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How much money do you need to retire? (and what is the 4% rule?)
by financebrain · October 20, 2026
A common starting point: multiply what you expect to spend each year in retirement by 25. If you plan to spend $50,000 a year, that's about $1,250,000. At $80,000 a year, it's $2,000,000.
That multiple comes from the 4% rule. It says you can withdraw 4% of your portfolio in your first year of retirement, raise that amount with inflation each year after, and have a high chance of the money lasting at least 30 years. Withdrawing 4% a year means you need 25 years' worth of spending saved, since 4% is one twenty-fifth.
Start from spending, not a round number
The right target depends on two things: how much you'll spend, and how long it needs to last. A round figure like "a million dollars" might be too much for one person and nowhere near enough for another.
Retirement spending is often lower than spending while you work:
- Work costs disappear: commuting, work clothes, lunches out.
- The mortgage may be paid off.
- Children are usually independent.
- You're no longer saving for retirement itself.
A common rule of thumb puts retirement spending at about 70-80% of what you spent before. It isn't flat over time, though: the early years often cost more (travel, experiences), and later years tend to bring less discretionary spending and higher healthcare costs.
Subtract your other income first
Your savings don't have to cover everything. Social Security or a government pension, a defined benefit pension, rental income or part-time work all reduce how much your portfolio needs to provide. Subtract those first, then multiply what's left by 25.
A worked example
With hypothetical round numbers:
| Step | Amount |
|---|---|
| Expected yearly spending in retirement | $60,000 |
| Minus expected Social Security | -$24,000 |
| Left for savings to cover | $36,000 |
| Multiply by 25 | $900,000 |
Check: 4% of $900,000 is $36,000, the first year's withdrawal. Each later year, the withdrawal rises with inflation.
Where the 4% rule falls short
It's based on historical US market returns, and the future may not look like the past. A 30-year horizon may be too short if you retire early. And it assumes you'll stick to steady inflation-adjusted withdrawals, while real spending moves around. Treat it as a planning benchmark, not a guarantee, and revisit the number as your plans become clearer.
Learn it properly
Finance Brain's How Much Do You Need to Retire lesson, in the Personal Finance course, walks through the 4% rule, estimating retirement spending and counting other income. The same section covers why starting early matters and the main retirement accounts. It ends with a short quiz.
Finance Brain is educational content, not financial advice. This post describes US rules.