The median American household heading into retirement has saved less than $100,000. Most financial planners say you need 25 times your annual expenses to retire comfortably. That gap is enormous — and the first step to closing it is knowing your actual target number.
The 25x Rule: Your Retirement Number in 30 Seconds
The most widely used retirement rule of thumb is simple: multiply your expected annual spending in retirement by 25. That's your target.
If you plan to spend $50,000 per year in retirement, you need $1,250,000. Spend $80,000 a year? You need $2,000,000. Spend $35,000? You need $875,000.
This isn't arbitrary. The 25x rule is derived from the 4% Rule — a guideline from a 1994 study by financial researcher William Bengen that found a portfolio of stocks and bonds could sustain a 4% annual withdrawal rate for at least 30 years. The math works in reverse: 100 ÷ 4 = 25.
How to Calculate Your Retirement Number
Your retirement number depends on two inputs: how much you expect to spend annually in retirement, and how long your money needs to last.
Step 1: Estimate your annual retirement spending
Most people assume they'll spend less in retirement than during their working years, but that's not always true. Healthcare costs rise sharply in your 60s and 70s. Travel spending often increases early in retirement. The rule of thumb is 70–80% of pre-retirement income, but your actual number could be higher or lower.
To get a clean estimate:
- Track your current annual spending (or use your after-tax income minus savings)
- Subtract work-related expenses that will disappear (commuting, work clothes, professional subscriptions)
- Add expected retirement spending increases (healthcare, travel, hobbies)
Step 2: Account for Social Security
Social Security reduces how much your portfolio needs to cover. If you expect $20,000/year from Social Security and plan to spend $60,000/year, your portfolio only needs to cover $40,000/year — a target of $1,000,000 instead of $1,500,000.
You can check your estimated Social Security benefit at ssa.gov. The average 2025 benefit is about $1,907/month, or roughly $23,000/year — but your number depends on your earnings history and the age at which you claim.
Step 3: Apply the 25x rule
Multiply your portfolio-funded spending (after subtracting Social Security) by 25.
| Annual spending | Social Security | Portfolio-funded | Target nest egg |
|---|---|---|---|
| $40,000 | $0 | $40,000 | $1,000,000 |
| $60,000 | $18,000 | $42,000 | $1,050,000 |
| $80,000 | $24,000 | $56,000 | $1,400,000 |
| $100,000 | $30,000 | $70,000 | $1,750,000 |
| $120,000 | $36,000 | $84,000 | $2,100,000 |
Use our Retirement Calculator to model your exact scenario, including different return assumptions and retirement ages.
What the 4% Rule Actually Says
The 4% rule means that in year one of retirement, you withdraw 4% of your portfolio. In subsequent years, you adjust that dollar amount for inflation. Historically, this strategy has survived every 30-year period in US market history — including the Great Depression, the 1970s stagflation, and the dot-com crash.
Important caveats:
- The 30-year assumption matters. If you retire at 55, your money may need to last 40 years. A 3.5% withdrawal rate is safer for longer retirements.
- The original study used US-only data. Some researchers recommend 3.5–3.8% as a more conservative safe withdrawal rate given current interest rate environments and international diversification.
- Sequence of returns risk is real. A bear market in your first 3–5 years of retirement is far more damaging than one later on. Holding 1–2 years of living expenses in cash or short-term bonds mitigates this significantly.
Factors That Move Your Number Up or Down
Not everyone needs the same target. Several factors push your number meaningfully higher or lower.
Factors that increase your target
- Retiring early. A 55-year-old needs their money to last 35–40 years, not 30. The math gets tighter.
- Higher healthcare costs. Fidelity estimates that a 65-year-old couple today will spend $315,000 on healthcare in retirement — and that figure climbs every year.
- No pension. A pension functions like a large bond paying guaranteed income. Without one, your portfolio carries the full load.
- High cost-of-living location. Retiring in a major metro requires a larger nest egg than retiring in a lower-cost region.
Factors that reduce your target
- Strong Social Security income. Delaying your claim to age 70 increases your benefit by about 8% per year past full retirement age.
- A pension or annuity. Each $1,000/month in guaranteed income reduces your portfolio target by approximately $300,000.
- A paid-off mortgage. Eliminating a $1,500–$2,500/month housing payment is worth hundreds of thousands of dollars in retirement savings.
- Part-time work. Even $10,000–$15,000/year in part-time income takes enormous pressure off your portfolio in the early retirement years.
Are You on Track?
Benchmarks give you a quick read on where you stand. Here are the most widely cited retirement savings milestones by age, assuming retirement at 65 and a similar standard of living:
| Age | Savings target |
|---|---|
| 30 | 1× your annual salary |
| 35 | 2× your annual salary |
| 40 | 3× your annual salary |
| 45 | 4× your annual salary |
| 50 | 6× your annual salary |
| 55 | 7× your annual salary |
| 60 | 8× your annual salary |
| 67 | 10× your annual salary |
These come from Fidelity's retirement guidelines and assume steady contributions and average market growth. If you're behind the benchmark for your age, you're not alone — but don't use that as an excuse to delay action. Compound growth works harder the earlier you move.
What to Do If You're Behind
Most Americans are behind on retirement savings. The right response depends on how far behind you are and how many years you have left.
More than 20 years out: Time is your biggest asset. Even moderate increases to your savings rate compound dramatically over two decades. Maxing out a 401(k) ($23,500 in 2025) and a Roth IRA ($7,000) puts $30,500/year to work tax-advantaged — before any employer match.
10–20 years out: Savings rate matters more than investment returns at this stage. A 10% savings rate is unlikely to close a large gap; 20–25% is more realistic. Also re-examine your planned retirement spending — a modest lifestyle adjustment can cut your target by hundreds of thousands.
Under 10 years out: The options are: save aggressively, plan to work a few years longer, reduce planned retirement spending, or delay Social Security to increase your guaranteed income. If you're 50 or older, catch-up contributions are available — an extra $7,500/year in a 401(k) and an extra $1,000/year in an IRA beyond the standard limits.
The Most Common Retirement Planning Mistakes
Underestimating healthcare. Medicare doesn't cover dental, vision, or long-term care. Budget a minimum of $500–$700/month per person on top of Medicare premiums.
Ignoring inflation. At 3% annual inflation, $60,000 of purchasing power today requires $97,000 in 20 years. Your withdrawal amounts must increase each year.
Over-relying on Social Security. The average benefit replaces about 40% of pre-retirement income. For higher earners, the replacement rate is even lower — often 25–35%.
Not planning for sequence of returns risk. Selling stock funds to cover living expenses during a bear market in year two of retirement can permanently impair your portfolio. A cash buffer or bond ladder for the first 2–3 years of withdrawals is worth more than slightly better average returns.
Retiring too early without running the numbers. Retiring at 60 instead of 65 doesn't just shorten your savings window by 5 years — it extends the period your portfolio must fund by the same amount. That swing can change your required nest egg by 30–40%.
Bottom Line
Your retirement number is personal, but the formula is universal: estimate annual retirement spending, subtract guaranteed income sources like Social Security or a pension, multiply the remainder by 25. That's your target.
For most households earning a median income, the target lands between $800,000 and $1.5 million. Getting there requires starting early, saving consistently, and keeping spending in check — before and during retirement.
The numbers feel overwhelming until you break them into monthly savings targets. A 30-year-old investing $800/month in a diversified portfolio earning 7% annually reaches just over $1,000,000 by age 65. That same $800/month started at age 40 yields about $490,000 — less than half, from just a 10-year delay.
The best time to know your number was 10 years ago. The second best time is today.
→ Calculate your retirement number with the Retirement Calculator