How much do you need to retire in California?

Start with spending, not a magic number

Most retirement headlines lead with a single figure — $1 million, $1.5 million, whatever survey ran that week. Those numbers are averages of other people's lives. Your number depends on one thing those surveys can't see: what your retirement actually costs per month, minus what arrives automatically each month without touching savings.

So the framework runs in three steps, and every step is arithmetic you can check:

1. Estimate your monthly retirement spending. Start from what you spend today, then adjust: the mortgage may be gone, commuting shrinks, healthcare usually grows. A common starting assumption is 70–85% of pre-retirement spending, but retirees who travel early on often spend more in the first years, not less.
2. Subtract guaranteed monthly income. Social Security, a CalPERS or CalSTRS pension, an annuity you already own, rental income you consider reliable. What's left is the gap your savings must fill.
3. Size the savings against the gap. This is where the withdrawal-rate research comes in — carefully, and with its limits stated out loud.

The expense-based math, worked once

Suppose your household expects to spend $6,500 a month in retirement, and Social Security plus a small pension will deliver $4,000. The gap is $2,500 a month, or $30,000 a year. If you plan around an initial withdrawal rate of 4% — more on that figure in a moment — the savings needed to fill that gap is $30,000 ÷ 0.04 = $750,000, often shorthanded as "25 times the annual gap."

Notice what changed the answer: it wasn't income, age or net worth. It was the gap. A teacher with a $4,800 CalSTRS pension and modest spending may need far less saved than a higher earner with no pension. That's why "how much do I need?" has no universal answer — and why any article that gives you one without asking about your spending is guessing.

What the 4% research actually says — and doesn't

The 4% figure comes from real research, and it's worth knowing exactly what it found. In 1994, financial planner William Bengen tested historical US market data and found that a retiree withdrawing 4% of the starting portfolio in year one, then adjusting that dollar amount for inflation each year, would not have run out of money over any historical 30-year period he examined. The 1998 Trinity study (Cooley, Hubbard and Walz) reached broadly similar conclusions using historical success rates across stock/bond mixes.

Three honest caveats before you build a life around it:

• It's history, not physics. Both studies describe what US markets did in the past. Nothing obliges future markets to repeat it, and past performance is not indicative of future results.
• It assumed a 30-year retirement. Retire at 55 and you may need the money to last 40 years, which argues for a lower starting rate. Retire at 70 with a pension and it may be conservative.
• The order of returns matters as much as the average. Two retirees can earn the same average return and end in completely different places depending on whether the bad years come first. This is sequence-of-returns risk, and it's the single most under-discussed threat to a new retiree's plan.

Used properly, 4% is a screening tool: it tells you whether you're roughly in range, and it converts a savings balance into an intuition about monthly income. It is not a set-and-forget withdrawal instruction.

The California adjustments

Retiring here changes the inputs, in both directions.

• Housing dominates. If you own your home with a low property-tax base under Proposition 13, your housing cost in retirement may be lower than a renter's in a cheaper state. If you rent, California rent inflation belongs in your spending estimate explicitly. Proposition 19 also lets homeowners 55+ transfer a low tax base to a replacement home, which matters if downsizing is part of the plan.
• California taxes retirement income. Unlike several states, California taxes 401(k), IRA and pension withdrawals as ordinary income. It does not tax Social Security benefits. That mix affects how large a pre-tax balance really is once it becomes spending money.
• Healthcare before 65. Retiring before Medicare eligibility means buying coverage, often through Covered California — a real line item that surprises early retirees.
• Family support flows both ways. In the communities we serve, many retirees help parents or adult children. If that's you, it belongs in the spending estimate, not in the margin of error.

If you have a CalPERS or CalSTRS pension

A public pension changes the arithmetic more than almost anything else, because it shrinks the gap your savings must cover. A few things pension households get wrong in this calculation:

• Use the benefit for the option you'll actually elect. The single-life allowance is the biggest number, but if you elect a survivor option to protect a spouse, the monthly benefit is lower — plan on the lower number.
• Check the COLA. CalPERS and CalSTRS cost-of-living adjustments are limited and can lag real inflation over a long retirement, so a pension's purchasing power erodes; your savings pick up that slack.
• Social Security may be smaller — but no longer artificially reduced. Many CalSTRS members don't pay Social Security tax on their teaching income, so their benefit from other covered work is naturally modest. Importantly, the Windfall Elimination Provision and Government Pension Offset, which used to cut those benefits further, were repealed by the Social Security Fairness Act, signed in January 2025 — public-sector retirees now receive their full earned benefit. Our guide on when to claim Social Security covers this in detail.

Putting it together

A workable process, in an afternoon:

1. Write down realistic monthly retirement spending, in today's dollars.
2. Get your Social Security estimate from your statement at ssa.gov/myaccount and your pension estimate from CalPERS/CalSTRS, using the survivor option you'd actually choose.
3. Compute the monthly gap, multiply by 12, then by 25 for a first-pass savings target — and by 30 if you plan a long or early retirement and want a more conservative screen.
4. Compare against what your current savings could plausibly grow to. Our retirement savings calculator does that arithmetic with the assumptions shown on screen.

If the numbers are close, the details — tax location, withdrawal order, sequence risk in the first five years — start to matter a great deal, and that's the point where a plan beats a rule of thumb. Our retirement planning service exists for exactly that conversation.

Common questions