The Retirement Rules Everyone Quotes—And the Gaps They Miss
When people ask us, “How much do I need to retire?”, the answer they usually expect is a single number. And if you search online, you’ll find plenty of shortcuts that promise exactly that.
These rules of thumb are helpful—they give you a place to start. But they’re also overly simplistic. If you stop at the quick math, you risk overlooking some of the biggest financial realities of retirement: healthcare, long-term care, home maintenance, and lifestyle goals.
So let’s recap the three most common rules you’ve probably heard—and then talk about why they all fall short in the same way.
Rule #1: The 25X Rule
This rule says you should aim to save 25 times your expected annual retirement expenses.
- Spend $80,000 a year? Aim for $2 million.
- It’s a simple, powerful way to connect your lifestyle to your savings target.
Rule #2: The 70–80% Income Replacement Rule
This shortcut suggests you’ll need about 70–80% of your pre-retirement income to maintain your lifestyle.
- Earn $100,000 now? Plan for $70,000–$80,000 in retirement.
- The logic is that some expenses (commuting, payroll taxes, retirement savings) disappear when you stop working.
Rule #3: The 4% Withdrawal Rule
This rule assumes you can safely withdraw 4% of your portfolio each year without running out of money.
- A $1 million portfolio → ~$40,000/year.
- It accounts for market downturns and inflation by relying on long-term averages.
Where These Rules Fall Short
On paper, these rules make sense. In real life, retirement is messy. And here’s where most people stumble: estimating future expenses correctly.
- Tracking: Very few of us have a reliable system for tracking spending. Some use spreadsheets, some use apps, but many don’t track at all. And even among those who try, it’s tough to stay consistent. According to Investopedia, while 86% of Americans say they budget, only about 22% actually stick with it long-term (Investopedia). Without reliable data today, projecting tomorrow is nearly impossible.
- Emotion: Spending isn’t just math—it’s emotional. It reflects priorities, and those priorities change. One year it’s travel, the next it’s helping kids, later it may be healthcare or downsizing.
- Life stages: Retirement unfolds in phases. What you spend at 65 looks very different from what you spend at 85.
- Long-term care: The biggest blind spot. According to Genworth’s 2024 Cost of Care Survey, median costs range from $5,000–$10,000+ per month for assisted living or in-home care (Genworth). Yet it almost never gets included in a “25X” calculation or a 4% withdrawal plan.
- Big-ticket surprises: Roof replacements, major dental bills, car purchases—expenses like these don’t fit neatly into a monthly budget but are very real.
The Bottom Line
The 25X Rule, the 70–80% Rule, and the 4% Rule are useful. We share them with clients all the time because they provide a sense of direction when retirement feels overwhelming. But here’s the truth we’ve seen over and over again: they give comfort, not clarity.
Comfort comes from a simple formula that tells you you’re “on track.” Clarity comes from knowing your plan accounts for healthcare, long-term care, home repairs, shifting priorities, and those big expenses you don’t see coming.
That’s why my message is always the same: start with the shortcuts—but don’t stop there. Ask yourself:
- What expenses am I not accounting for?
- How will my priorities change over time?
- What surprises could throw off my plan?
- What big ticket items are coming up?
That’s when retirement planning shifts from being about numbers on a page to building a roadmap that supports the life you actually want to live. And that’s the point: not just reaching retirement, but being able to enjoy it with confidence.
