How Much Do I Need to Retire? Your Own Number From Your Own Spending, the 4% Rule Honestly, Social Security, and Why Your Saving Rate Sets the Date (Money School, Lesson 14)

How much you need to retire is not a number someone can tell you; it is a number you can work out from your own spending in three steps. Take what you expect to spend in a year of retirement, subtract the income you will get anyway (Social Security, which averaged about $2,071 a month for retired workers in January 2026, plus any pension), and multiply what is left by about 25 to 26. That multiple comes from a safe starting withdrawal rate of roughly 3.9% to 4% a year. If you plan to spend $40,000 a year and Social Security covers $24,852 of it, the gap is about $15,150 a year, and your number is about $380,000 to $390,000, not the millions you see in headlines. Use the calculator below with your own figures. Here is the part that surprises almost everyone: your saving rate, not your salary, decides when you get there. Starting from zero, saving 10% of income takes about 52 years; saving 25% takes about 32; saving 50% takes about 17, whatever the income. This is Lesson 14 of Money School.

Jake read an article on his phone at the shop counter one quiet Tuesday that said the average person needs $1.46 million to retire. He did the arithmetic on a receipt: at $300 a month he would get there at roughly age 112. He put the phone face down and decided retirement was something that happened to other people. When Ethan came in that afternoon, Jake slid the receipt across the counter. Ethan looked at it, turned it over, and wrote a different calculation on the back: not someone else's average, but Jake's own spending, minus the Social Security Jake had never checked. The number on the back was less than a third of the one on the front.

If retirement numbers have ever made you feel hopeless, you are not alone, and the feeling is usually based on the wrong number. The big figures in headlines are averages of what people say they think they need, or targets built for incomes and lifestyles that may look nothing like yours. Nobody taught me how to work out my own number either. For years I carried around a figure I had read somewhere, about two million dollars, that bore no relation to how I actually lived. The first time I calculated it from my own spending, the target moved from impossible to merely difficult, and difficult is something you can plan for.

How much do I need to retire? The three steps to your own number

Your retirement number is the amount of savings that can pay for the gap between what you will spend and what you will receive anyway, for as long as you might live. Here is how to estimate it, with a pencil and the statements from Lesson 5.

1. Estimate your yearly spending in retirement. Start with what you spend now, from your statements, not from guesswork. Then adjust: subtract what stops (commuting, retirement contributions, a mortgage you will have paid off, children's costs) and add what grows (healthcare, travel if you want it). U.S. households headed by someone 65 or older spent about $61,400 on average in 2024, against about $84,900 for those aged 55 to 64; spending usually falls, but not to zero.
2. Subtract the income you will get anyway. Social Security, any pension, rental income, part-time work you actually plan to do. What is left is the gap your savings must fill each year.
3. Multiply the gap by 25 to 26. That is the savings that can plausibly support the gap for about 30 years, rising with inflation, at a starting withdrawal rate of about 3.9% to 4%. A smaller multiple, like 20, is riskier; a larger one, like 30, is more cautious, for a longer or less flexible retirement.

Three examples, using the average Social Security benefit of $24,852 a year for a retired worker:

The middle row is closer to the headline averages; the first row is the reality for many households; the last row shows why retiring well before Social Security starts needs so much more. Your own row is the only one that matters.

Jake: "So the $1.46 million wasn't wrong. It just wasn't mine."

Ethan: "It's somebody's average guess. Yours comes from your receipts. And yours has Social Security in it, which the headline didn't bother to subtract."

The 4% rule, explained honestly

The "4% rule" says that if you withdraw 4% of your savings in the first year of retirement and then raise the dollar amount with inflation each year, the money has historically lasted about 30 years in most periods. Twenty-five times your yearly gap is the same idea written the other way round, because 1 divided by 4% is 25.

It is a useful starting point, and it is worth knowing its edges. Research published in 2025 put the highest safe starting withdrawal rate at about 3.9% for someone who wants steady, inflation-adjusted spending with a 90% chance of the money lasting 30 years, slightly up from 3.7% a year earlier and down from 4.0% in 2023. The estimate moves with market valuations and bond yields; the exact figure matters less than its range. The same research found that retirees willing to let their spending flex with the market, cutting back a little after bad years, could start closer to 6%.

