How to Calculate Your Real Retirement Number (Not the Generic One)
Short answer: your real retirement number starts from what you will actually spend, adjusted for known changes such as a paid-off mortgage, children leaving home and healthcare, then reduced by income that does not come from savings, then divided by a withdrawal rate suited to your retirement length. In the example below, $52,000 of spending today becomes $40,600 in retirement, a pension of $12,000 leaves $28,600 to fund, and at 3.5% the number is about $817,143 instead of the generic $1,300,000.
Key takeaways
- Use expenses, not income. Retirement has to cover what you spend, and most people spend less than they earn.
- Adjust today's spending for what will change: a mortgage that ends, kids who leave, and healthcare that rises.
- Subtract gixed income first. A pension of $12,000 lowers the portfolio target by hundreds of thousands.
- Pick a withdrawal rate for your own horizon. 25 times is only the 4% case.
Why is 25 times spending only a starting point?
The 25-times figure comes from a 4% withdrawal rate modelled on a roughly 30-year retirement. It ignores which costs end, which start, and what other income you have. For a household spending $52,000, it gives $1,300,000, which may be far too high or too low for their actual situation.
What does a worked example look like?
| Step | Amount |
|---|---|
| Spending today | $52,000 |
| Mortgage paid off before retirement | -$14,400 |
| Children no longer at home | -$6,000 |
| Healthcare before public coverage starts | +$9,000 |
| Spending in retirement | $40,600 |
| Pension and other fixed income | -$12,000 |
| Needed from the portfolio | $28,600 |
| Target at 3.5% ($28,600 ÷ 0.035) | $817,143 |
| Generic shortcut ($52,000 × 25) | $1,300,000 |
The real number here is about $483,000 lower than the generic one, because the mortgage ends and a pension covers part of the cost. The reverse can happen: a household that will pay rent in retirement, support a relative or travel often would end up above the shortcut.
How do you build your own in five steps?
- Find your spending. Use 12 months of statements, not a guess. See where does my money go.
- Adjust for changes. List costs that end (mortgage, commuting, children) and costs that begin (healthcare, travel, care).
- Subtract gixed income. Social Security, a pension, rental income. Use your own estimates.
- Pick a withdrawal rate. 4% for about 30 years, 3% to 3.5% for 40 years or more. See a safe withdrawal rate for early retirement.
- Divide. The result is your number. Add a margin of 10% to 20% if you can.
Which costs are easiest to forget?
| Cost | Why it matters |
|---|---|
| Healthcare before and after public coverage | Often the largest new cost, and it rises with age |
| Taxes on withdrawals | Traditional account withdrawals are taxed, so spendable money is lower |
| Home upkeep and property tax | Continue after a mortgage ends |
| Long-term care | Can arrive late and large |
| Helping family | Adult children or parents may need support |
| Inflation | Spending in 20 years will cost more than today's figures |
Work in today's dollars with a return after inflation, as in the retirement calculator guide. Then check the monthly saving that reaches your number, and whether you are on course in am I on track for retirement.
How do taxes change the number?
The $28,600 you need from the portfolio is after-tax spending. If it comes from a traditional account, you must withdraw more so that $28,600 is left after tax. The table shows the gross withdrawal and the target at 3.5% for different average tax rates on withdrawals:
| Average tax rate on withdrawals | Gross withdrawal needed | Target at 3.5% |
|---|---|---|
| 0% (Roth or tax-free money) | $28,600 | $817,143 |
| 10% | $31,778 | $907,937 |
| 15% | $33,647 | $961,345 |
| 20% | $35,750 | $1,021,429 |
A 15% average rate adds about $144,000 to the target. Where your money sits matters: Roth and taxable accounts are taxed differently from traditional accounts. See Roth IRA vs 401(k). Because tax rules change and depend on your income, ask a tax professional to model your case, and treat the 0% row as a floor.
What mistakes skew the number?
- Using last year's pay instead of real spending, which is often much lower or higher.
- Forgetting that healthcare and long-term care costs rise with age.
- Counting a pension or Social Security at a hopeful figure rather than your own statement.
- Skipping a margin, so any shortfall in returns becomes a shortfall in lifestyle.
- Calculating once and never updating it as spending and goals change.
Sources and further reading: SEC Investor.gov has a free retirement planning calculator, and the Consumer Financial Protection Bureau has retirement planning guides.
General education, not financial or investment advice. Reviewed October 2026. The household in the example is an illustration. Healthcare, tax and pension amounts vary widely.
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How do I calculate my retirement number?
Estimate your spending in retirement, subtract gixed income such as a pension or Social Security, then divide what is left by a withdrawal rate suited to your retirement length, such as 3.5% to 4%.
Should I use my income or my expenses to calculate my retirement number?
Use expenses. Retirement has to cover what you actually spend, not what you earn. Using income overstates the target for people who save a lot and understates it if spending is high.
Does Social Security or a pension change the number?
Yes, a lot. Gixed income lowers what your portfolio must supply. In the example, a $12,000 pension cuts the target by about $343,000 at a 3.5% withdrawal rate.
Is 25 times my expenses the right number?
It is a starting point based on a 4% withdrawal rate over about 30 years. A longer retirement, expected changes in spending and other income all argue for adjusting it.
How much should I add as a margin?
Many planners add 10% to 20% to the target to allow for higher costs, lower returns and a longer life. Run the numbers with a cautious return as well as a hopeful one.