Here's How Much Money You'll Need to Retire

Editors' pick: Originally published May 11, 2016.

The amount of money necessary to retire comfortably is different for everyone, but that doesn't mean you can't figure out what you'll need.

We already know you aren't great at predicting what kind of income you'll need for retirement. According to research from U.K.-based financial firm deVere Group, 78% of workers from all over the world underestimate how much they'll need to save for retirement. Advisors at Voya Financial found last year that 74% of Americans have never calculated their monthly retirement income needs. Meanwhile, 51% of retirees have never tried to determine if their current savings will be enough to last through retirement - though 39% assume what they have will not last 20 years. A full 13% of current retirees don't know how much savings they have in the bank in the first place.

HSBC says that 72% of pre-retirees ages 45 and older would like to retire in the next five years; however 37% won't hit that mark, largely because they don't have the cash to do so. Franklin Templeton, meanwhile, finds that 70% of people are stressed out about retirement -- with 65% not understanding of how much they'll spend each year during retirement and 60% still figuring out how they'll pay their medical expenses during retirement.

That latter element is a huge part of the equation. HSBC found that 67% workers are unable to predict how much they are likely to spend on healthcare in retirement, including 63% of those living in households with an annual income over $79,999. UBS, which only surveys investors with at least $1 million in investable assets, found that only 50% in investors have factored health care costs into their overall financial plan, and only 23% have saved for their future care. About 88% of wealthy investors say factoring in health care costs is harder, because people are living longer, while 76% note that the price of modern healthcare is significantly higher than it was for previous generations.

"The life expectancy factor is the trickiest one, because there is no way to confidently predict how long we will live, and we actually tend to underestimate our own longevity," says Mike Lynch, vice president of strategic markets for Hartford Funds. "While in the past, life expectancy was shorter, today we are living longer, healthier and more actively than previous generations before us. That's the good news and the bad news, because our retirement dollars may need to last longer and work harder than we realize."

As a result, Voya Financial points out that 59% of working Americans are very or extremely concerned about outliving their retirement savings -- with 74% having never calculated their monthly retirement income needs -- just taking that first step can be tough. Voya notes that retirees will need 70% of their annual income to continue their current lifestyle in retirement.

However, recent developments are poking holes into that 70% benchmark. Franklin Templetonfound that pre-retirement spending actually increases 28% one to five years into retirement, 42% six to 10 years in and 44% 11+ years later. That averages out to a 37% hike overall, which is tough on the 36% of workers who think they'll be able to live on 70% of their current income or less. That said, 45% of retirees do so.

"Conventional thinking and attitudes about what it means to retire are changing," says Michael Doshier, vice president of retirement marketing for Franklin Templeton Investments. "By taking action now -- via saving and planning for retirement -- individuals can help ensure that they're able to embrace this next phase of life. They can also reduce the stress increasingly associated with not having enough money to retire."

There are more specific guidelines available, but even those aren't foolproof.

According to GOBankingRates survey responses, J.P. Morgan Asset Management data and Census Bureau data on median incomes by age range, a 30-year-old making the median $54,243 should have about $16,273 saved. However, roughly 67% of workers that age are well behind that goal, 23% have less than $10,000 saved and a third of workers have no savings at all.

"There are plenty of obstacles Americans claim are in their way when it comes to saving for retirement: credit card debt, student loan debt, low wages, the need to save for a child's college education, and the list goes on," says Cameron Huddleston, life and money columnist for GOBankingRates. "Although all of these things can put a strain on our budgets, they don't necessarily make it impossible to save for retirement."

Overcoming those obstacles is much easier when you plan out exactly what you'll need for retirement and how much you should save. As Franklin Templeton discovered, though 94% have a retirement plan through their employer, 38% have no idea how much of their current income it will cover in retirement. Meanwhile, while 73% of people who haven't sat down and figured out retirement details are nervous about their plan, only 26% of those with a formal retirement plan share similar fears.

To guide workers through, Lynch from Hartford Funds offers a three-point plan for figuring out your retirement savings:

1. Take inventory of income: Get some idea of what percentage of your current income you'll need when you retire. Then factor in what your workplace retirement plan will pay out each year, what other investments will pay and what role a pension or Social Security will pay. Figure out when you'll collect benefits, add up all of your projected income and see how it stacks up to what you'll need in retirement.

2. Consider your savings: If your savings are going to play a large role in your retirement planning, figure out how you can save more now. Cut back on coffee, shipping fees, unused phone date and other small costs and, perhaps, use it to increase a 401(k) or IRA contribution. Even just $15 extra per week adds up to $4,000 over five years.

3. Dream about your retirement: This will give you some idea of what your retirement will look like. Will you be in your current house and paying to maintain it? Will you be moving, downsizing and incurring moving expenses? Will you keep working, or will you travel, play golf or do some quilting? All of those elements will give you some idea of what your retirement will cost and how best to save up for it.

"When it comes to retirement, it is important to think not just about quantity, but also about quality," Lynch says. "You can certainly help clients calculate and tabulate to come up with a figure that will give them greater financial peace of mind, but that is only one part of the equation."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.