The Quick Answer: The 4% Rule (and 25×)

Almost every “retirement number” starts from one idea: the 4% rule. It says you can withdraw about 4% of your savings in your first year of retirement, then give yourself an inflation raise each year after, with a high historical chance the money lasts 30 years. Flip that around — 4% is the same as one twenty-fifth — and you get the 25× rule: your target is 25 times your expected first-year spending.

The two are the same math wearing different hats. Pick whichever is easier to picture:

• Spend $40,000 a year → 25 × $40,000 = $1,000,000
• Spend $60,000 a year → 25 × $60,000 = $1,500,000
• Spend $80,000 a year → 25 × $80,000 = $2,000,000
• Spend $100,000 a year → 25 × $100,000 = $2,500,000

Not sure what you’ll spend? A quick shortcut is the income-replacement rule: most people need about 70–80% of their pre-retirement income, because some costs fall away — commuting, payroll taxes, and the retirement contributions you no longer have to make. So a household earning $100,000 today might plan for roughly $70,000–$80,000 a year in retirement, then multiply by 25.

One honest caveat before you bank on this: the 4% rule is a rule of thumb, not a guarantee. It comes from financial planner William Bengen’s 1994 study, which tested U.S. market history from 1926 onward using a roughly 50/50 mix of stocks and bonds over a 30-year retirement. Charles Schwab frames 4% as a solid, high-confidence starting point that you can personalize — and we’ll get into how the number moves for early or long retirements further down. Once you have a target, the harder work is drawing it down without running dry, which we cover in Retirement Income Planning: Make Your Savings Last.

Am I On Track? Savings Benchmarks by Age

A total dollar target is useful, but if retirement is years away, a more useful question is: am I saving enough right now? Fidelity publishes the most widely cited answer — a set of “salary multiplier” milestones that assume you save around 15% of your income a year (including any employer match), invest for growth, and retire at 67.

Your retirement age tilts these numbers. Because leaving earlier means a longer time horizon — and years before Social Security kicks in — retiring at 65 pushes the target up toward roughly 12× salary, while working until 70 lowers it to around 8×. Retiring at 55 or 60 raises the bar further still, which is why early retirees usually aim higher.

If you’re looking at these milestones and feeling behind, take a breath. They’re guideposts, not a pass/fail test, and the majority of Americans are under them — many still retire comfortably by combining savings with Social Security and a paid-off home. For a reality check on what people your age actually have, see Average Retirement Savings by Age: How Do You Compare? And if you’re playing catch-up, the fastest lever is usually contributions — the current caps are in 401(k) Contribution Limits 2026.

Is $500k, $1 Million, or $2 Million Enough?

These are the questions people actually type into search at 11 p.m. The honest answer is “it depends on your spending” — but the 4% math gives you a real starting point. Here’s what each nest egg produces on its own, and what it looks like once you add an average Social Security check.

• $500k

  ~$20,000/yr at 4%

  + ~$24k Social Security ≈ $44k

  ModestWorkable for a lean lifestyle, especially with a paid-off home. Tight otherwise.

• $1M

  ~$40,000/yr at 4%

  + ~$24k Social Security ≈ $64k

  ComfortableEnough for many households to cover a solid middle-class retirement.

• $2M

  ~$80,000/yr at 4%

  + ~$24k Social Security ≈ $104k

  Very comfortableRoom for travel, hobbies, and cushion — for most spending levels.

Can you retire at 60 with $500k? For some people, yes — but it’s the trickiest case on this list. At 60 you’re bridging several years before Social Security starts, and you’re planning for a longer-than-30-year retirement, so many planners suggest leaning toward a more cautious withdrawal (around 3.5%) and budgeting carefully for health coverage before Medicare begins at 65. With a modest lifestyle and a paid-off home, it can work; with a $70,000-a-year spending habit, it will feel stretched.

Don’t Forget Social Security (It Shrinks Your Number)

This is the single most reassuring — and most overlooked — point in the whole conversation. Your savings don’t have to cover all of your spending. They only have to cover the gap between what you spend and what other income, chiefly Social Security, already provides.

In 2026, the average Social Security retirement benefit is about $2,080 a month — roughly $25,000 a year — after a 2.8% cost-of-living increase, according to the Social Security Administration. The maximum runs higher: about $4,152 a month at full retirement age and up to $5,181 a month if you wait until 70. And married couples typically receive two benefits, which can shrink a household’s savings target even more than the example above.

The Tax Trap: Why $1 Million Isn’t Really $1 Million

A $1 million balance sounds like $1 million to spend. It usually isn’t — and it depends entirely on which type of account it’s sitting in.

Money in a traditional 401(k) or IRA was never taxed on the way in, so every dollar you withdraw in retirement is taxed as ordinary income. After federal (and often state) taxes, a “$1 million” traditional balance is really more like $750,000–$800,000 of spendable money. A Roth account is the mirror image: you paid tax up front, so qualified withdrawals are generally tax-free — meaning $1 million in a Roth is worth more to you in retirement than $1 million in a traditional account.

Is the 4% Rule Still Safe in 2026?