Three honest caveats:

• It assumes about 30 years. Retiring at 45 means planning for 45 or 50 years, which calls for a lower rate, or a larger multiple such as 28 to 33.
• It assumes a balanced portfolio, a mix of stocks and bonds, not all cash and not all stocks.
• It ignores flexibility. Real retirees adjust: spend less after a bad year, more after a good one, take a part-time job, move somewhere cheaper. Flexibility is worth more than a precise starting rate.

Social Security: the income most people forget to subtract

For most American retirees, Social Security is the foundation, not a bonus, and leaving it out of your number makes retirement look far harder than it is. In January 2026, the average retired worker received an estimated $2,071 a month, about $24,850 a year, after a 2.8% cost-of-living increase; the average couple both receiving benefits got about $3,208 a month. Benefits rise with inflation every year, which makes them unusually valuable: almost nothing else you can buy is protected that way.

Your own benefit depends on your earnings history and on the age you start. For anyone born in 1960 or later, the full retirement age is 67. You can start as early as 62, which permanently reduces the monthly amount by about 30%, or delay past 67, which adds about 8% for every year you wait, up to age 70, about 24% more than at 67. For someone in good health with other savings to live on, delaying is often the cheapest way to buy a larger inflation-protected income for life; for someone who needs the money or has reasons to expect a shorter life, starting earlier can be right. It is a personal decision, and it is worth making on purpose.

Find your own estimate by creating an account on the Social Security website and checking your statement: it shows your earnings record and your estimated benefit at 62, 67 and 70. Check the earnings record for gaps; a missing year can lower your benefit.

When can I retire? Your saving rate sets the date

Here is the most useful table in this lesson. It assumes you start from zero, invest what you save at a 5% return after inflation, and stop when your savings reach 25 times your yearly spending. The interesting thing is what it does not include: your income. A higher income does not shorten the path by itself, because a higher spender needs a higher number. What matters is the share of your income you save.

Before this table makes you feel behind, read it the right way. It ignores Social Security, which, as the section above showed, covers a large share of spending for most people; with it, the real numbers are much shorter. It also starts from zero, and most readers already have something. What it shows clearly is the lever: each extra few percent saved helps twice, because it adds to the pile and lowers the spending the pile must cover. That is why the raise split in Lesson 4, which sends part of every raise to savings before your lifestyle can absorb it, is so powerful over a career.

Closing the gap: the five levers

If your number is larger than your savings path can reach by the age you want, you have five levers. Most people use two or three of them.

1. Save a larger share. The table above. Even a few percentage points, added through raises, move the date by years.
2. Spend less in retirement. Each $1,000 a year of planned spending you can drop lowers the number by about $25,000. Paying off a mortgage before retiring is one of the largest single reductions.
3. Delay Social Security. About 8% more lifetime income for each year after 67 you wait, up to 70.
4. Work a little longer, or a little. One more working year adds a year of saving, a year of growth and a year less to fund. Part-time income in early retirement, even modest, lowers the gap substantially in those first years.
5. Keep fees low and the money invested. Lesson 12's fee check and Lesson 13's "never cash out" are worth tens of thousands of dollars on the same savings.

What you should not do is chase higher returns with risky investments to close the gap faster. That is how a gap becomes a hole.

Healthcare and the costs people forget

Three costs routinely surprise people at the start of retirement, and they belong in step 1 of your number.

• Health insurance before Medicare. Medicare generally starts at 65. Retiring earlier means buying coverage on your own until then, often one of the largest line items in those years. Lesson 8 covered how to read a health plan's worst case.
• Medicare premiums and gaps. Medicare is not free: there are monthly premiums, deductibles and costs it does not cover, such as most dental and long-term care. Budget for them rather than assuming they are zero.
• Taxes on withdrawals. Money from traditional 401(k)s and IRAs is taxed as income when you withdraw it, as Lesson 13 explained. A $40,000 withdrawal is not $40,000 to spend. Roth money and some savings outside retirement accounts help smooth this.

