Follow This One Simple Rule To Avoid Outliving Your Retirement Savings

Many retirees share a common concern: Will my savings actually last? It's a valid fear, as no one wants to outlive their money. Fortunately, a simple benchmark can make that big question easier to manage. The $1,000-a-month rule offers a clear, approachable way to connect your retirement savings to a sustainable monthly income.

When used thoughtfully, this rule can help you estimate how much you need to save and how much you can safely withdraw once you stop working. Below, we'll walk through how the rule works, what to watch out for, and how to use it as part of your retirement plan.

Here's how to make the $1,000 a month rule a practical tool rather than just a catchy phrase.

Breaking down the basics of the $1,000-a-month rule

Popularized by certified financial planner Wes Moss, the idea behind this rule is refreshingly simple: For every $1,000 in monthly income you want during retirement, aim to have around $240,000 saved.

Understanding this concept gives a tangible target to compare your savings against.

How to calculate your retirement goal using this strategy

The math is straightforward: with a 5% annual withdrawal rate, to generate $12,000 per year (equivalent to $1,000 a month), you'd need $240,000 in savings. In other words, if you plan to withdraw about 5% annually, divide $12,000 by 0.05 and you'll get $240,000.

Once you understand the math, it's easy to tweak. Want to withdraw $2,000 per month? Double it: that's $480,000 at 5%. Aiming for $4,000? You'll need around $960,000. It's a simple calculation that can make retirement planning that much easier.

Where does the 5% withdrawal rate come from

The rule often assumes a 5% annual withdrawal rate — it's more aggressive than the classic 4% rule, which means it can provide a higher income in early years. It also means your savings are depleted a bit faster.

In other words, a 5% withdrawal could become harder to sustain over time. Some retirees use this rule as a starting point, then adjust based on market conditions, risk tolerance, and other income sources like Social Security or pensions.

The 4% rule vs. the $1,000 a month rule

The 4% rule is more conservative and may be safer for longer retirements. If you use 4% instead of 5%, to get $1,000 a month, you'd need $300,000 saved (because $300,000 × 0.04 = $12,000 per year).

The $ 1,000-a-month rule, using a 5% withdrawal rate, yields only $240,000, so the difference is meaningful. If you only have $240,000 saved and withdraw at 4%, you'll be able to spend only $9,600 per year ($800 a month). 

In short, it's a balance between income now and security later. Your ideal rate depends on how long you expect retirement to last and how much risk you're comfortable taking.

How far $1,000 a month can take you in retirement

For many retirees, it generally supports a moderate lifestyle that supplements other income sources. Much of your basic expenses may be covered by guaranteed sources like Social Security or pensions, and these withdrawals cover discretionary spending like travel and hobbies. 

It may be less suited to a high-spending retirement or one with high medical or long-term care costs, for example.

The risk of relying on the $1,000-a-month rule alone

The biggest limitation with this retirement strategy is that it assumes your investments will earn steady returns over time, but markets rarely move in a straight line. If your portfolio underperforms or suffers significant losses early, you may erode your savings too quickly.

In strong years, you might outperform, but volatility and sequence-of-returns risk are real threats. So, combining the rule with a diversified portfolio and some buffer is prudent rather than blindly relying on it.

How your retirement timeline affects the rule

How long you expect your retirement to last matters a lot for applying the rule. A 20-year horizon is different from a 30- or 40-year one. If you retire early, your funds need to stretch far longer, which means using a lower withdrawal rate — like 4% or even 3.5% — may be the safer move.

Your age, health, lifestyle, and financial commitments should all influence how aggressively you apply the rule. Think of it as a flexible framework, not a fixed formula.

Start saving for retirement as early as possible

A strong savings habit is foundational, so your capital keeps up with your income goals. According to Fidelity Investments, saving at least 15% of pretax income is a good benchmark to accumulate enough capital, assuming you save consistently for retirement from age 25 to age 67.

Time is your biggest ally due to compounding. The earlier you begin, the smaller your required monthly contributions to hit your target and the more time your money has to grow.

Early action gives you margin for unforeseen setbacks and sets you on a steadier footing toward a sustainable retirement. If you consistently save at this rate throughout your career, implementing the $1,000 a month rule may become more attainable without relying on risky returns.

Bottom line

The $1,000 a month rule offers a clear benchmark — save roughly $240,000 for a $1,000 a month income at a 5% withdrawal rate — but it shouldn't be your only guide. It works best as a rough compass in your broader retirement plan, not necessarily as a hard rule.

By combining this rule with prudent savings, careful portfolio design, and regular review, you can set yourself up for retirement full of rest and relaxation rather than financial worries.