📊 Quick Answer: The 25x Rule
Multiply your annual expenses by 25 to find your retirement number.
$40,000/year expenses
$1,000,000
$60,000/year expenses
$1,500,000
$80,000/year expenses
$2,000,000
Understanding the 4% Rule
The 4% rule is the foundation of retirement planning. It states that you can withdraw 4% of your portfolio in the first year of retirement, then adjust for inflation each year, without running out of money over a 30-year retirement.
Your Retirement Number =
Annual Expenses × 25
(or Annual Expenses ÷ 0.04)
Why 25x?
If you can safely withdraw 4% per year, you need enough saved so that 4% equals your annual expenses:
- 4% of $1,000,000 = $40,000/year
- $40,000 × 25 = $1,000,000
- 1 ÷ 0.04 = 25
Calculate Your Personal Retirement Number
Step 1: Estimate Your Annual Retirement Expenses
Include housing, healthcare, food, transportation, insurance, and leisure. Many people need 70-80% of their pre-retirement income.
Step 2: Subtract Guaranteed Income
Subtract Social Security, pensions, or annuity income from your expenses. The remainder is what your portfolio must cover.
Step 3: Multiply by 25
This gives you your target portfolio value at retirement.
Example Calculation
Desired retirement income: $60,000/year
Expected Social Security: -$24,000/year
Portfolio must provide: $36,000/year
$36,000 × 25 = $900,000 target
Retirement by Age: What You Should Have Saved
Fidelity's retirement savings benchmarks based on salary:
| Age | Savings Target | Example ($75k salary) |
|---|---|---|
| 30 | 1x annual salary | $75,000 |
| 40 | 3x annual salary | $225,000 |
| 50 | 6x annual salary | $450,000 |
| 60 | 8x annual salary | $600,000 |
| 67 | 10x annual salary | $750,000 |
⚠️ Don't panic if you're behind! These are guidelines, not requirements. Start where you are, save what you can, and increase contributions over time. The best time to start was yesterday; the second best time is today.
Strategies to Build Your Nest Egg
1. Maximize Employer Match
If your employer matches 401(k) contributions, contribute at least enough to get the full match. It's a 100% instant return!
2. Increase Contributions Annually
Commit to increasing your savings rate by 1% each year or with each raise until you hit 15-20%.
3. Use Tax-Advantaged Accounts
Max out 401(k) ($23,000 in 2024) and IRA ($7,000) before taxable accounts. Consider Roth for tax-free growth.
4. Start Early for Compound Interest
$10,000 at 25 becomes $217,000 at 65 (7% return). The same $10,000 at 35 becomes only $109,000.
Frequently Asked Questions
Is the 4% rule still valid?
The 4% rule was based on historical data. Some experts now suggest 3.5% to be more conservative, especially for early retirees or if expecting lower future returns. Our calculator lets you adjust this rate.
What about inflation?
The 4% rule accounts for inflation. You withdraw 4% in year one, then increase that dollar amount by inflation each year. Your portfolio is expected to grow enough to sustain this.
Can I retire early (before 59½)?
Yes! You'll need taxable accounts or Roth contributions (not earnings) to bridge until 59½. SEPP/72(t) distributions and the Rule of 55 can also provide early access to retirement accounts.
Plan Your Retirement Now
Use our free calculator to see how your savings will grow.
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