How much money do you need to retire if your house is paid off?


Editorial team Published on

With a paid-off house, you typically need to replace 55% to 65% of your pre-retirement income (down from the traditional 70% to 80%) because you no longer pay a monthly mortgage.

The 25x Rule

To find your total savings target, multiply your expected annual living expenses in retirement (minus your old mortgage, but keeping property taxes, insurance, and maintenance) by 25.

  • For example, if you need $40,000 a year after subtracting your mortgage, you need roughly $1,000,000 in invested assets using the 4% retirement rule (withdrawing 4% the first year and adjusting for inflation).

Factors to Subtract and Add

  • Subtract: Monthly principal and interest payments. Eliminating a $2,000/month mortgage saves you $24,000 a year, which equates to needing roughly $600,000 less in your retirement portfolio.
  • Subtract: Expected Social Security or pension income, which covers a portion of your baseline expenses.
  • Add (Keep in Mind): You still must pay property taxes, homeowners insurance, and higher ongoing home maintenance or healthcare costs. You can also use a Retirement Calculator to test different numbers.