Retirement Planning 101: How Much Do You Really Need?

The 4% Rule Explained

The 4% rule says you can withdraw 4% of your retirement savings in your first year of retirement, then adjust for inflation each year, with a high probability that your money lasts 30 years. Under this rule, if you need $40,000 per year from investments, you need $1 million saved ($40,000 / 0.04 = $1,000,000). The rule was based on historical US stock and bond returns from 1926-1995 and is a guideline, not a guarantee. Many experts now recommend 3-3.5% for longer retirements.

Savings Benchmarks by Age

Social Security and Pensions

Social Security replaces about 40% of pre-retirement income for the average worker. If you have a pension, factor that into your calculations too. The retirement calculator lets you include Social Security and pension income to see how much you still need from your savings. Remember: Social Security benefits increase by about 8% per year if you delay claiming from age 62 to 70.

Frequently Asked Questions

What if I want to retire early (before 59.5)?

Early retirement requires a higher savings rate (typically 50%+ of income) and careful tax planning. You can access 401(k) funds penalty-free through Roth conversion ladders or SEPP (72t) distributions. Health insurance before Medicare also needs to be factored in. The retirement calculator includes early retirement scenarios.

How do I account for inflation in my retirement plan?

Use real (after-inflation) return rates in your calculations. If you expect 7% market returns and 3% inflation, use 4% as your real return. The retirement calculator has an inflation toggle to show both nominal and real (inflation-adjusted) projections.