---
title: "How Much Money Do I Need to Retire?"
description: "The usual answer comes from a 1998 study of a retiree with no pension, no taxes and a budget that never changes, which is almost certainly not you."
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last_updated: "2026-10-13"
---
# How Much Money Do I Need to Retire?
> The usual answer comes from a 1998 study of a retiree with no pension, no taxes and a budget that never changes, which is almost certainly not you.
## Article metadata
- Category: Retirement
- Published: 2026-10-13
- Reading time: 13 min read
- Tags: retirement, financial-planning, withdrawal-rates, pensions
Ask how much money you need to retire and you will usually hear one answer: **25 times your yearly spending**. If you spend €30,000 a year, that means €750,000.
The figure comes from the 4% rule, which is easy to remember and rests on serious research. That research, however, answered a narrower question than the one you are asking, and for most people the number it gives is wrong. To see why, it helps to start from the beginning.
## Why you need money when you stop working
### Your bills don't stop when your paycheck does
Housing, food, energy and healthcare keep costing money after your last paycheck, so your savings must cover those **expenses** for every year you live after you stop working:
> MathBlock component is available in the HTML page.
Take **Ana and David**, both 50. They spend **€30,000 a year**, want to stop working at 60 and need their money to last until 90, which adds up to 30 years of expenses:
> MathBlock component is available in the HTML page.
### Invested money makes more money
That sum assumes their savings sit idle for 30 years, and they don't have to. **Investing** means buying assets that pay an income or grow in value: **shares** give you a slice of companies' profits, while **bonds** pay you interest for lending to governments or companies.
The gains then earn gains of their own. This is [compound interest](https://en.wikipedia.org/wiki/Compound_interest), and over time it pulls far ahead of simple interest, which only pays on the original amount. Here is how €10,000 grows at 5% a year above inflation:
| Years | Simple interest | Compound interest |
|:-:|---:|---:|
| 1 | €10,500 | €10,500 |
| 2 | €11,000 | €11,025 |
| 3 | €11,500 | €11,576 |
| 5 | €12,500 | €12,763 |
| 10 | €15,000 | €16,289 |
| 20 | €20,000 | €26,533 |
| 30 | €25,000 | €43,219 |
After 30 years compounding has produced more than twice the gains, which is why Ana and David need far less than €900,000, as long as they accept that markets also fall, sometimes by a third or more in a single year.
### Money left in cash quietly shrinks
[Inflation](https://en.wikipedia.org/wiki/Inflation) is the sustained, general rise in prices. At 3% a year, the €30,000 Ana and David spend this year will cost €30,900 next year, and money left in cash buys a little less every year:
| Years | Cost of Ana and David's spending | What €100,000 in cash buys |
|:-:|---:|---:|
| 1 | €30,900 | €97,087 |
| 2 | €31,827 | €94,260 |
| 3 | €32,782 | €91,514 |
| 5 | €34,778 | €86,261 |
| 10 | €40,317 | €74,409 |
| 20 | €54,183 | €55,368 |
| 30 | €72,818 | €41,199 |
After 30 years, money left in cash has lost almost 60% of its purchasing power, which is why, from here on, all amounts are in **today's euros** and returns are measured *above* inflation.
## Putting the pieces together
Expenses, years, returns and inflation are the four ingredients. With a perfectly steady 5% a year above inflation, Ana and David could fund their 30 years with about **€461,000**. Real markets are never that steady, so the real question is how much money also survives the bad years. Researchers answered it by replaying history.
### The Trinity study
In 1994, the financial planner [William Bengen](https://en.wikipedia.org/wiki/William_Bengen) replayed US market history since 1926 in [a study](https://www.financialplanningassociation.org/sites/default/files/2021-04/MAR04%20Determining%20Withdrawal%20Rates%20Using%20Historical%20Data.pdf) that imagined a new retiree in every year. Each one withdrew a percentage of their starting savings in the first year and raised that amount with inflation every year after. At 4%, every portfolio lasted at least 33 years.> FootnoteRef component is available in the HTML page.
