How much do you need to retire?

Everybody will be quite different.

However, there is a baseline for the average people, which can be used as a reference.

For the average Canadian or US people, the average salary for a person is about $60,000 with net income of $45,000 after deductions. For a couple with total salaries of $120,000, the net income is around $84,000.

For the cost part, the average cost in Canada or US is about $40,000 for one person and $60,000 for a couple. A family of 4 should cost at least $80,000 per year.

Basically, for a couple without children, they can save about $24,000 for investing per year. Over 30 years of investing of only $1,000 per month in a S&P 500 index tracking ETF in a tax-free investment account (TFSA or Roth IRA), the capital can grow into a two-Million retirement fund, which should be enough for happy retirement.

The reason to invest in a tax-free investment account is that you can take out the fund without paying any tax and still enjoy all the social benefits, because it's not considered income for tax purpose.

Housing should be one big pie of the costs. All people should try to pay off the mortgage before retirement, which can save a lot for travelling around the world.

So how much do you need for happy retirement?

After you retire, the baseline expense is about 80% of pre-retirement income. So the baseline expense is $32,000 for one person and $48,000 for a couple.

If you retire now, you can just calculate the product of the baseline expense with expected remaining years. People usually retire at 60 years old, so the total funding required is $1,280,000 for one person and $1,920,000 for a couple. Social security should be able to pay half of the costs.

If you retire later, you should add 2% of inflation per year to the baseline expense, which could significantly increase the total costs.

In conclusion, the average Canadian or US people should be able to save enough money for happy retirement.