How much do you need to retire?
The most durable answer to this question comes from the 4% safe withdrawal rate, drawn from William Bengen's 1994 study of US market history and tested further by the 1998 Trinity Study. The rule: multiply your expected annual retirement expenses by 25. That is your target retirement number.
If you expect to spend $50,000 per year in retirement, you need $1.25 million. At $80,000, you need $2 million. This calculator applies this formula automatically and shows you the gap — or surplus — between where you are heading and where you need to be.
The 4% rule — what it is and its limits
The 4% rule means you can withdraw 4% of your portfolio in year one of retirement, then adjust that dollar amount for inflation each subsequent year. The Trinity Study found this withdrawal rate survived 30-year retirement periods across virtually all historical market scenarios, including the Great Depression.
Limitations to be aware of:
- It was designed for a 30-year retirement. Retiring at 55 means a 40+ year runway — consider 3.5% for longer timelines.
- It assumes a diversified stock/bond portfolio, not cash or CDs.
- Past performance does not guarantee future results, especially with current low bond yields and high equity valuations.
How much should you save each month?
The standard guidance is 15% of gross income, including any employer match. This assumes a roughly 40-year working career starting in your mid-20s.
If you are starting later, the math changes significantly due to compound interest having less time to work. Someone starting at 40 may need to save 25–30% of income to reach the same retirement outcome as someone who started at 25 saving 15%.
The most effective places to put retirement savings, in order:
- 401(k) up to employer match — free money, instant 50–100% return
- HSA (if eligible) — triple tax advantage (deductible contributions, tax-free growth, tax-free withdrawals for medical)
- Roth or Traditional IRA — $7,500/year limit (2026, plus $1,100 catch-up at 50+), choose based on whether you expect higher tax rates now or in retirement
- Max 401(k) — $24,500/year limit (2026, plus $8,000 catch-up at 50+)
- Taxable brokerage — no limits, but no special tax treatment
Retirement savings benchmarks by age
Fidelity Investments publishes widely-referenced age-based retirement savings benchmarks. While no single benchmark works for everyone — income, expenses, location, and retirement goals vary enormously — these targets provide a useful gut-check:
- By age 30: 1× your annual salary saved
- By age 40: 3× your annual salary saved
- By age 50: 6× your annual salary saved
- By age 60: 8× your annual salary saved
- By age 67: 10× your annual salary saved
These benchmarks assume you want to replace roughly 45% of pre-retirement income from savings (with Social Security covering the rest) and maintain your pre-retirement lifestyle. If you plan to spend more in retirement (travel, hobbies, a second home), aim higher. If you plan a lean retirement, lower multiples may be sufficient.
If you are behind the benchmark for your age, do not panic — but do increase your savings rate immediately. Closing a 5-year gap requires approximately doubling your savings rate. The calculator above shows exactly how much you need to contribute to get back on track.
How inflation erodes retirement purchasing power
At 3% annual inflation, prices roughly double every 24 years. If you plan to retire at 65 and live to 90, your expenses in the last year of retirement will be approximately 2.1× what they are in the first year. A monthly budget of $5,000 at age 65 becomes the equivalent of needing $10,500 per month at age 90 just to maintain the same standard of living.
This is why retirement planning must use real (inflation-adjusted) returns, not nominal returns. A portfolio returning 7% with 3% inflation has a real return of approximately 4% — which is what actually determines your purchasing power. Social Security benefits are adjusted annually for inflation (COLA), which partially offsets this effect, but private savings and pensions typically are not.
Social Security — including it in your plan
Social Security is often the largest single income source in retirement for middle-income Americans. The average retired-worker benefit in 2026 is around $2,071/month ($24,852/year). Check your personalised estimate at ssa.gov/myaccount.
Claiming strategy matters enormously: claiming at 62 reduces your benefit by up to 30% compared to waiting until full retirement age (67 for those born in 1960 or later). Waiting until 70 increases your benefit by 8% per year past full retirement age.
Common retirement planning mistakes
Even disciplined savers can fall into traps that undermine their retirement plan. The most costly errors are not about investment selection — they are about overlooking fundamental assumptions.
- Ignoring inflation. A $50,000 annual budget today requires approximately $90,000 in 20 years at 3% inflation. Planning in nominal dollars without inflation adjustment creates a false sense of security.
