When you start thinking about retirement, one of the first things to consider is what it will cost you to live comfortably.

That assessment gives you a basis for determining the income you’ll need.

Some things will probably cost less when you retire: You won’t be commuting. Your mortgage may be paid off, or nearly so. Your children may be college graduates with jobs, not living in their old rooms. There may be other expenses that will drop as well.

On the other hand, certain things will probably cost more. Health insurance and out-of-pocket healthcare costs top the list. Real estate taxes and property insurance may go up. You may want to spend more on travel, hobbies, or other things you’ve been waiting to do until you had more time.

And you’ll still be spending money on food, clothing, and other necessities.

The consensus is that in retirement you’ll need at least 70% of your last working year’s income to maintain your lifestyle after retirement. You will probably need more if you’re single or the primary breadwinner in your family.

Inflation is a primary factor: Your costs will increase over time, some faster than others. Each year that you’re retired you’re likely to need more income than the year before.

Six Primary Sources of Retirement Income
  • A pension from a private company or public organization
  • Social Security benefits
  • An annuity—a contract between you and an insurance company—that provides guaranteed income for a certain period of time

  • Income from tax-sheltered retirement accounts, such an employer-sponsored 401(k), 457, or 403(b) plan, and an individual retirement account (IRA)

  • Income from taxable investment accounts

  • Income from a post-retirement job