How Much Do I Need to Retire? The 4% Rule Explained

TL;DR — How much do I need to retire? Take the annual expenses you'll have in retirement and multiply by 25 — that's your target nest egg, the number your savings need to reach. The math comes from the 4% rule: withdraw 4% of your portfolio in year one, adjust for inflation after, and a diversified portfolio has historically lasted 30 years — so $40,000 in yearly spending points to about $1,000,000 saved.

Most people work backwards from a guess — "a million dollars" — and never tie the number to what they'll actually spend. That's a big reason the Federal Reserve's 2024 household survey found that only 67% of American adults had any money specifically earmarked for retirement income — meaning roughly one in three had nothing set aside for it at all. The median household has about $87,000 saved across retirement accounts, far short of what most will need. Vault — a free budgeting app that shows where every dollar goes — exists for exactly the gap between wanting to retire comfortably and knowing the monthly number that gets you there.

How much do I need to retire?

You need about 25 times your expected annual retirement expenses saved and invested. Spend $40,000 a year? Aim for roughly $1,000,000. Spend $60,000? Aim for $1,500,000. The 25× figure comes from the 4% rule — the withdrawal rate a diversified portfolio has historically supported over a 30-year retirement. Your number shifts with lifestyle, Social Security, and when you stop working.

What is the 4% rule (and the 25× rule)?

The 4% rule says you can withdraw 4% of your portfolio in your first year of retirement, then adjust that dollar amount for inflation each year after, with a high chance your money lasts 30 years. It comes from the Trinity Study, which tested withdrawal rates against decades of real market returns using a portfolio of roughly half to three-quarters stocks. Flip 4% upside down and you get 25 — meaning you need 25 times your annual expenses saved to support that withdrawal. That's the whole formula: annual expenses × 25 = your target.

Here's what 25× looks like at common spending levels:

Two things stand out. First, the number is driven by spending, not income — two people earning the same salary can need very different nest eggs depending on the life they plan to live. Second, the rule assumes a 30-year retirement; if you retire early at 55, you may want a lower withdrawal rate, closer to 3.5%, which raises the multiple to roughly 28–29×. Treat 4% as a starting line, not a guarantee — many advisors now suggest personalizing it to your own market, fees, and lifespan.

How to calculate how much you need to retire in 6 steps

1. Estimate your annual retirement spending. Start from what you spend now, then subtract costs that disappear (commuting, payroll taxes, a mortgage if it'll be paid off) and add new ones (healthcare, travel). Most people need about 70–85% of their pre-retirement income.
2. Subtract guaranteed income. Social Security, a pension, or rental income lower the amount your portfolio has to supply. If you'll spend $50,000 but Social Security covers $20,000, your portfolio only needs to generate $30,000.
3. Multiply the gap by 25. That remaining annual amount × 25 is your target nest egg under the 4% rule. A $30,000 gap means $750,000.
4. Check it against age milestones. Compare your current savings to where you'd expect to be for your age (below) to see if you're on pace.
5. Work back to a monthly number. Divide the gap between your target and what you have now by the years left, then by 12 — that's roughly what you need to save each month. The full method for picking that monthly figure is in how much to save each month.
6. Automate the contribution. The number only helps if it actually moves. Route it to a retirement account on payday, before spending gets a vote — which is the core of paying yourself first.

This is where Vault does the quiet work. Give retirement its own envelope — a named goal sitting alongside your emergency fund, vacation, and groceries — so the monthly contribution you settled on in step 5 has a visible home and a balance that climbs. The reports view shows your real monthly surplus against actual spending, which is the number step 5 depends on. And because Vault syncs across devices, the retirement goal you set at the kitchen table is the same balance you check after a raise. It's the same setup we walk through in envelope budgeting for beginners.

How much should I have saved by age?

Fidelity's milestones express your target as a multiple of your current salary, not a flat dollar amount — which keeps them useful as your income changes:

So if you earn $60,000, the milestones suggest roughly $60,000 saved by 30, $180,000 by 40, and $600,000 by 67. They assume you're saving about 15% of income (including any employer match) over your career and will need around 80% of your pre-retirement income to live on. Like the 4% rule, they're a compass, not a contract — a late start or a low-spending plan changes the math. If you're trying to free up that 15%, the 50/30/20 budget rule shows where retirement fits inside the savings slice.

What if I'm behind on retirement savings?

Behind is common, and it's fixable. Remember the Federal Reserve's finding that one in three adults has nothing earmarked for retirement — most people are not as far along as the milestones imply. The levers, in order of impact:

• Raise the rate, not the worry. Bump your contribution 1% every six months; you'll barely feel it, and compound growth does the rest. The U.S. personal savings rate averaged just 4.6% in 2024, well below the long-term average near 8%, so most households have real room to move more.
• Claim the full employer match. It's an instant 100% return on whatever your employer matches. Leaving it unclaimed is the most expensive mistake in retirement saving.
• Use catch-up contributions. Once you turn 50, the IRS lets you contribute extra to a 401(k) and IRA above the standard limits — a direct way to close a gap in your final working years.
• Push back the date. Working even two or three years longer does triple duty: more contributions, more growth, and fewer years your portfolio has to fund.

What counts toward your retirement number?

Your number is the total across every account meant to produce retirement income:

• Tax-advantaged accounts — 401(k), 403(b), traditional IRA, and Roth IRA balances.
• Employer match — counted once it's vested.
• Investments outside retirement accounts — brokerage holdings, index funds, dividend payers.
• Guaranteed income — Social Security and pensions are usually handled as income that lowers your gap, not as part of the nest egg itself.

Your primary residence usually doesn't count unless you plan to downsize and live on the difference. For most people a diversified, low-cost portfolio of stock and bond index funds is the engine that makes the 4% rule hold — not cash, which inflation quietly eats away year after year.

Frequently asked questions

How much money do I need to retire?

About 25 times your expected annual expenses in retirement. If you'll spend $50,000 a year, aim for roughly $1,250,000 saved and invested. The exact figure depends on your lifestyle, Social Security, healthcare costs, and the age you retire.

Is the 4% rule still accurate?

It's a sound starting point, not a guarantee. The original research assumed a 30-year retirement and a portfolio heavy in stocks. Many advisors now use 3.5–4% and adjust for market conditions, fees, and lifespan — but the 25× math behind it remains the standard quick estimate.

How much do I need to retire if I have Social Security?

Subtract your expected annual Social Security benefit from your annual expenses, then multiply what's left by 25. If you'll spend $50,000 and Social Security covers $20,000, your portfolio needs to supply $30,000 — a target of about $750,000.

How much should I have saved for retirement by 50?

About 6× your annual salary, per Fidelity's milestones. At a $70,000 salary, that's roughly $420,000. If you're under that, prioritize raising your contribution rate and capturing any employer match before anything else.

Can I retire on $500,000?

Yes, if your expenses are low enough. Under the 4% rule, $500,000 supports about $20,000 a year in withdrawals — workable with Social Security and a modest lifestyle, tight without them. The question is never the balance alone; it's the balance measured against your spending.

The bottom line

Multiply your annual retirement expenses by 25 to find your number, subtract what you already have, and divide the gap into a monthly contribution you automate on payday. The people who retire comfortably aren't the ones who guessed a round number — they're the ones who turned a spending estimate into a monthly habit and let it run.

Make monthly progress toward your number — build your retirement budget in Vault.

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