How Much Do You Need to Retire? A Simple Way to Find Your Number
Use the 25x rule, savings milestones by age and a monthly savings target to figure out how much you need to retire.
"How much do I need to retire?" is one of the most common money questions, and one of the most stressful. The honest answer depends on your lifestyle, when you retire and what other income you'll have. But you don't need a crystal ball. A few simple rules of thumb can give you a realistic target and a monthly savings number you can act on today.
Start with your retirement spending
Your target begins with how much you'll spend each year in retirement. Two common ways to estimate it:
- The replacement-rate method: many planners suggest aiming to replace roughly 70–80% of your pre-retirement income, since some costs (commuting, work clothes, retirement contributions) may disappear.
- The budget method: estimate your actual future expenses (housing, food, healthcare, travel, hobbies). This is more accurate, especially if you'll have a paid-off home or big travel plans.
Don't forget healthcare, which often rises with age, and inflation, which increases what everything costs over time.
The 25x rule and the 4% rule
A widely used rule of thumb is to save about 25 times your expected annual spending (minus other income, such as a pension or government benefits).
| Annual spending from savings | Target (25×) |
|---|---|
| $30,000 | $750,000 |
| $40,000 | $1,000,000 |
| $60,000 | $1,500,000 |
The 25x rule comes from the "4% rule," based on historical research suggesting that withdrawing about 4% of your portfolio in the first year of retirement, then adjusting for inflation, has historically lasted around 30 years in most market conditions. It's a starting point, not a guarantee. Retiring early, very long lifespans or poor market returns early in retirement may call for a more conservative withdrawal rate.
Don't forget other income
Your savings don't have to cover everything. Subtract expected income from:
- Government retirement benefits: in the U.S., Social Security. You can see an estimate of your future benefit by creating an account at SSA.gov. (The UK State Pension and Canada's CPP/OAS work similarly.)
- Pensions from current or past employers
- Rental or part-time income
For example, if you'll spend $55,000 a year and expect $20,000 from Social Security, your savings need to cover $35,000. At 25x, that's a target of about $875,000.
Retirement savings milestones by age
Fidelity Investments publishes a popular set of benchmarks based on your salary. They assume you retire around age 67:
| By age | Aim to have saved |
|---|---|
| 30 | 1× your salary |
| 40 | 3× your salary |
| 50 | 6× your salary |
| 60 | 8× your salary |
| 67 | 10× your salary |
Behind on these? You're not alone, and it isn't too late. These are guides, not pass/fail grades. The most important step is to increase your savings from where you are now.
How much to save each month
Time is the biggest factor. Here's roughly how much you'd need to invest each month to reach $1,000,000, assuming a hypothetical 7% average annual return:
| Years until retirement | Monthly investment needed |
|---|---|
| 40 years | About $380 |
| 30 years | About $820 |
| 20 years | About $1,920 |
Starting ten years earlier can cut the required monthly amount by more than half. That's the power of compounding. Try your own numbers with our compound interest calculator.
These figures are hypothetical. Actual returns vary, can be negative and aren't guaranteed, and inflation means $1 million in the future will buy less than it does today.
A simple savings guideline
If all of this feels like a lot, start with a simple rule: many guidelines suggest saving about 15% of your pre-tax income for retirement, including any employer match, starting in your 20s or early 30s. If you're starting later, you may need to save more.
How to catch up if you're behind
- Get the full employer match first. See 401(k) basics.
- Increase contributions by 1% a year, or every time you get a raise. Learn how to ask for a raise.
- Use catch-up contributions if you're 50 or older. U.S. retirement accounts allow extra contributions above the normal limits; check IRS.gov for current amounts.
- Open an IRA in addition to your workplace plan. See Roth vs. traditional IRA.
- Keep investment fees low with diversified index funds.
- Pay off high-interest debt, which frees up money for saving.
- Consider working a little longer or part-time in early retirement. Each extra year means more saving and fewer years of withdrawals.
Bottom line: Estimate your yearly retirement spending, subtract expected benefits and pensions, and multiply what's left by 25 for a rough target. Then work backward to a monthly savings amount, automate it, and increase it whenever your income grows. Starting early matters more than starting perfectly.
Frequently asked questions
How much do I need to retire?
A common rule of thumb is about 25 times the yearly amount you'll need from savings, after subtracting other income like Social Security or a pension. For $40,000 a year, that's about $1 million.
What is the 4% rule?
It's a guideline based on historical research suggesting that withdrawing about 4% of your portfolio in the first year of retirement, then adjusting for inflation, has historically lasted around 30 years. It's not a guarantee.
How much should I have saved by 40?
One popular benchmark from Fidelity suggests about three times your salary by age 40. It's a guide, not a requirement.
Is it too late to start saving for retirement at 40 or 50?
No. You may need to save a higher percentage of income, use catch-up contributions after 50 and consider working a little longer, but every dollar saved still helps.
Disclaimer: This article is for general educational purposes only and isn't personalised financial, tax or legal advice. Consider speaking with a qualified professional about your situation. Read our full disclaimer.