How much money do I need to retire?
In one paragraph
The most widely used benchmark is 25 times annual expenses — enough to support a 4% annual withdrawal rate indefinitely. A household spending $60,000 per year needs roughly $1.5 million, though the right number depends heavily on retirement age, Social Security income, and spending flexibility.
What this actually means
The 25x rule gives a fast, defensible starting estimate: multiply annual spending by 25 to arrive at a target portfolio size. A household spending $80,000 a year targets $2 million. The math flows from the 4% rule — at that withdrawal rate, a diversified portfolio has historically lasted through 30-year retirements in nearly all historical scenarios.
But the 25x shortcut hides important variables that move the number significantly in either direction.
Social Security changes the picture. If Social Security will cover $24,000 of a $72,000 annual budget, only $48,000 needs to come from the portfolio — dropping the target from $1.8 million to $1.2 million. Delaying claiming from 62 to 70 increases the monthly benefit by roughly 76%, which can permanently reduce portfolio dependence.
Retirement age matters more than most savers realize. Retiring at 50 requires a portfolio to last 40–45 years, not 30. That longer horizon makes 4% riskier; many planners suggest 3–3.25% for early retirees, which pushes the multiplier to 30–33x. Retiring at 67 with a shorter horizon allows slightly more aggressive initial withdrawal rates.
Healthcare is the most underestimated line item. Before Medicare at 65, retirees carry the full cost of private insurance — easily $800–1,500 per month per person at current market rates. Long-term care costs average $54,000–$108,000 per year for facility care. Including both in projections often adds $200,000–$500,000 to the target.
Lifestyle assumptions need honest scrutiny. Early retirement research shows spending often decreases in the "slow-go" years (70s) and "no-go" years (80s), providing natural relief — but unexpected medical expenses can offset this entirely.
The most rigorous approach: model multiple scenarios (base case, bear market, extended longevity) using a Monte Carlo simulation, ideally with a fee-only financial planner. The number that comes back is a range, not a point estimate — and building in a modest margin above the midpoint is the practical way to sleep at night.
