# How to calculate your retirement number in 5 steps

> Estimate annual retirement spending, subtract Social Security and pension income, and multiply the remaining gap by 25: the classic 4 percent rule in reverse. A household needing $40,000 beyond Social Security targets one million. Check progress against salary-multiple benchmarks by age, then set the monthly savings rate that closes the gap.

**Source:** True North by Competitive Compass
**Canonical URL:** https://competitive-compass.com/true-north/how-to-calculate-your-retirement-number-in-5-steps.html
**Author:** Anuj Shahani (https://www.linkedin.com/in/anujshahani)
**Published:** 2026-07-07 · **Last updated:** 2026-07-07
**Category:** Investing & Planning

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## Summary

The five-step plan to calculate your retirement number in 2026. Estimate retirement spending, subtract Social Security and pensions, multiply the gap by 25, check progress against age benchmarks, and set the savings rate that closes the distance. From True North by Competitive Compass.

## The Five Steps

### Step 1: Price a year of your retirement

Start from today's spending and adjust: the mortgage may retire, commuting and payroll taxes end, healthcare and travel typically rise. Most households land between 70 and 90 percent of pre-retirement spending. Anchor on essentials first, since that floor is what the plan must guarantee; wants stack above it. Use today's dollars throughout and let the return assumptions carry inflation.

### Step 2: Subtract the income that arrives regardless

Your Social Security statement at ssa.gov shows projected benefits at 62, full retirement age, and 70, with the age-70 benefit roughly 76 percent larger than the age-62 one, the best annuity money can buy for those who can wait. Add any pension. What remains after subtraction is the gap your portfolio must fill, and it is usually smaller than people fear.

### Step 3: Multiply the gap by 25

The 4 percent rule, drawn from every rolling US market period on record, says a diversified portfolio sustains 4 percent initial withdrawals adjusted for inflation across a 30-year retirement. Twenty-five times the gap is the same statement in savings form. Early retirees stretching past 30 years lean toward 28 to 30 times; flexible spenders who can trim in bad markets lean the other way.

### Step 4: Check the pace against age benchmarks

Fidelity's widely used milestones: one times salary saved by 30, three times by 40, six times by 50, eight times by 60, ten times by 67. The early marks reward starting more than earning, and a behind reading at any age converts directly into the step-five savings rate rather than into discouragement. The benchmarks are mile markers, never verdicts.

### Step 5: Set the savings rate that closes the gap

Work backward from the number: at 7 percent real returns, reaching one million in 30 years takes roughly $820 monthly; in 20 years, about $1,920. A 15 percent savings rate including employer match carries typical careers to the ten-times mark, and every one-point increase pulls the finish line closer. The number stays theoretical until a payroll percentage enforces it, so end the calculation inside the 401(k) portal.

## Frequently Asked Questions

### Is the 4 percent rule still valid?

It remains the strongest simple planning anchor, built on the worst retirement start dates in US history. Researchers debate decimals around it, and flexibility beats precision: retirees who trim spending modestly in down markets outperform any fixed rate. Plan on 4, adjust with reality.

### How much does the average person need to retire?

The honest answer is a formula rather than a figure, since a paid-off house in a low-cost town and a coastal renter's life price differently by millions. The 25-times-your-gap math personalizes it in ten minutes, which is precisely its advantage over any headline number.

### Should I count Social Security in my plan?

Yes. The program's long-term funding gap points to trims for future retirees under unchanged law, never to zero; even the trustees' no-action scenario pays most of scheduled benefits. Counting a haircut of your projected benefit is conservative planning. Counting zero abandons real money.

### What if I am behind the benchmarks?

The levers are real and cumulative: catch-up contributions from 50, each additional working year adding savings while subtracting a retirement year, and the age-70 Social Security claim raising the floor by three quarters. Households that engage the levers in their fifties routinely close startling gaps. Behind at 45 is a savings-rate problem, and savings rates move.

### Does the number include my house?

Keep home equity out of the 25-times portfolio math, since you live in it rather than draw from it. Note it separately as the flexibility reserve it truly is: downsizing, relocating, or a reverse mortgage can convert it later. The cleaner accounting keeps both numbers honest.

## How to Cite This Guide

Source: True North by Competitive Compass. "How to calculate your retirement number in 5 steps." https://competitive-compass.com/true-north/how-to-calculate-your-retirement-number-in-5-steps.html

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