How Much Do You Need to Save for Retirement? The Real Numbers
The short answer: 25x your annual expenses. The long answer is more nuanced.
The financial independence number is your annual expenses multiplied by 25. If you spend $50,000/year, you need $1,250,000. At $75,000/year: $1,875,000. At $100,000/year: $2,500,000. This is based on the 4% rule — withdrawing 4% annually from a diversified portfolio has historically lasted 30+ years.
But Social Security Changes the Math
If Social Security covers $24,000/year of your $60,000 expenses, you only need to fund $36,000 from your portfolio. At 25x: $900,000 instead of $1,500,000. Social Security dramatically reduces the required savings for most people.
The Savings Timeline
Starting at 25, saving $500/month at 10% returns: $3.2 million by 65. Starting at 35: $1.1 million. Starting at 45: $380,000. The math is brutal if you start late — you need to save 3-5x as much per month to catch up. Start now, whatever the amount.