Money Management

What the Simple $1000-a-Month Retirement Savings Rule Really Means Now

By  Opher Ganel

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Learn about the $1,000-a-month rule created by Certified Financial Planner Wes Moss and how it pertains to your retirement plans.

In 2018, Certified Financial Planner Wes Moss wrote this: “For every $1,000 per month you want to have at your disposal in retirement, you need to have $240,000 saved.” (Source:

He called this “The 1,000 Bucks-A-Month Rule.”

The (Overly) Simple Math Behind the “$1000/Month Rule”

The math behind the $1000-a-month rule is simple.

If you take 5% of a $240,000 retirement nest egg each year, that works out to $12,000/year, which, divided into 12 months, gives you $1000 each month.

Painless, right?

Two Problems with Moss’s “$1000/Month Rule”

Moss assumed that if you retire between the ages of 62 and 65, you could safely withdraw 5% each year and not run out of money before you die. His case was that if you keep your nest egg in ultra-safe accounts that (earn close to nothing but) have close to zero risk of losing principal, a 5% withdrawal would be sustainable for 20 years.

One of my favorite Albert Einstein quotes says, “Every problem should be simplified as far as possible, but no further!

Moss’s 1,000 Bucks-A-Month Rule does well in the first part – simplifying, but fails miserably in the second part – it does indeed simplify too far.

This over-simplification leads to two problems.

First, 20 years is not enough if you’re planning to retire in your early- to mid-60s.

According to the Social Security Administration’s Actuarial Life Table of 2017, the life expectancy of an American male was 20 years at age 62 and 18 years at age 65, while for an American female, those numbers were 23 and 20, respectively (all numbers rounded to the nearest whole year).

The way life expectancy is defined means that half of American men who reach age 62 and half of American women who reach age 65 would live longer than 20 years.

How would you like to take a 50% chance of running out of money when you’re too old to do anything about it?

Didn’t think so.

Neither would I.

The second problem is that inflation will eat away at the value of your planned $1000.

If you’re 30 years old now, assuming the long-term average inflation rate of 3%/year, you’ll need $2575 when you’re 62 to buy what you can buy for $1000 today.

Further, even if you plan for the expected value of $1000 when you’re 62, by the time you’re 82, 20 years later, you’d need $1806 to buy what you could buy with $1000 at age 62. You’d need a whopping $4650 at age 82 to buy what $1000 would buy you at age 30.

Scary, right?

And that’s without crazy inflation like the US had in the 1970s, when it averaged 7.1%/year over the decade and was higher than 10% in 1974 and in 1979. It averaged over 13% in the UK that decade, as you can see in the video below.

What the $1000-a-Month Savings Rule Really Means Now

If you’ve been reading about saving for retirement for a while, I’m sure you’ve heard of the famous “4% rule,” based on retirement savings research from the 1990s.

That rule stated that a balanced portfolio of stocks and bonds would last through a 30-year-long retirement if you’d only draw 4% of its value in your first year of retirement and then adjust that dollar amount by the rate of inflation each year. If we assume you want $1000 each month, or $12,000 a year, this would require $300,000.

So, the new $1000-a-month rule means you need $300,000 invested for each $1000/month you want to have in retirement?

Well… not so fast.

The 4% rule was based on historical returns from the 1920s to the 1990s. Currently, market returns are projected to be more muted in the coming decades. This means that a 3.5% first-year draw would be safer, and a 3% draw safer yet.

Recent research drew a more nuanced picture, where people whose retirement expenses are almost all non-discretionary (think mortgage, property taxes, utilities, food, etc.), and especially if they retired early and/or had no defined benefits (think pensions and fixed annuities) could only safely draw 2%.

On the other hand, those whose expenses in retirement were mostly discretionary (think gifts, travel, clothing, etc.), who retired later, and who had lots of defined-benefit income could draw as much as 7% of their portfolio.

Given all these nuances, there is no simple $1000-a-month rule that applies equally to everyone.

So, given that, here’s a table that lets you pick your own version of this rule of thumb.

Assumed First-Year Draw as Fraction of Nest Egg$1000 in Retirement Requires this Size Nest Egg

How to Use the Table

Consider which and how many of the following factors is true for you. The more of these, the higher in the table you can safely go.

