"How much do I need to retire?" is really two questions. How much will you spend, and how much of that will your portfolio have to cover? Once you know both, the answer is one line of math. The harder part is choosing the withdrawal rate, because researchers disagree and your situation may differ from the textbook case.
The basic formula
- FIRE number = (yearly spending − other income) ÷ withdrawal rate.
- "Other income" means guaranteed sources such as Social Security or a pension.
- The withdrawal rate is the share of your portfolio you take out in the first year, then adjust for inflation.
FIRE stands for Financial Independence, Retire Early. The number is just the multiple that matches your chosen rate. A lower withdrawal rate is more cautious and needs a bigger portfolio.
| Withdrawal rate | Multiple of yearly need | Portfolio for $36,000 a year |
|---|---|---|
| 3.0% | 33.3× | $1,200,000 |
| 3.25% | 30.8× | $1,107,692 |
| 3.5% | 28.6× | $1,028,571 |
| 3.9% | 25.6× | $923,077 |
| 4.0% | 25× | $900,000 |
| 4.7% | 21.3× | $765,957 |
| 5.0% | 20× | $720,000 |
Which withdrawal rate should you use?
There is no single right answer, and recent research shows why. Here is where the main estimates come from:
| Source | Rate | What it assumes |
|---|---|---|
| Bengen (1994) and the Trinity study (1998) | 4% | 30 years, inflation-adjusted withdrawals, historical U.S. returns, about a 95% success rate |
| Morningstar (December 2025) | 3.9% | 30 years, fixed inflation-adjusted spending, forward-looking returns, a moderate mix of stocks and bonds, about a 90% chance of lasting |
| Bengen, more recent work | About 4.7% | The worst historical starting point, not a forecast |
| Morningstar, flexible strategies | Up to about 5.7% | You cut spending after poor markets and raise it after good ones |
| Early-retirement researchers | 3.25% to 3.5% | Retirements of 40 to 50 years or more |
Why the range? The original studies used past market returns for 30-year periods. Morningstar builds its number from forward-looking assumptions, which is why it is a little lower. Someone retiring at 40 needs their money to last longer than 30 years, so many researchers suggest a lower rate. And a retiree willing to adjust spending can safely start higher than one who insists on a fixed amount every year.
Living on dividends vs. withdrawing from your portfolio
These are different strategies, and the difference matters for a dividend investor.
- Dividends only. You spend what your holdings pay and never sell. This needs your portfolio's yield times its value to cover your spending. It feels steady, but it pushes you toward higher-yielding holdings, which can carry more risk and less diversification.
- Total return. You spend dividends and also sell a few shares when needed. A withdrawal rate of 4% can be supported by a portfolio that yields much less than 4%, because growth covers the rest. This is the approach most withdrawal-rate research assumes.
The yield you can realistically count on is the catch. In September 2026 the S&P 500 yielded only a little over 1%, and SCHD about 3%. To fund $36,000 a year from dividends alone, you would need about $1.2 million at a 3% yield, but about $3.6 million at 1%. Our guide to how much to invest for a monthly dividend income goal walks through the yield math, and our guide to what a good dividend yield is explains how to judge one. Dividends can also be cut, so a plan that depends on a single payout is riskier than one that can flex.
Find your own FIRE number
Enter 0 if none applies when you retire.
Many people test 3.5% and 4%.
Using a real return keeps everything in today's dollars.
Your FIRE number
$900,000
Your portfolio covers $36,000 a year, or $3,000 a month, which is 25.0 times that amount.
Progress
17%
About 15 years to go at these numbers.
This assumes the withdrawal rate stays constant, your savings are added at the end of each year, and the return is after inflation. It ignores taxes, market ups and downs, and sequence risk, so treat it as a starting point, not a plan.
For a fuller projection, use the FIRE Calculator.
What different spending levels require
Here is the portfolio needed for three yearly spending levels, first with no other income, then with about $24,000 a year from Social Security. That is close to the average retired worker's benefit of $2,071 a month, or roughly $24,900 a year, in 2026.
| Yearly spending | 4%, no other income | 3.5%, no other income | 4% with $24,000 Social Security | 3.5% with $24,000 Social Security |
|---|---|---|---|---|
| $40,000 | $1,000,000 | $1,142,857 | $400,000 | $457,143 |
| $60,000 | $1,500,000 | $1,714,286 | $900,000 | $1,028,571 |
| $100,000 | $2,500,000 | $2,857,143 | $1,900,000 | $2,171,429 |
Social Security shrinks the target dramatically, especially at lower spending levels. It also means someone retiring in their 40s or 50s needs enough saved to cover the years before benefits begin.
Social Security: what to count on
- The 2026 average. After a 2.8% cost-of-living adjustment, the Social Security Administration puts the average retired-worker benefit at $2,071 a month, and $3,208 for a couple who both receive benefits.
- Your number will differ. It depends on your earnings history and when you claim. Claiming at 62 permanently reduces your benefit, and waiting increases it. Check your own estimate in your my Social Security account.
- Plan for the gap. If you retire before benefits start, your portfolio has to cover the full spending until they do.
How much do people actually spend?
The Bureau of Labor Statistics found that households headed by someone 65 or older spent about $61,400 on average in 2024, and about $65,400 for ages 65 to 74. Those are national averages, not a target. Your own spending depends on housing, health care, and how you want to live. Health costs deserve a line of their own: the standard Medicare Part B premium is $202.90 a month in 2026, before any supplemental coverage.