Four years later, three professors at Trinity University ran the same test with more withdrawal rates and portfolio mixes. Their paper, now known as the [Trinity study](https://en.wikipedia.org/wiki/Trinity_study), is where most people first meet the 4% rule. Using US data from 1926 to 1995, [they measured](https://www.aaii.com/journal/199802/feature.pdf) how often the money lasted 30 years:> FootnoteRef component is available in the HTML page.
| Portfolio | 3% | 4% | 5% | 6% |
|---|---:|---:|---:|---:|
| 100% shares | 100% | 95% | 85% | 68% |
| 75% shares / 25% bonds | 100% | 98% | 83% | 68% |
| 50% shares / 50% bonds | 100% | 95% | 76% | 51% |
At 4%, every portfolio with at least half its money in shares lasted the full 30 years in 95% or more of the periods tested.
### The 4% rule, or 25 years of spending
The rule that came out of this research has three steps:
1. In the first year, withdraw **4% of your starting savings**.
2. In every year after that, withdraw **the same amount raised with inflation**, whatever the markets have done.
3. Leave the rest invested.
Turned around, the rule gives the familiar target: your savings should equal 25 years of spending.
> MathBlock component is available in the HTML page.
For Ana and David, that comes to **25 × €30,000 = €750,000**, almost €290,000 more than the €461,000 that would be enough if markets rose exactly 5% every year. The gap exists because the *order* of returns matters, not just their average. Suppose their €461,000 earns that same 5% a year on average over 30 years, but with three bad years (−25%, −15% and −5%) and about 7.5% in every other year:
| Year | Always 5% | Bad years first | Bad years last |
|:-:|---:|---:|---:|
| 1 | €454,233 | €315,880 | €465,992 |
| 3 | €439,292 | €196,574 | €476,748 |
| 5 | €422,819 | €165,111 | €489,189 |
| 10 | €373,867 | €63,165 | €529,502 |
| 15 | €311,391 | Run out | €587,510 |
| 20 | €231,653 | Run out | €670,982 |
| 25 | €129,886 | Run out | €791,096 |
| 30 | €0 | Run out | €433,749 |
With the bad years at the end, money is left over. With the same years at the start, it runs out in year 13, when Ana and David are 73, because every withdrawal during the fall sells assets at low prices, and what has been sold can't recover when the market does. This is **sequence-of-returns risk**. Covering a bad start like this takes roughly the €750,000 that the 4% rule gives.
It is a tidy result, but it describes the retiree in the experiment: no pension, no taxes or fees, one portfolio for life, a budget that never changes and exactly 30 years to fund. Few real retirements look like that.
## Seven reasons the 4% rule gets your number wrong
### 1. It assumes you have no pension
The rule expects your investments to pay for everything, even though most people will also receive a state or workplace pension.
Ana and David expect a combined pension of **€15,000 a year** after tax from age **67**, so from then on their investments only need to cover the other half of their spending:
> MathBlock component is available in the HTML page.
They still plan to stop working at 60, though, which leaves seven years in which their savings must also pay the €15,000 the pension will later cover. That **bridge** costs 7 × €15,000 = €105,000, so what they really need is **€375,000 + €105,000 = €480,000** rather than €750,000.
A single multiplier can't capture either part of this. Applied to their whole budget, it overstates their need by €270,000, and applied only to the gap after 67 it forgets the bridge and leaves them €105,000 short. Getting it right means placing each source of income on the date it actually starts.
### 2. It never changes your spending, even in a crash
The retiree in the study raises their spending with inflation every year no matter what happens, which means that after a crash they sell more shares at low prices to pay for the same holidays.
We have already seen what that costs: with the same bad years at the start instead of the end, Ana and David's €461,000 runs out at 73 instead of leaving money over. Bengen's worst cases were exactly this, people who retired in the late 1960s and ran into a crash and high inflation in their first few years.
