How Much Should You Save for Retirement?

One of the most common questions I hear from clients is: "How much money do I need to retire?" It's a great question—and unfortunately, there's no one-size-fits-all answer. But there are some helpful guidelines that can point you in the right direction.

The 25x Rule

A popular rule of thumb is to save 25 times your annual expenses. This guideline is based on the "4% rule," which suggests you can safely withdraw 4% of your portfolio each year in retirement without running out of money.

Here's how it works: If you spend $60,000 per year in retirement, you'd multiply that by 25 to get $1,500,000. With a $1.5 million portfolio, withdrawing 4% annually gives you $60,000 to cover your expenses.

Of course, this is just a starting point. Your actual needs depend on several factors.

Factors That Impact Your Number

When You Plan to Retire

Retiring at 55 means your money needs to last potentially 35-40 years. Retiring at 67 might mean planning for 25-30 years. The earlier you retire, the more you'll need saved.

Social Security

Social Security will cover a portion of your expenses. The average benefit is around $1,900 per month in 2025, though your amount will vary based on your earnings history and when you claim. If Social Security covers $30,000 of your annual expenses, you only need your portfolio to generate $30,000—not the full $60,000.

Healthcare Costs

Before Medicare kicks in at 65, healthcare can be expensive. And even with Medicare, you'll have premiums, copays, and potentially long-term care costs. A healthy 65-year-old couple might spend $300,000 on healthcare throughout retirement.

Lifestyle Expectations

Do you plan to travel extensively? Downsize your home? Move to a lower cost-of-living area? Your retirement lifestyle dramatically affects how much you'll need.

How Much Should You Be Saving Now?

A common recommendation is to save 15-20% of your gross income for retirement. If your employer offers a 401(k) match, make sure you're contributing enough to get the full match—that's free money you don't want to leave on the table.

If you're starting late, you might need to save more aggressively. The good news is that people 50 and older can make "catch-up" contributions to retirement accounts, allowing you to save an extra $7,500 in a 401(k) and an extra $1,000 in an IRA (as of 2025).

Don't Forget About Inflation

Whatever number you settle on today, remember that inflation will erode purchasing power over time. What costs $60,000 today might cost $90,000 in 20 years. That's why it's important to invest your retirement savings in a diversified portfolio that has the potential to grow beyond inflation.

The Bottom Line

While the 25x rule is a helpful starting point, your retirement needs are personal. The best approach is to create a comprehensive financial plan that factors in your specific situation, goals, and timeline.

Have questions about your retirement plan? Schedule a free consultation to discuss your specific situation and create a personalized roadmap.

Disclaimer: This article is for educational purposes only and should not be considered investment advice. Please consult with a qualified financial advisor before making investment decisions.