How Much Do I Need to Retire? (The Real Answer)
If you have ever asked yourself some version of "am I even on track for retirement?" you are in the majority. About one in eight of the people who fill out the questionnaire before our first meeting use the phrase "make sure" or "on track" verbatim. They are not asking for a lecture on compound interest. They are asking: is what I am doing enough?
The question gets harder because the internet's answer is some flavor of nonsense. Half the headlines say $1 million. The other half say $1 million is laughably low. A few say it depends, then refuse to do the math.
The answer is solvable. It just requires one number about yourself that most people have never bothered to figure out.
I am a CERTIFIED FINANCIAL PLANNER® (CFP®) professional in Nashville and the question I get the most is some version of "what is my number?" Here is the framework I actually use. It sits inside the bigger picture I lay out in the retirement planning guide for millennials; this post is just about the number.
TL;DR
Your retirement number is about 25 times your expected annual spending in retirement, in today's dollars.
This comes from the 4 percent rule, a research-backed safe withdrawal rate originally published in the 1990s Trinity Study [1].
The number is driven by spending, not income. Your income today is almost irrelevant.
The same person can need $1 million or $3 million depending on lifestyle. The variables that move the answer most: spending level, retirement age, Social Security claiming strategy, and whether the house is paid off.
You can run your own number in 15 minutes. The exercise is at the bottom of this post.
The 25x Rule, Explained
In 1998, three finance professors at Trinity University published a paper that became the retirement math standard. They tested historical market returns to find a safe withdrawal rate that would survive a 30-year retirement on a stock-bond portfolio [1].
Their answer: about 4 percent in the first year, adjusted upward for inflation each year after, would have worked in nearly every historical 30-year window tested. Newer research from Morningstar has suggested 3.7 percent depending on assumptions [2]. The exact number is debatable. The framework holds.
Working it backward: if you can safely pull 4 percent a year from your portfolio, then your portfolio needs to be 25 times what you plan to spend.
$40,000 a year of spending requires $1 million.
$60,000 a year requires $1.5 million.
$80,000 a year requires $2 million.
$100,000 a year requires $2.5 million.
$120,000 a year requires $3 million.
That is in today's dollars. The number scales with inflation, but the multiplier stays roughly the same.
Why the Generic $1 Million Number Is Wrong
The "$1 million to retire" headline is a relic from when household incomes were lower, mortgages were paid off in retirement, and pensions still existed. None of those three things are true for most millennials.
The number is also wrong because it ignores the variable that matters most: you.
Two hypothetical profiles:
Household A: Couple, mid-50s. House paid off in five years. Both want to spend their 60s traveling and seeing grandkids. Projected annual spending: $75,000. Their number: about $1.9 million.
Household B: Single, mid-40s. Mortgage into retirement. Wants a sailboat. Lives near a major city. Projected annual spending: $130,000. Their number: about $3.25 million.
Same age range, same professional class, very different numbers. The variable doing the work is spending, not income, not assets, not retirement age.
Your retirement number is driven by what you are going to do in retirement. Until you have spent ten minutes thinking about that, the math is going to feel arbitrary.
Variables That Change Everything
Five inputs move your number most. In rough order of impact:
1. Annual spending in retirement. Already covered. A $20,000 swing in annual spending swings your retirement target by $500,000. The single biggest input.
2. Retirement age. For early retirees, planners typically use 3.3 percent as the safe withdrawal rate, which moves the multiplier from 25x to closer to 30x [3].
3. Social Security. For most millennials, Social Security replaces about 40 percent of pre-retirement income for the average earner [4]. A $30,000 annual benefit shaves around $750,000 off your target portfolio. Even discounting by 20 percent for prudence, the offset is real.
4. Is the house paid off? A paid-off house usually cuts $20,000 to $40,000 a year off projected spending, which reduces your target by $500,000 to $1 million.
5. Asset allocation in retirement. More conservative allocations support lower withdrawal rates. More aggressive allocations support higher rates but with higher sequence-of-returns risk in the first decade of retirement. If you are still building the portfolio underneath all of this, start with the complete guide to investing for beginners.
Other inputs (healthcare, long-term care, kids' continued dependence, second-home plans) matter at the margin. These five move the answer most.
A Better Way to Think About Your Number
I would generally recommend you stop chasing a fixed retirement number and start tracking two ratios over time.
Ratio 1: Savings rate. What percentage of your gross income are you saving for retirement, including employer match? A reasonable target for millennials is 15 percent. Higher if you got a late start.
Ratio 2: Your portfolio as a multiple of your annual spending. Take your current investment balance and divide by your current annual spending. A 35-year-old with $200,000 invested and $80,000 of spending has a 2.5x ratio. A 50-year-old with $1.2 million and $80,000 of spending has a 15x ratio.
The first ratio tells you whether you are saving enough. The second tells you how close you are to financial independence. Both are more useful day to day than a fixed dollar target because they adjust to your reality automatically.
What To Actually Do: Run Your Own Numbers
This is the 15-minute exercise. Do it on a Saturday morning with a coffee. You need:
Your last three months of credit card and bank statements.
A piece of paper or a spreadsheet.
Your Social Security statement from ssa.gov (free).
