Planning
The classic rules of thumb — a fixed multiple of your salary or a single magic number — are a starting point at best. What you truly need depends on how you plan to live and where your income will come from.
Why rules of thumb fall short
A salary multiple ignores almost everything that actually matters: how much you plan to spend, whether you have a pension, how much Social Security you will receive, your health, and where you will live. Two people with identical savings can have very different retirements.
A number that is not tied to your real spending is really just a guess dressed up as a target.
A better way: work backward from spending
Start with what you expect to spend each year in retirement. Subtract the reliable income you will receive — Social Security, any pension — and what is left is the gap your savings must fill.
Then apply a sustainable withdrawal rate. A common guideline suggests drawing around 4% of your portfolio in the first year and adjusting for inflation. Dividing your annual gap by that rate gives a realistic sense of the portfolio size you actually need.
Small levers, surprisingly big effects
Modest changes move the answer more than most people expect. Trimming annual spending, working one or two years longer, or delaying Social Security can each shrink the savings you need by a meaningful amount.
Rather than chasing a single number, it helps to see how these levers interact — which is exactly what a readiness estimate is for.
Key takeaways
- Ignore salary multiples; base your target on real expected spending.
- Subtract guaranteed income, then size your portfolio to cover the gap.
- Spending, retirement age, and claiming age are powerful, controllable levers.
