Planning for retirement can feel overwhelming. It’s tricky to estimate how much you’ll spend and how much income you’ll need to cover those expenses.
There are always curveballs in life, but some simple frameworks can help you set helpful savings targets.
One of those is the $1,000 per month rule, a quick way to estimate how much to save based on your expected monthly income needs in retirement.
The idea is that for every $1,000 you want to withdraw each month, you’ll need about $240,000 saved. That figure assumes a 5% annual withdrawal rate.
While it’s not a substitute for a comprehensive financial plan, this rule, which is more of a guideline, offers a fairly straightforward way to set incremental savings goals.
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Watch Your Withdrawal Rate
To set the stage for implementing this rule, it’s important to understand your overall portfolio withdrawal rate.
Russ Thornton, owner of Wealthcare for Women in Atlanta, said that withdrawing $1,000 per month in income from $240,000 of portfolio assets is reasonable.
He noted that the traditional 4% withdrawal rule has long served as a retirement planning benchmark, but its creator, financial advisor and author William Bengen, now believes that rate may be too conservative. Thornton pointed out that Bengen recently revised his guidance upward to 4.7%, reflecting more recent research and market conditions.
“It’s not a leap from 4.7% to 5%,” Thornton said in an email. “I have some clients who have a higher percentage retirement income number based on their specific circumstances.”
“Assuming the $240,000 is diversified and invested prudently, it should address inflation over time with a growing portfolio value,” he added.
A Solid Starting Point With Caveats
While some advisors view the $1,000 per month rule as a helpful guide, others argue that it may not be sufficient on its own.
“Setting aside $240,000 for every $1,000 you wish to spend in retirement gets you close,” said Nathan Mueller, financial planner at Blackbird Finance in Colorado Springs, Colorado, in an email.
“But I wouldn’t feel comfortable recommending that to clients because it wouldn’t be enough for many folks’ lifestyles,” he added.
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Include Other Income Sources
Thornton noted that the $1,000 per month rule of thumb doesn’t account for Social Security. “These should absolutely be considered in planning for retirement income,” he said.
Mueller emphasized that for the rule to be effective, retirees would not only need to include these additional income sources but also have no liabilities.
“You would want your home paid and all your debts paid off,” he said.
Factor in Health Care Expenses
Health care expenses are another concern.
“A retiree or soon-to-be retiree needs to understand that if you retired in 2025 and are in average health, it is expected, even with Medicare, that you will incur $6,400 on average in health care expenses,” Mueller said.
For that reason alone, he added, the math suggests that withdrawing $1,000 a month for every $240,000 invested would be possible, but it would be tight on the wallet.
Think Beyond Drawdowns
As with any withdrawal guideline, investors should consider the $1,000 rule in the context of their income needs over the course of a retirement that can last 30 years or even more.
Jason Gilbert, founder and managing partner of RGA Investment Advisors in Great Neck, New York, said in an email that he prefers to reframe retirement planning not in terms of how much a person can safely withdraw, but rather how to replace income while preserving and compounding principal.
“The $1,000 per month rule and even the popular 4% rule assume principal depletion, which can leave retirees more vulnerable to market cycles, longevity risk and inflation,” he said.
“My approach with clients is to focus on building durable income streams: dividends, interest, real estate income and, selectively, private investments, while maintaining and even growing the principal base over time,” Gilbert said.
“Retirement shouldn’t feel like watching a sand timer slowly empty,” he said. “It should feel like your capital is still working for you, producing income while protecting future purchasing power.”
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How to Implement the $1K Per Month Rule
The $1,000 per month rule can provide an easy-to-understand approach to setting savings and withdrawal targets, but it doesn’t replace a comprehensive financial plan.
As financial advisors point out, there are nuances to people’s retirement plans, and any single rule of thumb won’t address wild cards like longevity, market volatility, inflation or whether a retiree wants to preserve their principal to leave a legacy.
It also doesn’t account for various income sources, spending needs and health care costs that will vary from person to person.
Retirement investors who want to use the $1,000 per month rule as a guidepost should speak with a financial advisor to be sure it fits with their income needs.
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What Is the $1K Per Month Rule in Retirement? originally appeared on usnews.com
Update 07/08/25: This story was published at an earlier date and has been updated with new information.
