How Much Do You Need to Retire? Rules of Thumb That Actually Help
The 4% rule, the 25× rule, savings milestones by age and the 15% guideline, with what each one assumes and where it falls short.
"How much do I need to retire?" has no single answer, because it depends on when you stop working, how you want to live and what other income you will have. But a few well-tested rules of thumb give you a target and a way to check whether you are on track.
Start with spending, not income
Your retirement number is driven by what you will spend each year. Many people spend less in retirement because the mortgage is paid off, commuting stops and they no longer save for retirement. Others spend more early on travel and hobbies. A common starting assumption is 70–80% of your pre-retirement income.
Subtract guaranteed income such as Social Security, a state pension or a workplace pension. What is left must come from your savings.
The 25× rule
Multiply the yearly amount you need from savings by 25. If you need $40,000 a year on top of Social Security, aim for $1,000,000. This is the 4% rule turned around.
The 4% rule
The 4% rule comes from a 1994 study by financial planner William Bengen and the later "Trinity study". Looking at historical US stock and bond returns, they found that a retiree who withdrew 4% of their starting balance in year one, then increased the amount with inflation, would not have run out of money over any 30-year period in the data with a balanced portfolio.
Some caveats:
- It was designed for 30-year retirements. If you retire at 50, a 3–3.5% rate is safer.
- It assumes a portfolio of roughly 50–75% stocks.
- Being flexible, for example skipping inflation increases after a bad market year, makes it much more robust.
Savings milestones by age
Fidelity's widely cited guideline suggests having saved a multiple of your salary by certain ages:
| Age | Saved (× salary) |
|---|---|
| 30 | 1× |
| 40 | 3× |
| 50 | 6× |
| 60 | 8× |
| 67 | 10× |
These assume you start saving around 25, retire at 67 and save about 15% a year. If you are behind, that is common; the important thing is the trend.
How much to save each year
The usual guideline is 15% of gross income, including any employer contributions, starting in your 20s. Starting at 35 pushes it closer to 20–25%. The retirement calculator will show exactly where your current contribution leads.
Do not forget inflation
A million dollars in 30 years will not buy what a million buys today. At 2.5% inflation, it will have the purchasing power of about $477,000 now. Always compare future balances in today's dollars, which the retirement calculator does automatically. The inflation calculator shows how prices change over any period.
Practical steps
- Contribute at least enough to get your full employer match.
- Increase your savings rate by 1% each year until you reach 15% or more.
- Use tax-advantaged accounts first.
- Choose low-cost diversified funds; fees compound against you.
- Recheck your plan every year or after major life changes.
Retirement planning can feel abstract, but putting real numbers on it is the best way to make it concrete. Try a few scenarios in the calculator: retiring two years later, saving $200 more a month, or assuming a lower return. Seeing the effect of each lever makes the decision much easier.