The Big Question
"How much do I need to retire?" is the most common question in personal finance — and the answer is different for everyone. But with a few calculations, you can find your personal retirement number.
The 4% Rule: A Starting Point
The 4% rule states that you can withdraw 4% of your retirement portfolio in the first year, then adjust for inflation each year, and your money should last at least 30 years.
Your retirement number = Annual expenses in retirement × 25
Quick Calculation
| Annual Spending | Retirement Number (25x) |
|---|---|
| $40,000 | $1,000,000 |
| $60,000 | $1,500,000 |
| $80,000 | $2,000,000 |
| $100,000 | $2,500,000 |
Step 1: Estimate Your Retirement Expenses
Most financial planners suggest you will need 70-80% of your pre-retirement income in retirement. Some expenses decrease (commuting, work clothes, payroll taxes), while others increase (healthcare, travel, hobbies).
Expenses That Typically Decrease
- Commuting and work-related costs
- Mortgage (if paid off by retirement)
- Retirement savings contributions
- Payroll taxes (Social Security and Medicare)
Expenses That Typically Increase
- Healthcare and insurance premiums
- Travel and leisure activities
- Home maintenance (aging house)
- Long-term care (later years)
Step 2: Account for Social Security
Social Security will cover a portion of your retirement income. The average benefit in 2026 is approximately $1,900 per month ($22,800 per year).
To estimate your benefit, create an account at ssa.gov and check your projected benefits.
Adjusted retirement number = (Annual expenses - Social Security income) × 25
Example
- Desired annual spending: $70,000
- Expected Social Security: $24,000/year
- Gap to fill: $46,000/year
- Retirement savings needed: $46,000 × 25 = $1,150,000
Step 3: Factor in Healthcare
Healthcare is the wildcard in retirement planning. A 65-year-old couple retiring today can expect to spend approximately $315,000 on healthcare throughout retirement (excluding long-term care).
Medicare begins at 65, but it does not cover everything. Budget for:
- Medicare premiums ($175-500+/month)
- Supplemental insurance (Medigap)
- Dental, vision, and hearing (not covered by basic Medicare)
- Prescription drug costs
Step 4: Adjust for Inflation
Inflation erodes purchasing power over time. At 3% inflation, $70,000 today will need to be $126,000 in 20 years to maintain the same lifestyle.
The 4% rule already accounts for inflation adjustments, but make sure your savings projections use real (inflation-adjusted) returns, not nominal returns.
Step 5: Build Your Savings Timeline
Once you know your number, work backward to determine how much you need to save monthly:
| Current Age | Years to 65 | Monthly Savings for $1.5M* |
|---|---|---|
| 25 | 40 years | $625 |
| 30 | 35 years | $850 |
| 35 | 30 years | $1,200 |
| 40 | 25 years | $1,750 |
| 45 | 20 years | $2,700 |
Assuming 7% average annual return
Key Takeaways
- Use the 4% rule as a starting point: annual expenses × 25 = retirement number
- Subtract expected Social Security income to find the gap your savings must fill
- Budget separately for healthcare — it is the largest variable expense in retirement
- Start saving as early as possible — time is your most powerful asset
- Use our Retirement Calculator to run personalized scenarios with your actual numbers