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How Much Money Do I Need To Retire If My House Is Paid Off?


Are you wondering how much you might need to have saved for retirement if you didn’t have a housing payment? The math to break down this calculation may be simpler than you think.

To determine how much money you need to retire if your house is paid off, do the following:

• Take your annual expenses

• Subtract your annual housing costs

• Divide that number by your withdrawal rate

The number you calculate is the adjusted number you need to have saved in order to reach financial independence and be prepared for retirement.

While simple, there are a few factors worth considering when breaking down this calculation.

How Much Money Do I Need to Retire if My House is Paid Off?

To do these calculations for yourself, you’ll need a few numbers and just a few minutes. If you’re wondering how to calculate how much money you’d need for retirement in general, start here. Once you know how to calculate your financial independence number, the calculations are much the same minus the mortgage. Let’s work an example.

Say your typical annual expenses are $50,000, and that you spend around 30% of your annual income on housing. Our first step will be to subtract your housing costs from your annual expenses.

Annual Expenses: $50,000

Annual Housing Costs: $15,000 (30% of $50,000)

$50,000 – $15,000 = $35,000

Adjusted Annual Expenses (Without Housing): $35,000

Next, we’ll take your annual expenses without housing, and divide that by your withdrawal rate in retirement. We’ll use 4% as a rule of thumb, as it’s a generally safe method to account for at least 30 years worth of savings in retirement.

Withdrawal Rate: 4% (which is 4 / 100, or 0.04)

$35,000 / 0.04 = $875,000

Adjusted Financial Independence Number (Without Housing): $875,000

And there you have it, the number you’d need to have saved and invested in retirement is $875,000 per the conditions expressed in the example above.

To show just how significant a role housing plays in your overall journey to financial independence and retirement, let’s look at how much money you’d need saved if you were still paying that $15,000 / year on housing.

Annual Expenses: $50,000

Withdrawal Rate: 4% (which is 4 / 100, or 0.04)

$50,000 / 0.04 = $1,250,000

Without your house being paid off, the amount you’d need to have saved for retirement is $1,250,000. That’s another $375,000 in savings – essentially the price of another home altogether! As a result, having your home paid off prior to retirement means you won’t need as much saved up before retiring. That’s because a significant portion of your annual expenses are tied to housing, so removing that expense means you may need less saved overall. Of course, you’ll want to be mindful of the kind of retirement that you’re planning for as well. If you’re planning on spending more in retirement than you’re spending today, you’ll want to adjust your calculations accordingly to ensure you have enough saved up.

For convenience, below are a few additional examples based on the calculations above. If your annual expenses are different but you’re spending around 30% in housing annually, here’s a quick breakdown.

Annual ExpensesHousing Cost (%)Housing Cost ($)Expenses Without HousingWithdrawal RateFI Number (Without Housing Costs)

If your expenses are around $50,000 annually but you spend a different amount on housing annually, this table has a few easy calculations to help you find your number as well.

Annual ExpensesHousing Cost (%)Housing Cost ($)Expenses – HousingWithdrawal RateFI Number

Why Should I Pay Off My House Before Retiring?

The main reason to pay off your house before retirement is that you’ll need to have less saved in order to retire. If your $50,000 annual expenses were $35,000 instead (subtracting your housing payment), you’d need $375,000 less saved in order to reach your financial independence number.

If you were to continue with your mortgage payment into retirement, you’d likely need to be withdrawing more from your retirement funds in order to cover your housing costs. If your house was paid off, you wouldn’t need to withdraw as much in retirement since you wouldn’t need to make payments on your home.

Your goal in retirement will be to have enough funds to last until you physically retire (i.e die) and pass on to the next life. The more you take out, the smaller the pool of your funds will be year over year. As you continue to withdraw from your retirement savings, there’s less money compounding in your accounts. The smaller the amount to compound, the slower your money grows as funds are depleted. This is why it’s important to account for housing costs when considering retirement. The Federal Reserve found in surveying consumer finances that Americans are increasingly going into retirement with a mortgage on their homes. By planning today for your housing tomorrow, you can reach the peak of your mortgage mountain long before you hang your financial mountain climbing boots up for good.

What If I Relocate?

Now, what happens to the amount of money you need to have saved up if you relocate? Simply put, your expenses will go down in places with a lower cost of living, and your expenses will go up in places with a higher cost of living. An easy way to determine if your costs will increase or decrease is to use a cost of living calculator. If your annual expenses are $50,000 and you’re living in Salt Lake City, settling down in New York City would mean increasing your expenses 2.5x, while moving to Spokane would keep your expenses about the same.

Current CityExpenses
Salt Lake City$50,000
Target LocationsExpensesMultiplier
New York City$125,4682.50936
San Francisco$98,5711.97142
Cost of living comparison by various cities

To show how this would effect the amount you might need to have saved for retirement, let’s look at another example. As calculated in the chart above, the difference in cost of living from Salt Lake City to New York is 2.51x.


Current Expenses (SLC): $50,000

Withdrawal Rate: 4% (which is 4 / 100, or 0.04)

Financial Independence Number: $1,250,000 ($50,000 / 0.04)

Cost of Living Multiplier: 2.51

Estimated Expenses (NYC): $125,500 ($50,000 x 2.51)

Withdrawal Rate: 4%

Estimated Financial Independence Number: $3,137,500 ($125,500 / 0.04 – note that this is the same as taking the current FI number and applying the multiplier: $1,250,000 x 2.51 = $3,137,500)

That’s an extra $1,887,500 to save if you were to relocate to New York. You can easily do this for your own financial calculations as well. Simply take your current expenses and multiply them by your cost of living multiplier, and divide by your withdrawal rate.

If you already had your house paid off and were able to sell it for an amount that could cover the cost of a new home in your new location, you would be able to use your adjusted annual expense amount in your calculations.

Keep in mind that your move may not be permanent. It’s normal (and necessary) to adjust your calculations as you navigate life and prepare for retirement. For more on how cost of living can have an effect on retirement, click here.


Remember that while the calculations of how much you may need for retirement without a housing payment may be simple, life can be complex. But with proper planning and goals, you can be ready for whatever comes along your journey. It may take time to pay down your home. You may need more saved up to end up in your dream retirement location. Overall, however, the view from the top will be more glorious than the one from the base. And we believe that you’ll get there.

Climb on, Finbase.


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John is a personal finance writer, editor, and a fellow FinBase climber. Tech worker by day, design owl by night, he is the co-founder and creator behind The Financial Basecamp.
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