This is the question that keeps people up at night — and the reason most of them can't answer it isn't a lack of effort, it's a lack of a clear framework. The good news: there is a framework, it's not complicated, and once you run the numbers, you'll either feel relieved or appropriately motivated. Either way, you'll know where you stand.
The bad news is there's no single magic number that works for everyone. Your retirement number depends on how you want to live, when you want to stop working, how long you might live, and what income sources you'll have outside of your savings. But we can nail down a solid estimate — and that's exactly what this page walks you through.
The Foundation: The 4% Rule
Almost every retirement estimate is built on one bedrock concept: the 4% rule. Developed from research by financial planner William Bengen in 1994 and later reinforced by the Trinity Study, it says this: if you withdraw 4% of your portfolio in year one of retirement, then adjust that amount for inflation each year after, your portfolio has historically lasted at least 30 years — through recessions, crashes, and everything else the market has thrown at it.
The 4% Rule — Your Starting Point
To find your retirement target, flip the 4% withdrawal rate around. If 4% of your portfolio equals your annual expenses, then your target is simply 25 times your annual expenses.
Target Nest Egg = Annual Expenses × 25Need $60,000/year to live? Your target is $1,500,000. Need $80,000/year? Your target is $2,000,000. It really is that simple as a starting estimate.
This doesn't mean you'll definitely be fine — it's a starting estimate, not a guarantee. But it's the most battle-tested rule of thumb in retirement planning, and it gives you a concrete target to aim for. We'll refine it further below.
"When I first heard '25 times your expenses,' I panicked. Then I realized that included Social Security as income — which reduced what I needed to draw from savings dramatically. Run the full numbers before you despair. The picture is usually better than the first glance suggests."
Step 1: Estimate Your Annual Retirement Expenses
The most important input in any retirement calculation is how much you'll actually spend each year in retirement. Most people underestimate this — but most financial planners also overestimate it. Here's what the research actually shows: spending in retirement tends to follow a "smile" pattern. It's highest in the early "go-go" years (travel, hobbies, bucket list), dips in the quiet middle years, then rises again in late retirement as healthcare costs climb.
A common rule of thumb is that you'll need 70–80% of your pre-retirement income — but this varies enormously based on your lifestyle. The better approach: build up from actual spending categories.
| Expense Category | Typical % of Budget | Notes |
|---|---|---|
| Housing (mortgage/rent, taxes, insurance, maintenance) | 25–35% | Lower if mortgage is paid off at retirement |
| Healthcare (premiums, copays, out-of-pocket) | 10–15% | Rises significantly after age 75 |
| Food & Groceries | 10–15% | Often increases — more meals at home |
| Transportation | 10–14% | Usually drops — no commute costs |
| Travel & Leisure | 5–15% | Highly personal — biggest wildcard |
| Utilities & Phone | 5–8% | Relatively stable |
| Gifts & Family Support | 3–8% | Often underestimated by retirees |
| Miscellaneous | 5–10% | Always budget a buffer |
Whether you enter retirement with a paid-off mortgage is one of the single biggest factors in your retirement number. A paid-off home can reduce your annual expenses by $15,000–$30,000 per year — which at 25×, means your target nest egg drops by $375,000 to $750,000. If you're close to retirement and still carrying a mortgage, this deserves serious attention.
Step 2: Account for Your Income Sources
Your retirement savings don't have to cover 100% of your expenses. Most retirees have other income streams — and these reduce the amount you need to draw from your portfolio. The most common sources:
| Income Source | Type | Average Annual Amount | Key Consideration |
|---|---|---|---|
| Social Security | Guaranteed | $18,000–$36,000 | Claiming age dramatically affects amount |
| Pension (if applicable) | Guaranteed | Varies widely | Increasingly rare in private sector |
| Part-time Work | Variable | $10,000–$30,000 | Many retirees work 5–10 years part-time |
| Rental Income | Variable | $8,000–$24,000 | Requires active management |
| Annuity Income | Guaranteed | Varies by purchase size | Useful for covering fixed expenses |
| Dividends / Interest | Passive | Varies | Depends on portfolio allocation |
The critical formula is simple: the income you need from savings = annual expenses minus all other income. That's the number you multiply by 25.
$56,000 × 25 = $1,400,000 target
The Retirement Number Calculator
Put your own numbers in below to get a personalized estimate. The calculator uses the 4% rule as its foundation and accounts for your other income sources, inflation, and time horizon.
Real-World Scenarios: What Does Retirement Actually Cost?
To give you a sense of how the numbers look across different lifestyles, here are three common retirement scenarios using the 4% rule — before accounting for Social Security.
Remember these are gross numbers — your actual required portfolio is reduced dollar-for-dollar by Social Security and any other guaranteed income. At $24,000/year from Social Security, each scenario above drops by $600,000 in required savings (24,000 × 25).
The Portfolio Growth Chart
This chart shows how a portfolio grows over time based on your current savings and annual contributions — and where it needs to land by retirement.
The Social Security Decision: When to Claim
Social Security is one of the most valuable and most misunderstood retirement assets most Americans have. The decision of when to claim it has a massive impact on your lifetime income — and it's essentially irreversible.
Delaying Social Security from 62 to 70 requires you to fund those 8 years yourself. The break-even point — where total lifetime benefits equalize — is typically around age 78–80. If you expect to live past 80 (statistically likely for healthy retirees), delaying to 70 is almost always the better financial choice. Check your personal benefit estimate at ssa.gov/myaccount.
Healthcare: The Wildcard Everyone Underestimates
Fidelity's annual estimate suggests a couple retiring at 65 today needs roughly $315,000 set aside purely for healthcare costs through retirement — and that's with Medicare coverage. Before Medicare kicks in at 65, if you retire early, you're on your own for coverage. This is one of the most financially dangerous gaps in early retirement planning.
Budget $800–$1,200 per month per person for healthcare before Medicare, and $400–$700 per month per person after Medicare (for premiums, copays, dental, vision, and long-term care insurance). Don't let healthcare be a surprise — it's the single most common budget-buster in retirement.
The 5 Biggest Retirement Planning Mistakes
Your Retirement Readiness Checklist
"The number is big. It's supposed to be. But here's what I want you to take away: every dollar you save and invest today is worth dramatically more than a dollar saved ten years from now — because of compound growth. You don't have to hit the number all at once. You build it, year by year, decade by decade. The most important thing is to start, stay consistent, and not panic when markets drop. Time is your most powerful asset."