Add an honest line for each to your spending estimate, and your number becomes one you can trust.

The United Kingdom and Australia: same method, different guaranteed income

The three steps work everywhere; only the guaranteed income in step 2 changes. In the United Kingdom, the State Pension plays the role of Social Security: check your forecast on the government's State Pension service, along with the number of qualifying National Insurance years you have, then add your workplace and personal pensions. In Australia, the Age Pension is means-tested, so your super balance and other assets affect how much you receive; superannuation is the main pot, and the government's retirement planning calculators show how the two interact.

Wherever your paycheck lands: estimate your spending, subtract what you will receive anyway, multiply the gap by about 25, and let your saving rate, not your salary, set the date.

Retirement number calculator: your own figures

Put in your expected yearly spending in retirement, the yearly guaranteed income you expect (Social Security, pensions), what you have saved now, what you save each month, and a return after inflation. The calculator shows your number and roughly how many years until your savings reach it.

The defaults show someone planning to spend $40,000 a year with average Social Security, $20,000 saved and $400 a month going in. Put in your own figures; then try the levers: $100 more a month, $2,000 less spending, or the larger Social Security figure from waiting until 70.

This week's exercise: calculate your number, do this with me

Forty minutes, your Lesson 5 statements, and the calculator. I redo mine every January, and it is the most reassuring forty minutes of my year.

1. From your statements, write down what you spend in a typical year now.
2. Cross out what will stop in retirement and add healthcare, Medicare premiums and the taxes on withdrawals. That is your retirement spending.
3. Create your account on the Social Security website (or your country's pension service) and write down your estimated benefit at 62, 67 and 70. Check your earnings record for missing years.
4. Put both into the calculator with what you have saved and what you save monthly. Write down your number and your years.
5. Try the levers one at a time. Write down which one moves your date the most for the least pain.
6. Put a reminder in January to update all of it.

If your number is still far away, write it down anyway. A number you know is a plan; a number you fear is just a worry.

Honest aside: "enough" is a feeling as well as a number

The calculator gives you a figure, and the figure is useful. But people who reach their number often keep moving it, because "enough" is partly a feeling, and the feeling can retreat as fast as you approach it. Others discover they needed less than they thought, because a life with less commuting, less buying and more time costs less than they expected. Your number is a tool for making decisions now, not a finish line you must cross before you are allowed to feel safe.

That is why this lesson asks you to start from your own spending. A number built on your actual life can be reached, adjusted and lived with. A number borrowed from a headline is designed to sell you something, usually anxiety first and a product second.

Where this fits in Money School, and what comes next

Lesson 14 is the fourth lesson of Stage 3, "Build the reservoir." Lesson 11 explained compounding, Lesson 12 what to invest in, Lesson 13 where to hold it, and this lesson how much you need. Lesson 15, the last of Stage 3, runs the honest comparison of renting and buying a home, including the costs the "rent is throwing money away" line leaves out, because for many people the home decision decides the retirement number.

Stage 4 then takes the habits of a good company finance team and applies them to a household: paying yourself first as payroll, zero-based budgeting, and an annual report for your own life. The course page shows every lesson and which ones are live.

Retirement number: your questions, answered straight

Jake's number, on the back of the receipt, came out at about $406,000: $42,000 a year of planned spending, minus the $26,400 a year his Social Security statement estimated at 67, times 26. With his rolled-over 401(k), the $300 a month from Lesson 11 and half of his next two raises, the calculator put him there at about 66, and a larger benefit from waiting to claim would pull that date earlier. He taped the receipt to the inside of the till drawer, number side up. Ethan wrote the line below underneath.

Revision note. Written October 24, 2026, as Lesson 14 of Money School. The figures carry their dates in the text: Social Security's 2026 cost-of-living figures and retirement ages, 2025 research on safe withdrawal rates, and 2024 household spending by age from the Consumer Expenditure Survey; the saving-rate table and examples are our own arithmetic. "Cut your coat according to your cloth," says the old proverb; your retirement number should be cut from your own spending, not someone else's.