How much do you need to retire? The Rule of 25 gives the fastest honest answer in personal finance: take the annual spending you expect in retirement and multiply it by 25. Spend $40,000 a year? You need about $1,000,000. Spend $60,000? $1,500,000. One multiplication, and a decades-long goal becomes a concrete number you can plan against.
This guide shows where the rule comes from, when to use a bigger multiple, how to estimate your spending honestly, and — most importantly for readers of this site — why you almost certainly need less than you think right now.
Why the Rule of 25 Works
The Rule of 25 is just the 4% rule read backwards. Research by William Bengen (1994) and the Trinity Study (1998) found that a diversified portfolio historically sustained inflation-adjusted withdrawals of about 4% per year for 30+ years. Flip the fraction:
Annual withdrawal = 4% of portfolio → Portfolio = spending ÷ 0.04 = spending × 25
We cover the withdrawal-rate side of the story — including the 2026 updates from Bengen and Morningstar — in What Is the 4% Rule?. The Rule of 25 is simply its planning-friendly twin.
Quick-Reference Table
| Annual retirement spending | Rule of 25 retirement number |
|---|---|
| $30,000 | $750,000 |
| $40,000 | $1,000,000 |
| $50,000 | $1,250,000 |
| $60,000 | $1,500,000 |
| $80,000 | $2,000,000 |
| $100,000 | $2,500,000 |
Notice what the table really says: every $10,000 of annual spending costs you $250,000 of required portfolio. That cuts both ways — trimming $5,000/year of retirement spending lowers your target by $125,000. Spending is the lever fully in your control.
Conservative Variants: 28x and 33x
The 25× multiple is calibrated to a ~30-year retirement. Retire earlier, or simply want more margin, and the multiple grows because the safe withdrawal rate shrinks:
| Withdrawal rate | Multiple | Number for $40k/year spending |
|---|---|---|
| 4.0% | ×25 | $1,000,000 |
| 3.5% | ×28 | $1,120,000 |
| 3.0% | ×33 | $1,320,000 |
A sensible default: 25× for traditional retirement at 60–67, ~28× for early retirement, ~33× if you want near-bulletproof margins or expect 45+ years of withdrawals. The point isn’t false precision — it’s picking a number sized to your actual horizon.
Step 1: Estimate Your Retirement Spending Honestly
The multiplication is easy; the input is where people go wrong. A quick framework:
- Start with the 80% rule of thumb — retirees commonly need about 80% of their pre-retirement income, since saving, commuting, and payroll taxes disappear
- Subtract the mortgage if it’ll be paid off. Housing is most budgets’ biggest line; eliminating a $1,800/month payment removes $21,600/year from the target
- Add healthcare. Before Medicare at 65, individual coverage can run $500–$1,000+/month. Even after Medicare, budget for premiums and out-of-pocket costs
- Add the fun stuff. Travel and hobbies spike in early retirement for most people — pretending otherwise just underfunds the plan
- Be honest about the life you want, not the life you think you’re supposed to want. A frugal retirement is a choice, not a requirement
Step 2: Subtract Guaranteed Income First
The Rule of 25 assumes your portfolio funds 100% of spending. If you’ll have Social Security or a pension, only the gap needs multiplying:
Retirement number = (annual spending − guaranteed annual income) × 25
Spend $50,000/year with $24,000/year of expected Social Security? Your number isn’t $1,250,000 — it’s ($50,000 − $24,000) × 25 = $650,000. Guaranteed income nearly halves the target. The full method — including the bridge years before benefits start — is in our guides to Coast FIRE with Social Security and Coast FIRE with a pension.
What the Rule of 25 Leaves Out
Like every rule of thumb, this one has fine print:
- Taxes. The 25× target funds your spending, but withdrawals from traditional 401(k)s and IRAs are taxed as income. If you’ll owe 15% on withdrawals, your gross target needs to be higher — or your Roth balances do the heavy lifting.
- Big one-time costs. New roofs, replacement cars, weddings, long-term care: the steady-spending model has no line items for these. Many planners add a separate sinking-fund cushion on top of the 25× figure.
