Retirement Planner
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Retirement Guides
Retirement Planner — Frequently Asked Questions
How much money do I need to retire?
The most widely used benchmark is the 25x rule: multiply your desired annual retirement spending by 25 to find your target nest egg. For example, if you need $60,000/year, you need approximately $1.5 million saved. This is based on the 4% safe withdrawal rate — the historically sustainable amount you can withdraw annually without running out of money over a 30-year retirement. For a longer retirement (retiring early) use 3–3.5% withdrawal (28–33x spending).
What is the 4% withdrawal rule?
The 4% rule comes from the Trinity Study (1998), which analyzed historical stock and bond market returns. It found that a portfolio of 50–75% stocks could sustain a 4% annual withdrawal (adjusted for inflation each year) for at least 30 years in nearly all historical periods, including the Great Depression and the 1970s stagflation era. It's a starting guideline, not a guarantee — sequence-of-returns risk, healthcare costs, and personal longevity all matter.
What rate of return should I use in retirement projections?
For long-term projections, most financial planners use 6–7% annual real return (after inflation) for a diversified stock portfolio. For a conservative mixed portfolio (60% stocks / 40% bonds), use 5–6%. For a very conservative portfolio, use 4–5%. The historical nominal return of the S&P 500 is approximately 10%, but stripping out 2.5–3% inflation gives you the 7% real return often quoted. Always run scenarios at both optimistic and conservative rates.
Should I prioritize my 401(k) / RRSP or pay off debt first?
Always contribute enough to get the full employer 401(k) match first — that's a guaranteed 50–100% return. After capturing the match: if you have high-interest debt (credit cards, personal loans above 7%), pay those off before investing more. If your only debt is a mortgage or student loans below 5–6%, contributing to your retirement account simultaneously is usually the better mathematical choice thanks to compounding.
What happens if I start saving for retirement late?
Starting late is costly but not hopeless. The key levers: increase your savings rate aggressively (20–30% of income instead of 10–15%), plan to work a few years longer (each extra year both adds savings and reduces the drawdown period), consider part-time work in early retirement, and downsize housing. Someone starting at 40 instead of 25 needs to save roughly 3x as much per month to reach the same goal — but a higher income in your 40s often makes this achievable.
How does inflation affect retirement savings?
Inflation is one of the biggest retirement risks. At 3% inflation, your purchasing power halves in about 24 years. A $6,000/month lifestyle today will cost $10,900/month in 20 years. This is why maintaining significant stock exposure (50–60%+) even in retirement is important — stocks have historically outpaced inflation, while cash and bonds can lose real value over long periods. Many financial planners recommend owning I-Bonds, TIPS (Treasury Inflation-Protected Securities), or dividend-growing stocks as inflation hedges.