How much money do I need to retire?
Start from what you expect to spend, not from a round number: roughly 25 times the annual spending your portfolio has to cover after Social Security and any pension, then adjust for how long you need it to last.
The reason to work from spending rather than from income is that the target is funding a life, not replacing a salary. Retirement usually removes some costs — commuting, the mortgage, the saving itself — and adds others, most of which are health-related and lumpy.
The multiple then follows from the Withdrawal rateThe percentage of the starting portfolio taken in the first year of retirement, then usually raised with inflation each year after. The 4% figure is a historical result for one country and one portfolio, not a law.Read the evidence on this → you think is defensible. Twenty-five times comes from 4%; a more conservative 3.5% implies closer to 29 times. Neither is a precise number, and treating either as one is a mistake the arithmetic invites.
Guaranteed income is the lever most people underuse. Every dollar of Social Security or pension income reduces the pot the portfolio has to produce, and deferring Social Security to 70 is the cheapest way most Americans can buy more of it.
When the answer is different
- Life expectancy is a median. Funding to it means running out roughly half the time, which is why a plan should be built to a high percentile of survival rather than to the average.
- The first decade's returns matter far more than the average return, so two people with the same pot and the same long-run assumption can face very different outcomes.
Put your own numbers to it
Every answer here is general. These are not.
- Retirement number
How much do I need, and am I on track?
- Monte Carlo projection
What is the range of outcomes, not just the average?
The research this rests on
Each note states its claim, rates how strong the evidence actually is, and lists the conditions under which it fails.
- The 4% rule is a historical result with three heavy assumptions
A 4% initial withdrawal, inflation-adjusted, survived every historical 30-year US retirement — under assumptions that may not hold for you. (moderate)
- Planning to life expectancy is planning to run out half the time
Life expectancy is a median, so a plan funded to that horizon fails for roughly half of the people who use it, and individuals systematically misjudge their own survival odds at older ages. (strong)
- Delaying Social Security is the cheapest longevity insurance available
For someone in average health reaching their mid-60s, deferring Social Security to age 70 raises expected lifetime benefits, and the gain is largest for the higher earner in a married couple because the survivor inherits the larger benefit. (moderate)
- The order of returns decides retirements that averages cannot explain
Two retirees experiencing identical average returns can face opposite outcomes depending on when the bad years arrive. (strong)
Terms used on this page
The same definitions the underlined words open, written out so nothing on this page depends on a click.
- Withdrawal rate
- The percentage of the starting portfolio taken in the first year of retirement, then usually raised with inflation each year after. The 4% figure is a historical result for one country and one portfolio, not a law. Evidence →