How much do I need to retire? is the most important money question there is. The good news: with one simple rule of thumb, you can estimate your number in under a minute.
The 4% Rule
The 4% rule says you can safely withdraw 4% of your portfolio in your first year of retirement, adjust for inflation each year, and have a high probability of your money lasting 30 years.
That means your target is simply:
Retirement Number = Annual Expenses รท 0.04 = Annual Expenses ร 25
Example: $60,000 a Year in Retirement
$60,000 ร 25 = $1,500,000
| Annual Spending | Target Savings (25ร) |
|---|---|
| $40,000 | $1,000,000 |
| $60,000 | $1,500,000 |
| $80,000 | $2,000,000 |
| $100,000 | $2,500,000 |
Why the 4% Rule Works
It was designed from historical market data: a portfolio of roughly 60% stocks and 40% bonds has survived 30-year retirements in nearly every historical period when withdrawals stayed at or below 4%.
- Withdrawals are adjusted for inflation each year
- The portfolio keeps earning while you spend
- Down years in the market are weathered by the bond cushion
Factor In Inflation
If you retire in 30 years, your lifestyle cost will rise with inflation. At 3% inflation, today's $60,000 lifestyle becomes about:
| Years from now | Cost of today's $60,000 lifestyle |
|---|---|
| 10 | $80,635 |
| 20 | $108,367 |
| 30 | $145,635 |
Plan for the future number, not today's.
How Much to Save Each Month
The earlier you start, the less you save per month. Use our Compound Interest Calculator to run the numbers, but here is the rough scale for a $1.5M goal with a 7% average return:
- Starting at 25: about $580/month
- Starting at 35: about $1,270/month
- Starting at 45: about $3,170/month
Starting a decade earlier more than halves your monthly contribution.
Accounts That Help You Get There
- 401(k) / workplace plans โ tax-deferred, often with employer match (free money)
- Traditional IRA โ tax-deductible contributions
- Roth IRA โ tax-free growth and withdrawals
Try Our Tools
- Retirement Calculator โ build a personalized plan with inflation
- Compound Interest Calculator โ see your savings grow year by year
- Investment Calculator โ project portfolio growth over decades
๐ก Pro Tip: Every $100 you save per month today, invested at 7%, becomes roughly $120,000 in 40 years. Small contributions, started early, do the heavy lifting โ not big ones started late.
*Find your personal retirement number with our free Retirement Calculator.*
