Every retirement answer starts the same way: it's your spending, not your salary, that sets the target. Two neighbors earning the same money and needing different amounts to retire is normal — one spends $48,000 a year, the other $95,000, and their targets differ by more than a million dollars. Here's the math, layer by layer, with every number reproducible in our retirement calculator.
1. The one-line answer: 25× your spending
Take your expected annual spending in retirement and divide by your withdrawal rate. At the classic 4%: $60,000 of spending needs a $1.5 million portfolio. At the more conservative 3.5% — increasingly the planning standard for 30+ year retirements — the same spending needs about $1.71 million. The multiplication is trivial; the honesty about spending is the hard part. Track 12 months of actual statements before trusting any estimate.
2. The inflation correction nobody skips twice
A 40-year-old planning to retire at 65 can't buy today's retirement with today's dollars. At 3% inflation, $60,000 of spending becomes about $129,800 a year by 65, and $150,500 for a 30-year horizon — making the 4% target roughly $3.25 million to $3.76 million in future dollars. Your investments compound in future dollars too, which is why the projection side of the calculator matters as much as the target side. The gap between the two is the whole plan.
3. Social Security shrinks the target
The 25× rule assumes your portfolio covers allspending. Social Security reduces what the portfolio must supply. A $2,100 monthly benefit — close to the 2026 average — is $25,200 a year of income the portfolio no longer needs to generate. At 4%, that's $630,000 of target you don't need. The catch: between 50% and 85% of the benefit becomes taxable as other income rises, which is why the SS estimate helper computes the taxable portion, not just the gross.
4. A worked example, start to finish
A 40-year-old spending $60,000/year, expecting $25,200 of Social Security at 67, retiring at 65 with a 4% rate: portfolio spending need is $60,000 − $25,200 = $34,800 in today's dollars. Inflated 25 years at 3%, that's about $72,900 — a target near $1.82 million, not the naive $1.5 million. Two years without Social Security (65–67) need a bridge, usually from taxable savings. Every figure here recomputes live in the retirement calculator's target check.
5. The two costs that break tidy models
- Healthcare before 65: unsubsidized ACA marketplace premiums for a 60-year-old commonly run $900–1,300+/month, and subsidy rules changed for 2026 as enhanced credits expired — price this line every year.
- Long-term care: the median private nursing-home room now runs about $130,000/year (2025 CareScout survey); self-insure with a reserve, buy insurance, or decide explicitly — but decide.
6. Run your own numbers
The sequence: real spending → minus Social Security → inflated to your retirement year → divided by your stress-tested withdrawal rate → compared against your projected savings. Then the tax layer: Roth conversions in the gap years between retiring and claiming can permanently lower the taxable portion of your Social Security — the Roth conversion planner prices that year by year, and the readiness checklist makes sure nothing structural is missing.