Retirement Savings Guide

How Much Do You Need to Retire?

The answer depends on your desired lifestyle, but a common benchmark is 25 times your annual expenses. If you spend $50,000 per year, you would need approximately $1,250,000 saved. This figure comes from the widely cited 4% rule.

The 4% Rule Explained

The 4% rule, based on the Trinity Study, states that you can withdraw 4% of your portfolio in the first year of retirement, then adjust for inflation each year, and your money should last at least 30 years with high probability. So if you have $1,000,000 saved, you can withdraw $40,000 in year one.

Critics note that the study used historical US stock and bond returns, and future returns may differ. Many financial planners now suggest a more conservative 3.5% withdrawal rate for added safety, especially for early retirees.

The Power of Starting Early

Compound growth rewards time more than money. Consider two people:

• Person A starts investing $500/month at age 25 and stops at 35 (10 years, $60,000 total invested).
• Person B starts investing $500/month at age 35 and continues until 65 (30 years, $180,000 total invested).

At an 8% average annual return, Person A ends up with about $787,000 at age 65. Person B ends up with about $745,000. Person A invested one-third as much money but came out ahead because of the extra decade of compounding.

Strategies by Age

• 20s-30s: Focus on building the habit. Even small amounts matter. Take full advantage of employer matching in retirement accounts — it is free money.
• 40s: Increase savings rate aggressively. This is often peak earning years. Aim for 15-20% of income.
• 50s-60s: Maximize catch-up contributions. Shift toward a more conservative asset allocation. Start planning withdrawal strategies.

Savings Rate Matters Most

Your savings rate has a bigger impact than investment returns. Someone saving 30% of their income with modest 5% returns will outperform someone saving 5% with exceptional 12% returns. Focus on what you can control.

Run your retirement projections with our compound interest calculator and see where you stand today.