From the moment you receive your first paycheck as a young adult entering the workforce, you should be thinking about retirement. No, not in a cynical “take this job and shove it” kind of way, but instead in the sense that it’s never too early to start saving. This inevitably leads to the most common retirement-related question: How much money do I need to retire?

To estimate this figure, financial experts often recommend the so-called “4% rule.” This guideline states that you should expect to withdraw 4% of your total investments in the first year of retirement. In each subsequent year, you will withdraw 4% plus a bit more to account for inflation.

To use a round number, let’s say your retirement portfolio totals $1 million. The 4% rule indicates you can withdraw $40,000 in the first year. If the cost of living between your first and second year of retirement increases by 3%, you should expect to withdraw $40,000 + 3% the following year, or $41,200. And so on.

This guideline was first introduced in 1994, and due to its continued reliability, it is still used today. However, numerous variables should also be taken into account (no pun intended) when calculating your actual retirement estimate.

Retirement Age

If you plan to retire at age 65, you’ll have access to Medicare (beginning at 65), social security (beginning at 62), and retirement accounts like a 401(k) or roth IRA (both of which begin at age 59.5), which can help with your medical bills and overall spending. If you’re eyeing an early retirement, you’ll have to compensate for this compensation in the meantime.

Life Expectancy

The 4% rule is meant to plan for 30 years of retirement. However, you might be fortunate enough to live longer than that, and subsequently, you’ll need more money. (And keep in mind that healthcare costs will likely increase as you age.) Alternately, your personal health situation or retirement age may dictate that you won’t need 30 years of spending money—after all, the average global life expectancy still hovers around 73 years, or 77 years in the U.S.

Post-Retirement Plans

If you expect to live modestly in your golden years, the 4% rule should have you covered. But if you have loftier retirement goals—perhaps you want to travel most of the year, start a business, or buy an additional home—4% might not be enough. Crunch some numbers and adjust your goal, if needed.

Portfolio Composition

The 4% rule assumes a hypothetical retirement portfolio that’s invested 50% in stocks and 50% in bonds. Not only can your personal portfolio differ from this composition, but it could change during the course of your retirement. You may want to move away from stocks and riskier investments as you near your retirement age so you have a more reliable estimate of your available assets.

While not an exact science, the 4% rule is a solid guidepost, and the variables above are just some of the other factors to consider when estimating how much you’ll need to retire.

It’s never too late to start figuring out what’s best for you. To discuss all your retirement options, contact your local Camden National Bank banking center.