  • You plan to retire when you’re at least in your 60s
  • You plan to move to a lower-cost-of-living country when you retire
  • Fixed income (Social Security benefits, pensions, fixed annuities) will cover most of your retirement budget
  • Most of your retirement budget is discretionary, so you can reduce your spending sharply when the market tanks
  • Your family typically has a lower-than-average life expectancy
  • You suffer from conditions that make a long life unlikely
  • You don’t care too much about leaving a bequest

The more of this next set of factors holds true for you, the lower in the table you should go.

  • You plan to retire early (think 50s, 40s, and especially if 30s)
  • You plan to retire in a higher-cost-of-living country (think the US, UK, most of EU, Japan, etc.)
  • Fixed income (Social Security benefits, pensions, fixed annuities) will cover only a small part (or none) of your retirement budget
  • Most of your retirement budget is non-discretionary, so you can’t reduce your spending much even when the market tanks
  • Your family typically has a higher-than-average life expectancy
  • You’re in excellent health
  • Leaving a bequest is important to you

If you’re sort of in the middle about all these, or don’t have a good idea of where you fall, you could do worse than assuming 3.5% as your starting point, and reevaluating when you’re closer to retiring.

In this scenario, your personal $1000-a-month rule does become simple again, if not as easy to achieve: “For every $1,000 per month you want to have at your disposal in retirement, you need to have $343,000 saved.

💡 The $1,000 a Month Rule: 9 Steps to Know How Much You Need to Retire

And how to get there without letting despair overwhelm you.

I love simplicity.

But, sometimes, even if you avoid the trap of over-simplifying things, the simple answer is far from easy.

Case in point – the $1,000-a-month savings retirement rule.

If you’re not sure what that is, here’s a quick explanation of the $1,000 a month rule, including how to tailor it to your personal situation.


Great, let’s start figuring out how to use the rule without getting overwhelmed by how much you think you’ll need to save for retirement.

Man and woman couple looking at laptop together smiling as they receive online education
Image Credit: Depositphotos.

Step 1: Going from Annual Salary to Estimated Amount Needed in Retirement

Let’s use a hypothetical guy, John, age 40, who makes $80,000 a year, putting him above 56% of Americans. To figure out how much income John needs to replace in retirement, we’ll use T. Rowe Price’s guideline of 75%.

As they explain, “Why 75%? Generally, living expenses do go down in retirement. Taxes will likely be reduced as well, especially payroll taxes when you stop working. And you won’t be saving for retirement any longer.

A bit of simple math – 75% of $80,000 is $60,000, so John expects to need $5,000/month in retirement.

Step 2: Using the $1,000-a-Month Rule to Get a Rough Estimate of Nest Egg Needed

Next, we can determine how much John needs to save to generate $5,000 in monthly income.

John chooses to draw 3.5% of his nest egg in year 1 of his retirement, and update that dollar amount each year thereafter to account for inflation. Using the table in the above-mentioned article, John calculates he needs a nest egg of $1,715,000 ($343,000 for each $1,000/month).

Simple, but over $1.7 million?! Yikes!

P. Timothy Uihlein, CFP®, MBA, Partner, Managing Director, and Senior Wealth Manager at Vincere Wealth Management says, “With inflation and market uncertainty, I prefer a 3.75%-4% maximum distribution rate for my clients in retirement. That works out to $750-$800 per month on a $240,000 nest egg. Conversely, to get $1,000 monthly, the math says the portfolio needs to be $300,000-$320,000. The risk of taking 5% out is that the portfolio will not be able to sustain itself between distributions and growth.”

Step 3: Breathe

John starts hyperventilating.

Wouldn’t you, in his situation? Saving over $1.7 million on an $80,000 salary before turning 150?

After a bit, he calms himself down and starts figuring out his options.

Step 4: Growth to Existing Investments

John started saving for retirement but has a below-average (for his age) balance of $10,000.

Assuming the market returns its historic average of 10%/year from now until John wants to be able to retire at age 65, that $10,000 will grow to about $108,000.

