When Can I Retire?

Two questions behind one number

"When can I retire?" really combines two questions: how much money do I need, and how long will it take me to save it? The first sets a target — the pot of savings large enough to fund your lifestyle. The second is a growth calculation that turns your current savings, yearly contributions, and expected return into a number of years.

A common rule of thumb sets the target at 25 times your expected annual spending in retirement, which pairs with a roughly 4% yearly withdrawal rate. If you plan to spend 24,000 a year, a target near 600,000 is a reasonable starting point.

How the savings grow each year

Each year, your existing pot earns a return, then you add your yearly contribution. In formula terms: new balance = old balance × (1 + return) + yearly contribution. Repeat that step year after year until the balance reaches your target. The number of repetitions is the number of years until retirement.

Compounding is what makes early saving so powerful: returns are earned not just on your contributions but on all the returns from previous years. That is why the same yearly contribution shortens the wait far more when you start younger.

A worked example

Suppose you are 40, have 100,000 saved, add 12,000 each year, and expect a 5% annual return. After year one you have 100,000 × 1.05 + 12,000 = 117,000. After year two, 117,000 × 1.05 + 12,000 = 134,850. Repeating this, the balance passes a 600,000 target after about 22 years, putting retirement at roughly age 62.

Small changes move the date a lot. Raising the yearly contribution to 18,000 reaches the same target years sooner, while a lower assumed return or a bigger target pushes it later. Because none of the inputs is guaranteed, treat the result as a planning guide and revisit it as your income and markets change.

Frequently asked questions

How much do I need to retire?

A common starting point is 25 times your expected yearly spending, matching a 4% annual withdrawal rate. Adjust upward for a long retirement, healthcare costs, or a wish to leave an inheritance.

What return should I assume?

Many planners use a conservative real return of 3% to 5% a year for a diversified portfolio after inflation. A lower assumption is safer: it pushes the date out rather than leaving you short.

Does this replace the state pension age?

No. This estimates when your own savings could support you. The state pension age is a separate legal threshold set by your country, and public benefits may start earlier or later than your savings target is reached.

How does saving more change the date?

Raising your yearly contribution brings the target closer, often by several years. Because compounding builds on a larger balance, extra savings in the early years shorten the wait the most.