- Underestimating healthcare costs. Fidelity's 2026 estimate (July 2026) is that a 65-year-old retiring in 2026 will spend an average of $185,500 per person on health care and medical expenses throughout retirement, not counting long-term care. Medicare does not cover everything — dental, vision, hearing, and long-term care are significant out-of-pocket categories.
- Not accounting for taxes in retirement. Traditional 401(k) and IRA withdrawals are taxed as ordinary income. A $1.5 million IRA balance does not give you $1.5 million in spending power. Depending on your withdrawal rate and other income sources, 15–25% could go to federal and state taxes.
- Retiring with debt. Mortgage payments, car loans, or credit card balances in retirement eat into fixed income. Eliminating debt before retirement reduces your required monthly income and gives your portfolio more breathing room.
- Forgetting about sequence-of-returns risk. A bear market in the first few years of retirement can permanently reduce your portfolio's longevity, even if long-term average returns are fine. This is why many planners recommend keeping 1–2 years of expenses in cash or bonds at the start of retirement.
Tax-efficient retirement income strategies
Where you draw income from in retirement matters as much as how much you have saved. A tax-efficient withdrawal strategy can save tens of thousands of dollars over a 25–30 year retirement.
The general order of withdrawals recommended by most financial planners:
- Taxable accounts first — dividends and long-term capital gains are taxed at preferential rates (0%, 15%, or 20%). Long-term gains that fall within taxable income of up to $98,900 for married couples filing jointly ($49,450 single) are taxed at 0% in 2026 (IRS Rev. Proc. 2025-32), so selling appreciated stock in that range is effectively tax-free.
- Tax-deferred accounts (Traditional IRA/401k) second — withdrawals are taxed as ordinary income. Strategic withdrawals to fill lower tax brackets (the 10% and 12% brackets) before claiming Social Security can reduce lifetime taxes.
- Roth accounts last — withdrawals are completely tax-free. Letting Roth assets compound tax-free for as long as possible maximises their value.
Roth conversions in lower-income years (between retirement and claiming Social Security) can shift money from tax-deferred to tax-free, reducing future Required Minimum Distributions and potentially lowering Medicare IRMAA surcharges.
When to consult a financial advisor
A fee-only Certified Financial Planner (CFP) can add significant value in retirement planning — especially for Social Security timing, tax-efficient withdrawal sequencing, Roth conversion strategy, and Medicare planning. The most common scenarios where professional advice is worth the cost:
- You are within 5 years of retirement and need a withdrawal plan
- You have significant assets in both Roth and Traditional accounts and need to optimise the drawdown sequence
- You are married and need to coordinate Social Security claiming strategies
- You have a pension and need to decide between lump-sum and annuity options
- You are a business owner and need to plan for the sale of your business as a retirement asset
Look for fee-only fiduciary advisors at NAPFA.org or the Garrett Planning Network. Avoid commission-based advisors who may recommend products that pay them more rather than what is best for you.
Frequently asked questions
How much do I need to retire?
Multiply your expected annual expenses in retirement by 25 (the 4% rule). To spend $60,000/year you need $1.5M. Use this calculator to see whether your savings rate gets you there by your target retirement age.
What is the 4% rule?
The 4% rule says you can withdraw 4% of your portfolio in year one of retirement, then adjust for inflation annually, with very high confidence of not running out of money over a 30-year period. It comes from William Bengen's 1994 study, tested further by the 1998 Trinity Study, and is the most widely used retirement planning benchmark.
What return rate should I use?
7% nominal (before inflation) is a reasonable baseline for a diversified, stock-heavy portfolio. The S&P 500 has averaged ~10% historically. Use 6% for a mixed stock/bond portfolio, or 5% if you are conservative. The calculator lets you adjust the slider.
Should I include Social Security?
Yes. Enter the monthly amount at full retirement age from your statement at ssa.gov/myaccount, then pick the age you expect to start. The calculator adjusts the amount for that age (less if you start before full retirement age, more if you wait, up to 70), subtracts it from the spending your savings must cover, which lowers your target, and adds it to your projected monthly income once it starts. Your statement assumes current law and that your earnings continue, so a lower figure leaves a margin.
How much should I save each month?
15% of gross income including employer match is the standard starting target. If you are behind, model 20–25%. The calculator's monthly contribution field shows you exactly what you need to contribute to close any gap by your target retirement age.