How Much Do You Need to Retire? Your Number, Your Withdrawal Rate

You need about 28 to 30 times the yearly spending that Social Security and any pension will not cover, plus a separate fund for the years before those checks start. The multiple comes from dividing by a safe withdrawal rate: 1 ÷ 3.5% is 28.6. The separate fund covers the bridge years and large one-time costs, which the multiple does not.

The mistake to avoid is multiplying your whole budget by 25. A couple spending $120,000 a year would conclude they need $3 million. If $86,400 of that arrives from Social Security and a pension, the portfolio only has to supply the rest plus tax, and the answer falls by close to half. The worked example below shows the full calculation.

From historical back-testing of 30-year retirements. In 1994 the financial planner William Bengen published Determining Withdrawal Rates Using Historical Data, which found that a retiree who withdrew 4% of a balanced portfolio in year one, then raised the dollar amount with inflation each year, would not have run out of money over any 30-year period in the US record. The 1998 Trinity study by Cooley, Hubbard and Walz reached a similar conclusion from a different data set. The "25x rule" is the same idea turned around: 1 ÷ 4% = 25.

Two things are easy to forget about that research. First, it was a worst-case figure over 30 years, not a forecast, and in most historical periods the retiree finished with more money than they started with. Bengen himself now puts the historical safe maximum at 4.7% for a more diversified portfolio (CNBC, 2025). Second, it assumes rigid spending: the same real amount every year, regardless of markets, which few people actually do.

Morningstar takes a forward-looking approach instead, using current bond yields, valuations and inflation forecasts. Its 2026 estimate for a new retiree seeking steady inflation-adjusted spending with a 90% chance of success over 30 years is 3.9%, for a portfolio of 30% to 50% stocks (Morningstar, 2025). It was 3.7% a year earlier and 3.3% in 2021, which is a reminder that the "safe" rate moves with market conditions at the start of retirement.

The spread between the top and bottom rows is about $450,000 for the same $50,000 of income. Which row you plan with is the single biggest assumption in the number, so it deserves more thought than the return assumption.

About 3.5% if you retire around 60 and want fixed spending; closer to 3.9% if you retire at 65 or later. Morningstar's September 2026 analysis puts the starting safe rate at 3.9% for 30 years, 3.5% for 35 years, 3.3% for 40 years and 2.9% for 50 years, for a 40% stock portfolio with a 90% chance of success (Morningstar, 2026). At 35 years, the 3.5% rate held for stock allocations anywhere from 30% to 60%.

Why plan for 35 years at 60? Because a couple's horizon runs to the second death, not the first, and the odds that at least one of two healthy 60-year-olds lives into their 90s are far higher than for either one alone. Planning to 95 for the younger spouse is a sensible default. If you are single, in poor health, or 67 before you stop work, a 30-year or shorter plan is reasonable and Morningstar notes that older retirees can spend well above its 30-year figure.

Retirement also tends to start sooner than planned. Workers expect to retire at 66 on average, but the average actual retirement age is about 61, according to a May 2026 Gallup poll cited in the same Morningstar analysis. If you are 58 and planning for 65, it is worth knowing what the numbers look like at 62 too.

A great deal. At a 3.5% withdrawal rate, every $1,000 a month of inflation-adjusted lifetime income replaces about $343,000 of savings ($12,000 ÷ 3.5%). A couple with $5,700 a month of combined Social Security has the equivalent of nearly $2 million in a portfolio that never runs out and rises with inflation. That is why the 25x rule applied to total spending overstates what most retirees need.

Social Security is the best income of this kind you can buy. Benefits rise with the cost of living, last for life, and grow by 8% for each year you wait past full retirement age until 70; full retirement age is 67 for anyone born in 1960 or later (SSA). A surviving spouse keeps the larger of the couple's two benefits, so delaying the larger one protects the survivor as well. Our Social Security Estimator shows your benefit at each claiming age, and our guide to when to claim Social Security covers the trade-offs in detail.

Pensions need one adjustment. Most private pensions pay a flat amount with no cost-of-living increase, so their buying power shrinks every year. At 2.5% inflation a flat pension loses about 40% of its real value over 20 years. Counting it at full value in a 35-year plan overstates it. A simple fix is to count a flat pension at about two-thirds of its face amount. If you still have a choice between a lump sum and monthly payments, see our comparison of pension lump sums and annuities.

For a couple retiring at 60, often $100,000 or more across the five years before Medicare begins at 65. Unless an employer offers retiree coverage, the usual options are COBRA for up to 18 months and then an Affordable Care Act marketplace plan, priced by age and ZIP code. Premiums for people in their early 60s are the highest in the marketplace.

Subsidies matter more in 2026 than they did a year ago. The enhanced premium tax credits expired at the end of 2025, so the credit is again available only to households with income up to 400% of the federal poverty level (IRS). For a couple buying 2026 coverage that line is $84,600 of income, 400% of the 2025 guideline of $21,150 (HHS). One dollar over, and the subsidy disappears entirely. A retiree who funds the bridge years from cash and a taxable account can often keep income under that line; one who draws from a traditional IRA often cannot.

Medicare does not make health costs go away. The standard Part B premium is $202.90 a month per person in 2026, and joint filers with modified adjusted gross income above $218,000 pay more, based on the tax return from two years earlier (CMS, 2026). Fidelity estimates that a 65-year-old retiring in 2026 will spend an average of $185,500 on health care over retirement, not counting long-term care (CNBC, 2026). Add Medigap or Medicare Advantage, Part D, dental and vision to your yearly budget. The Healthcare Cost Estimator builds that line for you, and our guide to Medicare enrollment and IRMAA explains the surcharges.

