- 1You need 25× annual expenses for a traditional 30-year retirement (4% rule)
- 2For early retirement (40+ years), consider 28–33× expenses (3–3.5% SWR)
- 3Social Security replaces roughly 30–40% of pre-retirement income
- 4Healthcare costs average $315,000 for a retiring couple — plan for it
- 5Flexibility in spending dramatically improves retirement success rates
- 6The gap between "just enough" and "comfortable" is often smaller than people think
#The Short Answer
The most widely used retirement formula is simple:
Retirement Number = Annual Expenses × 25
This comes from the 4% rule: if you withdraw 4% of your portfolio in year one, then adjust for inflation each year, historical data shows a 95%+ success rate over 30 years.
| Lifestyle | Annual Expenses | Retirement Number | Monthly Income |
|---|---|---|---|
| Lean | $30,000 | $750,000 | $2,500 |
| Modest | $50,000 | $1,250,000 | $4,167 |
| Comfortable | $75,000 | $1,875,000 | $6,250 |
| Affluent | $100,000 | $2,500,000 | $8,333 |
| Wealthy | $150,000 | $3,750,000 | $12,500 |
| Premium | $200,000 | $5,000,000 | $16,667 |
But this simple answer misses crucial nuances. Let's break it down.
#Retirement Savings Benchmarks by Age
These targets assume a goal of replacing 80% of pre-retirement income and retiring at 67:
| Age | Savings Target (× Income) | Example ($75K) | Example ($100K) | Example ($150K) |
|---|---|---|---|---|
| 25 | 0.5× income | $37,500 | $50,000 | $75,000 |
| 30 | 1× income | $75,000 | $100,000 | $150,000 |
| 35 | 2× income | $150,000 | $200,000 | $300,000 |
| 40 | 3× income | $225,000 | $300,000 | $450,000 |
| 45 | 4× income | $300,000 | $400,000 | $600,000 |
| 50 | 6× income | $450,000 | $600,000 | $900,000 |
| 55 | 7× income | $525,000 | $700,000 | $1,050,000 |
| 60 | 8× income | $600,000 | $800,000 | $1,200,000 |
| 65 | 10× income | $750,000 | $1,000,000 | $1,500,000 |
Source: Fidelity Investments guidelines.
Behind schedule? Don't panic. These are guidelines, and accelerating savings in your 40s and 50s (when income often peaks) can close the gap surprisingly fast. Someone who increases their savings rate from 15% to 30% at age 45 can catch up within 10–15 years.
See where you stand: Average Net Worth by Age →
#The 4% Rule: How It Really Works
The "4% rule" comes from the 1998 Trinity Study by professors at Trinity University. It's the most cited research in retirement planning:
The Method
- 1Year 1: Withdraw 4% of your portfolio ($40,000 on a $1,000,000 portfolio)
- 2Year 2+: Adjust the previous year's dollar withdrawal by inflation
- 3Result: 95%+ success rate over 30 years with a 50/50 to 75/25 stock/bond portfolio
10-Year Withdrawal Example
| Year | Starting Value | Withdrawal | Market Return | End Value |
|---|---|---|---|---|
| 1 | $1,000,000 | $40,000 | 8% | $1,036,800 |
| 2 | $1,036,800 | $41,200 | -5% | $945,820 |
| 3 | $945,820 | $42,436 | 12% | $1,011,790 |
| 4 | $1,011,790 | $43,709 | 7% | $1,035,847 |
| 5 | $1,035,847 | $45,020 | -15% | $842,203 |
| 6 | $842,203 | $46,371 | 22% | $970,114 |
| 7 | $970,114 | $47,762 | 10% | $1,014,587 |
| 8 | $1,014,587 | $49,195 | 5% | $1,013,661 |
| 9 | $1,013,661 | $50,671 | 9% | $1,049,569 |
| 10 | $1,049,569 | $52,191 | 7% | $1,067,195 |
Even with two significant market downturns (years 2 and 5), the portfolio survived and grew. This is the power of the 4% rule — it accounts for bad years.
Success Rates by Withdrawal Rate (30-Year Period)
| Withdrawal Rate | Stock/Bond Mix | Historical Success Rate |
|---|---|---|
| 3.0% | 75/25 | 100% |
| 3.5% | 75/25 | 98% |
| 4.0% | 75/25 | 95% |
| 4.5% | 75/25 | 85% |
| 5.0% | 75/25 | 70% |
| 5.5% | 50/50 | 55% |
Limitations to Know
- Designed for 30-year retirements (age 65 → 95)
- Based on U.S. historical data — future may differ
- Doesn't account for sequence-of-returns risk perfectly
- Assumes constant spending (real retirement spending fluctuates)
- Ignores taxes on withdrawals
For early retirees planning 40–50+ year retirements, many advisors recommend 3.0–3.5% SWR. Consider using our calculator to model your specific scenario.
