Multiply the monthly gap your savings must cover by 12, then divide by 4% and 3% to make a rough range. A $3,000 monthly gap points to about $900,000 at 4% and $1.2 million at 3%.
The quick gap table
This shortcut begins with the gap, not total spending. Monthly spending minus monthly Social Security, pension, rent, and other dependable income equals the amount savings must provide.
For each $1,000 of monthly gap, a 4% starting test points to about $300,000. A 3% test points to about $400,000. So a $2,000 gap points to $600,000–$800,000; $4,000 points to $1.2–$1.6 million; and $6,000 points to $1.8–$2.4 million.
The range is a screening tool. It assumes the same gap for a long time. Add any larger bridge before Social Security or a pension, then test taxes, inflation, bad markets, and large one-time costs.
A $3,500 monthly gap
A household spends $7,500 a month and expects $4,000 from Social Security and a pension. The gap is $3,500 a month, or $42,000 a year.
At 4%, $42,000 ÷ 0.04 is $1.05 million. At 3%, $42,000 ÷ 0.03 is $1.4 million. The household now tests both balances across the actual retirement timeline.
What the shortcut leaves out
Do not apply the percentage to total spending if dependable income covers part of it. Use only the gap that savings must fill.
A percentage cannot see your tax bill, health plan, home repair, support for family, or ability to cut spending. Add those facts before making a decision.
Three checks before using the range
- What is the monthly gap after dependable income?
- Is the gap larger in the first retirement years?
- Which large costs are missing from an average month?
Quick answers
How much money do I need for each $1,000 a month of retirement spending?
As a rough test, about $300,000 at a 4% starting rate or $400,000 at 3%. This is not a guarantee and should be tested against your real timeline.
Should I include Social Security?
Yes, but use a personal estimate and the age you plan to start. The benefit may begin years after work ends, so bridge years need separate treatment.
Checked against primary sources
This explanation was checked against the sources below. Rules and limits can change, so check the source before making a decision.
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