Morningstar also points to research suggesting that spending tends to drift down in the later years of retirement instead of rising with inflation. That can justify a somewhat higher starting rate, but it is safer to base your plan on your real budget than on an average.
Taxes reduce what you can spend
The numbers above are before tax, and how much tax you owe depends on where the money comes from. In a taxable account, qualified dividends are taxed at 0% up to $49,450 of taxable income for single filers in 2026 and $98,900 for joint filers, and at higher rates above that, while ordinary dividends and withdrawals from traditional retirement accounts are taxed as regular income. Our guide to qualified vs. ordinary dividends explains the rates, and the Dividend Tax Calculator can estimate your own. If your spending target is after tax, build in a buffer or divide by one minus your tax rate.
What can go wrong
- Poor returns early on. A downturn in the first years of retirement hurts more than the same downturn later, because you are selling shares while prices are low.
- Inflation. A number that feels comfortable today is worth less in 25 years. The withdrawal-rate approach adjusts for it, but only if your portfolio keeps up.
- Dividend cuts. Payouts are not guaranteed, and a plan that relies on dividends alone is exposed to them.
- Living longer than planned. A longer retirement needs a lower rate or more flexibility.
- Health and long-term care costs. These can be large and are hard to predict.
Ways to reach your number sooner
- Lower your spending. Every $1,000 you cut from yearly spending lowers your target by $25,000 at a 4% rate, or about $28,600 at 3.5%. It also means less to save.
- Save more. The table below shows how much your yearly savings change the timeline.
- Stay flexible. Being willing to spend less after bad markets supports a higher starting withdrawal rate.
- Delay Social Security. A larger check lowers what your portfolio must cover.
- Consider Coast FIRE. If you already have enough invested to grow into your number by a traditional retirement age, you may only need to cover current expenses.
Here is how long it takes to reach a $900,000 target if you save different amounts each year, earning 5% a year after inflation.
| Saved each year | Starting from $0 | Starting from $150,000 |
|---|---|---|
| $15,000 | 29 years | 21 years |
| $30,000 | 19 years | 15 years |
| $45,000 | 15 years | 12 years |
Doubling the yearly savings from $15,000 to $30,000 cuts the timeline by about six years when you already have $150,000 invested. These are illustrations with a steady return, and real markets move up and down.
How to work out your own number
- Estimate your retirement spending. Start from your current budget and adjust for housing, health care, and taxes.
- Subtract guaranteed income. Use your own Social Security estimate and any pension.
- Choose two withdrawal rates. Try 3.5% and 4%, and lean lower for a long retirement.
- Calculate the portfolio. Use the formula or the estimator above.
- Work out the timeline. Test your yearly savings with the estimator, the FIRE Calculator, or the Compound Interest Calculator.
- Revisit it every year. Update your spending, balance, and assumptions as they change.
Frequently asked questions
How much do I need to retire on dividends?+
Take the yearly amount you need your portfolio to cover, which is your spending minus Social Security or pension income, and divide it by a withdrawal rate. At 4% that is 25 times the amount. For example, $36,000 a year needs about $900,000 at 4%, or about $1.03 million at 3.5%.
What is the 4% rule?+
It says you can withdraw 4% of your portfolio in the first year of retirement, then increase that dollar amount with inflation each year, and have a high chance of your money lasting 30 years. It comes from research by William Bengen in 1994 and the 1998 Trinity study, which found about a 95% success rate over 30-year periods in historical data.
Is the 4% rule still safe in 2026?+
Opinions differ. Morningstar's December 2025 research puts the safe starting rate for a new retiree at 3.9% for a fixed, inflation-adjusted 30-year plan. Bengen has said the worst historical case supports about 4.7%. Flexible spending strategies can support higher starting rates. Treat all of these as estimates, not guarantees.
Can I retire on dividends alone without selling anything?+
Yes, if your portfolio's yield times its value covers your spending. At a 3% yield that takes about 33 times your yearly spending, and at the roughly 1% yield of the S&P 500 it would take about 100 times. Most people who retire early rely on total return, meaning dividends plus selling some shares, rather than dividends alone.
What withdrawal rate should early retirees use?+
Because the 4% rule was tested on 30-year periods, researchers such as Karsten Jeske suggest 3.25% to 3.5% for retirements of 40 to 50 years or more. That means 28.6 to 30.8 times your yearly spending, before subtracting other income.
How much do I need to retire on $60,000 a year?+
With no other income, about $1.5 million at 4% or about $1.7 million at 3.5%. If Social Security covers $24,000 of that, you need your portfolio to cover $36,000, which is about $900,000 at 4% or about $1.03 million at 3.5%.
How does Social Security change my FIRE number?+
It lowers the amount your portfolio has to cover, so it lowers your target. In 2026 the average retired worker receives about $2,071 a month, or roughly $24,900 a year. If you retire before benefits start, you need enough savings to bridge the gap years.
What is Coast FIRE?+
Coast FIRE means you already have enough invested that, with no further contributions, it should grow to your full retirement number by a traditional retirement age. You then only need to earn enough to cover your current expenses, instead of saving more.
This guide is for educational purposes only. It isn't financial, investment, or tax advice, and the figures are illustrative. See our Terms of Use.