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Identify how much you need

You can't predict exactly how much money you'll need during retirement – but you can make an educated guess. To start, gather the following information:

  • Annual cost of living during retirement: Use your current cost of living as a starting point, then adjust for inflation and figure in expenses that are likely to rise, such as medical care or travel.
  • Expected retirement benefits: Consider any and all funds you have in retirement savings, plus benefits such as Social Security or pension. Figure in any taxes due when you take a distribution.
  • Number of years in retirement: Though this part can be tricky, make your best estimate of how much time you'll have between retirement age and passing away. Consider the average life expectancy for your demographic, along with family health history.

Once you compile the information above, plug it into this formula to estimate how much money you’ll need to retire:

(Annual cost of living - expected retirement benefits) x number of years in retirement

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Make big cuts

Big spending cuts can be painful in the short-term but rewarding down the line. If you want to accelerate your timeline to retirement, consider slashing on spending and diverting the money toward retirement savings. Here are a few ways to reduce what you spend:

  • Examine your biggest expenses and brainstorm ways to eliminate or reduce them
  • Downsize your home, relocate to a more affordable area or move in with a family member
  • Eliminate car payments, auto insurance, gas and more by selling your car and switching to a bike, public transit or walking

Use your employer match

If your employer offers a match on retirement contributions, such as for a 401(k), it may represent your only opportunity to bring in free money.

According to research from Vanguard, the average employer match was 4.5% of salary in 2020. In other words, if you earned $80,000 and your employer matched 4.5%, their contribution to your retirement would be $3,600.

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Make catch-up contributions

Starting at age 50, you can make a catch-up contribution to the following retirement accounts for $1,000 all the way up to $7,500 a year (thanks to recent changes in tax law), depending on the account:

  • 401(k) (other than a SIMPLE 401(k))
  • 403(b)
  • Governmental 457(b)

A catch-up contribution is tax deferred and higher than the maximum amount usually permitted by the IRS. In other words, it lets you reduce your taxable income more than usual and add extra money to your retirement savings.

Tap into home equity

It's not ideal to borrow against your home, since falling behind could mean facing foreclosure. But if you’re a homeowner with equity and can comfortably afford the payments, here are some options:

  • Home equity loan: A second mortgage received as a lump sum, usually for up to 80% of your equity, and paid back over five to 30 years.
  • Home equity line of credit: Withdraw a certain percentage of your home equity and repay it an unlimited number of times during a "draw period" (usually 10 years) before you enter a repayment period (usually 20 years).
  • Reverse mortgage: Receive monthly payments or a lump sum from your lender, then pay it back (plus interest) when you sell your home or pass away.

Keep in mind that equity isn't the only requirement to qualify for this kind of financing. Lenders will approve or deny you based on your credit score and income. You may also need to cover financing charges such as origination fees or closing costs.


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Sarah Brady Freelance Contributor

Sarah Brady is a (self-)certified money nerd. She's a personal finance writer and speaker who's been helping individuals and entrepreneurs improve their financial wellness since 2013. Sarah has written for Forbes Advisor, USA Today's Blueprint, FORTUNE, Experian, Investopedia and more,


The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.