator. (August 2024)
The information provided is not intended as a source for tax, legal or accounting advice. Please consult with a legal and/or tax professional for specific information regarding your individual situation.