Retirement planning

How much do I need to retire, and where do I put the money?

Every headline number — a million, two million, twelve times your salary — is someone else's answer to a question about your spending. Start from what your life costs.

Where to open an account

Last reviewed 16 September 2026

The short answer

Start with annual spending, then divide by a withdrawal rate. For $80,000 of spending, 3.9% implies $2.05M and 4.7% implies $1.70M.S19 Social Security changes this substantially: at the 2026 average of $2,071/mo, your portfolio covers only ~$55,000 — roughly $1.17M–$1.41M.S18

The question is backwards

"How much do I need to retire" implies a universal number. There isn't one, because the dominant variable isn't return or retirement age — it's what your life costs per year. Two people the same age with identical portfolios get different answers, and the difference is spending, not strategy.

What $80,000 of spending requires

With and without Social Security counted

Portfolio required at each withdrawal rate Ignoring Social Security $2.05M at 3.9% $1.70M at 4.7% Counting the average benefit of $24,852/yr $1.41M at 3.9% $1.17M at 4.7% Social Security removes roughly $640,000 from the requirement at the conservative rate. Plenty of retirement content omits it entirely, producing targets that are frightening and wrong.
Average retired-worker benefit $2,071/month in 2026 after a 2.8% COLA; the median is lower, around $1,835.S18 Withdrawal rates per Morningstar and Bengen.S19 Illustrative example.

Nobody agrees on the withdrawal rate anymore

The 4% rule is the most repeated number in personal finance, and it's currently contested by the two most credible parties in the argument — including the man who invented it.

4.7% or 3.9%?

Two defensible answers to different questions

Bengen versus Morningstar on safe withdrawal rates BILL BENGEN, WHO CREATED THE RULE 4.7% Raised from 4% after testing portfolios with small- and micro-cap stocks added. MORNINGSTAR, 2026 RESEARCH 3.9% Up from 3.7% last year. Argues forward returns will fall short of historical averages. Bengen asks what survived every historical sequence. Morningstar asks what to assume if the future is worse. Neither is wrong. Build a plan that works at 3.9% and treat anything above it as upside.
Bengen's revised estimate of ~4.7%; Morningstar retirement income research, 2026: 3.9% for fixed inflation-adjusted spending.S19

The disagreement is the finding. No real retiree spends a fixed inflation-adjusted amount for thirty years regardless of what markets do. Flexibility in bad years is worth more than precision in the estimate.

Why starting now beats picking well

$500 a month, and what the balance is made of

7% real return, compounded monthly

Contributions versus growth over 40 years $86,542 10 yrs 31% growth $260,463 20 yrs 54% growth $609,985 30 yrs 70% growth $1,312,407 40 yrs 82% growth contributions growth
$500/month at a 7% real annual return, compounded monthly. At 40 years you contribute $240,000 and finish near $1.31M. A 7% real return is a historical approximation, not a promise.S7 Illustrative example.

This is why the account you open at 28 matters more than the fund you pick at 48. Time is the only input doing heavy lifting there, and it's the one you can't buy back.

Where to put the money, in order

This half of the question is far more settled. Account order is one of the few things in personal finance with a near-consensus answer.

Funding order, 2026 limits

Work down, not across

Retirement account funding order 1  401(k) up to the full employer match Most common formula: 50% of contributions up to 6% of pay 50%+ 2  Health Savings Account, if eligible Deductible in, tax-free growth, tax-free out for medical costs Triple 3  Roth IRA, under the income limits Phases out $153k–$168k single, $242k–$252k married filing jointly $7,500 4  Fill the rest of the 401(k) Catch-up adds $8,000 at 50+, or $11,250 at ages 60–63 $24,500 5  Taxable brokerage account Also where money for goals before 59½ belongs No cap
2026 limits per IRS: 401(k) $24,500, IRA $7,500, catch-up $8,000 at 50+ and $11,250 at 60–63.S16 Roth phase-outs per IRS Notice 2025-67.S17 Note for 2026: if prior-year wages with that employer exceeded $150,000, catch-up contributions must be Roth.

Maxing steps 3 and 4 together is $32,000 in 2026, or $41,100 at 50 and over. Most people never reach the ceiling, which is fine — the order matters far more than the total, because nearly all the free money lives in step 1.

What to buy inside the account. That depends on your timeline and your tolerance for watching a balance fall, so this page won't tell you. But the boring observation holds: a low-cost broad index fund, or a target-date fund matched to your retirement year, is what the consensus recommends for people who don't want a second job. Fees compound exactly like returns, in the wrong direction — 1% a year over 40 years consumes a meaningful share of the growth above.

Related questions

Roth or traditional? Roth if you expect a higher tax rate in retirement, traditional if lower. Nobody knows future tax rates, so many people split. Early in a career, when income is lowest, Roth tends to be the stronger bet.

What if I'm starting at 50? Catch-up contributions exist for this and they're substantial: $32,500 into a 401(k) at 50+, rising to $35,750 at 60–63.S16 Delaying retirement two or three years also does unusual work — it adds contributing years, removes withdrawal years, and raises your Social Security benefit at once.

Should I count on Social Security? It pays retired workers an average of $2,071 a month today.S18 Its long-run funding is a live policy debate and beyond what this page can responsibly forecast. Modeling it at a reduced level is a reasonable hedge; modeling it at zero produces numbers so large they cause paralysis rather than action.