The 25x rule
The target is built on annual spending, not income: you need roughly 25 times what you spend in a year. Spend 8,000 a month — 96,000 a year — and the number is 2,400,000.
It is the flip side of the 4% rule. Research into long-run market history found that withdrawing 4% of a diversified portfolio in the first year, then adjusting for inflation, had a high chance of lasting 30 years or more. Four percent is one twenty-fifth, so "withdraw 4%" and "save 25×" are the same statement.
Spending is the lever
Because the target is spending × 25, cutting your retirement spending by 1,000 a month lowers the pot you need by 300,000. Reducing what you need is often easier than earning the extra return to fund it, and it works on both sides — less to fund, and more to save now.
Why we use a real return
This tool asks for your return above inflation and works entirely in today's money. That avoids the illusion of a large future number that buys less than it appears — the target and the projection are both in money you would recognise today.
Built by Mohammed Jamil. Corrections to [email protected].