How to Calculate Your Real Retirement Number

Calculate how much money you actually need to retire using the 4% rule and your expected expenses.

1. Calculate your current essential expenses. Add up housing, food, transportation, healthcare, insurance, and debt payments from your actual spending over the past 12 months. Skip discretionary spending for now — focus on what you absolutely need to live. This gives you a baseline that won't disappear when you stop working.
2. Estimate your retirement expense changes. Some costs drop (no more commuting, work clothes, or retirement contributions), others rise (healthcare, travel, hobbies). Most retirees spend 70-80% of their pre-retirement income, but your number depends on your mortgage timeline, healthcare needs, and lifestyle plans. Be honest about what you actually want to do.
3. Account for inflation over time. Multiply your estimated annual retirement expenses by the inflation factor for your timeline. At 3% average inflation, costs double every 23 years. If you need $50,000 today and retire in 20 years, budget for $90,000 in future dollars.
4. Apply the 25x rule. Multiply your inflation-adjusted annual expenses by 25. This follows the 4% withdrawal rule — the idea that you can safely withdraw 4% of your portfolio each year without running out of money. If you need $80,000 annually, your target is $2 million.
5. Factor in Social Security and pensions. Estimate your annual Social Security benefit using the SSA calculator at ssa.gov and add any pension income. Subtract these guaranteed payments from your annual expense needs, then multiply the remainder by 25. This reduces how much you need to save personally.
6. Stress-test your number. Consider what happens if you retire early, live longer than expected, or face a market crash in your first retirement years. Some planners use 3.5% withdrawal rates or 28x multipliers for extra safety. Run scenarios with higher healthcare costs and lower Social Security benefits.