Income Planning · 6 min read
How Much Do You Actually Need? The ×25 Rule, and Where It Bends
Take the annual spending your portfolio must cover — total spending minus Social Security and pension income — and multiply by 25. That approximates the portfolio supporting a 4 percent initial withdrawal over a 30-year retirement, per the research line from Bengen (1994) and the Trinity Study (1998). Current research brackets the multiplier from ×21.3 (Bengen's 2025 update) to ×25.6 (Morningstar's 3.9%). Multiply the portfolio-funded gap, not your income — that error alone can double the target. A calculator and the honest limits are below. This is an educational summary, not advice.
Ask ten people how much it takes to retire and you will hear ten guesses, most of them round numbers with a million in them. The honest starting point is simpler and more personal: it begins with what you spend. The oldest shortcut in retirement planning — multiply your annual spending by 25 — turns a vague question into an arithmetic one in about ten seconds. It is a first answer, not a final one, and both halves of that sentence matter.
Where Does ×25 Come From?
The multiplier is the mirror image of a withdrawal rate. If a portfolio can sustainably fund withdrawals of 4 percent of its starting value each year (adjusted for inflation thereafter), then the portfolio you need is your annual withdrawal divided by 4 percent — which is the same as multiplying by 25, because 1 ÷ 0.04 = 25.
The 4 percent figure has real research behind it. William Bengen's 1994 study tested actual retirements against market history back to 1926 and found a 4 percent initial withdrawal survived every 30-year period tested — a figure he later dubbed his “SAFEMAX.” The Trinity Study, published by three Trinity University finance professors in 1998, reached similar territory across 200 combinations of portfolios and payout rates. (Bengen, Journal of Financial Planning, 1994; Cooley, Hubbard & Walz, AAII Journal, 1998.)
The research has kept moving, and the multiplier moves with it:
| Withdrawal Rate | Source | The Multiplier |
|---|---|---|
| 3.9% | Morningstar, for 2026 retirees (90% confidence, 30 years) | ×25.6 |
| 4.0% | The classic Bengen/Trinity figure | ×25 |
| 4.7% | Bengen's 2025 update, using a more diversified portfolio | ×21.3 |
(One fairness note: Bengen's 4.7% assumes a broader multi-asset mix than his original 50/50 stocks-and-bonds model, so the three rows are not identical portfolios — they bracket a reasonable range.)
The Input Everyone Gets Wrong
The multiplier is the easy part. The number that deserves your attention is the one you multiply — and it is not your income, and not your total spending either. It is the spending your portfolio has to cover: annual spending minus Social Security, minus any pension, minus rental or other durable income.
Run a household spending $80,000 a year with $40,000 of combined Social Security:
- Portfolio-funded spending: $80,000 − $40,000 = $40,000
- At ×25: $40,000 × 25 = $1,000,000
- At the conservative ×25.6: $1,024,000; at Bengen's ×21.3: $852,000
Multiply the full $80,000 instead and the target doubles to $2 million — the single most common way this estimate goes wrong. Social Security is doing real work in that arithmetic, which is also why claiming decisions and the timing math deserve their own attention.
Where the Rule Bends
Four honest limits, each of which moves the answer:
- The horizon. The research standard is a 30-year retirement. Retire at 55 and the plan may need 35–40 years — which argues for the conservative end of the range.
- Spending is not a flat line. The rule assumes inflation-adjusted constant spending. Real retirements often spend more early, less in the middle, and differently late — flexibility is worth real money in the research.
- Taxes hide inside it. A $1 million pre-tax 401(k) and a $1 million Roth are not the same number after taxes. The withdrawal order decides how much of each dollar you keep.
- The gap years. Retiring before Social Security begins means the portfolio carries the full load for a while — the arithmetic above understates what those bridge years draw.
What Do Households Actually Have?
For scale: among the 57 percent of households aged 55–64 that hold retirement accounts, the median balance was $185,000 in the Federal Reserve's 2022 survey — and 43 percent of that age group held no retirement account at all. (Federal Reserve Survey of Consumer Finances 2022, via CRS R48143.) Those figures exclude pensions, Social Security's own value, home equity, and taxable accounts, so they are not the whole picture of readiness — but they do say the “number” conversation is worth having with your own arithmetic rather than someone else's headline.
What the Number Is Not
A ×25 result is a first-pass estimate, not a plan and not a verdict. It cannot see your tax mix, your claiming strategy, your home, your health, or what you would actually change if markets fell early. Households on either side of the line routinely retire well — and badly — on the strength of the decisions the multiplier cannot model. What the number does well is orient: it turns “can we?” into “here is the gap, and here are the levers.” The levers are what the rest of this library is about.
Frequently Asked Questions
Q: What is the multiply-by-25 rule?
A first-pass estimate of the portfolio needed to retire: multiply the annual spending your portfolio must cover by 25. It is the arithmetic inverse of a 4 percent initial withdrawal rate, from the research line running through Bengen (1994) and the Trinity Study (1998).
Q: Do I multiply my income or my spending?
Neither, exactly — multiply the spending your portfolio has to cover: annual spending minus Social Security, pension, and other durable income. Skipping that subtraction is the most common error, and it can double the apparent target.
Q: Is 25 still the right multiplier?
It is the middle of the current range. Morningstar's current research supports a more conservative 3.9 percent withdrawal (×25.6); Bengen's 2025 update supports 4.7 percent (×21.3) with a more diversified portfolio. The multiplier is a range, not a constant.
Q: Does the rule account for taxes?
No. It treats a pre-tax dollar and a Roth dollar identically, though they buy different amounts of spending. The account mix and withdrawal order are separate decisions — and often worth as much attention as the headline number.
The decisions in this guide are what the Retirement Checkup scores — seven questions, two minutes, no email needed to see your score.
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The views and opinions expressed here are those of The Financial Sciences Company as of the publish date and are provided for informational and educational purposes only. They are not personalized investment, tax, or legal advice. The Financial Sciences Company, LLC is an investment adviser registered with the State of Texas. Registration does not imply a certain level of skill or training. Additional information is available in our Form ADV at adviserinfo.sec.gov.
General educational information, current as of 2026. Not personalized investment, tax, or legal advice — figures and rules change. For guidance specific to your situation, talk to a qualified professional.