How Much Do I Need to Retire? Start With Spending, Then Do the Math

You need enough savings to cover the gap between what you'll spend each year and what Social Security and any pension will pay you. A common rule of thumb says to multiply that yearly gap by 25, so a $40,000 gap points to about $1 million and a $20,000 gap to about $500,000.

How much you need, by yearly gap

Find the row closest to the amount your savings would have to supply each year, after Social Security and any pension. The middle column is the 25-times rule.

The arithmetic is the yearly amount divided by the withdrawal rate: $40,000 ÷ 0.04 = $1,000,000. These are today's dollars, before income tax, and they assume nothing about what markets will do.

Step 1: Estimate what you'll spend in a year

For a starting point, the Bureau of Labor Statistics tracks what American households spend in its Consumer Expenditure Survey. The latest figures, for 2024, were published in December 2025.

That's about $5,100 a month for the 65-and-older group. Housing was the largest piece at $22,193. Transportation came to $9,538, food to $7,940 and healthcare to $7,799. Income taxes aren't included in these totals.

An average is only a reference point. Your own number is better, and you already have the data. Pull twelve months of bank and credit card statements, add them up, then adjust for what will change: commuting and other work costs go away, a mortgage may be paid off, travel and medical bills may go up.

Step 2: Subtract Social Security and any pension

Savings only have to cover what your guaranteed income doesn't.

The Social Security Administration's monthly snapshot put the average retired worker's benefit at $2,087.52 a month in August 2026. That's about $25,050 a year, and it rises with inflation through yearly cost-of-living adjustments.

Yours will differ, because it's based on your own earnings record and the age you claim. Your estimate at each claiming age is in your account at ssa.gov. Use that figure. If you have a pension, add its yearly amount too, and check whether it rises with inflation or stays flat.

Step 3: Multiply the gap by 25

Take the averages above as an example. A household spending $61,432 with one average Social Security benefit of $25,050 has a gap of about $36,400 a year. Multiply by 25 and you get roughly $910,000.

Now make it a couple with two average benefits. Their Social Security comes to about $50,100, the gap shrinks to about $11,300, and 25 times that is roughly $283,000. Same spending, a very different target.

Where the 4% rule comes from

Multiplying by 25 is the same as saying you'll withdraw 4% of your savings in the first year. The figure traces to William Bengen, a financial planner who published a study in the Journal of Financial Planning in October 1994. He tested retirements starting in each year of U.S. market history back to 1926, using a portfolio split evenly between stocks and intermediate-term Treasury notes. A retiree who took out 4% in year one, then raised the dollar amount each year to match inflation, never ran out of money in fewer than 33 years.

It's a finding about the past. It assumes a 30-year retirement and leaves out fees and taxes, and nobody can promise the next 30 years will look like the ones he studied. We'd use 25 times as a first estimate and test it against the 3% and 5% columns.

How long will my retirement savings last?

That depends on three things: how much you take out, what your investments earn, and inflation. You control only the first.

Here's the most cautious way to look at it. Assume your savings earn exactly enough to keep up with inflation and nothing more. Then the math is simple division.

Say you have $500,000 and need $30,000 a year from it. That's 6%, so the money covers about 17 years under this assumption. Retire at 67 and it runs to 84.

Growth above inflation stretches those years. Our guides to the 7% rule and to a market drop just before you retire go deeper on both.

The income-replacement shortcut

You'll also see targets given as a share of your paycheck. The Social Security Administration's Retirement Benefits booklet (January 2026 edition) says most financial advisers put the figure at about 80% of your pre-retirement income, counting Social Security, investments and other savings together. On an $80,000 salary that's $64,000 a year.

The same booklet says that if you start benefits at 67, Social Security replaces about 42% of pre-retirement income for a medium earner, as much as 78% for very low earners, and about 28% for high earners. Fidelity builds its savings targets on replacing about 45% of your pre-retirement income from savings, assuming no pension.

These shortcuts assume your spending tracks your pay. If you've been saving 15% and paying a mortgage that ends at 62, you could live well on far less than 80%. We'd use the percentage as a cross-check on the spending estimate from Step 1.

Healthcare before and after 65

Before 65

Medicare starts at 65. Retire earlier and you have to arrange coverage for the years in between. The routes are a spouse's employer plan, retiree coverage from your old employer if it offers any, COBRA for a limited time, or a plan from the Health Insurance Marketplace. Premiums depend on your age, where you live and your income, so get a real quote and put it in your budget as its own line.

