Wondering, “how much do I need to retire?” It’s a good question, especially if you’re in your 20s and 30s. When you’re younger and earlier on in your career, you have plenty of time to think about what you want and then develop an action plan to actually make it happen.

But it’s also a tricky question because there’s no one right answer. What you want and when you want it will make the right steps for you to take look much different than what the person next to you needs to do to reach their goals.

This is where planning for or thinking about retirement can get overwhelming, and fast. There are just so many variables and options to consider!

That’s part of the value of hiring a financial planner who can figure this out with you. We’re trained to take complex questions like this and explore all the options so you get the best answer for you.

If you don’t have a planner, don’t just throw up your hands and give up on figuring out how much money you need to retire (or hit financial independence). You can at least begin the process of answering the “how much do I need to retire” question on your own by leveraging a few rules of thumb that will guide you to a specific number.

Here are 5 to try out and apply to your situation.

The Rule of 72

The Rule of 72 can help you understand the compounding effect — and may even motivate you to save more, now, so you can compound your money faster.

This math shortcut shows you how long it will take your money to double, based on the return you earn in your portfolio. Let’s say you expected to earn a 6 percent return. You would divide 72 by 6, which is 12.

In other words, if you earn a 6 percent return, it will take 12 years for your nest egg to double.

This gives you some sense of how long it will take to build the wealth you need to achieve your goals. But be aware that this rule really only works if you assume return rates between 6 and 10 percent. Outside that range, the rule of 72 is less reliable.

The 4% Rule

This rule doesn’t tell you how much money you need before you can retire, but it will let you test your current portfolio value  to see if you’ve amassed enough wealth to live off your invested assets.

The 4% Rule says you can withdraw 4% of this amount each year. This is the “safe” withdrawal amount, meaning you won’t run out of money if you only take out that percentage.

Let’s say you have $500,000 of invested assets. That means you can safely take out $20,000 per year and you can reasonably expect to not run out of money. If you can live off $20,000 per year, then you can retire right now.

If not, keep saving and investing!

The “Multiply by 25” Rule

This is another super simple guideline and can give you the quickest answer to the “how much do I need to retire” question. (It’s also related to the 4 percent rule!)

How much do you want to spend per year in retirement? Take that number and multiply it by 25. For example, let’s say you wanted to spend $75,000 per year. According to this rule, you’d need at least $1,875,000 to retire and fund the lifestyle you want.

This rule is really straightforward, but it makes one big assumption about something that is entirely out of your control: how long you’ll live after you retire. Using this rule means you assume your retirement — or the time between when you stop working and when you die — is 25 years.

With people living longer (or retiring sooner), retirements that last 30 or even 35 years aren’t out of the question… and enjoying the same lifestyle for a decade longer is going to require a lot more money.

This rule also doesn’t account for things like taxes and inflation — but that’s where things tend to get complicated no matter what rule you use. It can be a good starting point, but you’ll want to do some additional retirement planning to make sure you set your goal high enough.

The Multiply-Your-Salary Rule

Another way to multiply your way to an answer is to consider your salary and your age. This will tell you how much you should have saved through every decade of your life in order to be on track to retiring with enough money to live off of.

Here’s how Fidelity recommends breaking this down:

  • At 35, you should have 2 times your current salary in the bank. If you make $100,000, you should have $200,000 in your investment and retirement accounts.
  • At 45, you need 4 times your salary. If you’re making $150,000 at this age, your investable assets should be about $600,000
  • At 55, you’ll want to see 7 times your salary in the bank. If that’s still about $150,000 per year, you’ll need a nest egg worth $1,050,000.

The 10 Percent Rule

This rule isn’t so much about how much you need to retire, but provides a guideline for how you can get there. Most experts say that saving 10 percent of your salary over your working career will be enough to grow a sizeable nest egg by the time you’re in your mid-60s.

But that assumes a lot about what you want your life to look like over the next few decades. Do you really want to work well into your 60s? What if you can’t work before you hit that age? What if you feel comfortable investing more aggressively for the potential of a higher return?

It’s good to have a rule of thumb that dictates how much of your income you need to save — but 10 percent might be a little low if:

  • You want to reach financial freedom earlier in life
  • You want to have more flexibility and choice with your lifestyle once you reach retirement or financial freedom (only saving 10 percent during your working years might mean living on a strict budget in retirement)
  • You don’t want to be forced to work into your 60s
  • You didn’t start saving until your late 30s or 40s

Instead, I’d recommend saving 20 percent of your income — at a minimum. You should aim to save and invest even more if you have more aggressive financial goals, like early retirement or financial independence.

How Much Do I Need to Retire? A Financial Planner Can Tell You

The point of all these rules of thumb is to get you in the right ballpark. It narrows down the vast array of possibilities to a more manageable guesstimate — but it’s still just that, a guess.

Until you sit down with a financial planner who can actually run complex projections with various numbers, you may never know for sure how much you need to retire without running out of money, or how much in investable assets you need to have before you officially reach financial freedom.

If you don’t want to leave your financial future up to some rough guesswork, let’s chat further about what you hope to accomplish so we can develop an action plan that shows you how to make it happen.