How Much Do I Need to Retire?
The "magic number" for retirement is more knowable than it feels. Learn the 25x rule, the 4% guideline, and how to turn them into a target you can plan for.
"How much do I need to retire?" sounds impossibly open-ended, but two simple rules turn it into a number you can actually aim at. They're estimates, not guarantees — but they're a far better starting point than guessing.
Start with your spending, not your income
Your retirement target is driven by what you'll spend, not what you earn today. Begin with your expected annual expenses in retirement. Many people spend somewhat less than during their working years (no commuting, no mortgage if it's paid off, no retirement saving), but some spend more early on through travel. Estimate the annual figure you'll need from your savings, after any pension or Social Security income.
The 25x rule
Once you know your annual spending need, multiply it by 25. That's roughly the nest egg you need to support it.
If you'll need $40,000 a year from your savings, the target is about $1,000,000. Need $60,000? Around $1,500,000. The 25x rule is just the flip side of the 4% rule below.
The 4% rule
The 4% rule says you can withdraw about 4% of your portfolio in your first year of retirement, then adjust that amount for inflation each year, with a strong chance the money lasts 30 years. Four percent is simply 1 ÷ 25, which is why the two rules agree.
It's a guideline, not a law. A longer retirement, poor early market returns, or high fees argue for a more cautious rate (say 3.5%); a shorter horizon or extra income sources allow a bit more flexibility.
What changes your number
- Other income. Pensions, Social Security or rental income reduce how much your savings must cover, lowering your target.
- Retirement age. Retiring early means more years to fund and fewer years to save — both push the number up.
- Lifestyle. The gap between a modest and a comfortable retirement can be hundreds of thousands of dollars.
- Inflation. Your target is in today's money; the actual dollar figure you'll need will be higher by the time you get there.
How to get there
The two biggest levers are your savings rate and time. Thanks to compound growth, money invested in your twenties and thirties does far more heavy lifting than money saved later. Consistent contributions to tax-advantaged accounts, increased whenever your income rises, are what turn a distant target into reality.
Find your number
Use the retirement calculator to estimate your target and see whether your current savings rate gets you there — and what to adjust if it doesn't. To understand why starting early matters so much, see our guide on how compound interest works.