How Much Do I Need to Retire?
A step-by-step way to estimate your retirement number using the 25x rule and the 4 percent guideline, then stress-test it with inflation.
The honest answer is it depends on your spending, not your income. A fast estimate is 25 times your annual spending in retirement, which is the flip side of the 4 percent withdrawal guideline.
Start with spending, not income
Estimate the annual spending you expect in retirement, not the income you earn today. Housing may fall once a mortgage is paid off, but healthcare and travel often rise. The spending figure is the number that matters, because it is what your portfolio has to cover.
The 25x rule and the 4 percent guideline
Multiply your expected annual retirement spending by 25 to get a rough target portfolio. The 25x rule is the flip side of the 4 percent withdrawal guideline from the Trinity and Bengen studies, which found that withdrawing 4 percent of a diversified portfolio in year one and adjusting for inflation each year has historically lasted 30 years. It is a starting point, not a promise: sequence of returns, fees, and long retirements can all pull the safe rate down.
Account for Social Security and pensions
Subtract guaranteed income first. Only the gap between spending and guaranteed income needs to be funded from savings. A 60,000 dollar spending target with 24,000 in Social Security only requires the portfolio to cover a 36,000 dollar gap.
Inflation and time
Compounding and inflation both matter. A dollar of spending in 30 years costs more, and a longer horizon lets contributions and growth compound further. Run the projection in both today's dollars and inflated dollars so you can see the target both ways.
Worked example
Someone spending 60,000 dollars a year with 24,000 of expected Social Security has a 36,000 dollar gap. 36,000 times 25 is a 900,000 dollar target portfolio at retirement. Add a margin of safety for a longer retirement, higher healthcare, or a lower safe withdrawal rate.
Ready to run the numbers?
Use the retirement calculator to get a specific quantity for your project.
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Last reviewed . Educational estimates only; local conditions and codes take precedence. Consult a qualified professional for site-specific decisions.