How much do you need to retire?

"How much do I need to retire?" sounds impossibly big, but it reduces to a surprisingly simple question: how much income do you want in retirement, and how large a nest egg does that require? Two well-known rules turn it into an actual number.

Start with the income you want

Everything begins with your desired annual spending in retirement. A common starting point is to assume you will need around 70–80% of your pre-retirement income, since some costs (commuting, saving for retirement itself) fall away. If you earn $80,000 now, that is roughly $56,000–$64,000 a year in retirement — though your real number depends entirely on the life you want.

The 25x rule

The fastest estimate: multiply your desired annual spending by 25.

Want $60,000 a year from your savings? You would target roughly $1.5 million. Want $40,000? About $1 million. It is a blunt instrument, but it anchors the conversation in a real figure instead of anxiety.

The 4% rule, and why it exists

The 25x rule comes from the 4% rule: research suggested that withdrawing about 4% of a diversified portfolio in your first year of retirement, then adjusting for inflation each year, gives a good chance the money lasts around 30 years. It is a guideline, not a guarantee — real safe-withdrawal rates depend on markets, fees, how long you live, and how flexible you can be in down years. But it is a sound planning starting point.

What changes your number

• Social Security and pensions. These provide income you do not have to fund from savings, which lowers the nest egg you need. Estimate them and subtract from your target spending.
• When you retire. Retiring earlier means more years to fund and fewer years to save — both push the number up.
• Inflation. Prices rise over decades, so plan in "real" (inflation-adjusted) terms and keep investments that outpace inflation.
• Health care and lifestyle. These are the biggest wild cards; err toward a cushion.

The most important lever: time

Because of compounding, when you start matters more than almost anything. As our compound interest guide shows, contributions made in your twenties and thirties do the heaviest lifting. If your number looks daunting, the answer is rarely "save an impossible amount" — it is "start now and let time work."

The bottom line

Estimate the annual income you want, subtract guaranteed sources like Social Security, and multiply what is left by 25 for a target nest egg. Then use the retirement calculator to see whether your current savings and contributions get you there — and adjust while you still have decades to act.

Educational information only, not financial or investment advice. Investing involves risk, including possible loss of principal. The 4%/25x rules are guidelines, not guarantees.