How much do you actually need to retire comfortably? It’s one of the most common questions—and one of the most confusing.
Today I’ll show you a simple way to estimate your retirement number, even if you’re starting from scratch. No complicated spreadsheets or financial jargon—just a straightforward approach that gives you clarity and direction.
Disclaimer: This article is for educational purposes only and not personal financial advice. Everyone’s situation is different, so consult with a professional before making big financial decisions.
Why Your Retirement Number Matters
You can’t plan for retirement without knowing your destination. When you have a clear retirement number, everything becomes easier—saving, investing, and deciding what to prioritize.
Without a target, you’re essentially saving blindly, never knowing if you’re on track or falling behind. A clear number gives you confidence and helps you make informed decisions about your financial future.
The Simple Formula: The 25× Rule
One of the easiest ways to estimate how much you need is the 25× rule. This rule is based on the concept that you can safely withdraw about 4% of your retirement savings per year without running out of money.
Here’s how it works:
- Think about how much yearly income you’d like in retirement
- Multiply that number by 25
That’s your rough retirement target.
Quick Examples
- Want $40,000 per year? → $1 million ($40,000 × 25)
- Want $60,000 per year? → $1.5 million ($60,000 × 25)
- Want $80,000 per year? → $2 million ($80,000 × 25)
It’s not meant to be perfect—just a starting point that gives you clarity and a realistic goal to work toward.
How to Choose Your Retirement Income Number
Most people spend about 70–80% of what they spent before retiring. You may spend less on commuting, work clothes, and meals out, but possibly more on healthcare, hobbies, or travel.
Simple Way to Estimate Your Retirement Income Needs
- Look at your current monthly spending – What are your actual expenses right now?
- Subtract expenses you won’t have later – Mortgage (if paid off), work commuting, retirement contributions, kids’ expenses
- Add expenses you expect in retirement – Healthcare costs, travel, hobbies, home maintenance
This gives you a realistic income goal without overcomplicating the math.
Example Calculation
If you currently spend $70,000 per year and expect to:
- Save $10,000 on commuting and work expenses
- Pay off your mortgage ($15,000/year)
- Add $8,000 for travel and hobbies
Your retirement income need would be approximately $53,000 per year ($70,000 – $10,000 – $15,000 + $8,000).
Accounting for Social Security
Social Security can reduce how much you need to save—but it usually won’t cover your entire lifestyle on its own.
The average Social Security benefit is around $1,800 per month (about $21,600 per year), though your actual benefit depends on your earnings history and when you start claiming.
How Social Security Reduces Your Savings Need
Let’s say you want $60,000 a year in retirement:
- Social Security might cover $20,000–$25,000
- Your savings need to cover the remaining $35,000–$40,000
Using the 25× rule, that means saving roughly $900,000–$1 million (not $1.5 million).
Pro tip: You can check your estimated Social Security benefits by creating an account at ssa.gov. This gives you a more accurate number to work with in your planning.
Using a Range, Not a Single Number
Retirement planning works best when you think in ranges, not exact numbers.
For example, instead of saying “I need exactly $1.2 million,” use a comfortable range like $1 million to $1.4 million.
Why Ranges Work Better
- They account for market fluctuations and uncertainty
- They reduce anxiety about hitting a specific target
- They give you flexibility in your retirement lifestyle choices
- They acknowledge that life rarely follows a perfect plan
A range gives you flexibility and keeps the process from feeling overwhelming or impossible to achieve.
What If You Feel Behind?
You are not alone—most people feel behind at some point. According to various studies, the median retirement savings for Americans nearing retirement is far below what they’ll actually need.
What matters is starting where you are and being consistent.
How to Catch Up on Retirement Savings
Increase contributions gradually – Boost your retirement contributions by 1–2% each year. This is often easier than making one large jump.
Use catch-up contributions after age 50 – The IRS allows people 50 and older to contribute extra to retirement accounts. Take advantage of this.
Avoid lifestyle creep – When you get raises, direct the extra income toward retirement instead of upgrading your lifestyle.
Keep investments simple and long-term focused – Don’t try to time the market or chase hot stocks. Stick with low-cost index funds and stay invested.
Consider working a few extra years – Even working 2-3 years longer has a triple benefit: more time to save, less time in retirement to fund, and a higher Social Security benefit.
The biggest factor isn’t how much you save in any single year—it’s how long you give your money to grow through the power of compound interest.
Putting It All Together: Your Action Plan
Here’s the quick summary to calculate your retirement number:
- Pick the yearly income you want – Use 70-80% of your current spending as a baseline
- Subtract expected Social Security – Check your estimate at ssa.gov
- Multiply what’s left by 25 – This is your retirement savings target
That number is your starting point. From there, you can build a plan that supports the lifestyle you want—not just the one you can afford.
Sample Complete Calculation
Desired retirement income: $65,000/year
Estimated Social Security: $24,000/year
Gap to cover from savings: $41,000/year
Retirement savings target: $1,025,000 ($41,000 × 25)
Now you have a clear goal. You can work backward to figure out how much you need to save monthly to reach that target based on your current age and expected retirement age.
What Happens After You Have Your Number?
Once you know your retirement target, you can:
- Calculate how much to save monthly to reach your goal
- Determine if you’re on track with your current savings rate
- Make adjustments to your spending or timeline if needed
- Feel confident about your retirement planning instead of anxious
Remember, this number isn’t set in stone. You can (and should) revisit it every few years as your life circumstances change.
The Bottom Line
Retirement planning doesn’t have to be complicated or overwhelming. The 25× rule gives you a simple, realistic starting point for estimating how much you need.
Will your actual number be exactly this? Probably not. But having a clear target is infinitely better than having no target at all.
Start with this formula, adjust for your personal circumstances, and remember that the best retirement plan is the one you actually follow consistently.
Your retirement number is within reach—you just need to start taking simple, consistent steps toward it.
Want to learn more? Check out our article on how compound interest actually works to see how your savings can grow over time, or read about what an IRA is and how it helps you retire.