Real retirees rarely behave like the one in the study, because most of them would travel less after a bad year, and that flexibility turns out to be worth a great deal. In 2006, Jonathan Guyton and William Klinger [tested retirees](https://www.financialplanningassociation.org/article/journal/MAR06-decision-rules-and-maximum-initial-withdrawal-rates) who skipped the inflation raise after a losing year and cut spending by 10% whenever withdrawals grew too large relative to the portfolio. With those two rules, starting withdrawals of **5.2–5.6%** held up in 99% of their historical tests for portfolios with at least 65% in shares.> FootnoteRef component is available in the HTML page.
At 5.2%, Ana and David's €30,000 would require about **€577,000 instead of €750,000**. In return, they would have to accept a smaller budget in some years, which is only reasonable if essentials such as housing and food stay protected while the optional spending absorbs the cuts.
- **See how return order changes retirement outcomes:** [Follow two portfolios with the same returns in a different order as withdrawals push their outcomes apart.](/blog/retiring-into-a-crash/)
### 3. It assumes one fixed portfolio for 30 years
Each portfolio in the research kept the same mix, rebalanced every year for 30 years, and the version most people quote is half shares and half bonds.
The mix you choose matters more than the rule suggests. At 4% in the Trinity study, a portfolio with 75% in shares lasted in 98% of periods compared with 95% for an even split, and bond-heavy portfolios did far worse, with only 71% lasting when shares made up a quarter of the mix. Assets that grow slowly simply couldn't keep pace with spending that rose with inflation every year.
Real plans also tend to change their mix as time goes on. Ana and David might keep the seven years of bridge money in cash and short-term bonds, hold their long-term savings mostly in shares, and gradually move money from one to the other as the pension date approaches, none of which the 4% rule has any way to express.
### 4. It buys 95% certainty at a steep price
Here are the Trinity results for an even split of shares and bonds, translated into the money Ana and David would need to save:
| Starting withdrawal | Money needed for €30,000 a year | Periods that lasted 30 years |
|---:|---:|---:|
| 6% | €500,000 | 51% |
| 5% | €600,000 | 76% |
| 4% | €750,000 | 95% |
| 3% | €1,000,000 | 100% |
Moving from 51% to 76% costs €100,000, or about €4,000 for each percentage point, while moving from 76% to 95% costs €150,000, closer to €8,000 a point. The last five points, from 95% to 100%, cost €250,000, which works out at **€50,000 a point**.
In other words, certainty gets more expensive the closer you push it towards 100%, and since every euro of extra savings has to be earned, each additional point also costs more working time than the one before it.
It is also worth remembering what "failure" meant in this study, which is a retiree who kept spending the same amount all the way down without ever adjusting. A plan that shows a 75% success rate on a rigid budget therefore doesn't mean a 25% chance of going broke so much as roughly a 25% chance that you would need to cut back at some point. [Research on spending adjustments](https://www.kitces.com/blog/monte-carlo-retirement-projection-probability-success-adjustment-minimum-odds/) suggests that for households willing to do that, a lower starting probability can be a perfectly reasonable plan,> FootnoteRef component is available in the HTML page. provided they know in advance how deep the cuts could go and their essential spending stays protected.
### 5. It ignores the cost of ending up with too much
The study counts a retiree as a success whether they finish with €1 or with €3 million, and in practice most finished far above €1.
When [Michael Kitces](https://en.wikipedia.org/wiki/Michael_Kitces) looked at rolling 30-year periods going back to the 1870s with a 60/40 portfolio, [he found](https://www.kitces.com/blog/the-ratcheting-safe-withdrawal-rate-a-more-dominant-version-of-the-4-rule/) that a retiree following the 4% rule ended up with **more than their starting money 60% of the time**, even after adjusting for inflation.> FootnoteRef component is available in the HTML page.
Money you never spend has a cost of its own, paid in extra years of work or in trips and help for your children that you put off because a formula told you to wait. Leaving an inheritance is a perfectly good goal, but it ought to be a decision you make rather than the side effect of an overly cautious rule of thumb.
This is the flip side of the previous point, because the higher the success rate you insist on, the more often you will finish with far more than you needed.
### 6. It ignores taxes
The Trinity study used returns before any tax or fund fees, whereas you will be paying your bills with money that has already been taxed.
