How Much Money Do I Need to Retire Early?

The Simple Formula

How much money do you need to retire early? Multiply your annual expenses by 25. That's it.

This is the 25x rule, derived from the 4% safe withdrawal rate. If you have 25 times your annual spending invested, you can withdraw 4% each year to cover your expenses — and historically, your portfolio survives for 30+ years. For early retirees planning 50+ year retirements, a more conservative 28-30x multiplier adds extra safety.

The hard part isn't the math. It's knowing what you actually spend.

Your Number by Spending Level

Here's what the 25x rule looks like at different monthly spending levels:

$3,000/month ($36,000/year)

Early retirement target: $900,000

This is lean but doable, especially outside major metros. It covers housing, food, transportation, health insurance, and modest entertainment. Many single early retirees live well at this level in mid-cost-of-living cities or abroad.

$5,000/month ($60,000/year)

Early retirement target: $1,500,000

This is the sweet spot for most FIRE planners. It allows a comfortable lifestyle with room for travel, hobbies, dining out, and a reasonable housing budget. Families with kids in lower-cost areas can make this work.

$8,000/month ($96,000/year)

Early retirement target: $2,400,000

This is Fat FIRE territory. You're living a lifestyle that most Americans would consider upper-middle-class — nice housing, regular vacations, no real need to budget day-to-day. It takes longer to reach but offers more cushion.

What Changes the Number

The 25x rule is a starting point. Several factors can shift your actual target up or down.

Healthcare costs

If you're retiring before 65 (when Medicare kicks in), budget $300-600/month for individual ACA marketplace coverage or $800-1,500/month for a family. This is often the biggest expense people underestimate. Include it in your monthly spending before applying 25x.

Housing

If you own your home outright by retirement, your monthly expenses drop significantly. A paid-off house can reduce your annual spending by $15,000-30,000 — which means your target drops by $375,000-750,000. This is the single biggest lever in the equation.

Location

Geographic arbitrage is real. The same lifestyle that costs $6,000/month in San Francisco costs $3,000/month in Raleigh and $1,500/month in Chiang Mai. Your spending location after retiring can dramatically change your number.

Additional income sources

Social Security, a pension, rental income, or even part-time work reduces how much your portfolio needs to cover. If you expect $1,500/month from Social Security starting at 62, that's $18,000/year you don't need your investments to produce — reducing your target by $450,000.

Your withdrawal rate preference

The 4% rule is well-tested for 30-year retirements. For 50+ year retirements, many early retirees prefer 3.5% (multiply by ~29 instead of 25). The extra margin costs 1-3 years of additional saving but provides significantly more protection against market downturns in early retirement.

Why Most People Overestimate What They Need

New FIRE planners almost always overestimate their number. Three reasons:

They use gross income, not expenses. You don't need to replace your salary. You need to replace your spending. Taxes, 401(k) contributions, commuting costs, and work-related expenses disappear when you quit. Most people spend 50-70% of their gross income.

They forget expenses that go away. Daycare ends. Student loans get paid off. The second car isn't needed. Retirement spending is often 20-30% less than peak working-year spending.

They ignore flexibility. A 40-year-old early retiree isn't locked in. If the market crashes, you can freelance for a year, cut travel spending, or downsize. This flexibility means a 4% withdrawal rate is actually quite conservative for someone with options.

How to Find Your Actual Number

Step 1: Track your spending for 2-3 months. Use your bank and credit card statements — don't guess. Most people are surprised by where their money actually goes.

Step 2: Adjust for retirement. Remove work-related costs (commuting, work clothes, lunches). Add health insurance if you'll lose employer coverage. Add any new expenses (more travel, hobbies).

Step 3: Multiply by 25 (or 29 for extra safety). This is your target — your Quit Number.

Step 4: Calculate your Quit Number to see your current score and projected quit date. It takes 60 seconds and gives you three numbers: what you need (Quit Number), how far along you are (Quit Score), and when you'll get there (Quit Date).

Getting There Faster

There are only two levers: earn more or spend less. Spending less is doubly powerful because it both increases your savings and decreases your target number. Cutting $500/month from spending means you save an extra $6,000/year AND reduce your target by $150,000.

The savings rate is the single most important variable. At a 50% savings rate, you can retire in roughly 17 years regardless of income level. At 60%, it's about 12 years. At 70%, about 8 years.

You don't need a six-figure salary. You need a gap between earning and spending that lets compound growth work in your favor over time.

Your Next Step

Calculate your Quit Number right now. It takes 60 seconds. You'll see exactly how much you need, how close you are, and when you can quit. The number might surprise you — it's usually more reachable than you think.