The 4% rule has been debated for years, and the experts don’t fully agree — which is worth knowing before you treat any single rate as gospel. The honest picture is a range:

• Bengen himself has revised upward. The rule’s creator has said his original 4% was conservative and that something closer to 4.7% would have survived even the worst historical stretches (some of his later analyses go higher still).
• Others argue for caution. Research from firms like Morningstar and academics such as Wade Pfau suggests a starting rate nearer 3.3%–3.7% may be safer given today’s higher valuations and for people retiring early into a longer horizon.
• Schwab splits the difference. It treats 4% as a reasonable, high-confidence baseline — and recommends staying flexible, revisiting your rate each year, and leaning toward roughly 3%–3.5% for longer retirements.

Our take: use 4% as your baseline, go lower (around 3.5%) if you’re retiring early or expect a long retirement, and you may be able to go a bit higher (4.5–5%) if you’re flexible about cutting back in bad markets or you have a shorter time horizon. One line item people badly underestimate is health care — Fidelity’s latest estimate puts a 65-year-old’s lifetime medical costs at about $172,500 per person (roughly $345,000 for a couple), excluding long-term care. If you want to stress-test your plan against bad-luck market timing, that’s where tools like Monte Carlo simulations or a financial advisor come in.

What Changes Your Number

The tables give you a starting point; your real number is personal. A handful of factors push it up or down:

• Retirement age. Earlier means a bigger number — more years to fund, and a gap before Social Security and Medicare begin.
• Longevity and health. Plan for roughly 30 years; many people live into their 90s, and healthier retirees spend more years drawing down savings.
• Location. Cost of living and state income taxes vary widely — the same lifestyle can cost far less in one state than another.
• Housing. A paid-off home is one of the biggest number-shrinkers there is; renting for life pushes it up.
• Lifestyle. A travel-heavy retirement needs a larger cushion than a frugal, close-to-home one.
• Pensions and annuities. Any guaranteed income beyond Social Security lowers what your savings must cover.
• Inflation. Rising prices erode purchasing power, which is exactly why the 4% rule builds in annual inflation raises.

Frequently Asked Questions

How much money do I actually need to retire?

A common starting point is 25× your expected annual spending — the 4% rule. Want to spend $60,000 a year? That’s a $1.5 million baseline. But once Social Security covers part of your spending, the amount your savings actually need to cover is often far smaller (around $900,000 in that example). Your true number depends on your spending, other income, taxes, and how long your retirement lasts.

What is the 4% rule (and the 25× rule)?

The 4% rule says you can withdraw about 4% of your portfolio in your first year of retirement, then adjust for inflation, with a high historical chance the money lasts 30 years. Since 4% equals one twenty-fifth, your savings target is simply 25× your first-year spending. Same math, two framings.

Is $1 million enough to retire?

At 4%, $1 million produces about $40,000 a year. Add an average Social Security benefit (~$24,000) and you’re near $64,000 a year — comfortable for many households, especially with a paid-off home. Whether it’s “enough” comes down to your spending and where you live.

Can I retire at 60 with $500k?

Possibly. $500,000 at 4% is about $20,000 a year, and you’d bridge several years before Social Security starts. It can work for a modest lifestyle — particularly with low housing costs — but because retiring at 60 means a longer horizon, many planners suggest a more cautious ~3.5% withdrawal and careful budgeting for health coverage before Medicare at 65.

How does Social Security change how much I need to save?

It shrinks your target, because your savings only have to cover the gap between your spending and your Social Security income. Need $60,000 and receive $24,000 from Social Security? Your savings cover $36,000 → ÷ 4% = $900,000 instead of $1.5 million.

What’s the average Social Security benefit in 2026?

About $2,080 a month — roughly $25,000 a year — for a retired worker after the 2.8% 2026 cost-of-living increase. The maximum is about $4,152 a month at full retirement age and up to $5,181 at age 70, but most people land near the average. Check your own estimate at SSA.gov.

Do I pay taxes on 401(k) withdrawals in retirement?

Yes — withdrawals from a traditional 401(k) or IRA are taxed as ordinary income. That’s why a “$1 million” traditional balance is really more like $750,000–$800,000 in spendable money. Roth withdrawals, by contrast, are generally tax-free.

How much should I have saved by age 50?

Fidelity’s guidepost is about 6× your salary by 50 — roughly $480,000 on an $80,000 salary. It’s a benchmark, not a cutoff; plenty of people catch up meaningfully in their 50s and 60s.

What percentage of my income do I need in retirement?

A common rule is 70–80% of your pre-retirement income, since costs like commuting and retirement contributions fall away. Use that to estimate your annual spending, then multiply by 25 to get a baseline savings target.

Is the 4% rule still safe?

It’s a solid baseline. William Bengen, who created it, has since suggested a higher rate (around 4.7%) would have been safe historically, while Morningstar-style research argues for something closer to 3.3–3.7% given today’s valuations and longer retirements. Treat 4% as a starting point and adjust for your situation.

How long will $1 million last in retirement?

At a 4% inflation-adjusted withdrawal (about $40,000 a year), the rule is designed to make $1 million last roughly 30 years. Spend more aggressively (5%+) and it may fall short; keep to around 3.5% and it can stretch longer.

How much do I need to retire comfortably?

“Comfortable” is personal, but a household spending $60,000–$80,000 a year would target roughly $1.5M–$2M in savings before Social Security — and often much less after it. Nail down your expected spending first; that single number drives everything else.