How Much Do I REALLY Need to Retire? A Step-by-Step Guide to Finding Your Number

Are You Wondering How Much Money You Actually Need to Retire?

It’s the million-dollar question—sometimes literally!

Did you know that 47% of retirees worry about outliving their money, according to AARP?

Whether you’re planning to retire early or simply want financial security in your later years, knowing your number is essential.

But here’s the thing—there’s no one-size-fits-all answer.

Your ideal retirement savings depend on your lifestyle, expenses, inflation, and financial strategy.

Let's break it all down so you can confidently calculate your personal retirement number and avoid common financial pitfalls.

By the end of this post, you’ll have a crystal-clear strategy to ensure you never run out of money in retirement.

Let’s dive in!

Step 1: How Much Will You Spend in Retirement?

The foundation of your retirement plan is knowing how much you’ll need to spend each year.

Think about your ideal lifestyle—do you want to:
✅ Travel the world?
✅ Live simply and frugally?
✅ Pursue hobbies and new passions?

Your expenses will typically fall into three categories:

1. Basic Living Expenses 💰

These are your essential costs, including:

• Housing: Mortgage, rent, or property taxes

• Utilities: Electricity, gas, water, internet

• Groceries & Food: Home cooking and dining out

• Transportation: Car payments, gas, insurance

2. Discretionary Spending 🎉

This covers all the fun things in life:

• Vacations & Travel ✈️

• Dining Out & Entertainment 🍽️

• Hobbies & Recreation 🎸

Many retirees increase spending on hobbies and travel in their early retirement years, so plan accordingly!

3. Unexpected Costs & Emergencies 🚨

Life is unpredictable, so prepare for:

• Medical Expenses 🏥 (especially before Medicare kicks in at 65)

• Home Repairs 🔨

• Helping Family Members 👨‍👩‍👧

💡 Pro Tip:
If you haven’t tracked your spending before, review your last year’s expenses to get a realistic baseline for your retirement budget.

Step 2: How Long Will Your Savings Need to Last?

Here’s something that shocked me during my early retirement planning:

If you retire at 55, your money might need to last 35–40 years—longer than your entire career!

Ask Yourself:

🔹 What’s the longest possible time I’ll need my savings to last?
🔹 What happens if I live longer than expected?

Planning for a long retirement is key—because running out of money at 75 is NOT an option.

Step 3: How Inflation Will Affect Your Retirement?

Inflation is the silent killer of retirement savings.

For example:
📌 In 1996, gas was $1.23 per gallon—today, it’s over $3.00+ 😲
📌 With just a 3% inflation rate, $50,000 today will only buy $27,684 worth of goods in 20 years.

That means your money must grow over time to keep up with rising costs.

The Impact of Inflation on Key Expenses:

✔️ Healthcare costs rise faster than general inflation—plan accordingly!
✔️ Everyday goods and services will cost double or even triple in your lifetime.

💡 Pro Tip: Keep a portion of your portfolio in growth investments like stocks to outpace inflation.

Step 4: The 25x Rule – A Quick Way to Estimate Your Retirement Number

A simple rule of thumb to determine your retirement number is:

📌 Annual Spending x 25 = Your Target Savings

This is based on the 4% Rule, which suggests that you can withdraw 4% of your portfolio annually (adjusted for inflation) without running out of money for 30 years.

Example Scenarios:

🔹 Jane’s Plan:

• Annual Spending: $40,000

• Retirement Target: $1 million

• Social Security Expected: $200,000 over lifetime

• Adjusted Savings Goal: $800,000

🔹 John’s Plan:

• Annual Spending: $80,000

• Passive Rental Income: $20,000/year

• Adjusted Annual Need: $60,000

• Retirement Target: $1.5 million

• Social Security Expected: $300,000

• Final Savings Goal: $1.2 million

💡 Key Takeaway: Different lifestyles and income sources change your savings goal—calculate accordingly!

Step 5: The Caveats – Why the 25x Rule Isn’t Always Enough

The 25x Rule is a great starting point, but it has limitations:

🔸 It assumes a 30-year retirement. If you retire early, you may need 30–35x your annual expenses.
🔸 It doesn’t factor in one-time big expenses (e.g., helping kids with college or paying for a wedding).
🔸 It assumes market stability—but sharp downturns early in retirement can significantly impact your portfolio.
🔸 Taxes matter! Withdrawals from Roth IRAs vs. Traditional IRAs vs. brokerage accounts are taxed differently.
🔸 Legacy goals—Do you want to leave money behind for your heirs?

Step 6: Test Your Plan with Retirement Calculators

To dig deeper than the 4% rule, I highly recommend using a tool like Boldin.com (it’s like TurboTax for retirement planning).

✅ Play with different scenarios—retirement ages, market crashes, healthcare costs
✅ See your probability of success under multiple conditions
✅ Get a projected timeline for your money’s longevity

💡 They offer a FREE plan to get started, and their Planner Plus version is just $120 per year (worth every penny!).

Final Thoughts: How Much Do YOU Need to Retire?

The real answer to how much you need for retirement depends on:

✔️ Your annual spending needs
✔️ Your life expectancy
✔️ How you plan for inflation & unexpected costs

Action Plan to Find Your Number:

✅ Track your current spending (or estimate future expenses)
✅ Adjust for potential lifestyle changes (e.g., more travel, hobbies)
✅ Add a safety buffer for healthcare & one-time expenses
✅ Multiply by 25 (or 30–35 for early retirement)
✅ Adjust for Social Security, rental income, or side hustles
✅ Test your plan with retirement calculators

Early retirement is a journey, and great planning will set you up for success.

📺 YouTube: Watch the video version of this content below for even greater detail & subscribe to my YouTube channel to ensure you don't miss any of my videos! I publish new videos weekly!