Retirement Planner

The most widely used framework for calculating your retirement number is the Rule of 25: multiply your expected annual retirement expenses by 25. This is derived from the 4% safe withdrawal rate, which states that withdrawing 4% of your portfolio annually has historically sustained a 30-year retirement without depleting principal. If you expect to spend $60,000 per year in retirement, you need approximately $1,500,000 saved. This target should be reduced by expected Social Security income and any pension benefits if Social Security covers $24,000 per year of your expenses, you only need your portfolio to cover the remaining $36,000, reducing your target to $900,000. According to the 2026 Northwestern Mutual Planning & Progress Study, Americans say they need $1.46 million to retire comfortably.

Fidelity Investments recommends saving 15% of your pre-tax income annually including employer match contributions and reaching the following savings milestones: 1 times your annual salary by age 30, 3 times by 40, 6 times by 50, and 10 times by age 67. Most Americans fall short of these benchmarks. Vanguard's How America Saves 2025 report found the median 401(k) balance across all participants was $38,176 significantly below the savings needed for a secure retirement for most income levels. If you're behind these milestones, the most effective responses are to increase your contribution rate immediately (even by 1%), eliminate high-interest debt that competes with your savings capacity, and delay retirement age by 1–3 years, which dramatically changes the math by adding saving years and reducing withdrawal years simultaneously.

The 4% rule states that a retiree can withdraw 4% of their investment portfolio in the first year of retirement, then adjust that amount annually for inflation, and historically the portfolio would last at least 30 years across a wide range of market conditions. It was developed by financial planner William Bengen in 1994 using historical market return data going back to 1926, and later validated by the Trinity Study. For a $1,000,000 portfolio, the 4% rule allows a $40,000 annual withdrawal (or approximately $3,333 per month). Some financial planners now recommend a 3.3% to 3.5% rate for retirements expected to last 35 or more years, to account for lower projected future returns and increased longevity. The 4% rule is a planning guideline, not a guarantee actual withdrawal sustainability depends on your specific portfolio, market conditions during your retirement, and spending flexibility.

Standard 401(k) catch-up contributions in 2026 allow adults aged 50 and older to contribute an additional $8,000 beyond the standard $24,500 limit, for a total of $32,500. The SECURE 2.0 Act created a new super catch-up provision for adults aged 60 through 63: in 2026, this group can contribute an additional $11,250 in catch-up contributions for a total of $35,750 the highest 401(k) contribution limit in US history. For traditional and Roth IRAs, the 2026 catch-up limit for those 50 and older is $1,100 on top of the $7,500 standard limit, for a total of $8,600. These limits are indexed for inflation and may increase in subsequent years.

The decision of when to claim Social Security significantly affects your lifetime income. You can claim as early as age 62 with a permanent benefit reduction of approximately 30% compared to your Full Retirement Age (FRA) benefit. The FRA is 67 for those born in 1960 or later. For every year you delay claiming past your FRA up to age 70, your benefit permanently increases by approximately 8%. Claiming at 70 instead of 62 can result in a benefit that is roughly 77% higher per month. The break-even age where the cumulative higher benefit surpasses what you would have received by claiming earlier is typically around age 80 to 82. If you are in good health and expect to live past your early 80s, delaying Social Security is generally the financially superior choice. Married couples should coordinate claiming strategies, as the higher earner delaying to 70 maximizes survivor benefits.

Required Minimum Distributions are mandatory annual withdrawals that the IRS requires from traditional 401(k)s, traditional IRAs, and most other tax-deferred retirement accounts. Under the SECURE 2.0 Act, RMDs now begin at age 73 (increased from age 72). The amount of each RMD is calculated by dividing your account balance at the end of the prior year by your IRS life expectancy factor from the Uniform Lifetime Table. Failure to take the required RMD results in a 25% excise tax on the amount that should have been withdrawn (reduced from 50% under the SECURE 2.0 Act). Roth IRAs are not subject to RMDs during the owner's lifetime, making them a valuable tool for estate planning and tax management in retirement. RMDs from tax-deferred accounts count as ordinary income and can significantly increase your taxable income sometimes enough to trigger higher Medicare premiums (IRMAA surcharges) or push more of your Social Security benefit into taxable income.