How Much Do I Need to Retire

How It Works

The 25x rule states that you need 25 times your annual expenses saved to retire safely. This comes from the 4% safe withdrawal rate - if you withdraw 4% per year, your portfolio should last 30+ years.

Basic Formula

=annual_expenses * 25

Or based on withdrawal rate:

=annual_expenses / withdrawal_rate

Example

Your Situation:

• Annual Expenses: $50,000
• Desired Withdrawal Rate: 4%

Retirement Number:

=$50,000 * 25 = $1,250,000

Or: =$50,000 / 4% = $1,250,000

You need $1.25 million to retire on $50,000/year.

The Math Behind 25x

Withdrawal Rate	Multiplier	$50K Expenses Needs
3% (conservative)	33.3x	$1,666,667
3.5%	28.6x	$1,428,571
4% (standard)	25x	$1,250,000
4.5%	22.2x	$1,111,111
5% (aggressive)	20x	$1,000,000

Formula: =1/withdrawal_rate gives the multiplier

Building a Retirement Calculator

Input	Value
Current Annual Expenses	$50,000
Expected Retirement Expenses	$45,000
Inflation Rate	3%
Years Until Retirement	20
Withdrawal Rate	4%

Output	Formula
Future Annual Expenses	=B2*(1+B3)^B4
Retirement Target	=B6/B5
In Today’s Dollars	=B7/(1+B3)^B4

Results:

• Future expenses: $81,308
• Target needed: $2,032,694
• Today’s equivalent: $1,125,000

Adjusting for Your Situation

Retirement Expenses ≠ Current Expenses

Some costs decrease in retirement:

• No more retirement savings contributions
• Potentially paid-off mortgage
• Lower transportation costs
• No work-related expenses

Some costs increase:

• Healthcare (often significantly)
• Travel and hobbies
• Long-term care

Rule of thumb: Plan for 70-80% of pre-retirement income, or calculate actual expected expenses.

Including Social Security

=((annual_expenses - social_security_income) * 25)

Example:

• Expenses: $50,000
• Social Security: $20,000
• Gap to fund: $30,000
• Target: $30,000 × 25 = $750,000

Including Pension

=((expenses - social_security - pension) * 25)

Retirement Number by Lifestyle

Lifestyle	Annual Spend	Target (25x)
Frugal	$30,000	$750,000
Modest	$45,000	$1,125,000
Comfortable	$60,000	$1,500,000
Upper Middle	$80,000	$2,000,000
Affluent	$120,000	$3,000,000

Are You On Track?

Compare your current savings to your target:

=current_savings / retirement_target

Progress	Status
<25%	Behind - increase savings rate
25-50%	Building - stay consistent
50-75%	Good progress - maintain course
75-100%	Almost there - consider derisking
100%+	Financially independent!

How Long Until You Reach Your Number?

=NPER(return_rate/12, -monthly_savings, -current_savings, retirement_target)

Example: $200,000 saved, saving $2,000/month, targeting $1.25M at 7%:

=NPER(7%/12, -2000, -200000, 1250000) / 12

Result: ~13 years

The Trinity Study Basis

The 4% rule comes from the 1998 Trinity Study:

• Analyzed 30-year retirement periods
• 50/50 stock/bond portfolio
• 4% withdrawal succeeded 95% of the time
• Adjusted for inflation each year

Caveats:

• Based on historical US market data
• 30-year timeframe (early retirees may need lower rate)
• Doesn’t guarantee success in all futures

Conservative vs. Aggressive

Approach	Withdrawal Rate	Multiplier	Best For
Very Conservative	3%	33x	Early retirees, risk-averse
Conservative	3.5%	28.5x	Long retirement expected
Standard	4%	25x	Traditional retirement age
Moderate	4.5%	22x	Flexible spending, other income
Aggressive	5%	20x	Short retirement, pension backup

Spouse/Partner Calculation

For couples, use combined expenses and savings:

=combined_annual_expenses * 25

But consider:

• Both Social Security benefits
• Survivor benefits if one passes
• Healthcare costs for two
• Separate vs. joint accounts

Pro Tips

1. Use actual expenses - track spending for 6-12 months, don’t guess

2. Include healthcare - budget $10-15K/year pre-Medicare, significant post-65

3. Plan for inflation - your number grows over time; $1M today ≠ $1M in 20 years

4. Consider sequence risk - bad returns early in retirement hurt most; keep 2-3 years cash buffer

5. Recalculate annually - your target changes as expenses and withdrawal rate assumptions evolve

Common Errors

• Forgetting inflation: Your target should be in future dollars, not today’s
• Ignoring healthcare: Often the biggest underestimated expense
• Using gross income: Base on expenses, not income
• One-size-fits-all: Your situation is unique; adjust the multiplier accordingly