28 April 2026 · Retirement Planning
The 25x rule is a starting point, not an answer. Here's how to calculate your personal retirement number — accounting for state pension, spending phases, and your actual life.
The most-quoted answer is 25 times your annual spending. Spend £40,000/year? You need £1,000,000. Spend £60,000? You need £1,500,000.
That's the 4% rule in reverse: a portfolio of 25x your spending can sustain 4% annual withdrawals indefinitely (in theory).
But the 25x rule ignores your state pension, the fact that spending changes with age, where you live, how long you'll actually work, and tax. Your real number is different — and often lower than the 25x headline figure.
Before any calculation, get specific about what you'll spend in retirement. Most people overestimate or underestimate this by 20–30%.
Break it into three phases:
Early retirement (60s): Often the most expensive. Travel, hobbies, active lifestyle. You're healthy, energetic, and have time to spend money.
Middle retirement (70s): Spending typically falls. Major travel slows, the mortgage may be gone, children are independent.
Late retirement (80s+): Spending often rises again due to healthcare, care costs, and support needs.
A flat spending assumption is a useful fiction. If you want a more accurate number, model the three phases separately.
Want to know your exact retirement number?
Run your numbers in RetireGauge →This is where most retirement calculators go wrong: they ignore the income you'll receive from the state.
If you're planning to retire at 65 and the state pension provides £11,500/year, you don't need your private portfolio to generate that £11,500. You only need it to cover the gap between state income and your desired spending.
Example:
That's a £287,500 difference — almost entirely explained by accounting for state pension.
The 25x (4%) rule assumes a 30-year retirement. If you retire at:
| Retirement age | Expected retirement length | Safer multiplier |
|---|---|---|
| 70 | 20 years | 22–25x |
| 65 | 25–30 years | 25–28x |
| 60 | 30–35 years | 28–32x |
| 55 | 35–40 years | 30–35x |
| 50 | 40+ years | 33–40x |
The further from age 65, the more conservative you should be with the multiplier.
Profile:
Private portfolio target: £32,000 × 25 = £800,000
If both have ISAs and pension pots — say, £500,000 in SIPPs and £300,000 in ISAs — they're right on target. If they plan to downsize the family home and release £150,000, they have a comfortable margin.
That's a very different picture from the "£55,000 × 25 = £1,375,000" headline figure.
Want to know your exact retirement number?
Run your numbers in RetireGauge →Start with your current take-home pay and subtract:
Many people find their retirement spending is 70–80% of their working take-home. If you earn £60,000 gross and take home £45,000, you might need £32,000–£36,000/year in retirement — significantly less than your gross salary.
A common mistake is planning for your pre-tax income. Budget from post-tax take-home instead.
1. Retirement age — retiring 5 years earlier adds significant portfolio pressure. Retiring 5 years later makes the goal much more achievable.
2. State pension entitlement — have you checked your actual projected state pension? In the UK, you can check via the government gateway. In the US, the Social Security statement shows your projected benefit. This number directly reduces what you need to save privately.
3. Investment returns — a 1% difference in long-term real return can shift your required savings by 15–20%. Fees matter enormously.
4. Spending flexibility — a plan with 10% spending flexibility is much more robust than one with none. If you can cut £400/month in a bad market year, you massively reduce sequence-of-returns risk.
5. Tax efficiency — using ISAs, pension drawdown, and dividend allowances correctly can reduce the tax you pay on retirement income by thousands per year. That directly reduces the portfolio needed to sustain a given after-tax income.
The honest answer is: less than the 25x rule suggests, once you account for state pension — but more than you might hope, once you account for inflation, healthcare, and living longer than expected.
The most important thing is to run the numbers for your specific situation: your spending, your state pension entitlement, your retirement age, your country, and your savings trajectory.
A good retirement calculator does this for you with real tax rates, real pension rules, and a simulation that stress-tests your plan.
For many people in the UK, £1 million is enough — especially combined with a full State Pension. At £11,500 State Pension + 4% of £1 million (£40,000), you'd have £51,500/year, which is well above the median UK household income. Whether it's enough depends entirely on your lifestyle costs.
The 25x rule says your retirement portfolio should be 25 times your annual spending. It's derived from the 4% safe withdrawal rate — withdrawing 4% of a portfolio annually over 30 years has historically preserved capital in most market scenarios. It's a useful starting point but should be adjusted for retirement age, state pension, and your specific circumstances.
At a 4% withdrawal rate, £500,000 generates £20,000/year. Combined with a full UK State Pension of £11,500, that's £31,500/year — enough for a modest retirement. At a higher 5% withdrawal rate (riskier, especially in early retirement), it generates £25,000/year. How long it lasts depends heavily on investment returns and inflation over your retirement period.
Home equity is a real asset that many people choose to access through downsizing. Whether to include it in your "how much do I need to retire" calculation is a personal choice. Conservative planners treat it as a last resort buffer. Including it can make your plan look healthier than it is if you never intend to move.
Retiring at 60 vs 65 makes a significant difference. You'll need 5 more years of private savings to fund the gap before state pension kicks in, plus your portfolio needs to last 5 years longer. As a rough guide, retiring at 60 instead of 65 requires 15–25% more in savings, depending on your spending and state pension amount.
Answer a few questions about the life you want — RetireGauge gives you a single readiness score and the exact income or age that funds it.
Try the calculator →