How much do you need to retire?

The short version: five steps to a number

Your retirement number is the lump sum that fills the gap between what you'll spend and what you'll receive. Here's the whole method with one example household, retiring at 67, with figures in today's dollars.

1. Estimate spending. $6,000 a month is $72,000 a year.
2. Add income tax. At an example 12% rate, you need $81,818 before tax to spend $72,000.
3. Subtract guaranteed income. $3,000 a month of Social Security is $36,000 a year, which leaves a gap of $45,818.
4. Divide by a withdrawal rate. At 4%, that's $1,145,455.
5. Test it against market swings. In the retirement calculator, that lump sum lasts through 92 in 86% of simulated markets.

Each step has a place where people go wrong. The rest of this guide goes through them, then shows what the number looks like at different ages and what it takes to get there.

Start with what you will spend, not what you earn

Base your number on spending, because income can overstate it by a lot. A rule of thumb says you'll need 80% of your income, which on $90,000 is $72,000 a year. But someone single on that salary who puts 10% in a traditional 401(k) has about $65,125 of take-home pay, by this site's federal estimate. That's all they spend now, before counting any tax they'd still owe in retirement.

In retirement, you stop saving for retirement and stop paying Social Security and Medicare tax on wages you no longer earn. A mortgage may end. Other costs, including healthcare, may rise. So build your estimate from your actual spending. The budget calculator can help you list it, and a written line for each of these beats any percentage:

• Housing that stays after a mortgage ends: property tax, insurance, and repairs
• Health insurance premiums and out-of-pocket care
• Costs that come and go, such as a new car or a new roof, spread over the years
• Travel or hobbies you plan to do while you're able

Add the tax you will still owe

Your number has to cover tax as well as spending. Withdrawals from a traditional 401(k) or IRA are taxed as income. Qualified Roth withdrawals aren't. Under IRS Publication 915, part of your Social Security may be taxable too: up to 50% once half your benefits plus other income passes $25,000 for a single filer or $32,000 for a joint filer, and up to 85% above $34,000 or $44,000. Those thresholds cover the 2025 tax year in the current edition of the publication.

A flat 12% is only a placeholder, and it matters. Moving it to 20% adds $210,000 to the example's 90% success number, shown in a table further down. If you'll hold mostly traditional money, use the income tax calculator on the income you expect to draw. The IRA calculator shows how Roth or Traditional changes the after-tax result.

Subtract Social Security and any pension

Every dollar of steady income removes about 25 dollars from your number at a 4% rate. So $500 more a month of Social Security or pension cuts the lump sum by $150,000, ignoring tax. Get your own Social Security estimate from a my Social Security account at ssa.gov rather than guessing.

Your claim age matters. A person with a full retirement age of 67 (anyone born in 1960 or later) who is due $3,000 a month would receive $2,100 by claiming at 62, or $3,720 by waiting until 70. Those changes follow the federal reduction formula and delayed retirement credits.

Check two details on pensions. First, whether yours rises with inflation: without raises, at 2.5% inflation, $2,000 a month buys only $1,221 of today's goods after 20 years. And if your pension or Social Security starts after you retire, your savings must carry the full load until it does.

Turn the gap into a lump sum with a withdrawal rate

Multiply your gap by 25 to use a 4% rate, because 1 ÷ 0.04 = 25. Lower rates cost more up front and leave more margin.

The 4% figure comes from William Bengen's 1994 study. Using US stock and Treasury returns for retirements starting from 1926 to 1976, he found 4% with yearly inflation raises never ran out in under 33 years. It's a historical result and doesn't predict future markets. For a longer retirement, note that up to about 3.5% lasted at least 50 years in his tests.

Why the bare minimum is a trap

The smallest amount that "works" on paper survives less often than you'd expect. On steady returns of 5% and 2.5% inflation, our example needs only $850,086 to last through 92. But in the calculator's simulated markets, that amount survives just 41% of the time.

That happens because a steady-return plan assumes an average return every year. When real markets fall early in retirement, withdrawals take a larger share of a smaller balance, which is known as sequence-of-returns risk. These figures show the trade: the 4% number ($1,145,455) survives 86% of paths, and about $1,210,000 reaches 90%. Simulated rates come from a statistical model and aren't a promise, but they're a sensible way to compare plans.

How much do you need to retire at 55, 60, 62, 65, 67, or 70?

Retiring earlier raises the number fast, since your money must last longer and cover more years before Social Security. This table keeps the example's spending and its $3,000 of Social Security from age 67, planning through 92.

Three rules matter if you stop before 67. Medicare generally starts at 65, so you need your own coverage before then. Social Security retirement benefits can't begin until 62. And withdrawing before 59½ generally adds a 10% tax, though there are exceptions, such as a 401(k) after leaving a job in or after the year you turn 55.

Which assumption moves your number the most?

Spending and retirement date are the changes you control, and both move the number a lot. Each row changes one thing from the example, starting from $1,210,000 for 90% success.

The Social Security row is a stress test. The 2026 Trustees message projects the retirement trust fund can pay scheduled benefits in full until late 2032, then 78% from continuing income, unless lawmakers act. The figure isn't a forecast of what they'll do, but it's a useful case to run.

Why your number looks different in future dollars

Everything above is in today's dollars. Your statement, decades from now, will show bigger numbers that buy the same things. Don't compare a today's-dollar goal with a future-dollar projection, or a plan can look finished when it isn't.

How much do you need to save each month to get there?

Starting at 25 from nothing, reaching $1,210,000 by 67 takes about $855 a month in today's dollars, with an example 7% return and 2.5% inflation. Waiting makes it much harder. An employer match counts toward these amounts, so check it first with the 401(k) calculator.

At 55 from nothing, that's $77,201 a year. The 2026 limits on a 401(k) plus an IRA at that age add up to $41,100, so tax-advantaged accounts alone won't get you there. A later retirement date or lower spending may be the more realistic fix, and you can try both in the retirement calculator.

What your number still leaves out, and who can help

Long-term care is the biggest cost this math misses. Medicare doesn't pay for most long-term care, so plan for it separately through savings, insurance, or, if you qualify, Medicaid. Also missing here: the income drop when a spouse dies, required withdrawals from traditional accounts, and help you may give family.

Treat your number as a range to revisit each year, since spending, tax law, and benefits all change. As you get closer to retiring, a fee-only fiduciary adviser can test the plan with your real accounts and taxes. For free help, a State Health Insurance Assistance Program offers Medicare counseling, and Tax Counseling for the Elderly covers pension and retirement tax questions from age 60.

Common questions

Sources

1. Determining Withdrawal Rates Using Historical Data (William P. Bengen, 1994, reprinted 2004) · Journal of Financial Planning
2. A Message to the Public: 2026 Trustees Reports · Social Security and Medicare Boards of Trustees, via U.S. Treasury
3. 20 CFR 404.409: What is full retirement age? · Code of Federal Regulations, via Cornell LII
4. 20 CFR 404.311: When does my entitlement to old-age benefits begin? · Code of Federal Regulations, via Cornell LII
5. 20 CFR 404.410: How does SSA reduce my benefits when my entitlement begins before full retirement age? · Code of Federal Regulations, via Cornell LII
6. 20 CFR 404.313: What are delayed retirement credits? · Code of Federal Regulations, via Cornell LII
7. Publication 915: Social Security and Equivalent Railroad Retirement Benefits · Internal Revenue Service
8. Retirement topics: Exceptions to tax on early distributions · Internal Revenue Service
9. Get started with Medicare · Medicare.gov
10. Long-term care · Medicare.gov