How Much Do I Need to Retire? The 25x Rule (2026)

The 4 percent rule and the 25x shortcut

The 4 percent rule, from a well known study of historical returns, suggests you can withdraw about 4 percent of your portfolio in the first year of retirement, then adjust that amount for inflation, with a strong chance the money lasts 30 years. Flip it around and 4 percent a year means you need 25 times your annual withdrawal saved.

Nest egg needed = annual spending gap × 25

The spending gap is the part of your expenses that other income does not already cover, which is why the first step is subtracting Social Security and any pension.

A worked example

Worked example: $60,000 a year in retirement

Target annual spending$60,000
Expected Social Security$24,000
Gap the portfolio must fund$36,000
Nest egg needed (25x)$900,000
4 percent of $900,000$36,000

You need to fund a 36,000 dollar gap, not the full 60,000, because Social Security covers the rest. That drops the target from 1.5 million to 900,000 dollars.

How saving now gets you there

Reaching a seven figure number sounds daunting until compounding does its share. Saving 500 dollars a month for 30 years at a 6 percent average return grows to about 502,000 dollars, and you only contributed 180,000 of it. Raise the contribution, add an employer match, or give it more years and the gap to your target closes fast. The two biggest levers are your savings rate and your time horizon, both of which you control more than the market return.

Frequently asked questions

Is the 4 percent rule still safe?

It is a starting guideline, not a guarantee. It was based on historical US returns and a 30 year horizon. Some planners use a more conservative 3 to 3.5 percent for early retirees or lower expected returns. Treat it as a planning anchor, then adjust for your situation.

Should I subtract Social Security from the target?

Yes. Your portfolio only needs to cover the spending that other income does not. Subtracting Social Security and any pension from your annual spending, then multiplying the remaining gap by 25, gives a much smaller and more realistic number.

Does the 25x number account for inflation?

The 4 percent rule builds in inflation by letting you increase the withdrawal each year to keep pace with prices. The 25x figure is in today's dollars, so as long as your spending estimate is in today's dollars, they line up.

What if I want to retire early?

Early retirement means a longer withdrawal period, so a lower withdrawal rate and a larger multiple, often 28 to 33 times spending, is more prudent. You also need a plan to bridge the years before Social Security and penalty free retirement account access begin.