They raise it, by roughly the share of each withdrawal that goes to tax. Withdrawals from a traditional 401(k) or IRA are ordinary income. Withdrawals from a taxable account are taxed only on the gain, often at lower capital-gains rates. Qualified Roth withdrawals are tax-free. A $2 million balance that is all pre-tax supports less spending than $2 million split across the three.

Social Security is partly taxable too. For joint filers, up to 50% of benefits can be taxed once "combined income" (adjusted gross income plus nontaxable interest plus half of benefits) passes $32,000, and up to 85% above $44,000 (SSA). Those thresholds are not indexed to inflation, so most retirees with meaningful savings will have 85% of their benefits taxed.

Timing matters as much as the total. The years between retirement and required minimum distributions, which begin at 73, or 75 if born in 1960 or later, are often the lowest-tax years of your life. Converting part of a traditional IRA to Roth in those years can lower lifetime tax and future Medicare surcharges, at the cost of higher income now and possibly the loss of a marketplace subsidy. Our guides to Roth conversions before RMDs and retirement withdrawal order cover the sequencing. For the number itself, the practical rule is: work out the spending you need after tax, then gross up the portfolio withdrawals for federal and state tax.

Yes, with a margin of about $200,000, and about $350,000 if the higher earner delays Social Security to 70. The couple is hypothetical: David and Susan are both 60, own their home outright, and have two adult children and three grandchildren. Figures are in today's dollars and federal tax only; state tax would add to the gap in most states.

Step 1: The long-run gap, once all income has started

From 67, they spend $120,000 plus about $12,000 for Medicare Part B, a supplement and drug coverage for two: $132,000. Social Security pays $68,400 and the pension $18,000, leaving $45,600 for the portfolio. Drawing that from traditional accounts, with 85% of their Social Security taxable and the standard deduction for two people over 65, adds about $11,200 of federal tax at 2026 brackets, ignoring the temporary senior deduction that ends after 2028. The portfolio withdrawal is about $56,800 a year. At 3.5%, that needs $1.62 million.

Step 2: The bridge years, 60 to 67

For five years they buy marketplace coverage, which we budget at $24,000 a year unsubsidized. From 60 to 64 they need $144,000 a year, less the pension: $126,000 from savings. At 65 and 66, Medicare replaces the marketplace plan, and they need $114,000. Over seven years that is about $858,000. The long-run portfolio would have supplied about $398,000 of it at its 3.5% pace, so the extra they need is about $460,000. Funding these years from cash and the taxable account keeps their taxable income low.

Step 3: A reserve for what the formula misses

Susan's pension is flat, so counting it at full value overstates it. Valuing it at two-thirds costs $6,000 a year of income, or about $170,000 at 3.5%. They also want $150,000 for a new roof, two car replacements and help with a grandchild's tuition. Reserve: about $320,000.

Step 4: Test the one lever that helps most

If David waits to 70, his benefit rises 24% to about $4,216 a month, $9,792 a year more. That shrinks the long-run gap enough to cut the portfolio by about $280,000. The cost is three more years in which the portfolio pays what his benefit would have: about $122,000. The net saving is roughly $158,000, and if David dies first, Susan keeps the larger check for life. The plain 25x rule applied to their $120,000 budget would have told them they need $3 million and are $400,000 short. The more careful calculation says they can retire now, with a margin.

Sequence risk raises the number for rigid spenders; flexibility lowers it. Morningstar found that retirees who met poor returns in the first five years of retirement and did not cut spending were much more likely to run out of money than those whose first five years were positive, with the same long-run average return (Morningstar, 2025). Withdrawals taken after a fall lock in the loss; the shares sold are not there for the recovery.

That is the case for the bridge fund in the example. Holding the first two or three years of withdrawals in cash and short-term Treasuries means a bear market in year one does not force stock sales at the bottom. The Retirement Withdrawal Calculator has a sequence-risk view that runs the same returns in good and bad order, and a Monte Carlo view that tests 1,000 market paths.

Flexibility is the other answer. Morningstar's 2026 research found that retirees willing to let spending move with markets could start with a withdrawal rate of nearly 6%, against 3.9% for fixed spending, with flexible methods such as guardrails working best when a large share of essential costs is covered by guaranteed income. In practice this means dividing your budget into essentials, which Social Security and pensions should cover, and discretionary spending such as travel and gifts, which you agree in advance to trim by 10% or so after a poor year. A household that will do that can retire with less than the fixed-rate number, or retire sooner.

Anything large, likely and not in your monthly budget. Four items come up in almost every plan for readers in their 60s:

• •Long-term care. Medicare covers little of it. Decide whether you will insure, self-fund from a reserve, or use home equity. Our long-term care planning guide compares the options.
• •Your home. A paid-off house lowers spending but pays no bills. Downsizing can release equity and cut property tax and upkeep; see downsizing in retirement.
• •Gifts and legacy. Help for children and grandchildren is a spending line, not an afterthought. If leaving a set amount matters to you, the withdrawal rate must be lower. See gifting to children and grandchildren.
• •Spending that changes with age. Many retirees spend more on travel in their 60s and less in their 80s, while health costs rise. A level real budget is a conservative simplification, not a prediction.

In five steps, each with a free calculator on this site.

Rerun the numbers every January. The safe rate for a 65-year-old is higher than for a 60-year-old, so a plan that is tight at 60 often looks comfortable at 66 if spending held steady. For a full worked plan with a different couple, see our case study Can We Retire at 60 on $1.4 Million?