Most people have no idea how much they actually need to retire — they guess, hope for the best, and find out too late that it wasn’t enough. The good news is that answering this question is simpler than it looks. Here’s a clear framework for calculating your retirement number and whether you’re on track.
The 4% rule — the most useful starting point
The 4% rule states that if you withdraw 4% of your retirement portfolio in year one and adjust for inflation each year after, your money has a high probability of lasting 30 years. This rule, derived from the Trinity Study, gives you a simple way to calculate your retirement number: multiply your expected annual retirement expenses by 25. If you expect to spend $50,000/year in retirement, you need $1,250,000 saved. If you expect $80,000/year, you need $2,000,000. This is your target number.
Step 1 — Estimate your retirement expenses
Your retirement spending is not necessarily the same as your current spending. Some costs decrease — commuting, work clothes, payroll taxes, mortgage (if paid off). Others increase — healthcare, travel, leisure. A common rule of thumb is that retirees need 70–80% of their pre-retirement income to maintain their lifestyle. For a more accurate estimate, list your expected monthly expenses in retirement category by category. The more precise your estimate, the more useful your retirement number becomes.
Step 2 — Account for Social Security
Social Security will cover a portion of your retirement income — reducing how much you need to save. The average Social Security benefit in 2026 is approximately $1,900/month, but your personal benefit depends on your earnings history and when you claim. You can check your estimated benefit at ssa.gov. Subtract your annual Social Security income from your annual retirement expenses — the remainder is what your savings need to cover. This can significantly reduce your required portfolio size.
Are you on track? The savings benchmarks
Fidelity’s widely used age-based benchmarks provide a quick reality check:
- By age 30: 1x your annual salary saved
- By age 40: 3x your annual salary saved
- By age 50: 6x your annual salary saved
- By age 60: 8x your annual salary saved
- By age 67: 10x your annual salary saved
These are benchmarks, not guarantees — they assume a specific savings rate, investment return, and retirement age. But they’re a fast, useful gut check for whether you’re in the right range.
How much to save each month
The standard recommendation is to save 15% of your gross income for retirement — including any employer match. For someone starting at 25, 15% invested consistently in a diversified portfolio has a high probability of funding a comfortable retirement at 65. Starting later requires a higher savings rate to catch up. At 35 with nothing saved, hitting retirement security requires closer to 20–25% of income. At 45, the math gets harder but is still workable with aggressive saving and realistic adjustments to retirement age or spending expectations.
The starting-late reality check
If you’re behind on retirement savings, two levers matter more than anything else: savings rate and retirement age. Delaying retirement by 3–5 years has an outsized impact — it gives your portfolio more time to grow, reduces the number of years your savings must last, and increases your Social Security benefit. Working until 67 instead of 62 can reduce the required portfolio size by 30–40% while simultaneously increasing monthly Social Security income by 30–40%. It’s the single most powerful adjustment available to late starters.
The mistake that derails most retirement plans
Cashing out a 401(k) when changing jobs. It feels like a small amount early in your career — $8,000, $15,000 — but the long-term cost is devastating. $10,000 withdrawn at age 30 and never replaced is worth approximately $75,000–$100,000 at age 65 at a 7% average annual return. Multiply this across multiple job changes and the retirement gap becomes enormous. Always roll over — never cash out.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Retirement projections are estimates based on assumptions that may not reflect your individual situation. Consult a licensed financial advisor for personalized retirement planning.