Calculate your exact retirement timeline →
#What Most People Forget: Healthcare
Healthcare is consistently the biggest surprise in retirement planning. Fidelity estimates a 65-year-old couple retiring today needs approximately $315,000 saved just for healthcare expenses in retirement.
Healthcare Costs by Phase
| Life Phase | Age Range | Insurance Source | Annual Cost |
|---|---|---|---|
| Early Retirement | 55–59 | ACA Marketplace or COBRA | $12,000–$24,000 |
| Pre-Medicare | 60–64 | ACA Marketplace | $10,000–$20,000 |
| Medicare-eligible | 65–74 | Medicare + Supplement | $8,000–$15,000 |
| Late Retirement | 75–84 | Medicare + Supplement | $12,000–$20,000 |
| End of Life | 85+ | Medicare + Long-term care | $20,000–$80,000+ |
Medicare Breakdown (2026 Estimates)
| Expense | Estimated Annual Cost |
|---|---|
| Medicare Part B (medical) | $2,200–$6,400 |
| Medicare Part D (prescription) | $500–$2,000 |
| Medigap supplement | $1,800–$4,200 |
| Out-of-pocket (copays, deductibles) | $3,000–$8,000 |
| Dental, vision, hearing | $2,000–$4,000 |
| Total | $9,500–$24,600/year |
Long-Term Care: The Hidden Bomb
70% of people over 65 will need some form of long-term care. The median cost of a private nursing home room in 2026 is approximately $108,000/year, which Medicare does NOT cover. Options include long-term care insurance, self-insuring, or hybrid life/LTC policies.
#Retirement Income Sources: The Full Picture
Most retirees rely on multiple income streams, not just portfolio withdrawals:
| Income Source | Median Annual Amount | % of Retirees Who Use It |
|---|---|---|
| Social Security | $22,000–$40,000 | 90%+ |
| 401(k)/IRA withdrawals | Varies | 60% |
| Pension/defined benefit | $20,000–$50,000 | 25% (declining) |
| Part-time work | $10,000–$30,000 | 25% |
| Real estate income | $5,000–$30,000 | 15% |
| HSA (medical expenses) | Varies | 10% |
The Power of Multiple Income Streams
| Scenario | Portfolio Needed | Monthly from Portfolio |
|---|---|---|
| Portfolio only ($70K spending) | $1,750,000 | $5,833 |
| Portfolio + Social Security ($30K SS) | $1,000,000 | $3,333 |
| Portfolio + SS + $15K part-time | $625,000 | $2,083 |
| Portfolio + SS + part-time + rental income | $375,000 | $1,250 |
Adding just Social Security and modest part-time work can cut your required portfolio in half.
#Factors That Change Your Number
Cost of Living by Region
Where you retire dramatically affects how much you need:
| Region | Annual Cost of Living | Retirement Need (25×) |
|---|---|---|
| Rural South/Midwest | $35,000–$45,000 | $875,000–$1,125,000 |
| Mid-sized city | $45,000–$65,000 | $1,125,000–$1,625,000 |
| Major metro (Atlanta, Denver) | $60,000–$85,000 | $1,500,000–$2,125,000 |
| High-cost city (NYC, SF, Boston) | $85,000–$130,000 | $2,125,000–$3,250,000 |
| Abroad (Portugal, Thailand, Mexico) | $20,000–$40,000 | $500,000–$1,000,000 |
Social Security Optimization
Each year you delay claiming Social Security past age 62 increases your benefit:
| Claiming Age | Monthly Benefit ($100K earner) | Annual Benefit | Lifetime Extra (vs. 62) |
|---|---|---|---|
| 62 | $1,750 | $21,000 | — |
| 65 | $2,250 | $27,000 | +$72,000 by age 80 |
| 67 (full) | $2,700 | $32,400 | +$114,000 by age 80 |
| 70 (max) | $3,350 | $40,200 | +$96,000 by age 80 |
The breakeven age for waiting until 70 vs. 62 is roughly age 80. If you expect to live past 80 (average life expectancy is 78–82), delaying is usually the better financial decision.
Inflation's Impact
At 3% average inflation, purchasing power erodes significantly:
| Today's Dollars | In 10 Years | In 20 Years | In 30 Years |
|---|---|---|---|
| $50,000 | $67,196 | $90,306 | $121,363 |
| $75,000 | $100,794 | $135,459 | $182,044 |
| $100,000 | $134,392 | $180,611 | $242,726 |
This is why you must plan in today's dollars and use real (inflation-adjusted) returns. A "$1M retirement fund" in 2026 will have the purchasing power of only $552,000 in 2046.
