Almost everyone planning for retirement wants to know what's "their number" (the size of the nest egg they actually need to retire comfortably). There is no single figure that fits everyone, which is why the headlines that print "$1.5 million" or "$2 million" are close to useless. What you need depends on how much you spend, how long retirement lasts, and how much of your income comes from other sources.
You can get a rough number in about five minutes with one rule, and a far more accurate one by running your own figures. This article covers both: the rule of thumb, why it works, where it breaks down, and how to turn it into a number you can trust.
The fastest way to estimate your number is to multiply your expected annual retirement spending by 25.
Quick math: Your number ≈ annual spending × 25. If you expect to spend $60,000 a year, that's $60,000 × 25 = $1.5 million.
The 25 comes from the other side of the 4% rule, credited to financial planner William Bengen's 1994 research. If you can safely withdraw about 4% of your portfolio in your first year of retirement, your portfolio has to be about 25 times your annual spending. The two rules describe the same relationship from opposite ends. One tells you how much to withdraw, the other how much to save.
That gets you in the ballpark, but it hides one assumption. It treats every dollar you spend as a dollar your portfolio has to provide. For most retirees that isn't true, and that is where the numbers start to move.
The biggest input to your number is how much you will spend, and most people anchor on the wrong figure. They start with their current salary. What matters is your future spending, which usually runs lower than your salary, for a few reasons:
A common shorthand is that retirees need 70–80% of their pre-retirement income. That is a reasonable placeholder, but it is still a guess based on averages. The more reliable approach is to build the number from the bottom up. Add up what you actually expect to spend each month in retirement (housing, food, insurance, travel, hobbies, healthcare, etc.) and annualize it. Give healthcare its own line, because it tends to rise with age: Fidelity estimates a 65-year-old retiring in 2025 will spend about $172,500 on healthcare over the course of retirement. Leave room for the occasional big-ticket item too, like a new roof or a car.
Spending does not hold steady across retirement. Researchers, notably Michael Stein, describe three phases: the "go-go" years, with active, higher discretionary spending on travel and hobbies; the "slow-go" years, a natural taper as you settle down; and the "no-go" years, when discretionary spending falls, but healthcare or care costs can rise. A single flat number hides this arc. It will not ruin your estimate, but real spending usually bends down in the middle and can tick back up at the end.
The raw 25x rule has a flaw. It assumes your portfolio funds every dollar in your spending budget, when in reality, it doesn't. Social Security, a pension, or an annuity pays part of your spending for you, and that part needs no savings behind it. Your portfolio only has to cover the gap between what you spend and what that guaranteed income pays.
Adjusted formula: Portfolio needed ≈ (annual spending − guaranteed annual income) × 25.
Run the same $60,000 spender through it, this time with $30,000 a year from Social Security.
| Approach | Calculation | Portfolio needed |
|---|---|---|
| Raw 25x rule | $60,000 × 25 | $1,500,000 |
| Spending minus Social Security | ($60,000 − $30,000) × 25 | $750,000 |
The guaranteed income did not change the spending. It changed what the portfolio is responsible for. Half the spending now comes from Social Security, so the portfolio target falls by half. A married couple often has two benefit checks, which widens the gap the portfolio does not have to fill and lowers the number again.
This is the line item people leave out, and it is why so many overestimate their number. They size a portfolio to cover spending that their benefits already cover. Subtract the income you have already earned before you trust any number. One caveat on the figure itself: it depends on when you claim. Benefits taken at 62 are permanently reduced, benefits at full retirement age pay the baseline, and benefits delayed to 70 pay more. The Social Security Administration's estimate at ssa.gov gives you the number to plug in, and the claiming age you assume moves the gap your portfolio has to close.
The 25x rule was calibrated for a retirement of about 30 years. At 65, that is a reasonable assumption. Retire at 55, or at 50, and you may be funding 40 years or more, and a portfolio built to last 30 years will not necessarily stretch that far.
Over a longer retirement the safe withdrawal rate has to come down, which pushes the multiple up. A 3.5% rate works out to roughly 29x; a 3.25% rate, closer to 31x. Why the rate falls, and how the market conditions on your retirement date change it, is the subject of our guide to safe withdrawal rates.
| Retirement age / horizon | Rough multiple | On $40k of portfolio spending |
|---|---|---|
| 65, ~30 years | 25x | $1.0M |
| 60, ~35 years | 27–28x | $1.1M |
| 55, ~40 years | 29–31x | $1.2M+ |
The spending figure in that last column is the gap from Step 2, meaning what your portfolio covers after Social Security, not your total spending.
A single multiplier compresses a dozen moving parts into one number. The 25x rule quietly assumes a 30-year retirement, steady spending, no pension, average market returns, and a retiree who never adjusts course. Each of those can break.
Sequence-of-returns risk is the one most people miss. Two retirees with the same average return can end up in very different places depending on when the bad years arrive. A market crash in your first few years of retirement does far more damage than the same crash 15 years later, because you are selling assets to live on while they are down.
Inflation moves the target while you aim at it. Your spending number is not fixed; it grows, and a plan that ignores it can look comfortable today and still fall short over 25 years. Taxes cut in too, because a dollar in a Roth account is worth more than a dollar in a traditional 401(k). And one-time events such as a home sale, an inheritance, a wedding, a large medical bill, never fit the flat annual figure the rule assumes.
Monte Carlo simulation is made for this kind of uncertainty. Rather than assume one average rate of return, it replays your plan against many randomized return sequences and records how often the money lasts to the age you set. The result is a frequency. A plan that survives 870 of 1,000 sequences reports an 87% success rate, not a guarantee. That probability is more useful than a single average, because it tells you how much room for bad luck your plan has. Our Monte Carlo explainer covers the mechanics to help you understand how it runs.
The steps stack into a short process:
The first three steps give you a number to aim at. The fourth tells you whether the number holds up under conditions the rule of thumb cannot see.
There is no universal retirement number, and any headline that prints one is trading accuracy for just that: a headline. Your number is your spending, minus the income you have already secured, multiplied by a factor that reflects how long the money has to last. The 25x rule gets you into the right range in about five minutes, which is all it is meant to do.
Getting from the right range to a number you can act on means running your own figures. Enter your spending, your Social Security estimate, your accounts, and your retirement age, then run a Monte Carlo simulation and read the probability your plan succeeds. That is the number worth trusting, and it takes about as long as reading this article.
Enter your spending, Social Security, and savings, then run a Monte Carlo simulation to see how much you really need for your timeline.
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