In this guide
Your number: 25× spending is the anchor
The standard target is 25× your annual spending — the inverse of the 4% rule. $60,000/year of spending implies $1.5M. Get your personal number and gap from the retirement calculator, and check the pace against benchmarks (1× salary by 30, 3× by 40, 6× by 50).
Compounding rewards the early, punishes the late
At 7%, money doubles about every decade (Rule of 72). $500/month from 25 beats $1,000/month from 40. Run your own timeline in the compound interest calculator — the chart makes the argument better than any lecture.
Account order: match, then tax-advantaged, then taxable
The standard sequence: 401(k) up to the employer match (free 50–100% return — see the 401(k) calculator), then IRA (see Traditional vs Roth), then max the 401(k), then taxable. 2025 limits: $23,500 employee 401(k), $7,000 IRA, both with catch-ups at 50+.
Roth vs Traditional is a tax-rate bet
Deduct now and pay taxes later (Traditional) or pay now and never again (Roth). Early-career and low-bracket years favor Roth; peak-earning years favor Traditional. Model both with the Roth and Traditional calculators — and remember Roths have no required distributions.
What return should you assume?
History says ~10% nominal for stocks (see market return statistics), but plans should be robust, not optimistic: 6–8% nominal for diversified portfolios, then subtract inflation for real spending power (inflation calculator).
The withdrawal phase is its own problem
Sequence-of-returns risk — bad markets early in retirement — can break a plan whose average return looks fine. Test longevity with the withdrawal calculator: balance, spending, growth, and inflation, year by year. Flexible spending in bad years is the strongest practical defense.
FIRE: the same math, compressed
Financial independence is 25–33× spending reached early, driven overwhelmingly by savings rate: at 50% of income saved, retirement is roughly 17 years away from zero. The FIRE calculator shows your timeline and how spending cuts move it more than raises do.
Reviewed July 2026 · Formulas and 2025 tax figures per the methodology page. Educational content, not financial advice.