Suppose, purely as an illustration, that Ana and David's withdrawals are taxed at an effective rate of 15%. To spend €15,000 they would need to withdraw €15,000 ÷ 0.85 ≈ €17,647, and applying that to their plan with the pension and bridge raises their €480,000 to about **€565,000**. Fees have the same effect, since a 1% yearly fund fee on €750,000 takes €7,500 a year, a quarter of a €30,000 withdrawal.
Careful planning can bring the tax bill down. Many tax systems only tax the gain when you sell rather than the whole amount, so early withdrawals, which are mostly your original savings, can be lightly taxed. **Tax-loss harvesting** goes further by selling investments at a loss to offset taxable gains, although many countries restrict buying the same asset back straight away. **Borrowing against your portfolio**, sometimes called a Lombard loan, lets you pay for spending without selling anything, so no sale is taxed yet, but the loan charges interest and a falling market can force you to repay it or sell at the worst possible moment. Which of these options you have depends on where you live and how your accounts are held.
### 7. It assumes exactly 30 years
Trinity's longest test lasted 30 years, but someone retiring at 60 might well live to 95 or beyond, and someone retiring at 45 needs money for half a century. Couples also have to plan for whichever partner lives longer, often on a single reduced pension, so the horizon that matters is your own, and the rule doesn't adjust to it.
### What the rule got wrong for Ana and David
| | Amount |
|---|---:|
| Spending × 30 years, no investing | €900,000 |
| The 4% rule | €750,000 |
| With their pension and the 7-year bridge | €480,000 |
| Adding 15% tax on withdrawals | €565,000 |
The 4% rule told Ana and David they needed €750,000, while their own numbers put the figure at about **€565,000**, almost €200,000 less, and that is before allowing for any flexibility in their spending. For them, the difference amounts to years of extra saving.
The error can just as easily run the other way. Someone retiring at 45 without a pension, facing high taxes or holding mostly bonds could find that the rule leaves them short, which is why a single multiplier is the wrong tool for a decision this large.
## How Fignis replaces the rule with your plan
Each of the assumptions above can be replaced with one of your own. Fignis builds a financial projection from your actual numbers instead of a multiplier:
| The 4% rule assumes | In Fignis |
|---|---|
| No pension | Add each pension and income on the date it starts |
| Rigid spending | Separate essentials from optional spending and choose how optional spending reacts to bad years |
| One fixed portfolio | Give each asset its own returns and move money between assets on dates or life events |
| 95% or nothing | Run Monte Carlo simulations and see the success rate *and* what each outcome looks like |
| Ending with too much doesn't matter | See the full range of ending wealth, not just whether you lasted |
| No taxes | Apply supported tax rules and cost basis to your withdrawals |
| Exactly 30 years | Set your own retirement date and plan horizon |
To see it with numbers, we ran Ana and David's plan through Fignis. They reach 60 with about €565,000 in a 60/40 portfolio: 60% in an equity fund we expect to return 5% a year above inflation, and 40% in a bond fund at 1.5%. When they retire they set aside €105,000 in a deposit for the bridge, and from 67 they receive €15,000 a year of pension between them. Fignis doesn't yet calculate tax on withdrawals, so the €565,000 includes the tax cushion from point 6.
### Income on its real dates
Ana and David can enter their salaries until 60 and each pension from 67, and the projection then shows both the bridge years, when their savings carry everything, and the years when the pension takes over, without anyone having to decide which multiplier applies.
> TimeSeriesChart component is available in the HTML page.
### Spending that responds to markets
Every expense is marked as either essential or optional, and for optional spending Fignis offers three policies:
- **Use available assets first** sells investments to keep paying.
- **Preserve capital** pays optional spending only from what the investments earned in that period, so a bad year trims the travel budget automatically instead of forcing a sale at low prices.
- **Preserve purchasing power** works the same way while also protecting the capital against inflation.
This builds the flexibility described in point 2 into the plan itself rather than leaving it to willpower in the middle of a crash.
