Retirement planning produces more conflicting advice than almost any other personal finance topic. Save 10% of income. No, 15%. You need $1 million. No, $2 million. Save enough to replace 70% of your salary — or is it 80%? Here's how to cut through the noise and find your actual number.
The 4% Rule — What It Is and What It Assumes
The most widely cited retirement guideline states you can safely withdraw 4% of your portfolio per year without running out of money over a 30-year retirement. This means: multiply your desired annual retirement income by 25 to get your target portfolio size. If you want $50,000/year, you need $1.25 million.
The 4% rule comes from the "Trinity Study" (1998) using historical stock/bond returns. It held up through most historical periods, but some researchers now suggest 3–3.5% is safer given lower expected future returns and longer retirements.
💡 The 25x rule in practice: If Social Security will cover $20,000/year of your retirement needs, you only need your portfolio to cover the rest. Need $60,000/year total? Your portfolio target is ($60,000 − $20,000) × 25 = $1,000,000.
How Much to Save Each Month
The math is driven by three variables: time, return, and contribution. Starting early is the single most powerful lever. Someone saving $500/month starting at 25 with a 7% average return will have more at 65 than someone saving $1,000/month starting at 40 — despite contributing far less total.
Common Benchmarks by Age
Fidelity's widely-used milestones suggest:
- By 30: 1× your annual salary saved
- By 40: 3× your salary
- By 50: 6× your salary
- By 60: 8× your salary
- By 67: 10× your salary
These are benchmarks, not verdicts. Someone with a pension, low expenses, or a working spouse needs far less. Someone retiring early or with high expenses needs more.
The 15% Savings Rate Rule
Fidelity and most financial planners suggest saving 15% of gross income for retirement, including any employer match. If your employer matches 5%, you need to contribute 10%. This rate, started in your 20s, gets most people to full retirement by their mid-60s.
What If You're Starting Late?
The best time to start was 20 years ago. The second best time is now. Starting at 45 instead of 25 doesn't mean retirement is impossible — it means you need a higher savings rate, a later retirement age, or both. Maximizing your 401(k) ($23,500 in 2025, plus a $7,500 catch-up contribution if over 50) and a Roth IRA helps close the gap significantly.