You’ll need to replace 70% to 90% of your annual income after you retire.

If you’re like most people, you’d like to retire early and enjoy the same lifestyle during retirement that you had while working.

Income Replacement
To keep your same lifestyle in retirement, you’ll need to “replace” 70% to 90% of your annual income with income from other sources. This figure assumes that some of your expenses should go down after retirement (work wardrobe,
commuting costs, mortgage payments, etc.), while others may go up (medical, travel, etc.).

If you have a yearly salary of $25,000 when you retire, you’re likely to need about $17,500 to $22,500 of annual income during retirement. So what will your savings need to be if you spend $20,000 each year for 25 years of retirement? A lot will depend on your investment earnings and costs during retirement. But you’ll probably need a nest egg of $250,000 to $300,000 at retirement. If you hope to retire early or to leave some money to your heirs, or you want to draw out more money each year to keep up with inflation — you’ll need a larger nest egg. Unexpected medical conditions or family emergencies can change your needs and create large demands on your savings. Plan accordingly.