- Early-retirement health insurance. If you retire before Medicare at 65, marketplace premiums can add $6,000–$12,000+ per person per year to your spending number.
- Fee drag. The rule implicitly assumes low-cost investing. A 1% annual fee is, mathematically, like needing a meaningfully bigger portfolio for the same income.
None of this breaks the rule — it just means treating 25× as the floor of your target rather than the ceiling.
Common Mistakes With the Rule of 25
- Using income instead of spending. The rule multiplies what you’ll spend, not what you earn. If you make $120,000 but live on $60,000, your number is based on $60,000 (adjusted for how retirement changes it).
- Forgetting to subtract guaranteed income. Every dollar of Social Security or pension removes $25 from the target. Skipping this step overstates your number by hundreds of thousands.
- Counting the wrong assets. Only invested, withdrawal-generating assets count — not home equity (unless you’ll genuinely downsize), cars, or your emergency fund.
- Treating the number as static. Spending, family size, and benefit estimates all move. Recalculate yearly.
- Giving up because the number looks huge. Which is exactly what the next sections fix — read on.
Sanity Check: Fidelity’s Salary Benchmarks
Fidelity’s widely cited age-based checkpoints offer a second opinion on your trajectory:
| Age | Target savings (× salary) |
|---|---|
| 30 | 1× |
| 40 | 3× |
| 50 | 6× |
| 60 | 8× |
| 67 | 10× |
Earning $80,000, that’s $80,000 at 30 and $480,000 at 50 — directionally consistent with a Rule of 25 number for a moderate-spending household retiring at 67. If you’re ahead of the curve, great. If you’re behind, don’t panic: these benchmarks assume a traditional timeline, and they don’t account for the compounding runway you still have. Which brings us to the part most retirement articles skip.
The Coast FIRE Twist: You Don’t Need $1M Today
Here’s the reframe this whole site is built on. The Rule of 25 tells you what you need on the day you retire — not what you need today. Because of compound growth, today’s requirement is dramatically smaller:
Coast FIRE number = Rule of 25 number ÷ (1 + real return)^years until retirement
Example: a 30-year-old targeting $1,000,000 at 60 with typical assumptions (7% returns, 3% inflation → 3.88% real return) needs only:
- $1,000,000 ÷ 1.0388^30 ≈ $318,862 invested today
Hit that, and retirement is funded even with $0 in future contributions — you only need to cover current expenses while compounding does the rest. That’s the entire Coast FIRE concept, and it’s why your age matters as much as your savings rate: the same $1M target requires $263,555 at age 25 but $683,179 at age 50 (both retiring at 60). The math is laid out step by step in our Coast FIRE formula guide.
So the honest answer to “how much do I need to retire?” is two numbers: your Rule of 25 target at retirement, and your Coast FIRE number today. The second one is the one to track — it’s smaller, closer, and far more motivating.
How Long Will It Take to Get There?
Once you have your 25× target, the natural follow-up is “when?” The answer depends mostly on your savings rate, because it works twice: saving more builds the portfolio faster and means living on less, which shrinks the target itself. Starting from $0 at a 5% real return, a 20% savings rate reaches 25× spending in about 37 years, 30% in about 28 years, and 50% in about 17 years. We break down the full math and table in What Is a FIRE Number? — but the short version is that every 10-point increase in savings rate buys you several years of freedom.
And remember the shortcut from the previous section: if your target feels decades away, check whether you’ve already crossed your Coast FIRE number. Many disciplined savers in their 30s discover they’re closer to “done saving” than to “just getting started.”
The Bottom Line
- Estimate retirement spending honestly (80% of income is a start; adjust for mortgage and healthcare)
- Subtract Social Security and pension income
- Multiply by 25 — or 28–33× for early or extra-safe retirements
- Then work backwards: discount that target to today to find your Coast FIRE number
Ready for your two numbers? Plug your spending, age, and current investments into the Coast FIRE calculator — it shows your Rule of 25 target, your coast number, and the exact date your investments cross the line. Couples should combine their numbers first (see Coast FIRE for couples), and if you’re weighing how to use financial freedom before full retirement, compare the paths in Coast FIRE vs Barista FIRE.