What $781,000 Pays Me Every Month, and the 25x Rule Behind It

My $781,000 can throw off about $2,603 a month. I know the figure because I did one piece of division, and every soldier saving for the long run should do the same division with their own balance before they touch anything else.

Most people build a nest egg without ever naming what it is for. They save a percentage, watch the balance grow, and hope the number feels big enough someday. I prefer to know the target, because a target tells me which spending cuts matter and which are noise.

The 25x rule in one line

Take your yearly spending and multiply it by 25. The result is the portfolio that has historically supported that spending for a 30-year retirement. Run it backward and it becomes the 4% rule: withdraw 4% of the portfolio in year one, then adjust for inflation each year after.

This is not my invention. Bill Bengen, a financial planner, studied rolling retirement periods back to 1926 and published the result in 1994: the worst historical starting years still survived 30 years at roughly a 4% initial withdrawal. In 1998, three Trinity University finance professors tested stock and bond mixes the same way and reached a similar conclusion. It is a historical guideline built on past markets, and the future owes nobody a repeat.

Run it on three budgets

Here is the multiplication with round numbers:

$30,000 a year of spending needs $750,000.

$40,000 a year needs $1,000,000.

$60,000 a year needs $1,500,000.

Now my own balance, run the other direction. $781,000 times 4% is $31,240 a year, which is $2,603 a month. That covers a lean budget and nothing more, and I am fine with that answer, because it tells me the pile has more work to do. I have not sold a single share and I do not plan to start. I use the division as a measuring stick and leave the withdrawals for another decade.

A spending cut works twice

This is the part that changed how I look at small recurring costs. Every dollar you remove from monthly spending does two things at once. It frees cash to invest, and it shrinks the target, because the target is 25 times your spending.

Take $500 a month. Over a year that is $6,000, and 25 times $6,000 is $150,000 less you need to accumulate. Meanwhile, invest that $500 a month for 10 years at a 10% annual return, which is close to the S&P 500's long-run nominal average and is not guaranteed, and your $60,000 of contributions grows to about $102,400. One decision, two effects, and neither one needs a raise.

This is also why I kept saving 50 to 60% of my income and kept living like a private. A lean lifestyle lowers the number you are chasing while the savings rate speeds up the chase.

Where the rule bends

The 4% figure assumes a 30-year horizon. If you leave service early and your money has to last 45 or 50 years, you want a lower withdrawal rate. At 3.5%, the multiple is about 28.6, so $40,000 a year of spending needs about $1,143,000 instead of $1,000,000.

Two more adjustments belong in your math. First, the 4% is before taxes, and traditional TSP dollars are taxed as ordinary income when they come out, so Roth balances and traditional balances do not carry the same weight. Second, a military pension, VA compensation or Social Security covers part of your spending first, and the portfolio only has to fill the gap. Someone with a $2,000 monthly pension needs far less than 25 times the full budget.

What I do with the number

I put it somewhere I see it. Then I keep buying the same index funds every payday, TSP C Fund and VOO, through every headline, the way I did in 2018, 2020 and 2022. Once the target has a name, each dollar saved becomes a brick in a wall I can see.

If you want a second set of eyes on your own number, I run free 30-minute sessions where we turn your pay and your spending into a written plan. You can book one right here. I am a battle buddy, not a financial guru, and I am not a licensed financial advisor, so treat everything here as education from someone who has run the math on his own money.

Know the number, cut what does not serve it, and feed it every payday. Boring on purpose, relentless by design.