The Wrong Answer Everyone Gives
You've probably heard the rule: "Save 10x your salary for retirement."
It sounds simple. It's easy to remember. And it's completely wrong for most people.
Here's why: retirement costs are based on what you spend, not what you earn.
Someone earning $150,000 who lives on $50,000 needs the same retirement fund as someone earning $60,000 who lives on $50,000. The salary is irrelevant—only the spending matters.
The Right Formula
The actual formula is simple:
Your Retirement Number = Annual Expenses × 25
This comes from the 4% rule, backed by decades of research (the Trinity Study). It means you can safely withdraw 4% of your portfolio each year with minimal risk of running out over 30 years.
Examples
- $3,000/month ($36,000/year) → $900,000 retirement number
- $4,000/month ($48,000/year) → $1,200,000 retirement number
- $5,000/month ($60,000/year) → $1,500,000 retirement number
- $7,000/month ($84,000/year) → $2,100,000 retirement number
Why Location Changes Everything
Here's where it gets interesting: your expenses depend heavily on where you live.
The same lifestyle costs vastly different amounts:
- New York City: $6,000/month → $1,800,000 retirement number
- Portugal: $2,928/month → $878,400 retirement number
- Thailand: $2,280/month → $684,000 retirement number
- Ecuador: $2,142/month → $642,600 retirement number
Moving from NYC to Portugal doesn't just save money—it can shave 10-15 years off your working career.
Want the full breakdown? See Cheapest Countries to Retire Abroad in 2026 or our detailed Portugal vs USA cost comparison.
The 4% Rule Explained
The 4% rule says: withdraw 4% of your portfolio in year one, then adjust for inflation each year.
Example: $1,000,000 portfolio
- Year 1: Withdraw $40,000
- Year 2: Withdraw $41,200 (with 3% inflation)
- Year 3: Withdraw $42,436
- And so on...
Historically, this strategy survived 30-year periods including the Great Depression, the 1970s stagflation, and the 2008 crash.
When to Adjust the Rule
The 4% rule assumes a 30-year retirement. Adjust for your situation:
- 20 years in retirement: 5.0% withdrawal rate
- 25 years in retirement: 4.5% withdrawal rate
- 30 years in retirement: 4.0% withdrawal rate
- 40 years in retirement: 3.5% withdrawal rate
- 50+ years in retirement: 3.0% withdrawal rate
Retiring at 40? Plan for 50+ years and use 3%. Retiring at 65? You might safely use 4.5%.
Don't Forget: Other Income Sources
Your retirement number shrinks when you have guaranteed income:
Social Security / State Pension
If you'll receive $20,000/year in Social Security:
- That's $500,000 less you need ($20,000 × 25)
- Someone needing $60,000/year with $20K Social Security only needs: ($60,000 - $20,000) × 25 = $1,000,000 instead of $1,500,000
Other Income Sources:
- Pension payments
- Rental property income
- Part-time work
- Annuities
Each reduces your required portfolio.
A Simple Calculator
Here's how to calculate your number:
- Add up monthly expenses (rent/mortgage, food, insurance, utilities, entertainment, travel)
- Multiply by 12 for annual expenses
- Subtract guaranteed income (Social Security, pension, rental income)
- Multiply by 25 for your FIRE number
Example
- Monthly expenses: $4,500
- Annual expenses: $54,000
- Minus Social Security: -$18,000
- Gap to fund: $36,000
- Retirement number: $900,000
The Bottom Line
Forget salary multiples. Your retirement number depends on:
- What you spend (not what you earn)
- Where you live (geography matters enormously)
- How long you'll be retired (affects withdrawal rate)
- What other income you'll have (reduces your required portfolio)
Calculate your actual number. It might be higher than you thought—or much lower.
Ready to calculate your personal retirement number? Try our free 2-minute quiz and see exactly where you stand.