Retirement Planning
How Much Do I Need to Retire? The 25x Rule vs. Monte Carlo
The 25x rule says: multiply annual spending by 25. That's your "number." Spend €40k/year → need €1M. Simple. But it hides three risks that change the answer by 20–30%.
What the 25x Rule Misses
| Assumption | Reality |
|---|---|
| Fixed 4% withdrawal forever | Sequence of returns risk crushes early retirees |
| No taxes | Tax drag = 0.5–1.5%/yr depending on account type |
| No fees | 0.5% advisory + 0.2% fund fees = 25% less ending wealth |
Monte Carlo Doesn't Predict — It Stress-Tests
Run 1,000 simulations with your actual inputs:
- Starting balance
- Annual contributions
- Expected return (use 6–7% for global stocks, not 10%)
- Volatility (15–18% for equities)
- Retirement age & spending
Output: Not a number. A probability. "87% chance of lasting 30 years."
When to Use Which
| Situation | Tool |
|---|---|
| Quick sanity check | 25x rule |
| Within 10 years of retirement | Monte Carlo |
| Early retirement (FIRE) | Monte Carlo + tax optimization |
| Variable spending | Monte Carlo with flexible withdrawals |
The Number You Actually Need
Most people need 28–33x annual spending, not 25x, when you account for:
- Tax drag (0.5–1%)
- Fees (0.3–0.7%)
- Sequence risk buffer (5–10%)
- Healthcare inflation (2× general CPI)
Try it yourself
Run your own Monte Carlo simulation
Our Retirement Planner runs 200 simulations in-browser. Free tier shows deterministic + median path. Premium unlocks 10th/90th percentiles and success probability.
Open Retirement Planner