After 65

Medicare isn't free. For 2026, Medicare.gov lists the standard Part B premium at $202.90 a month for each person, which is about $2,435 a year, and more if your income is high. There's a $283 yearly deductible, and then you pay 20% of the cost of most covered services.

Original Medicare has no yearly cap on what you pay out of pocket unless you add supplemental coverage. It also doesn't cover non-medical long-term care, most dental work, eye exams for glasses, or hearing aids.

Taxes on the money you take out

A dollar in a traditional 401(k) or IRA isn't a full dollar of spending money. Withdrawals are taxed as ordinary income. Qualified withdrawals from Roth accounts are tax-free.

So raise your gap to cover the tax. Say you need $40,000 to spend, all of it from a traditional IRA, and the tax on your withdrawals works out to 10%. You'd have to take out about $44,400. At 25 times, the target moves from $1,000,000 to about $1,110,000.

Social Security can be taxed too. Take half your benefits and add your other income. The IRS says up to 50% of your benefits may be taxable once that total passes $25,000 if you're single or $32,000 if you're married filing jointly, and up to 85% once it passes $34,000 or $44,000. And from age 73 or 75, required minimum distributions set a floor on what you must withdraw from traditional accounts each year.

How much to retire at 60

More than the 25-times rule gives you, for three reasons.

• No Social Security yet. The earliest you can claim is 62. For anyone born in 1960 or later, full retirement age is 67, and claiming at 62 cuts the monthly benefit by 30% for life, according to the Social Security Administration.
• No Medicare yet. You're paying for your own health insurance for five years.
• A longer retirement. Thirty years, the span Bengen was testing for, takes a 60-year-old to 90. Fidelity's rule of thumb shows the direction: 10 times your income saved if you retire at 67, and 12 times if you retire at 65.

One way to size it is to split retirement into two parts. Say you'll spend $60,000 a year, you retire at 60, and you plan to claim a Social Security benefit of $30,000 a year at 67. Those are made-up round numbers.

1. The bridge, ages 60 through 66: seven years at $60,000 is $420,000, all from savings.
2. From 67 on: the gap is $30,000 a year. Times 25, that's $750,000.

Together that's about $1,170,000 in today's dollars, compared with $750,000 if you worked until 67. It's a rough sketch that ignores taxes and investment growth.

Two more things to check. Your Social Security estimate depends on your future earnings as well as your past ones, so rerun it in your ssa.gov account with no earnings after 60. And at 60 you're past 59½, so withdrawals from your IRAs and 401(k)s don't carry the 10% early withdrawal tax. If you're thinking about stopping even earlier, read our guide to the rule of 55.

For other ages, see choosing a retirement age and our worked example of retiring at 62 with $400,000.

Check the result against where you are now

Once you have a target, compare it with your balance today. Our page on average retirement savings by age shows where other households stand, the 2026 contribution limits show how much room you have to save, and the retirement planning guide ties the steps together.

Everything here is general education built on averages and rules of thumb. For decisions that turn on your own taxes, health or pension, talk with a qualified professional.

Common questions

How much do I need to retire?

Enough to cover the yearly gap between your spending and your Social Security and pension income. A common rule of thumb is 25 times that gap. If you'll spend $60,000 and receive $25,000 from Social Security, the gap is $35,000 and 25 times that is $875,000.

How much do I need to retire at 60?

More than at 65 or 67, because you'll cover every expense from savings until Social Security starts at 62 or later, and you'll buy your own health insurance until Medicare at 65. Add the cost of those bridge years to 25 times your later gap.

How long will my retirement savings last?

Divide your savings by the amount you withdraw each year for a cautious estimate that assumes your money only keeps pace with inflation. $600,000 with $30,000 a year coming out lasts 20 years on that basis. Investment growth above inflation would stretch it, and nobody can promise that growth.

What is the 4% rule?

A rule of thumb from a 1994 study by financial planner William Bengen. Withdraw about 4% of your savings in the first year of retirement, then raise that dollar amount with inflation each year. In the historical periods he tested, the money lasted at least 30 years. It describes the past and guarantees nothing.

How much of my income will I need in retirement?

The Social Security Administration's Retirement Benefits booklet says most financial advisers put it at about 80% of your pre-retirement income. Your own spending is a better guide than a percentage, especially if your mortgage will be paid off or you've been saving a large share of your pay.

We base our guides on primary sources such as the IRS, the Department of Labor, and federal regulators. Read our editorial policy. Spot an error? Tell us.