How much do you need to retire?

The usual answer to this question is 25 times what you spend in a year, which is the same thing as withdrawing 4% of your balance annually. It is a real finding, not a made-up number. What gets lost is what kind of finding it is.

It came from running retirements against actual market history, one starting each January, and asking which starting balance lasted through the worst of them. Counted that way, the worst 30-year stretch to retire into began in 1966, and it needed about 25 times spending. That is where the rule comes from.

Let a retirement start in any month and the hardest start is a different one: September 1929, the peak before the crash, needed about 30 times. 25 times still covered all but 17 of the 1,470 months a 30-year retirement could have started in, all of them around 1929 or between 1965 and 1968.

The middle of that same history is a very different number. Most runs needed closer to 13 or 14 times spending, because most retirements are not the worst one. Neither figure is the right answer on its own, which is why this page shows the whole spread and puts the assumptions behind it face-up.

The spread comes from replaying real market history rather than assuming one average return: 1,000 runs of US stock returns since 1871, after inflation, spent down year by year. The runs disagree with each other, and when money is coming out every year the order the good and bad years arrive in matters as much as the average.