Large one-off costs, such as a new car at 65 or a kitchen at 70, go on the dates they are expected to happen rather than being spread into an average.
### A portfolio that changes over time
Each asset has its own return assumption, allocation rules decide where new money goes, and transfer rules can move money between assets on a given date or when a life event happens. That lets Ana and David take the bridge out of the bond fund so they don't sell equities as they retire, and decide what is sold first when cash runs short: the deposit, then the bonds, with equities last.
### Success rates that mean something
Fignis runs your whole plan through up to 1,000 simulated market paths, with crash years and shifting inflation. Every path ends in one of three outcomes: the plan is funded (even if some optional spending had to be cut), an illiquid asset such as the house had to be sold, or essential bills went unpaid. Cuts are counted separately, how often and for how many years, so you can see what each point of success costs.
With their rigid plan, in which they sell whatever it takes before cutting anything, Ana and David still have money at 90 in 89.9% of the simulated markets:
> TimeSeriesChart component is available in the HTML page.
The median tracks the constant-return plan closely, but the range opens wide: in one market in ten the money runs out before 90, while in the luckiest quarter they finish with more than €2 million. If your plan ends with millions in most paths, you are probably saving more than you need.
The flexibility from point 2 changes the result. If they let travel be paid only from the portfolio's gains, success rises to 96.7%:
> TimeSeriesChart component is available in the HTML page.
| Travel policy | Success | Years with travel cut (median) |
|---|---:|---:|
| Sell assets before cutting | 89.9% | 0 |
| Preserve capital | 96.7% | 11 |
| Preserve purchasing power | 97.3% | 14 |
The price of those seven points is giving up some or all of their travel in about eleven years out of thirty. Fignis puts that trade in front of you instead of hiding it in a percentage.
### Ask the question backwards
Rather than guessing a number and checking whether it works, you can let Fignis search for it. You choose one thing it is allowed to change, such as the retirement date, the spending level or the starting amount, and the success rate you want, anywhere between 50% and 99%. Ana and David could ask, for instance, *what is the earliest date we can retire with at least a 75% chance of keeping our essentials funded?* Fignis tests each candidate against the same set of simulated markets and then checks the winner against a fresh set.
[Build your retirement plan](https://app.fignis.io)
The 4% rule was a clever experiment about an imaginary American retiree, while your own retirement comes with a pension date, a tax bill, a portfolio, some spending you could cut and some you couldn't, and a horizon of its own. The rule is useful for getting a feel for the size of the number, but the plan that actually answers the question is the one built from your own.
- **Price one more year of work:** [See how an extra working year changes savings, the bridge, and the withdrawal rate at the same time.](/blog/financial-value-of-working-one-more-year/)
- **Plan the journey to your target:** [Connect your retirement number with contributions and the years needed to accumulate it.](/blog/financial-independence-roadmap/)
> Footnotes are available in the HTML article version.“Determining Withdrawal Rates Using Historical Data”, Journal of Financial Planning, 1994. 50% US shares / 50% intermediate-term Treasuries, retirements starting from 1926.' },
{ id: 2, text: 'Philip L. Cooley, Carl M. Hubbard, and Daniel T. Walz, “Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable”, AAII Journal, 1998. Table 3: inflation-adjusted withdrawals, S&P 500 and long-term high-grade corporate bonds, 1926–1995; taxes and transaction costs excluded.' },
{ id: 3, text: 'Jonathan T. Guyton and William J. Klinger, “Decision Rules and Maximum Initial Withdrawal Rates”, Journal of Financial Planning, March 2006. 99% confidence for portfolios with at least 65% equities, using the authors’ withdrawal and capital-preservation rules.' },
{ id: 4, text: 'Michael Kitces, “The Ratcheting Safe Withdrawal Rate: A More Dominant Version of the 4% Rule?”. 60/40 portfolio, rolling 30-year periods from the 1870s; inflation-adjusted result.' },
{ id: 5, text: 'Derek Tharp, “Why 50% Probability Of Success Is Actually A Viable Monte Carlo Retirement Projection”. Conditional on ongoing adjustments and income floors.' }
]} />