How much money will you need in retirement?

Who doesn’t have a retirement dream—a someday? It may be as simple as sleeping late or riding your bike on a sunny afternoon, or as daring as jumping out of a plane at age 90. Living your someday the way you want means having a roadmap now. And that means understanding your retirement goal.

Put simply, your retirement goal is the percentage of your pay that you want to replace in retirement. UC’s Retirement Review assumes that you’ll need to replace 80% of your current pay in retirement. This is a common benchmark, but it may not be right for you.

How much money will you really need?

How much will you really need? A lot depends on how you want to live in retirement. Make sure your retirement plan considers these factors.

How long you live Where you live What you do

People are living longer. You should plan for a retirement that lasts 30 years or more.

Where you live affects your cost of living and access to health care. Thinking of moving to a different state? Include tax rates in your planning. If you plan to stay put, know how your home equity factors into your plans.

The early stages of retirement can be a costly time in one’s life. Many people overestimate how much they’ll be able to work in retirement, and underestimate how much they’ll spend. Take a hard look at both fronts.

Your health Your taxes Your purchasing power

For many, health care is among the largest expenses in retirement.

When you retire from UC, you may be eligible to continue your UC-sponsored medical, dental, vision, accidental death and dismemberment, and legal coverage, so make sure you know what’s required to qualify for this coverage.

And remember that, as life expectancies increase, so does the potential need for long-term care. Thinking of buying long-term care insurance? Factor the cost of premiums into your plans.

Taxes can significantly reduce the amount you have available to spend in retirement. Remember that some of your retirement income may come from UC’s pension, 403(b), 457(b) and DC Plans. Most, if not all, of the income from these accounts is subject to income taxes.

The income from your non-retirement investments will be taxed, too. Income from taxable bonds is taxed at ordinary income tax rates, while income from municipal bonds may be exempt from federal income tax. Long-term capital gains and qualifying dividends are taxed at special capital gains rates.

When prices rise (also known as inflation) your purchasing power falls, and vice versa. That means inflation can eat away at your spending power.

An annual inflation rate of 3%—the average since 1926—will cut the value of your benefit in half in 24 years. Of course, you can’t control the economy. But investing at least a portion of your money for growth can help you outpace inflation.*

Note that in retirement, your UCRP benefit is adjusted annually according to the plan’s Cost of Living (COLA) rules to account for increasing prices or inflation. Please see the UCRP Summary Plan Description for details on the COLA rules.

Finally, remember that many of the deductions taken out of your paycheck now won't be needed in retirement. So you might be surprised how well your retirement "paycheck" compares to your current paycheck.


Model your retirement goal

Once you know your retirement goal, you can adjust your Retirement Review to display it. Here's how:

  • Enter the percentage of pay you want to replace when you retire.