The Retirement Spending Smile
Retirees don't spend at a constant rate. Research shows a "spending smile" pattern:
| Phase | Ages | Spending Level | Activities |
|---|---|---|---|
| Go-Go Years | 60–70 | High (110%) | Travel, dining, hobbies, home projects |
| Slow-Go Years | 70–80 | Moderate (90%) | Fewer trips, more local activities |
| No-Go Years | 80+ | Lower (75–80%) | Reduced mobility, simpler lifestyle |
| End of Life | Final 2–3 years | Very High (150%+) | Medical, long-term care costs |
Budget more for the first decade and less for the middle years. But always maintain a reserve for end-of-life healthcare costs.
#Three Withdrawal Strategies Compared
Strategy 1: Fixed 4% (Trinity Study)
Withdraw 4% year one, adjust for inflation annually.
- Pros: Simple, predictable income
- Cons: Ignores market conditions, may overspend in downturns
- Best for: Conservative retirees who want simplicity
Strategy 2: Dynamic Guardrails (Guyton-Klinger)
Set upper and lower guardrails around a base withdrawal rate:
| Condition | Action | Example |
|---|---|---|
| Portfolio grows 20%+ above plan | Raise spending 10% | $40K → $44K |
| Portfolio drops 20%+ below plan | Cut spending 10% | $40K → $36K |
| Normal range | Keep current level | $40K stays |
- Pros: Adapts to markets, higher initial withdrawal (5%)
- Cons: Income fluctuates, requires discipline during cuts
- Best for: Flexible retirees comfortable with variable income
Strategy 3: Bucket Strategy
Divide portfolio into three time-horizon buckets:
| Bucket | Time Horizon | Assets | Purpose | Amount |
|---|---|---|---|---|
| 1 | 0–2 years | Cash, money market | Near-term expenses | $80K–$120K |
| 2 | 3–10 years | Bonds, bond funds | Medium-term growth | $200K–$400K |
| 3 | 10+ years | Stocks, index funds | Long-term growth | Remainder |
- Pros: Protects against sequence-of-returns risk, reduces panic selling
- Cons: More complex to manage, cash drag
- Best for: People who worry about market crashes in early retirement
#Sequence-of-Returns Risk: The Retirement Killer
The order of your investment returns matters much more in retirement than during accumulation. Two retirees with identical average returns can have drastically different outcomes:
| Year | Scenario A (bad start) | Scenario B (good start) |
|---|---|---|
| 1 | -20% | +20% |
| 2 | -10% | +15% |
| 3 | +5% | +10% |
| 4 | +15% | +5% |
| 5 | +20% | -10% |
| 6 | +10% | -20% |
| Average | +3.3% | +3.3% |
| Portfolio after $40K/yr withdrawals | $670,000 | $850,000 |
Same average returns. Same withdrawals. But the person who experienced bad returns first ended up with $180,000 less. This is why cash reserves and the bucket strategy matter so much in early retirement.
#How to Close the Gap
If your current savings fall short of your target:
Increase Savings Rate
| Extra Monthly Savings | In 10 Years | In 15 Years | In 20 Years |
|---|---|---|---|
| $250 | $43,000 | $79,000 | $130,000 |
| $500 | $86,000 | $158,000 | $260,000 |
| $1,000 | $173,000 | $317,000 | $521,000 |
| $2,000 | $346,000 | $634,000 | $1,041,000 |
Assumes 7% real returns.
Delay Retirement by 2–3 Years
Working 2–3 extra years has an outsized impact:
| Factor | Impact |
|---|---|
| Extra savings | +$50K–$150K |
| Fewer drawdown years | -$100K–$200K needed |
| Higher Social Security | +$4,000–$6,000/year for life |
| Employer healthcare | Save $15K–$25K/year |
| Net impact | $200K–$500K effective improvement |
Reduce Expenses
Each $10,000 reduction in annual retirement spending lowers your target by $250,000 (at 4% SWR). This is often the fastest lever — cutting $500/month from your budget is equivalent to saving an extra $150,000.
Embrace Barista FIRE
Even $15,000/year from part-time work reduces your portfolio withdrawal need by $375,000 at the 4% rule. This is "Barista FIRE" — and it's the most practical option for many people.
Read our complete guide to financial independence →
#Your Action Plan
- 1Calculate your expected annual expenses in retirement (use today's dollars)
- 2Add healthcare costs ($10K–$25K/year depending on age and situation)
- 3Multiply total by 25 (or 28–33 for early retirement)
- 4Subtract expected Social Security, pensions, and any other income
- 5The remainder is what your portfolio must provide
- 6Compare to your current net worth to find the gap
- 7Use our calculator to model your timeline and scenarios
Calculate your retirement number →
Track your current net worth →
Run compound growth projections →
Last updated: February 13, 2026