Retirement Goal Calculator: How Much Do You Need?

"How much money do I need to retire?"

This is the most common, most important, and often the most intimidating question in personal finance. For a beginner, the thought of needing "millions" can cause total financial paralysis.

The truth is, there is no single, perfect answer. But there is a very powerful, simple shortcut that can give you a clear, actionable goal in under two minutes: The 25x Rule.

Once you know this rule, the number you need to save stops being a mystery and starts being a goal you can actually achieve.

The Goal-Setting Formula (The 25x Rule)

The 25x Rule comes directly from the famous 4% Rule (which we will cover in a future article). Together, these rules allow you to calculate your target "nest egg" based on one crucial number: What you plan to spend every year in retirement.

Step 1: Find Your Retirement Spending Target

Financial experts generally agree that you will need between 70% and 80% of your pre-retirement income to maintain your current lifestyle in retirement. Why less? Because you'll no longer have:

• Commuting Costs: Gas, maintenance, public transit fares.
• Work Expenses: Professional clothes, lunches out, etc.
• Savings: You stop saving for retirement once you are in retirement!
• Payroll Taxes: Social Security and Medicare taxes stop once you stop working.

The Simple Calculation: Start with your current annual income and multiply it by 0.75 (75%) for a quick estimate.

• Example: If you currently make $80,000 per year, your estimated retirement spending target is $80,000 x 0.75 = $60,000 per year.

Step 2: Apply the 25x Rule

The 25x Rule states that your total savings (your "nest egg") should be 25 times your estimated annual retirement expenses.

Why 25? Because if you have 25 times your annual spending saved up, the safest withdrawal rate (the 4% Rule) says you can withdraw 4% of that total every year for 30 years and have a very high likelihood of never running out of money.

The Simple Formula:

Your Target Savings = Annual Spending times 25

• Example: If your annual spending target is $60,000, your total savings goal is: $60,000 times 25 = $1,500,000.

This is your target "magic number."

Try the Retirement Goal Calculator

Use this simple calculator to find your target savings number.

1. Your Current Annual Income ($): [ $ ]

2. Estimated % of Income Needed for Retirement (75% is standard): [ 75% ]

(Calculate)

Your Annual Retirement Spending Target is: [ $_____ ]

(Calculate)

Your Total Savings Goal (25x Rule) is: [ $_____ ]

Adjusting Your Goal for Reality

The $1.5 million target is a great place to start, but you don't actually need to save all of that yourself. This goal needs to be adjusted based on the "free money" you'll receive.

1. Subtract Social Security

Social Security is designed to replace about 40% of the average worker's income. You can get a personalized estimate of your Social Security benefits by creating an account at the official SSA.gov website.

• Action: Subtract the estimated total annual Social Security benefit you expect to receive from your $60,000 Annual Spending Target.

2. Subtract Pensions (If Applicable)

If you are lucky enough to have a pension plan from a state, military, or union job, that guaranteed annual payment also reduces the amount your savings needs to cover.

3. Recalculate Your Final Goal

After subtracting your guaranteed income sources (Social Security and any pensions) from your Annual Spending Target, the remainder is your Annual Savings Gap.

You then apply the 25x Rule to this smaller, gap number.

• Example: If your Annual Spending Target is $60,000, but you expect $25,000 from Social Security, your Savings Gap is $35,000.
  • New Savings Goal: $35,000 times 25 = $875,000.

By factoring in your Social Security, your personal savings goal dropped from $1.5 million down to $875,000! This is a much more manageable and realistic target.

The Fidelity Milestones (Am I On Track?)

Knowing the final destination is one thing, but knowing if you're making progress is just as important. Fidelity Investments created a simple, age-based benchmark to show you if you are on track.

These "milestones" assume you started saving at age 25 and consistently invest at least 15% of your income annually (including any employer match).

The Beginner Action: If you are 35 and your salary is $70,000, your goal is to have $70,000 times 3 = $210,000 saved by age 40. This is an easier number to track than the $1.5 million goal.

Final Takeaway

The question "How much do I need to retire?" is no longer a mystery. By using the 25x Rule and factoring in Social Security, you can turn a scary seven-figure number into a concrete, achievable goal. The only thing left to do is start today and put the power of compound interest to work to hit your milestones.