The question every working adult eventually asks: how much money do I actually need to retire? The answer depends on your expected spending, retirement age, investment returns and other income sources. But there is a useful rule of thumb that makes the calculation straightforward.
The 25× Rule — Your Retirement Number
The most widely used retirement savings benchmark: multiply your expected annual spending in retirement by 25. This is your savings goal.
Example: You expect to spend £35,000 per year in retirement. Your savings goal = 35,000 × 25 = £875,000.
This is derived directly from the 4% rule — if you can withdraw 4% of your portfolio annually without depleting it over 30+ years, then you need 25 times your annual spending (because 1 ÷ 4% = 25).
The 4% Rule — Where It Comes From
The 4% rule originated from the "Trinity Study" (1998), which analysed historical US stock and bond market returns from 1926 onwards. The researchers found that withdrawing 4% of a balanced portfolio in year one, then adjusting for inflation annually, had a very high success rate over any 30-year period in the data.
Some researchers now suggest 3.5% is a safer withdrawal rate given lower current bond yields and higher valuations. More conservative retirees or those planning 40+ year retirements may want to target 30× annual spending instead of 25×.
What Counts Toward Your Retirement Income
Your savings pot isn't your only retirement income source. You should subtract guaranteed income from your annual spending target before multiplying by 25:
- UK State Pension: Currently £11,502/year (full amount, 2025/26). Reduces your savings goal by £11,502 × 25 = £287,550.
- US Social Security: Average benefit approximately £18,000–24,000/year. Reduces savings goal significantly.
- Australia Age Pension: Up to A$29,000/year for singles. Reduces the required superannuation balance.
How Much to Save Monthly
Working backwards from your retirement number: if you're 35, want to retire at 65, have £50,000 saved, and your target is £800,000 (at 7% annual return), you need to save approximately £880/month. Starting 10 years earlier halves this required monthly saving due to compound growth.
Benchmarks by Age
Fidelity's rough guidelines: by age 30 have 1× your salary saved; by 40 have 3×; by 50 have 6×; by 60 have 8×; by 67 have 10×. These are averages across all income levels — your specific target depends on your expected retirement spending.
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