How much do I need to retire? Annual spending × 25, minus pensions
Step 1: decide what you will spend each year
Start from today's budget: housing, food, transport, healthcare, insurance, travel and family support. Add up the monthly total and multiply by 12.
Some costs fall in retirement (commuting, a paid-off mortgage) and some rise (healthcare and long-term care). If unsure, try 70% to 100% of today's spending as a range and compare scenarios.
Step 2: account for inflation
At 2% inflation, something that costs 50,000 today costs about 90,568 in 30 years (50,000 × 1.02^30 ≈ 90,568).
Keep the units straight: either price everything in today's money, or in future money. Using the real return (nominal return minus inflation) and today's purchasing power throughout is easier to read.
Step 3: apply the 25× rule, then subtract pensions
Example in today's money: spending of 50,000 a month is 600,000 a year. With no pension you need about 600,000 × 25 = 15,000,000.
If you expect 240,000 a year from a pension or rent, the part your savings must cover is 600,000 − 240,000 = 360,000, so you need about 360,000 × 25 = 9,000,000.
Use your official pension statements for pension amounts; this site does not estimate personal pensions.
Common blind spots
- Treating today's savings rate as retirement spending: they are different numbers.
- Planning only to average life expectancy: living longer than expected is the risk, so plans often run to age 90 or beyond.
- Ignoring market swings: an average 5% return does not mean 5% every year, and the order of returns matters a lot. That is why Monte Carlo simulation is useful.
- Forgetting taxes, fees and rising healthcare costs.
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FAQ
How much money do I need to retire?
There is no single number. A quick estimate is yearly retirement spending × 25, minus pensions and other steady income. Your actual figure depends on spending, retirement age, pensions and risk tolerance.
Why multiply by 25?
25 is the inverse of 4%: if you withdraw 4% of your savings a year, you need 25 times your yearly spending. The 4% comes from research on US historical data and is not a guarantee; see the 4% rule guide.
Should I include inflation?
Yes. The simplest way is to price everything in today's purchasing power and use the real return after inflation.
Keep reading
- What is the 4% rule? Origin, assumptions and limitsWhere the 4% rule comes from (Bengen 1994, the Trinity study), what it assumes, and why longer or more cautious retirements often use a lower withdrawal rate.
- Monte Carlo simulation: reading the odds of a retirement planHow a Monte Carlo simulation uses many random market paths to estimate the chance your savings last, and how to read a success rate.
This page is general educational information and a description of calculation methods. It is not investment, tax or retirement advice and guarantees no outcome. Check official pension and tax rules and talk to a qualified professional for your situation.