How Much Do You Need to Retire?

Written by the William Allan team · Published 2025-07-31

There is no single account balance that makes retirement affordable. The amount needed depends on what a household will spend, what income it will receive, and how long its resources must last.

Averages can provide context. They cannot answer those questions for a particular person.

Start with spending

A commonly used starting point is to replace about 80% of pre-retirement income. Social Security’s retirement guide describes that general benchmark. It includes income from Social Security, investments, and other savings; it is not a target for portfolio withdrawals alone. SSA retirement-benefits guide.

The percentage is only a starting point. Housing, healthcare, taxes, travel, family support, and debt may produce a very different budget. Some work-related expenses may disappear, while other costs rise.

Build an estimate from the household’s actual expenses and intended changes. Then compare that with Social Security, pensions, and other expected income.

Understand what an average measures

A retirement-provider report may describe participants or accounts in that provider’s plans. That is different from all retirement assets belonging to a household, and different again from the resources of all American households.

For example, Fidelity’s Q4 2024 analysis reports results for specified IRA, 401(k), and 403(b) populations. Those figures should not be relabeled as a nationwide estimate of what the average household near retirement has saved.

The date and population matter. So does the difference between a mean, which can be pulled upward by large balances, and a median, which marks the middle of the measured group. Neither is a determination of how much you need.

Work through the income gap

Consider a simplified first-year example, before taxes. Suppose the target is $75,000 of annual income, and an assumed Social Security payment supplies $25,000. Those are hypothetical inputs, not an average benefit or a recommendation.

The gap is $50,000. A $50,000 initial withdrawal is 4% of a $1.25 million portfolio: $50,000 divided by 0.04 equals $1,250,000.

That calculation is an illustration, not proof that $1.25 million will fund the household’s retirement.

The classic 4% guideline starts with a percentage of the initial portfolio and adjusts that dollar withdrawal for inflation in subsequent years. It is commonly discussed in connection with a 30-year retirement and historical stock-and-bond portfolios. It does not mean the portfolio earns a guaranteed 4% yield or that a person recalculates 4% of the current balance each year. William Bengen’s original withdrawal research.

Fees, taxes, investment choices, market returns, inflation, and retirement length can all change the outcome. Poor returns early in retirement can be particularly consequential when withdrawals continue. A sustainable plan may require different spending, a different initial withdrawal, or later adjustments. Wade Pfau’s discussion of the 4% guideline’s limits.

Test your own plan

Estimate the spending the household needs and the spending it can change.
Use individual Social Security and pension estimates rather than an assumed average.
Account for taxes and investment costs.
Consider healthcare, longevity, and any goals for heirs or charitable giving.
Test less favorable returns and identify what could be adjusted.
Revisit the projections when circumstances change.

A meaningful retirement target comes from those inputs. A round number or a survey of what other people believe they need is not a substitute for that work.

Schedule a first call. The first conversation is an intake call with Ian, who gathers your situation and helps connect you with the appropriate advisor. It is not an advisory meeting.

This commentary is for informational purposes only and is not investment, tax, or legal advice. All investing involves risk, including the possible loss of principal, and past performance does not guarantee future results. Consult qualified tax and legal professionals regarding your situation. William Allan is an investment adviser registered with the SEC; registration does not imply any specific level of skill or training.