The Million-Dollar Question
"How much do I need to retire?" is the most common question in retirement planning—and the most personal. Your number depends on your lifestyle, location, health, and goals. But there are proven frameworks to calculate it.
Let's break down exactly how to find your retirement number.
The 25x Rule: Your Starting Point
The most widely-used formula is the 25x rule: multiply your annual expenses by 25 to get your retirement target.
| Annual Expenses | Retirement Target (25x) |
|---|---|
| $40,000 | $1,000,000 |
| $60,000 | $1,500,000 |
| $80,000 | $2,000,000 |
| $100,000 | $2,500,000 |
Why 25x? It's the inverse of the 4% safe withdrawal rate. If you have 25x your expenses, you can withdraw 4% per year with a high probability your money lasts 30+ years.
But Wait—It's More Nuanced
The 25x rule is a great starting point, but your actual number depends on several factors:
1. Your Retirement Age
Retiring at 65 vs 55 makes a huge difference:
- Retire at 65: Need to fund ~25-30 years
- Retire at 55: Need to fund ~35-40 years
- Retire at 50: Need to fund ~40-45 years
Earlier retirement = larger nest egg needed, OR a lower withdrawal rate.
2. Social Security Benefits
Social Security can cover a significant portion of your expenses:
| Monthly Benefit | Annual Income | 25x Reduction |
|---|---|---|
| $1,500 | $18,000 | -$450,000 |
| $2,500 | $30,000 | -$750,000 |
| $3,500 | $42,000 | -$1,050,000 |
If you expect $30,000/year from Social Security and spend $60,000/year, you only need to cover the $30,000 gap—requiring $750,000 instead of $1.5 million.
3. Pension or Other Guaranteed Income
Any guaranteed income (pension, annuity, rental income) reduces your portfolio needs the same way Social Security does.
4. Healthcare Costs
This is the wildcard. Before Medicare at 65:
- Individual marketplace plan: $500-$1,500/month
- COBRA: Often $1,500-$2,500/month
- Health sharing ministry: $200-$500/month
Budget $10,000-$20,000/year for healthcare in early retirement.
5. Where You Live
Cost of living varies dramatically:
| Location | $60k Lifestyle Equivalent |
|---|---|
| Mississippi | $48,000 |
| Texas | $54,000 |
| California | $78,000 |
| New York City | $96,000 |
Geo-arbitrage (moving to a lower cost area) can dramatically reduce your retirement number.
The Real Formula
Here's a more accurate calculation:
Retirement Number = (Annual Expenses - Guaranteed Income) × 25
Example:
- Annual expenses: $70,000
- Expected Social Security: $24,000
- Gap to cover: $46,000
- Retirement target: $46,000 × 25 = $1,150,000
What About Inflation?
The 4% rule already accounts for inflation—you increase withdrawals each year to maintain purchasing power. But you should also consider:
- Healthcare inflation: Typically 5-7% annually (faster than general inflation)
- Lifestyle inflation: Will you spend more or less as you age?
- Sequence of returns risk: A market crash early in retirement is more damaging
This is why Monte Carlo simulations (which RetirePro provides) are more accurate than simple rules.
Retirement Savings Benchmarks by Age
Where should you be right now?
| Age | Target (Multiple of Salary) | Example ($100k salary) |
|---|---|---|
| 30 | 1x | $100,000 |
| 35 | 2x | $200,000 |
| 40 | 3x | $300,000 |
| 45 | 4x | $400,000 |
| 50 | 6x | $600,000 |
| 55 | 7x | $700,000 |
| 60 | 8x | $800,000 |
| 67 | 10x | $1,000,000 |
Behind? Don't panic. Catch-up contributions, increased savings rates, and delayed retirement can all help.
How to Calculate YOUR Number
Here's what you need to determine:
- Estimate retirement expenses - Track current spending, adjust for retirement changes (no commute, but more travel?)
- Project Social Security - Check your statement at ssa.gov
- Factor in other income - Pension, rental properties, part-time work
- Choose your withdrawal rate - 4% is standard, 3.5% is conservative, 3% for early retirees
- Run Monte Carlo simulations - Test your plan against thousands of market scenarios
Common Mistakes to Avoid
❌ Using gross income instead of expenses - You don't need to replace your salary, just your spending
❌ Forgetting taxes - Withdrawals from 401(k)s are taxed as income
❌ Ignoring healthcare - The biggest expense surprise for early retirees
❌ Assuming fixed spending - Most people spend more early in retirement (travel), less later
❌ Not accounting for Social Security - It's a significant income source for most retirees
The Bottom Line
For most Americans, a retirement target of $1-2 million provides a comfortable retirement when combined with Social Security. But your number could be higher or lower depending on your specific situation.
The key is to calculate your actual expenses, factor in guaranteed income, and stress-test your plan with Monte Carlo simulations.
Related Calculators
- Free Retirement Calculator - Calculate your personalized retirement number
- Retirement Savings by Age - See if you're on track
- Social Security Calculator - Estimate your benefits
- Early Retirement Calculator - Plan for FIRE
Ready to find your number? RetirePro calculates your personalized retirement target based on your actual expenses, income sources, and goals. Start your free plan →