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There is no single "magic number," but a common rule of thumb is that you will need about 70-80% of your pre-retirement income to maintain your standard of living.
For example, if you earn $100,000 year now, you should aim for $70,000-$80,000 annually in retirement. This assumes some expenses (like commuting, saving for retirement, mortgage) will disappear.
Pro Tip: Don't forget to account for inflation. $1 million today won't buy as much in 30 years. Our calculator implicitly assumes "real" returns, or you can adjust your inputs.
The 4% Rule is a guideline established by the "Trinity Study." It states you can withdraw 4% of your portfolio in the first year of retirement, and adjust that dollar amount for inflation in subsequent years, with a very high probability of never running out of money over a 30-year retirement.
Multiply your desired annual income by 25 to find your target number.
Albert Einstein reputedly called compound interest "the eighth wonder of the world." It is interest earning interest.
Example:
Bob starts saving $500/month at age 25.
Alice starts saving $500/month at age 35.
At age 65 (assuming 7% return), Bob has $1.2 Million. Alice has only $600,000. Bob verified twice as much money simply by starting 10 years earlier.
An employer-sponsored plan. Contributions are often tax-deductible (Traditional) or taxed now for tax-free withdrawals later (Roth). Many employers match contributions—this is free money!
An account you open yourself. It has lower contribution limits than a 401(k) but offers more investment choices.
You can retire whenever your investments can support your lifestyle indefinitely. For Social Security, full benefits usually start at age 67 for those born after 1960.
Historically, the stock market averages about 10% annually before inflation. Financial planners often use 6-7% as a conservative estimate adjusting for inflation.
If you use a "real" rate of return (e.g., 7% instead of 10%), the final number is in "today's dollars," meaning it accounts for inflation's erosion of purchasing power.
