Guides · Retirement
How much do you actually need to retire?
A plain-English guide · reading time ~7 minutes
"How much do I need to retire?" is the most common — and most anxiety-inducing — question in personal finance. The honest answer is that there's no single magic number that fits everyone, but there is a simple, reliable way to work out your number. It comes down to one idea: your retirement pot needs to be big enough that the income it produces covers your spending, for as long as you live, without running out. This guide walks through exactly how to calculate that, the assumptions behind it, and the levers that move it.
The one formula that does most of the work
Your retirement number is your annual spending divided by a safe withdrawal rate. That's it. If you plan to spend €30,000 a year and you use a 4% withdrawal rate, your number is €30,000 ÷ 0.04 = €750,000. Because dividing by 4% is the same as multiplying by 25, people often use the shortcut: your number is 25× your annual spending.
The reason this works is compounding. A large invested pot keeps earning returns even as you draw from it. If your withdrawals stay below what the pot earns over time, the money can last indefinitely — in principle, forever. The withdrawal rate is simply the dial that decides how cautious you're being. You can try your own figures in the retirement number calculator.
Where does the 4% rule come from?
The 4% figure comes from the "Trinity Study" and related research, which looked at historical US market returns and asked: what's the highest percentage you could withdraw in year one, then increase with inflation each year, and still have money left after 30 years? The answer, across almost every historical starting point, was around 4%. It became the default rule of thumb for a roughly 30-year retirement.
Two important caveats. First, it's a guideline, not a law of physics — it's based on the past, and the future may be kinder or harsher. Second, it was built for a ~30-year retirement. If you're retiring early and might need the money to last 40 or 50 years, a more conservative rate of 3% to 3.5% is wiser. Lowering the rate raises your number: at 3.5%, that €30,000 lifestyle needs about €857,000 instead of €750,000.
The levers that move your number
- Your spending. This is by far the biggest lever, and it works twice: spend less and you need a smaller pot and you can save more to reach it. Trimming €5,000 off your annual spending cuts your number by €125,000 at a 4% rate.
- Your withdrawal rate. More cautious (3–3.5%) means a bigger, safer pot; more aggressive (4.5–5%) means a smaller pot with more risk of running short. Match it to how long the money must last and how flexible you can be.
- Pensions and other income. A state or workplace pension, rental income or part-time work reduces how much your investments need to cover. Your pot only has to fill the gap between other income and your spending — which can shrink your personal number dramatically.
- Inflation. €30,000 today won't buy €30,000 of goods in 20 years. Good calculators (including ours) handle this by working in "real" terms — using an after-inflation return so your number is expressed in today's money.
A worked example
Wanting €40,000 a year, using a 4% rate, expecting a €12,000/year pension
Without the pension, the number would be €40,000 ÷ 4% = €1,000,000. But the pension covers €12,000, so your investments only need to produce €28,000 a year: €28,000 ÷ 4% = €700,000. That single piece of guaranteed income knocked €300,000 off the target. This is why it's a mistake to size your pot as if it must do everything alone.
How to actually get there
Once you know your number, the next question is the monthly saving that reaches it by your target age. That depends on what you've already saved, how many years you have, and your expected return. The maths is a standard "future value" calculation, and the earlier you start, the more of the work compounding does for you — meaning a smaller monthly amount. The retirement number calculator solves for that monthly figure, and the FIRE calculator shows the exact year you cross the finish line.
It's also worth pressure-testing the other side: once you retire, will the pot actually last? Markets don't return a smooth average, and a bad run early in retirement is especially damaging. The "will my money last?" calculator models the drawdown year by year, including inflation, so you can see how long a given pot survives at your spending level.
The mindset that matters most
The biggest driver of when you can retire isn't your salary — it's your savings rate, the share of your income you keep. Because it raises how fast the pot fills and lowers the spending it must cover, it has an outsized effect on your timeline. Someone saving 50% of a modest income often reaches independence faster than a high earner saving 10%. Our savings-rate tool plots exactly how the number of years drops as your rate climbs.
The bottom line
Your retirement number is your yearly spending divided by a withdrawal rate you're comfortable with — roughly 25× your spending at the classic 4%, a bit more if you're retiring early. Subtract any pension income, keep the figures in today's money, and you have a concrete target. Then the game becomes reaching it: save a meaningful share of your income, start as early as you can, keep fees low, and let compounding do the heavy lifting. None of it requires a finance degree — just an honest look at what your life costs and a plan to fund it.
This guide is general educational information, not personalised financial advice. Figures assume steady, inflation-adjusted returns; real markets vary, and taxes and individual circumstances differ. Confirm big decisions with a qualified professional.