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RETIREMENT How Much Do You Need to Retire? A Realistic Answer f... 2026-02-27 · 4 min read ·

How Much Do You Need to Retire? A Realistic Answer for Every Budget

retirement 2026-02-27 · 4 min read

How Much Do You Need to Retire?

"Save a million dollars" is the generic retirement advice. It's unhelpful because the right number depends entirely on how much you spend.

For someone spending $30,000/year, $750,000 may be enough. For someone spending $120,000/year, $3 million may not be. Figuring out your personal number requires actual math.

The Core Framework: The 4% Rule

The most widely cited retirement planning guideline is the 4% rule: in the first year of retirement, withdraw 4% of your portfolio, then adjust that amount for inflation each year. Research suggests this approach has historically sustained portfolios for 30+ years.

Formula: Retirement Number = Annual Expenses × 25

This is simply the inverse: if you can withdraw 4% (1/25th) of your portfolio annually, you need 25x your annual expenses.

Annual Spending Retirement Number
$25,000 $625,000
$35,000 $875,000
$50,000 $1,250,000
$70,000 $1,750,000
$100,000 $2,500,000

Step 1: Estimate Your Retirement Spending

Current spending is a starting point, but retirement spending often differs:

You may spend less on:

You may spend more on:

A commonly used estimate: retirement spending is 70–90% of pre-retirement spending, though this varies widely.

For planning purposes, use your best estimate of actual retirement spending — not a rule of thumb. Track your current spending, then adjust for known changes.

Step 2: Account for Social Security

Social Security replaces a meaningful portion of income for most Americans. The average monthly benefit in 2024 is about $1,900/month ($22,800/year) for individuals.

Reduce your required portfolio by Social Security income:

Required Portfolio = (Annual Expenses − Annual Social Security) × 25

Example:

Without Social Security, the same person would need $1,375,000. The difference illustrates how important SS timing decisions are.

Claiming timing: Benefits increase by approximately 8% per year for every year you delay claiming past your Full Retirement Age (67 for people born after 1960), up to age 70. Delaying from 67 to 70 increases your benefit by ~24% permanently.

Check your estimated benefit at ssa.gov/myaccount.

Step 3: Stress-Test Your Number

The 4% rule has caveats:

For a 30-year retirement (retiring at 65): The research is relatively robust. Historical data supports 4% with about 95% success rates.

For longer retirements (retiring at 55–60): 4% may be too aggressive. Research suggests 3.5–3.75% is safer over 40+ years. This raises your required portfolio by 10–15%.

Sequence of returns risk: A severe market crash in the first 5–10 years of retirement is far more damaging than the same crash later. Having 1–2 years of expenses in cash/bonds provides a buffer.

Flexible withdrawals: Many retirees spend less during down markets. If you can reduce spending by 10–15% during bad years, higher initial withdrawal rates become more sustainable.

The Most Important Variable: Healthcare Before Medicare

If you retire before 65, you need health insurance outside of employer coverage. This is frequently the biggest planning gap for early retirees.

Options:

Building healthcare costs into your retirement number — and your transition planning — is critical.

Building Your Retirement Number: An Example

Profile:

Calculation:

Phase 1 (Ages 62–67, before SS and Medicare):

Phase 2 (Age 67+, with SS and Medicare):

Approximate retirement number at 62: ~$1,050,000–1,100,000 (accounting for withdrawals from 62–67 and needing more to start)

This exercise shows the value of delaying retirement by even a few years — both the portfolio grows, and the gap before Social Security shrinks.

Practical Milestones

Rather than staring at one large number, track progress against milestones:

Milestone Why It Matters
1x annual salary saved by 30 On track for conventional retirement
3x annual salary saved by 40 Standard retirement planning benchmark
6x annual salary saved by 50 Fidelity benchmark for age 50
8x annual salary saved by 60 Fidelity benchmark for age 60
10x annual salary saved at 67 Fidelity benchmark for full retirement

Or use your personal retirement number: what % of the way are you?

The Biggest Levers

1. Spending in retirement: Every $1,000 you can cut from annual retirement spending reduces the required portfolio by $25,000 (at 4% withdrawal rate).

2. Delaying retirement or claiming Social Security: One additional year of work means one more year of savings and one less year of withdrawals — a powerful double effect.

3. Part-time income in early retirement: Even $10,000/year in part-time income reduces your required portfolio by $250,000. The "semi-retirement" or "barista FI" approach works for many people.

4. Investment returns: Assumed returns matter enormously over long periods, but they're not directly controllable. Focus on keeping costs low (index funds, minimize taxes) rather than chasing higher returns.

The Bottom Line

Your retirement number is Annual Retirement Spending × 25 (or more, if retiring early). Reduce that by Social Security income, factor in healthcare, and stress-test the result.

Start with this calculation, refine it every few years as circumstances change, and use it as a compass for your savings rate. The number will be larger than you expect — and more achievable than it looks.