How much money do I need to retire?

Build the target from your income gap

Start with annual spending in retirement, including taxes and irregular costs. Subtract income you reasonably expect from Social Security, pensions, annuities, or work. Then divide the remaining annual gap by a withdrawal-rate assumption. A $60,000 spending estimate minus $24,000 of reliable income leaves a $36,000 gap; $36,000 divided by 4% equals $900,000.

This is an illustration, not a safe or guaranteed balance. A lower withdrawal assumption, a longer retirement, less spending flexibility, or a portfolio with more risk may require a larger starting amount. Stress-test poor market returns early in retirement, inflation, a longer-than-expected lifespan, taxes, and large one-time expenses.

Use personalized benefit and healthcare inputs

Social Security benefits are based on your earnings record and the age when you claim. The Social Security Administration lets you compare personalized estimates for claiming ages from 62 through 70; use that estimate instead of a national average.

Healthcare is more than one average. For 2026, the standard Medicare Part B premium is $202.90 per month, but higher-income enrollees pay more. That figure is not total healthcare spending: Part A cost sharing, the Part B deductible, Part D or other coverage, dental and vision care, and long-term services may add costs. Estimate each item for your household.

Why the rate you divide by matters more than the balance

The table is arithmetic, not advice: it is the annual gap divided by the assumed first-year withdrawal rate, rounded. Its only purpose is to show how much the assumption moves the answer. The same $36,000 gap implies a target that differs by about $300,000 between a 3.5 percent and a 4 percent assumption, which is far larger than the effect of most savings decisions.

There is no settled figure for the right rate. Morningstar's annual analysis of safe starting withdrawal rates revises the number each year as conditions change, and it varies with the time horizon, the equity allocation and the success threshold chosen (Morningstar). Treat any single rate as one scenario among several rather than a constant.

Two inputs that belong in the estimate and are often missing. The first is Social Security, which should come from your own earnings record rather than an average, and which interacts with working and with tax in ways worth understanding before you set the gap (SSA, SSA on benefit taxation). The second is the withdrawal schedule imposed on you later: required minimum distributions generally begin at age 73, which can force taxable income in years you had not planned to take it (IRS).

Common questions

How much money do I need to retire?

There is no universal number, and the ones in circulation are multiples of income rather than estimates of need. Build the target from your own gap instead: estimate annual spending in retirement including taxes, subtract the income you can reasonably rely on from Social Security and pensions, and size savings against what is left. The withdrawal rate you divide by is an assumption, not a guarantee, and changing it moves the answer more than almost any other input.

What makes a retirement target wrong?

Four things, usually. Using a withdrawal rate that assumes a shorter retirement than you will have; ignoring taxes on withdrawals, which are not the same across account types; using a national average for healthcare instead of estimating your own; and assuming spending is level, when in practice it moves with health and with one-off costs. A target that survives being stress-tested against poor early returns is worth more than a precise one that has not been.

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