How Much Do You Need to Retire?

"How much do I need to retire?" sounds like it needs a financial planner and a spreadsheet. It does not. Two well-worn rules of thumb get you a solid first estimate in a few minutes — and show you which levers actually move the answer.

Start with the income you will need

Retirement math is easier if you flip it around: instead of guessing a lump sum, start with the annual income you will want. A widely used benchmark is 70–80% of your pre-retirement income. You need somewhat less than you earned because you are no longer saving for retirement, commuting, or paying Social Security and Medicare payroll taxes.

So if you earn $80,000 today, a reasonable target is around $60,000 a year in retirement (75%). Adjust up if you plan to travel heavily or expect high health costs, down if your home will be paid off.

Subtract Social Security and other income

You do not have to fund that entire number from your own savings. Social Security replaces a meaningful share — the average retired-worker benefit is around $2,000 a month, and higher lifetime earners receive more. Pensions, rental income, and part-time work count too. Whatever is left after those sources is the "gap" your nest egg has to fill.

If you need $60,000 a year and expect $24,000 from Social Security, your savings only need to produce the remaining $36,000. A benefit estimate makes this concrete.

Turn the gap into a nest egg: the 25x rule

To convert that annual gap into a savings target, multiply it by 25. For $36,000 a year, that is $900,000. The 25x rule is simply the flip side of the famous 4% rule: withdrawing 4% of a portfolio in the first year, then adjusting that dollar amount for inflation each year after, has historically lasted 30 years or more.

The 4% rule, updated

The 4% rule comes from financial planner William Bengen’s 1994 research (his historical "safe" floor was actually closer to 4.7%). More recent forward-looking analysis — including Morningstar’s annual study — suggests a more cautious starting rate near 3.9% for people retiring around 2026, reflecting today’s market valuations and bond yields. A lower rate means a bigger target: at 3.9%, that same $36,000 of income needs about $923,000 rather than $900,000. Treat 4% as a familiar anchor, not a guarantee.

A shortcut: savings milestones by age

If the lump-sum math feels abstract, Fidelity’s age-based benchmarks are a quick gut check. They are expressed as multiples of your current salary:

These assume you start saving around 15% of your pay from age 25 and that Social Security covers part of your income. Being behind is not a crisis — it is a signal to raise your savings rate, delay retirement slightly, or both.

What changes your number

• Retirement age — retiring at 62 instead of 67 means fewer earning years and more years to fund.
• Health care — often the biggest wildcard, especially before Medicare starts at 65.
• Longevity — planning to age 95 is far safer than planning to 85.
• Where you live — state taxes and cost of living can move the target substantially.
• Legacy goals — leaving money to heirs or charity requires a larger balance.

Put your own numbers in

The frameworks above are deliberately simple; your real number depends on your income, current savings, expected return, and time horizon. The nest egg calculator combines the income-replacement and safe-withdrawal methods into one estimate and shows the monthly savings needed to reach it.

From there, check whether your current 401(k) trajectory is on track to land on that target by the time you retire.