Most pre-retirees underestimate the nest egg they actually need. The rule-of-thumb “80% of pre-retirement income” is a shortcut that papers over the real question: what do you actually spend each month, and does the math work?
The 4% rule — coming out of the Trinity study and decades of subsequent retirement research — is a useful first approximation. Multiply your annual expenses by 25 and you get a rough nest-egg target that has historically survived a 30-year retirement across most market scenarios. It is a starting point, not a final answer. A real plan models tax drag, Social Security, IRMAA brackets, RMDs, and sequence-of-returns risk in detail.
For households with $500K+ of investable assets, the difference between “rule of thumb” and a coordinated plan can be $1–$3M in lifetime portfolio value. The arithmetic below is step one.
Add up your monthly numbers.