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Calculate your exact retirement target with the 4% rule.
The most widely used rule of thumb is called the 4% Rule. It says you can safely withdraw 4% of your portfolio each year in retirement without running out of money over a 30-year period. To find your retirement number, simply flip it:
Your Retirement Number
Annual Spending × 25 = Portfolio Needed
Example
$60,000/year × 25 = $1,500,000
The 4% Rule comes from the 1994 "Trinity Study," which analyzed 30-year retirement periods using historical stock and bond returns. A portfolio of 50–75% stocks historically survived all 30-year periods with a 4% withdrawal rate — including the Great Depression and the 1970s stagflation era. It's a guideline, not a guarantee.
These numbers represent your portfolio target — separate from Social Security income, which reduces how much you need to withdraw from savings.
Annual spending
$40,000
Monthly budget
$3,333/mo
Modest lifestyle, low cost-of-living area, or significant Social Security income.
Annual spending
$70,000
Monthly budget
$5,833/mo
Mid-range lifestyle — travel, hobbies, dining out occasionally.
Annual spending
$120,000
Monthly budget
$10,000/mo
Comfortable travel, generous gifting, higher cost-of-living area.
Look at your last 12 months of bank and credit card statements. Total your actual expenses — this is your baseline.
In retirement you'll save on commuting, work clothes, lunches, and payroll taxes. Subtract these from your baseline.
Healthcare tends to rise significantly in retirement. Budget for travel, hobbies, and any plans you've been deferring.
Your SS benefit reduces how much your portfolio must cover. A $2,000/month SS check = $24,000/year less you need to withdraw.
Your savings rate (what % of income you save) is the single biggest lever you control. Here's how dramatically it affects your timeline, assuming 7% average annual investment growth:
| Savings Rate | Years to Retire | Retire Age (if start at 25) |
|---|---|---|
| 10% | ~46 years | 71 |
| 20% | ~37 years | 62 |
| 30% | ~28 years | 53 |
| 40% | ~22 years | 47 |
| 50% | ~17 years | 42 |
* Assumes 7% annual returns, 4% withdrawal rate, 25× target. Results are illustrative.
Key Insight
If you're planning to retire before 60, or just want more confidence, use a 3.5% withdrawal rate instead of 4%. That means multiplying your annual spending by 28.6 instead of 25. The extra buffer significantly improves your odds across a 35–40 year retirement.
A guideline suggesting you can withdraw 4% of your portfolio in year one of retirement, then adjust for inflation each year, with a high probability your money lasts 30 years.
The total portfolio size you need to retire comfortably. Calculated by multiplying your expected annual spending by 25 (the inverse of 4%).
The percentage of your pre-retirement income you'll need in retirement. Most financial planners use 70%–90% as a starting estimate.
The danger that a market downturn early in retirement — when you're withdrawing — can permanently damage your portfolio even if long-term returns are fine.
Quick Summary