Step 1: Estimate your retirement annual spending. Take your current annual spending. Subtract what disappears in retirement (mortgage if paid off, savings contributions, payroll taxes, work-related costs). Add what goes up (healthcare at $15,000 to $20,000 per person per year before Medicare [6], travel, hobbies). Most people land at 85 percent of their current pre-retirement spending.
Step 2: Pull your Social Security estimate. Log in to ssa.gov and find your "Estimated Monthly Benefit at Full Retirement Age." Multiply by 12. For planning, use 75 percent of that number to be conservative, per the 2025 Trustees Report projections [7].
Step 3: Calculate your portfolio target. Subtract the annual Social Security estimate (the 75 percent version) from your projected annual spending. That gap is what your portfolio has to generate. Multiply by 25.
Example:
Projected annual spending: $80,000
Social Security at 80 percent of FRA benefit: $24,000
Portfolio needs to generate: $56,000
Portfolio target: $56,000 × 25 = $1.4 million
Step 4: Compare to where you are. Add up all your retirement accounts and any taxable investing. The gap between your current balance and your target, divided by years until retirement, tells you how much annual contribution and growth your plan needs.
If the gap looks impossible, do not panic. Most people running this exercise for the first time have an "oh no" moment. The fix is some combination of saving more, working a little longer, or adjusting retirement spending. Often all three.
What This Is Really About
The retirement number, despite all the spreadsheet work, is mostly about whether the math says you get to live the way you want to live in your sixties and seventies. Travel to the places you have always wanted to see. Time with the people who matter. The freedom to say yes to something or no to something based on what you want, not what you can afford.
The point of running your number is rarely about feeling anxious about the gap. The point is to know the price tag for the life you actually want, so you can decide what you are willing to do to fund it. Every dollar you save toward this is a vote for the life you actually want.
FAQ
Is the 4 percent rule still valid? Yes, with caveats. Morningstar's recent research suggested 3.7 percent as a more conservative starting point given current bond yields and expected returns [2]. The Trinity Study principle holds up across decades of follow-up work. The point of the rule is to give you a defensible target multiplier, not to lock in 4.0000 percent forever.
Should I plan to spend more or less in retirement? Most retirees end up spending about 85 percent of their pre-retirement income. The first 10 years of retirement (the "go-go years") tend to be highest. The middle years drop. The final years often spike due to healthcare. Plan for a U-shape, not a flat line.
What if I want to retire early at 50 or 55? Use a multiplier of 28 to 30x instead of 25x. The longer your retirement, the lower the safe withdrawal rate. Early retirement also means no Medicare until 65, so healthcare costs in the gap years are a real budget item that has to be planned for.
Should I count on Social Security at all? Yes. The 2025 Trustees Report projects 77 percent of scheduled benefits will be payable from ongoing tax revenue after the OASI trust fund depletes in 2033, absent Congressional action [7]. Conservative planning uses 75 percent of your projected benefit. Do not zero it out.
References
Cooley, Hubbard, Walz, "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable" (Trinity Study). https://www.aaii.com/journal/article/retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable
Morningstar, "The State of Retirement Income." https://www.morningstar.com/lp/the-state-of-retirement-income
Bengen, William, "Determining Withdrawal Rates Using Historical Data." Journal of Financial Planning. https://www.financialplanningassociation.org/article/journal/MAY94-determining-withdrawal-rates-using-historical-data
Social Security Administration, "Estimated Average Monthly Social Security Benefits Payable." https://www.ssa.gov/oact/cola/AWI.html
J.P. Morgan Asset Management, "Guide to Retirement 2025." https://am.jpmorgan.com/us/en/asset-management/adv/insights/retirement-insights/guide-to-retirement/
Fidelity, "Retiree Health Care Cost Estimate." https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
Social Security Administration, "2025 OASDI Trustees Report Summary." https://www.ssa.gov/oact/trsum/
IRS, "401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500." https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
Vanguard, "How America Saves 2024." https://institutional.vanguard.com/insights-and-research/report/how-america-saves.html
Federal Reserve Board, "Survey of Consumer Finances." https://www.federalreserve.gov/econres/scfindex.htm
Employee Benefit Research Institute, "2024 Retirement Confidence Survey." https://www.ebri.org/retirement/retirement-confidence-survey
Fidelity Investments, "Building Financial Futures Q1 2024." https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/Building-Financial-Futures.pdf
SSA, my Social Security Account. https://www.ssa.gov/myaccount/
T. Rowe Price, "Retirement Savings Benchmarks." https://www.troweprice.com/personal-investing/resources/insights/retirement-savings-by-age.html
Federal Reserve Bank of St. Louis, FRED, S&P 500 historical returns. https://fred.stlouisfed.org/series/SP500
Bureau of Labor Statistics, Consumer Expenditure Surveys. https://www.bls.gov/cex/
I wrote a free guide called The Money Guide Nobody Gave You that walks through all five steps of building the financial foundation that gets you to a retirement number you can actually fund. Grab it here:
Or visit melbymoney.com/money-guide.
About The Author
Shaun Melby, CFP® provides fee-only financial planning and investment management services in Nashville, TN through his company Melby Wealth Management. Shaun has over 15 years of experience as a financial advisor in Nashville. Shaun created Melby Money to educate the public about finances.
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