How Big a Nest Egg Do You Need to Retire?

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Depending on your circumstances, your retirement may be in the distant future or right around the corner. But if you’re like many educators, you don’t have a clear picture of how you’ll spend your time – or money – when you leave the classroom behind. This can make it difficult to estimate how much money you will need to live for potentially two or three decades without a paycheck.

A new study by Hewitt Associates, a human resources consulting firm, provides a quick answer. The study finds that individuals will need to accumulate an average of 15.7 times their preretirement pay in order to maintain their lifestyle during retirement.* That may be savings in your CalSTRS or CalPERS pension plan, your 403(b) or 457 plan, Social Security benefits if you are eligible, personal savings or a combination.

For example, if you make $60,000 at the end of your career, you would need a nest egg of about $942,000 to last through retirement – assuming an average lifespan. If your salary is $65,000, you would need to amass $1,020,500. That may seem like an unattainable number, but remember, that includes your total CalSTRS or CalPERS lifetime pension.

Reaching Your Goal

It’s a simple calculation to determine what 15.7 times your preretirement pay is but not as easy to actually accumulate. Supplementing your CalSTRS or CalPERS pension with savings in a tax-advantaged account like your district's 403(b) or 457 plan is a good start. The tax benefits make it easier to grow your savings.

But you may also want to examine your spending habits to find areas you could trim in order to set aside more money for retirement. You may want to cut back on small, everyday expenses like eating out for lunch or buying fancy coffee drinks. Alternatively, you could put a critical eye to your big expenses like insurance, a mortgage or car payments and see if there’s a way to spend less by refinancing or getting new quotes on insurance coverage.

Tailor for a Perfect Fit

An individualized assessment of your retirement income needs will be far more valuable than any one-size-fits-all formula. Estimating what your retirement expenses will be can give you a ballpark figure for the amount of savings you’ll need. It will be imperfect because it requires making assumptions about factors such as how long you will live, what the inflation rate will be and how your investments will perform. Nevertheless, making an estimate is a valuable exercise. Those who have done the calculation tend to be considerably more confident about their ability to reach their savings goal.** The Projected Retirement Expenses Calculator can help.

* Source: Hewitt Associates, “Retirement Income Adequacy at Large Companies: The Real Deal,” 2010,
** Source: 2010 Retirement Confidence Survey, Employee Benefit Research Institute and Mathew Greenwald & Associates,