The most common answer — "it depends" — is true but useless. This guide walks you through the exact formula, every major variable that affects it, and how to calculate a precise, personalized retirement target.
Written by Mike Starr
Founder, StackedTomorrow · M.S. Organizational Management
Last Reviewed: August 2026
Educational Content Only. All content on this page is provided for informational and educational purposes only. It does not constitute financial, investment, legal, tax, or retirement advice. The calculators and projections shown are illustrative models — not predictions or guarantees of future performance. Past performance does not guarantee future results. Always consult a qualified financial professional before making investment or retirement decisions.
Every retirement number starts with the same two-step foundation:
Step 1: Calculate Annual Retirement Expenses
Annual Expenses − Other Income (Social Security, Pension) = Portfolio's Annual Burden
Step 2: Apply the 25× Rule
Portfolio Burden × 25 = Required Portfolio
Example: You expect to spend $65,000/year in retirement. Social Security will provide $22,000/year. Portfolio burden = $43,000/year. Required portfolio = $43,000 × 25 = $1,075,000.
The 25× rule is derived from the 4% safe withdrawal rate — the finding from the Trinity Study that a 4% annual withdrawal (inflation-adjusted) historically sustained portfolios for 30+ years. 1 ÷ 0.04 = 25.
| Annual Spending | Portfolio at 4% | Portfolio at 3.5% |
|---|---|---|
| $30,000 | $750,000 | $857,000 |
| $40,000 | $1,000,000 | $1,143,000 |
| $50,000 | $1,250,000 | $1,429,000 |
| $60,000 | $1,500,000 | $1,714,000 |
| $75,000 | $1,875,000 | $2,143,000 |
| $100,000 | $2,500,000 | $2,857,000 |
Use 4% for a retirement starting at 60+. Use 3.5% or lower for early retirement (40–55). Use our FIRE Calculator to model any scenario.
The most important variable — and the one most people estimate wrong. Track actual spending for 90 days and annualize. Include often-forgotten items: insurance premiums, car replacement, home maintenance (budget 1% of home value per year), medical costs, and leisure spending you want to maintain. Do not assume expenses will drop dramatically at retirement — many retirees find spending remains flat or increases in early retirement due to travel and activity.
For most people, this is the single most impactful free variable. Check your estimate at ssa.gov. Each year you delay claiming (from 62 to 70) increases benefits by approximately 5–8%. A $20,000/year Social Security benefit reduces your required portfolio by $500,000 (at 4% withdrawal).
Longer retirements require either a larger portfolio or a lower withdrawal rate. A retirement starting at 45 may span 50 years; one starting at 67 might span 25 years. The withdrawal rate should reflect your specific horizon.
The average 65-year-old couple needs ~$330,000 specifically for healthcare (Fidelity, 2024). Before 65 (Medicare eligibility), ACA premiums can be $500–$1,500/month or more. Include a specific healthcare line item in your budget.
Higher real returns mean your portfolio grows faster and sustains longer withdrawals. Most planners use 6–7% real return for a balanced equity/bond portfolio. Conservative planners use 5%. The assumed return is built into the 4% rule's historical testing.
Retirees who can reduce spending by 10–15% during severe market downturns dramatically improve portfolio longevity. Rigid, inflexible spending plans require a larger portfolio. The ability to spend a little less during bad markets is worth hundreds of thousands of dollars in required savings.
Social Security is a powerful inflation-adjusted annuity backed by the federal government. For many retirees, it is the most important and most underutilized financial asset.
Consider two retirees both spending $65,000/year. Retiree A ignores Social Security in planning; Retiree B correctly subtracts their $22,000/year projected benefit:
Retiree A (ignores SS)
Annual need: $65,000
Required portfolio: $1,625,000
Retiree B (includes $22K SS)
Portfolio burden: $43,000
Required portfolio: $1,075,000
The Social Security optimization alone reduces the required portfolio by $550,000.
Track 90 days of actual spending
Annualize by multiplying by 4. This is your current annual spending baseline.
Adjust for retirement lifestyle
Add anticipated new expenses (travel, hobbies, healthcare). Subtract eliminated expenses (commuting, work clothing, childcare if applicable).
Look up your Social Security estimate
Visit ssa.gov/myaccount. Use your projected benefit at your target claiming age.
Subtract SS income from annual expenses
This is your "portfolio burden" — what your investments must fund annually.
Multiply portfolio burden by 25 (or 28–29 for 3.5%)
This is your retirement number.
Check the number against our FIRE Calculator
Enter your current savings and contribution rate to find your retirement date.
Enter your current savings, monthly contributions, and target to see exactly when you will reach your number.
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