1. What is the Rule of 25?

The Rule of 25 is a simple retirement planning guideline that helps estimate the total amount needed for retirement. It suggests that you should save 25 times your annual expenses to maintain your lifestyle during retirement.

2. How Does the Calculator Work?

The calculator uses the Rule of 25 formula:

Where:

• \( \text{Annual Expenses} \) — Your estimated yearly living expenses in retirement
• \( 25 \) — The multiplier based on the 4% safe withdrawal rate

Explanation: This rule is based on the assumption that you can safely withdraw 4% of your retirement savings each year without running out of money over a 30-year retirement period.

3. Importance of Retirement Planning

Details: Proper retirement planning ensures financial security and maintains your desired lifestyle during retirement years. The Rule of 25 provides a straightforward benchmark for retirement savings goals.

4. Using the Calculator

Tips: Enter your estimated annual retirement expenses in dollars. The calculator will multiply this amount by 25 to determine your target retirement savings amount.

5. Frequently Asked Questions (FAQ)

Q1: Is the Rule of 25 accurate for everyone?
A: While it's a useful guideline, individual circumstances may vary based on investment returns, inflation, life expectancy, and other factors.

Q2: Should I include all expenses in my calculation?
A: Yes, include all anticipated expenses including housing, food, healthcare, transportation, and discretionary spending.

Q3: Does this rule account for inflation?
A: The 4% withdrawal rate (which underpins the Rule of 25) historically accounted for inflation adjustments over a 30-year retirement.

Q4: What if I expect to retire for more than 30 years?
A: You may want to use a more conservative withdrawal rate (3-3.5%) and multiply your expenses by 28-33 instead of 25.

Q5: Should I include Social Security or pension income?
A: Subtract any guaranteed income from your annual expenses before applying the Rule of 25 calculation.