Key takeaways
- Start from spending, not income. Your retirement number is built on what you'll spend each year, not what you earn today.
- The 25× rule is the quick estimate: multiply annual spending by 25 (the inverse of a 4% withdrawal rate) to get a portfolio target.
- Social Security and pensions shrink the number a portfolio has to cover — subtract them from spending before you multiply.
- Inflation means your future spending is higher than today's; plan in today's dollars and let a real (after-inflation) return do the work.
- The 25× figure is a pre-tax target. Traditional-account balances are worth less after tax, so your account mix matters.
Start with spending, not a magic number
Most people ask "how much do I need to retire?" hoping for a single dollar figure — a million, two million, some round number. But there is no universal answer, because the real driver is intensely personal: how much you spend in a year. A couple who spends $45,000 a year needs a fraction of what a couple spending $120,000 needs, even if both retire at the same age.
So the first job is to estimate your retirement spending, which is not the same as your spending today. Some costs fall — you stop saving for retirement, the mortgage may be paid off, commuting and work clothes disappear, and the kids are (hopefully) independent. Others rise — health care, travel in the early "go-go" years, and eventually long-term care. A common planning shortcut is to assume you'll spend 70–85% of your pre-retirement income, but the honest approach is to build a rough budget of what your life will actually cost.
The 25× rule: turning spending into a target
Once you have an annual spending figure, the fastest way to a portfolio target is the 25× rule: multiply your annual spending by 25. Spend $60,000 a year? Your target is roughly $1.5 million. Spend $40,000? About $1 million.
Where does 25 come from? It's simply the inverse of the 4% safe withdrawal rate. If you can safely withdraw 4% of a portfolio in the first year and adjust for inflation thereafter, then 1 ÷ 0.04 = 25 years of spending is the size of portfolio you need. Prefer a more conservative 3.33% withdrawal? Multiply by 30 instead. The FIRE number calculator runs this exact math and lets you dial the withdrawal rate up or down to see how the target moves.
| Annual spending | At 4% (25×) | At 3.5% (~29×) | At 3.33% (30×) |
|---|---|---|---|
| $40,000 | $1.00M | $1.14M | $1.20M |
| $60,000 | $1.50M | $1.71M | $1.80M |
| $80,000 | $2.00M | $2.29M | $2.40M |
| $120,000 | $3.00M | $3.43M | $3.60M |
Subtract Social Security and pensions first
Here's the step people forget, and it's the one that makes retirement far more attainable than the headline number suggests. Your portfolio doesn't have to cover all of your spending — only the part that other income doesn't.
Suppose you'll spend $60,000 a year, and Social Security will pay you and your spouse a combined $30,000 a year. Your portfolio only needs to cover the remaining $30,000 gap. Apply the 25× rule to the gap, not the whole: 25 × $30,000 = $750,000, not $1.5 million. Social Security just cut your target in half. A pension, annuity, or rental income works the same way — each dollar of reliable outside income is a dollar your portfolio doesn't have to generate.
This is why when you claim Social Security matters so much: delaying from 62 to 70 can raise your benefit by more than 75%, shrinking the gap your savings must fill. You can compare claiming ages with the Social Security claiming age calculator.
Don't let inflation fool you
A number that looks huge today will look ordinary in 30 years, because inflation quietly erodes what a dollar buys. At 3% inflation, prices roughly double every 24 years — so $60,000 of spending today becomes about $120,000 of spending by the time a 35-year-old retires.
The clean way to handle this is to plan in today's dollars and use a real (after-inflation) rate of return for your projections. If you expect 7% nominal growth and 3% inflation, plan around a ~4% real return. That keeps every figure in money you understand today, and the 25× target already bakes in inflation-adjusted withdrawals. To see how much purchasing power inflation strips away over time, run the inflation impact calculator.
Will your savings actually get there?
Knowing the target is half the battle; the other half is whether your current savings and contributions will reach it in time. Two levers dominate: how much you save each year and how many years it compounds. A 25-year-old saving 15% of income has a far easier path than a 45-year-old starting from zero, because decades of compounding do most of the heavy lifting.
Your savings rate — the share of income you set aside — is the single biggest predictor of when you can retire, and it works from both ends: a higher rate means more going in and a lower spending level to sustain. The savings rate & FI calculator turns your rate into a years-to-independence estimate, and the compound growth calculator shows how a given monthly contribution grows over the decades.
The number is pre-tax — your account mix matters
The 25× target quietly assumes your withdrawals are what you get to spend. But a dollar in a traditional 401(k) or IRA is taxed as ordinary income when you withdraw it, so a $1.5 million pre-tax balance might only fund $1.2–1.3 million of real spending. A dollar in a Roth is tax-free, and a dollar in a taxable brokerage is taxed only on its gains.
Two people with identical $1.5 million balances can have very different sustainable spending depending on where that money lives. That's why it pays to understand the different account types and to think about the order you draw them down. If most of your savings is pre-tax, consider padding your target to account for the future tax bill.
Frequently asked questions
Is $1 million enough to retire?
It depends entirely on your spending and other income. At a 4% withdrawal rate, $1 million supports about $40,000 a year from the portfolio. Add Social Security and that might fund a comfortable retirement for a modest-spending household — but it would fall short for someone spending $100,000 a year.
How does the 25× rule work?
Multiply the annual spending your portfolio must cover by 25. It's the inverse of the 4% withdrawal rate: 1 ÷ 0.04 = 25. For a more conservative plan, use 30× (a 3.33% rate). Subtract Social Security and pensions from spending before you multiply, since those reduce what your savings must provide.
Should I count Social Security in my retirement number?
Yes. Reliable outside income lowers the amount your portfolio must generate. If you spend $60,000 and Social Security covers $30,000, your portfolio only needs to cover the $30,000 gap — roughly $750,000 at a 4% rate rather than $1.5 million.
Does the retirement number account for taxes?
The 25× figure is a pre-tax target. Withdrawals from traditional accounts are taxed as income, Roth withdrawals are tax-free, and taxable-account withdrawals are taxed only on gains. If most of your savings is pre-tax, pad the target to cover the future tax bill.
How do I plan for inflation?
Plan in today's dollars and use a real (after-inflation) rate of return — for example, 4% real if you expect 7% growth and 3% inflation. The 25× target already assumes your withdrawals rise with inflation each year, so your spending keeps its purchasing power.
Find your retirement number
Planomy models your spending, savings, Social Security, and taxes together — so "how much do I need?" becomes a plan you can track. Free, private, and running entirely in your browser.