How much do I need to retire?

A lot goes into figuring out how much money you need to retire, but one common piece of advice is that you need about $1 million — and some sources suggest even more. In fact, 16 percent of people believe you need at least $2 million, according to a recent Transamerica study.

Of the people involved in the Transamerica study, only 11 percent used a retirement calculator for their estimates and 47 percent just guessed. Although many think you need $1 million in the bank to retire comfortably, that number is not necessarily based on real calculations — nor is it the right number for everyone.

You can spend your golden years living on less than $1 million — and still live well. To figure out how much you’ll need to retire, you must assess your lifestyle needs, understand your risk tolerance, consider the effects of inflation and most important, learn how to create a budget and follow it.

RELATED: Top 10 cities where retirees are moving

Planning Retirement Savings Is About Spending, Not Income

What many people might not realize is that retirement planning isn’t so much about how much you earn, but how much you spend. Your lifestyle today can have an impact on how much money you’ve got left over in your retirement years.

“I have met people who make $30,000 take-home per month and still have no retirement savings,” said Jeff Rose, certified financial planner, founder and CEO of Alliance Wealth Management, a financial planning firm. “Keep your lifestyle in check and make sure you are putting money away every month. Set a benchmark based on what [you] need per year and plan to live to 100.”

You might have heard you’ll need 55 to 80 percent of your preretirement income to live well, but with some budgeting and lifestyle changes, it’s possible to live on less. “A person or couple that has no house payment or car payments can live off less than 70 percent,” Rose said.

Don’t Miss: Survey Finds 42% of Americans Will Retire Broke — Here’s Why

Living on Less: How to Make a Budget for Retirement

Spending peaked at $71,166 per year for the 45 to 54 age group, then dropped to $38,691 per year for people 75 and older — a figure that shows a trend of spending less and living more simply in the golden years — according to the Bureau of Labor Statistics of the U.S. Department of Labor. With a reduction in overall expenses, it’s easier to live well on less during retirement. Here are some ways to achieve that:

– Drive less or use cheaper transportation. The typical senior between 65 and 74 spends $8,420 on transportation costs annually, according to the BLS. If you opt for an economy car, you can save money on gas and on the actual car because it will cost a lot less than a luxury model. You might also consider using public transportation.
– Downsize your home. The best places to retire might not be where you lived preretirement. Selling a home in California or the Northeast U.S. would enable you to buy something cheaper in, say, Detroit or Philadelphia — and you’d likely have cash left over.
– Cut back on entertainment. Spending less on things like dining out is an easy way to cut expenses. Be coupon-savvy at the grocery store and buy only what you need. Seek out low-cost activities with a senior discount, or clubs and groups aimed at your age group.

See: 17 Biggest Budgeting Mistakes You’re Making

Rely More on Investments Than Benefits

Your liquid savings probably won’t be your only assets when you enter retirement. Any employer-sponsored savings you’ve accrued can significantly supplement your retirement savings and any other nest egg investments you might have — like annuities or CDs — can also help when you retire.

Experts advise that with current and forthcoming Social Security trends, it’s not wise to rely solely on Social Security benefits to fund your retirement. “Right now, I would plan on getting 70 percent of the Social Security income we are being promised,” Rose said.

How Much Money Do I Need to Retire?

Estimating how much money you’ll need in retirement can be a difficult task. Here’s a starting point to find what your average monthly income in retirement should be:

1. Calculate your current monthly income and your monthly expenses.
2. Factor in lifestyle changes that might occur, like a cost of living adjustment, healthcare needs, travel plans and expenses, and money you plan to spend on kids and grandchildren.
3. Subtract what you’re currently investing each month in your individual retirement account or Roth IRA. Although you can contribute to a Roth IRA as long as you live, you likely won’t after you retire, and you can contribute to a traditional IRA only until you turn 70.5.
4. Factor in any pensions you’ll be receiving as part of your income.
5. Subtract the amount of taxes you’ve been paying on your current paycheck because you won’t be paying them anymore.

When you do these calculations you’ll end up with a retirement budget. You’ll be adding all of your income, subtracting your expenses and seeing how much — more or less — you’ll need to live on.

See: This Is All You Can Buy With the Average Social Security Check

Why Should I Retire Now?

No hard-and-fast rule mandates you must retire at 65. More seniors are choosing to work past the retirement age nowadays, and some are foregoing retirement altogether.

Social Security offers financial incentives to delay retirement. Currently, a worker born in 1943 or later gets an additional 8 percent for each year he puts off collecting benefits past the retirement age of 66.

Related: How Your Retirement Age Impacts Your Social Security Benefits

Avoid Retirement Pitfalls

Now that you have a better idea of what to do to save for your later years, remember to avoid some of the potential pitfalls, like carrying debt or prematurely withdrawing retirement funds.

So, how much do you need to retire? Aiming for $1 million is a great goal to have. But if you retire on less you can still have a happy, healthy retirement.

John Csiszar, Ruth Sarreal and Paul Sisolak contributed to the reporting for this article.

This article originally appeared on GOBankingRates.com: How Much Do I Need to Retire?