Not bad, but far short of $1.7 million, and that doesn’t even account for the effects of inflation. Assuming the historic average inflation of 3%/year, that $108,000 in 30 years will be worth only about $52,000 in today’s dollars.

It’s a start, but nowhere near enough.

He needs to think some more.

Step 5: Social Security

Based on the Social Security Administration’s benefits estimator, John expects $2,200 in monthly retirement benefits at age 65. However, considering the expected shortfall in Social Security’s ability to pay full benefits, John uses 79% of that, based on a article, or $1750/month.

According to the $1,000-a-month rule, this reduces the nest egg John needs by a hefty $600,000!

Instead of $1,715,000, he’ll only need $1,115,000. Considering the $52,000 he expects his existing investments to reach by then, he needs to add $1,063,000.

That’s still a lot. Can he get there?

Step 6: Regular Investing Helps

John has some time on his side.

For every dollar he invests annually, assuming the same historic average of 10%/year returns, he expects to end up with $98 in 25 years. After accounting for 3% annual inflation, that’s $61 in today’s dollars.

John does the math…

To add $1,063,000, he’d need to save $17,500 each year (updating that each year by inflation).

Can he do that? That’s a lot of money for someone earning $80,000. John considers his annual budget…

  • Taxes (federal, state, and local) $23,000 (assuming no retirement savings tax deduction)
  • Rent and utilities $19,000
  • Health insurance $6,000
  • Car ownership (loan payments, insurance, gas, maintenance, etc.) $5,000
  • Food and groceries $6,000
  • Miscellaneous (clothes, recreation, etc.) $6,000

That’s $65,000, leaving him with $15,000 a year, which is less than the $17,500.

However, investing the $17,500 in a 401(k) reduces his taxes by $5,000, so he only needs $12,500 which would leave him with a $2,500 annual margin.

Doable, but it makes other goals like saving to buy a house very hard. What else can he do?

Step 7: Work an Extra Couple of Years Before Retiring

This has multiple advantages.

First, retiring at age 67 means he’d be at the Social Security full retirement age, so his monthly benefits would increase to about $2560, or just over $2,000 at the 79% level he’s more comfortable with.

This reduces his nest egg needs by another $86,000, to $977,000.

Second, his existing $10,000, adjusting for inflation, should grow to about $59,000, reducing his nest egg needs by another $7,000, to $970,000.

Finally, with 27 years to contribute to his 401(k) and let the investments grow, the factor of 61 grows to 72, so the amount he needs to invest each year is just under $13,500. This reduces the tax benefit to $4,000, but it still helps reduce the extra strain on his budget from $12,500 down to $9,500.

With this, he’d have a somewhat more comfortable $5,500 left after taking care of his budget and his retirement investments. However, it’s still hard to save tens of thousands of dollars for a down payment on a home with only $5,500 left over each year.

Is there anything more he can do?

Step 8: Work Part-Time for Another 3 Years

If John continues working part-time for another 3 years after he turns 67, just enough to earn $2,500 a month, he can make his life easier now.

If John delays claiming benefits until he turns 70, his monthly Social Security retirement benefit would increase to $3,200, or just over $2,500 a month based on the 79% assumption.

The $1,000-a-month rule says this reduces his nest egg needs by another $171,500, to $798,500.

Dividing by the same factor of 72, the annual investment he needs drops to just over $11,000. With a $3,000 tax benefit, he’d need $8,000 out of the $15,000 his budget leaves over, leaving him $7,000 a year instead of $5,500.

According to a recent article by the Bryn Mawr Trust, the median home price in the US is about $300,000 (with state-specific prices ranging from a low of $107,000 in West Virginia to a high of $647,000 in Hawaii). Saving up for a 20% down payment requires about $60,000 for the US median-price home. If John saves $7,000 each year for this, he can pull it off in about eight and a half years.

Not ideal, but not terrible either. Plus, if he manages to score raises faster than inflation eats away at the purchasing power of his salary, and if he avoids lifestyle inflation, he can accomplish it faster.

Step 9: Spending in Retirement Gradually Decreases

According to, research shows retirees don’t continue spending at the same level (adjusted for inflation) throughout retirement. Rather, they seem to reduce their spending by about 1% a year.

