How Much Do You Need to Retire?
Retirement planning is one of the most important financial exercises of your life. The earlier you start, the less monthly effort you'll need thanks to the power of compound interest.
The 25x Rule
Savings needed = Annual retirement expenses × 25
If you need $3,000/month ($36,000/year), you'll need approximately $900,000 saved by retirement.
The Power of Time
Starting at 25, you need ~$500/month to retire at 65 with $900K (assuming 7% returns). Starting at 40, you need ~$1,700/month for the same goal.
Investment Options for Retirement
- Savings accounts: Safe but low returns (1-3%)
- 401(k) / IRA: Tax-advantaged retirement accounts
- Index funds: Diversified, historically 7-10% annual returns
- Real estate: Can provide passive income in retirement
- Social Security: Supplements but rarely sufficient alone
Inflation: The Silent Wealth Destroyer
Inflation averages 2-3% annually. This means $100,000 today will only be worth ~$55,000 in 20 years. Your retirement plan must beat inflation.
Social Security typically replaces only 30-40% of pre-retirement income. It's a supplement, not a complete retirement plan. Personal savings and investments are essential.
It's never too late, but each passing year makes the goal harder. If you're 50 with no savings, focus on reducing future expenses and maximizing savings in your remaining working years.
Common benchmarks: 1x salary by 30, 3x by 40, 6x by 50, and 8x by 60. But everyone's situation is different — use this calculator to find your personal target.