The 25x rule is the simplest way to calculate your retirement number: multiply your annual expenses by 25. If you spend $40,000 per year, you need $1,000,000. If you spend $100,000, you need $2,500,000. It's elegant, memorable, and backed by decades of financial research. But where does the "25" come from — and is it still valid in 2026?

Where 25 Comes From

The 25x rule is the inverse of the 4% rule. If withdrawing 4% of your portfolio each year is safe, then your portfolio must be 1 ÷ 0.04 = 25 times your annual withdrawal. The 4% rule itself comes from the Trinity Study (1998), which analyzed historical US stock and bond returns from 1926 to 1995. The researchers — Cooley, Hubbard, and Walz — found that a portfolio of 50-75% stocks, withdrawing 4% in year one and adjusting for inflation thereafter, survived at least 30 years in 95%+ of historical scenarios.

Later research by Wade Pfau, Michael Kitces, and others refined these findings. The key updates:

  • For 30-year retirements, 4% remains a reasonable starting point with a balanced portfolio
  • For 40-50 year retirements (common in FIRE), 3.25-3.5% may be more appropriate, translating to 29-31× expenses
  • International diversification improves success rates in some scenarios, worsens them in others
  • Current high stock market valuations (high CAPE ratios) suggest lower safe withdrawal rates

The 25x Rule at Different Spending Levels

Annual Expenses 25x (4% Rule) 29x (3.5%) 33x (3%)
$25,000 $625,000 $725,000 $833,000
$40,000 $1,000,000 $1,160,000 $1,333,000
$60,000 $1,500,000 $1,740,000 $2,000,000
$80,000 $2,000,000 $2,320,000 $2,667,000
$100,000 $2,500,000 $2,900,000 $3,333,000

The jump from 25x to 33x is significant — for someone spending $60,000 per year, it's a difference of $500,000 in required savings. That's 5-10 extra working years for most people.

Use our FIRE Number Calculator to see your personalized number at any withdrawal rate. Our Safe Withdrawal Rate Calculator lets you test different rates and retirement lengths.

Critiques of the 25x Rule

1. It Assumes US Historical Returns

The 4% rule was derived from US data, which has been exceptionally good compared to most other countries. A global portfolio may require a lower withdrawal rate. If you invest internationally, consider 3-3.5%.

2. It Ignores Spending Flexibility

The 4% rule assumes rigid, inflation-adjusted withdrawals. In reality, most retirees naturally reduce spending during market downturns. If you can cut discretionary spending by 20% in bad years, higher withdrawal rates become viable. Our Withdrawal Strategy Comparator models flexible strategies like Guyton-Klinger guardrails that adapt to market conditions.

3. It Ignores Other Income

The 25x rule focuses exclusively on portfolio withdrawals. Most retirees have additional income: Social Security, pensions, rental income, or part-time work. Every dollar from these sources reduces the portfolio burden. Our FIRE Number Calculator incorporates other income into the calculation.

4. Fees Are Not Accounted For

The 4% rule assumes zero investment fees. A 1% annual fee — typical for actively managed funds — effectively reduces the safe withdrawal rate to 3%. This is why FIRE advocates overwhelmingly recommend low-cost index funds with 0.03-0.15% expense ratios. Use our Investment Fee Impact Calculator to see what fees cost over decades.

5. Sequence Risk Is Ignored

The 4% rule is a probability statement, not a guarantee. The biggest risk is a market crash in the first few years of retirement (sequence-of-returns risk). Our Sequence of Returns Risk Calculator stress-tests your portfolio against the Great Depression, 1970s stagflation, and the 2008 financial crisis.

Should You Use 25x or Something Else?

For most FIRE seekers, 25x is a reasonable target — with caveats:

  • Early retirement (40s): Consider 30-33x for safety, given the longer withdrawal period
  • Late retirement (60s): 25x is usually fine, especially with Social Security approaching
  • Lean FIRE: 25-28x works if you can cut spending during market downturns
  • Fat FIRE: 25x may be sufficient if discretionary spending is a large portion of your budget
  • International portfolio: 30-33x to account for lower historical returns outside the US

The Real Lesson of 25x

The 25x rule is a compass, not a GPS. It tells you which direction to head and roughly how far. The exact number — whether 25x, 28x, or 33x — matters less than the process: tracking your expenses, saving aggressively, investing in low-cost index funds, and periodically recalculating. New to the journey? See our guide on how to start FIRE for the first steps.

As your portfolio grows and your expenses stabilize, you'll gain clarity. Someone with $200,000 saved and a $1,000,000 target has a clear road ahead — learn exactly how to calculate your FIRE number to find your own target. Someone with $900,000 saved and a wobbly expense estimate should spend time on the expense side, not the withdrawal-rate side.

Calculate your number. Save toward it. Revisit and adjust as life changes. That's the 25x rule in practice.

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