The simplest way to see the potential impact of this is to increase the assumed draw in the first year of retirement by 1% since that could reduce the nest egg by 1% each year, which would then reduce the amount available to draw the following year by 1%.

John realizes this means he could go back to the $1,000-a-month rule table and use the line for a 4.5% draw instead of 3.5%, reducing the nest egg size needed from $343,000 per $1,000 monthly to $267,000.

With this final step, the nest egg he needs to add drops to just over $621,000, which reduces how much he needs to invest each month to just over $700. Accounting for a $2,000 tax deduction, the annual impact on his budget is only $6,000, leaving him $9,000 a year toward a down payment on a house. He can save $60,000 for that in under 7 years.

The Bottom Line

While many people will hire a financial advisor to develop a personalized plan to achieve their retirement goals, John’s example gives you a step-by-step method to figure out how to use the corrected $1,000-a-month retirement savings rule to figure out how much you should invest each year for retirement.

It also helps you figure out how to make it work if your income and spending don’t quite allow you to reach the level of retirement investing you might first think you’d need.

Here’s what Cecil Staton, CFP® CSLP®, President & Wealth Advisor at Arch Financial Planning, LLC, says of his process when helping clients plan, “As a financial planner, I often assist clients to understand retirement expenses. The process begins by reviewing their tax return, as this provides all sources of income and taxes paid. Then we monitor the clients’ savings to determine how much income is available for expenses. What’s left after taxes and isn’t saved is tracked back to identify what expenses are needed in retirement. After these steps, I can provide an accurate solution for retirement spending that allows my clients to make the most efficient use of their money and maximize their quality of life during retirement.”

Michael R. Acosta, CFP®, ChFC®, CSLP®, Financial Planner at Genesis Wealth Planning, LLC sees some benefit in ‘rules’ like the $1,000/month one, but thinks their usefulness is limited. He says, “The ‘4% Rule’ or the ‘$1,000/month Rule’ are great generalized benchmarks or reference points for clients. In my opinion, though, they are flawed in various ways. For these ‘rules’ to be successful the assumptions used around variables like expected return on investment, longevity, annual savings rate, inflation rate, and the investor’s health can’t deviate too far.

“Our approach is driven by planning based on facts and variables we know today. Instead of trying to guess the future and mathematically working backward, we focus on today’s savings rate and strive to save 15% to 20% of the client’s gross income. We also exclude any employer match from that annual savings rate treating it as the “cherry on top.” This holds the clients accountable, teaching them to live off 80%-85% of their gross income from now until retirement. We prefer this method because we can’t control how the stock market, bond market, or crypto market will behave in any given year. The only thing we can control is how much we save each year.”

The following table recaps the gist of the steps, in case you prefer to see all the numbers in one place.

As you can see, using the above 9 steps, John reduces the amount he needs to invest for retirement each month by almost 70%!

I’m fond of saying, personal finance is… personal.

What’s right for me could be totally wrong for you, or mostly wrong, or somewhat right, or even totally right. It depends on too many factors to be able to rely on rules of thumb and follow them blindly, not knowing whether they apply to your personal situation or not.

Perhaps the only personal finance rule of thumb I’d sign off on for (almost) everyone is this: “If it fits in a tweet or on a bumper sticker, don’t count on it being accurate for you.

However, that doesn’t mean you can’t or shouldn’t personalize a rule of thumb to your personal situation, as long as you periodically reevaluate if it still seems to fit.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

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About the Author

Opher Ganel

My career has had many unpredictable twists and turns. A MSc in theoretical physics, PhD in experimental high-energy physics, postdoc in particle detector R&D, research position in experimental cosmic-ray physics (including a couple of visits to Antarctica), a brief stint at a small engineering services company supporting NASA, followed by starting my own small consulting practice supporting NASA projects and programs. Along the way, I started other micro businesses and helped my wife start and grow her own Marriage and Family Therapy practice. Now, I use all these experiences to also offer financial strategy services to help independent professionals achieve their personal and business finance goals.

Connect with me on my own site: and/or follow my Medium publication:

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