Planning for retirement doesn’t have to be complicated. While the finance world loves to throw around charts, projections, and calculators, sometimes a simple rule of thumb is all you need to stay on track. And one in particular has stood the test of time: the 25x rule.
What’s the 25x Rule?
The 25x rule says you should aim to save 25 times your expected annual retirement expenses. If you think you’ll need $60,000 a year to live comfortably, your goal is $1.5 million saved. That number is based on the idea that a 4% annual withdrawal rate is sustainable over a 30-year retirement horizon.
It’s not a perfect formula—but it’s close enough to give you a clear, actionable target. And for most people, it beats the paralysis of overanalyzing everything.
Why It Works
This rule is rooted in the same research that created the popular “4% rule,” which assumes a diversified portfolio of stocks and bonds will generally support 4% annual withdrawals without running out of money. Multiply your yearly expenses by 25, and you’ve got a ballpark savings goal that gives you flexibility and staying power.
It’s not about exact precision—it’s about creating a framework. And frameworks help you make consistent, smart decisions over time.
It Adjusts to Your Lifestyle
One of the best things about the 25x rule is that it’s not based on income—it’s based on expenses. That means it works whether you want to retire on $40K a year or $150K. The more lean or optimized your lifestyle, the less you need to save. It also helps keep your spending in check during your working years, since your future needs are directly tied to your current habits.
Use It as a Check-In Tool
You don’t have to be close to retirement to benefit from this rule. Even if you’re in your 30s or 40s, multiplying your current or target retirement expenses by 25 gives you a benchmark to measure progress. If you’re 40 and sitting at $250,000 in savings but expect to need $2 million, you know what needs to happen.
It’s a gut check that cuts through the noise and keeps you grounded in the long-term goal.
Pair It With Tax-Advantaged Accounts
Hitting your 25x goal is a lot easier when you’re using the right tools. Maxing out a 401(k), Roth IRA, or HSA gives you tax advantages that accelerate your growth. These accounts let you keep more of your investment returns—so your savings hit that target faster, with less risk.
The Bottom Line
The 25x rule isn’t magic—but it’s a simple, practical way to keep your retirement plan focused. It turns an overwhelming goal into a clear number, and that clarity makes action easier. Whether you’re just starting or already deep into your saving years, this one rule can help keep your future on track without the stress.
Alexander Clark is a financial writer with a knack for breaking down complex market trends and economic shifts. As a contributor to The Daily Overview, he offers readers clear, insightful analysis on everything from market movements to personal finance strategies. With a keen eye for detail and a passion for keeping up with the fast-paced world of finance, Alexander strives to make financial news accessible and engaging for everyone.
