By the RetireGauge Editorial Team · Updated June 2026 · Researched from authoritative sources. General information, not professional advice.
It is the question every saver eventually asks, usually hoping for a tidy dollar figure. The honest answer is that the number is personal, and the work of finding it is mostly arithmetic plus a few judgment calls about how you want to live.
Headlines love to print a round figure such as "$1 million" or "$1.5 million," but those numbers are averages dressed up as targets. A retiree with a paid-off home, a pension, and modest tastes in a low-cost area may need far less than a renter in a high-cost city who plans to travel widely. Your number is driven by what you will actually spend, what guaranteed income you will receive, and how long that money must last. Start with those inputs, not with someone else's headline.
The most reliable starting point is your future expenses, not your current income. Many planners use a shortcut called the replacement rate: a common rule of thumb suggests retirees need roughly 70% to 85% of pre-retirement income to maintain their standard of living. The logic is that some costs fall once you stop working, such as payroll (Social Security and Medicare) taxes on wages, retirement-plan contributions, and commuting.
The replacement rate is a useful first pass, but treat it as a sanity check rather than gospel. Its limits matter:
For a grounded picture of where retiree money actually goes, the U.S. Bureau of Labor Statistics Consumer Expenditure Survey breaks down spending by older households across housing, transportation, food, and healthcare. Comparing your draft budget to those categories helps you catch a line you forgot. Whenever you can, build a real budget category by category instead of relying solely on a percentage.
You do not have to fund your entire budget from savings. Subtract the income that will arrive regardless of the markets. For most people that means Social Security; for some it also means a pension or an annuity. What is left over is the gap your nest egg must fill.
To estimate your Social Security benefit, create a my Social Security account at ssa.gov, where the Social Security Administration shows your personalized estimated monthly benefit at different claiming ages based on your earnings record. Because claiming earlier permanently reduces the monthly amount and waiting increases it, run your plan with the age you realistically expect to claim, not the most optimistic one.
Once you know the annual income your savings must produce, turn it into a lump sum using a safe withdrawal rate. The most cited guideline is the 4% rule, which suggests withdrawing about 4% of your portfolio in year one and adjusting for inflation thereafter. Dividing your annual gap by 4% (the same as multiplying by 25) gives a rough nest-egg target. That multiply-by-25 step is the popular "25x expenses" shortcut.
Suppose a household targets $70,000 of annual spending in retirement and expects $30,000 a year from Social Security plus a small pension. The numbers below are illustrative only.
| Step | Figure | How it was found |
|---|---|---|
| Target annual spending | $70,000 | Budgeted from expected expenses |
| Less: Social Security | −$24,000 | Estimate from a my Social Security statement |
| Less: pension | −$6,000 | Plan provider estimate |
| Income needed from savings (the gap) | $40,000 | $70,000 − $30,000 |
| Divide by 4% safe withdrawal rate | ÷ 0.04 | Equivalent to × 25 |
| Nest-egg target | $1,000,000 | $40,000 ÷ 0.04 |
Notice how much the guaranteed income did. Without that $30,000, the same household would need to fund the full $70,000 from savings, pushing the target to $1,750,000. Maximizing reliable income often shrinks the savings goal more than any investment tweak.
The base calculation is only a frame. These factors push it up or down:
Small changes in assumptions swing the target a lot, so it is worth stress-testing. Spending is the biggest lever: trimming the gap from $40,000 to $35,000 lowers the target from $1,000,000 to $875,000. The withdrawal-rate assumption matters almost as much. The same $40,000 gap implies $1,000,000 at a 4% rate, about $1,143,000 at a more cautious 3.5% rate, and roughly $1,333,000 at a conservative 3% rate. Run your plan across a range rather than betting on one figure.
Because the final target sits decades away for many savers, age-based milestones offer a quick gut check between now and then. A widely circulated rule of thumb frames savings as a multiple of current salary, building toward roughly 10 times salary by retirement age, with smaller multiples along the way in your 30s, 40s, and 50s. These checkpoints are deliberately crude. They assume an average career arc and ignore pensions, dual incomes, and local costs, so use them to spot whether you are broadly on track, then return to your personal expense-based number for the real target.
For some households, yes; for others, no. At a 4% withdrawal rate, $1 million supports about $40,000 a year from savings before taxes, on top of Social Security or a pension. Whether that is enough depends entirely on your spending, your guaranteed income, your taxes, and how long the money must last.
Use both. The 25x shortcut (dividing your annual savings gap by 4%) gives a fast target, and a category-by-category budget tells you whether the spending figure feeding that shortcut is realistic. The shortcut is only as good as the number you put into it.
Create a free my Social Security account at ssa.gov. The Social Security Administration will show your estimated monthly benefit at different claiming ages based on your actual earnings record, which is far more accurate than a generic average.
Yes. Traditional 401(k) and IRA withdrawals are generally taxed as ordinary income, while qualified Roth withdrawals are generally tax-free, per IRS rules. Two people with the same balance can have very different spendable amounts, so factor the account mix into your target.
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