A common starting point is the 25x rule: multiply your expected annual retirement expenses by 25. If you plan to spend $40,000 a year in retirement, that points to a target of roughly $1,000,000. It’s a useful anchor, not a guarantee, taxes and market conditions can push the real number closer to 28x–30x your expenses.
The 25x rule is only one lens. Fidelity’s age-based savings milestones give you a second, complementary way to check whether you’re on pace at any given age, rather than waiting until retirement to find out. Below we walk through both, side by side, plus the assumptions and caveats that matter. Once you have a target number in mind, it’s worth looking at whether to prioritize your 401(k) or IRA first and how to know if you’re on track with your broader savings.
The 25x rule and the 4% rule, explained
The 25x rule and the 4% rule are two sides of the same idea. The 4% rule says that if you withdraw about 4% of your portfolio in the first year of retirement, then adjust that dollar amount for inflation each year after, your savings should historically last around 30 years. Work backward from that withdrawal rate and you get the 25x rule: your target nest egg is 25 times your annual expenses, because 1 ÷ 0.04 = 25.
Worked example: if you expect to spend $40,000 a year in retirement (after Social Security and any other income), the 25x rule points to a target of $1,000,000 saved by the time you retire. Spend $60,000 a year instead, and the target rises to $1,500,000. The math scales linearly with your expenses, which is what makes it useful as a quick planning anchor.
| Annual retirement expenses | 25x target |
|---|---|
| $40,000 | $1,000,000 |
| $50,000 | $1,250,000 |
| $60,000 | $1,500,000 |
| $80,000 | $2,000,000 |
Fidelity’s age-based savings milestones
Where the 25x rule gives you an end-state target, Fidelity’s milestones give you checkpoints along the way, expressed as a multiple of your current salary rather than a fixed dollar amount. They’re built on a specific set of assumptions: starting to save at 25, retiring at 67, saving 15% of pre-tax income (including any employer match), living to about 93, holding a portfolio that’s more than 50% stocks on average, and targeting roughly 45% income replacement in retirement with no pension. Fidelity frames these as benchmarks that “work” in about 9 of 10 modeled market scenarios, not a hard rule, and explicitly adjustable to your own circumstances.
| Age | Savings target (multiple of current salary) |
|---|---|
| 30 | 1x salary saved |
| 40 | 3x salary saved |
| 50 | 6x salary saved |
| 60 | 8x salary saved |
| 67 | 10x salary saved |
Why these two approaches can point to different numbers
The 25x rule targets a dollar amount based on what you plan to spend. Fidelity’s milestones target a multiple of what you currently earn, assuming you’ll replace about 45% of that income in retirement (Social Security and other sources typically cover the rest). If your spending in retirement will look very different from your current income, a paid-off mortgage, kids grown and independent, a smaller footprint, the two methods can diverge. Use the 25x rule as your real target based on projected expenses, and use the age-based milestones as a gut-check for whether you’re pacing correctly along the way.
The caveats that matter
- Taxes. The 25x/4% math is usually discussed in pre-tax terms. Depending on how your savings are split across traditional, Roth, and taxable accounts, the real number you need can run closer to 28x–30x your expenses once taxes on withdrawals are factored in.
- Sequence-of-returns risk. A market downturn in the first few years of retirement can do outsized damage to a portfolio you’re actively drawing from, even if long-term average returns are fine.
- Longer-than-30-year retirements. The 4% rule was built around roughly a 30-year horizon. Retiring earlier than 67, or simply living longer than the assumptions expect, both stretch that runway thinner.
- Market returns aren’t guaranteed to be steady. Both models assume fairly typical historical market behavior, they’re not a promise about the future.
Treat both the 25x rule and the age-based milestones as a starting point for the conversation, not the final word, this is general information, not personalized financial advice, and a CPA or licensed financial advisor can help translate these guidelines into a number that fits your actual income, expenses, and timeline.
Frequently asked questions
Is the 25x rule the same as the 4% rule?
They’re the same math viewed from two directions. The 4% rule describes a safe first-year withdrawal rate; the 25x rule is the savings target that produces that withdrawal rate (annual expenses × 25).
What if I’m behind on Fidelity’s age-based milestones?
Fidelity explicitly frames these as adjustable benchmarks, not hard rules. Being behind at one checkpoint doesn’t mean you can’t catch up, increasing your savings rate, using catch-up contributions once you’re 50 or older, or adjusting your planned retirement age are all common ways to close the gap.
Does the 25x rule include Social Security?
Apply the 25x rule to the portion of your annual expenses that your portfolio needs to cover, typically your total expected expenses minus Social Security and any pension income. If Social Security covers a meaningful chunk of your spending, your actual portfolio target is smaller than 25x your gross expenses.
Why might I need 28x – 30x instead of 25x?
The 4% rule’s original research generally assumed steady withdrawals without fully isolating the tax bill on each dollar withdrawn. If a large share of your savings sits in tax-deferred accounts like a traditional 401(k), taxes on withdrawals can effectively raise the multiple you need to 28x–30x your after-tax spending target, depending on your account mix and tax bracket.
Should I use these rules if I plan to retire early?
You can use them as a starting point, but both are built around a roughly 30-year retirement horizon starting around 67. Retiring significantly earlier stretches that runway well beyond 30 years, which is why many early-retirement planners lean toward a more conservative withdrawal rate and a larger multiple than 25x.
Once you have a target range in mind, the next question is usually where to put the money, see whether to prioritize a 401(k) or IRA first, check how to know if you’re on track with your savings, and revisit how much you should actually be saving each month to get there.
Leave a Reply