Wed May 28 2025, by Tyler Gardner

6 Steps to Figure Out Exactly How Much Money You'll Need to Retire

I'm Tyler, a former financial advisor and portfolio manager. If any of this is helpful, sign up for my free newsletter by clicking the link in my bio.

1. Estimate Your Annual Spending in Retirement

Start by estimating your annual spending in retirement. Let's say it's $80,000.

2. Add a Buffer for Inflation

Add a 10 to 15% buffer for inflation, healthcare, and general unpredictability. This brings you up to $92,000.

3. Multiply by 25 for a Conservative Withdrawal Rate

Now multiply that number by 25 to conservatively withdraw 4% of your assets each year in retirement. This equals $2.3 million.

4. Opt for a 5% Drawdown

If you're comfortable with a 5% drawdown, which I am, multiply by 20. This results in $1.84 million.

5. Subtract Expected Income

Now subtract expected income, like Social Security or pension payments. Say this is $30,000 a year, or $600,000 at 5%.

6. Determine Your Total Retirement Need

You now know you need roughly $1.24 million to generate your annual expected retirement income.

Conclusion

And lastly, just remember the famous words of Mike Tyson: Everybody has a plan until they get punched in the face. If any of this is helpful, sign up for my free newsletter by clicking the link in my bio.

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