How to Determine How Much You Need to Retire Comfortably   

For some Kenyans, retirement planning feels distant and something to worry about later in life. But the truth is, retirement isn’t an age; it’s a financial milestone. You retire not when you hit 60, but when you have enough money invested to sustain your lifestyle without working.

This is where the Rule of 25 comes in. It is a simple yet powerful formula that tells you exactly how much money you need to retire comfortably.

What Is the Rule of 25?

The Rule of 25 states that you need to save and invest 25 times your annual expenses to become financially independent.

This rule helps you calculate your Financial Independence (FI) number — the amount of money you need invested to fund your lifestyle for the rest of your life without running out.

It’s built on one assumption: that you withdraw 4% of your investment portfolio per year, which historically allows your money to last 25–30+ years, even after accounting for inflation.

So if your annual expenses are Ksh 2,000,000, you need: Ksh2,000,000 × 25 = Ksh 50,000,000 saved or invested

This isn’t money sitting in a bank account — it’s invested in income-generating and growth assets such as money market funds, SACCO shares, pension schemes, REITs, bonds, and equities.

Let’s break down how the Rule of 25 looks for different lifestyles.

Example 1: Modest Lifestyle

Monthly expenses: Ksh 80,000
Annual expenses: 80,000 × 12 = Ksh 960,000

FI Number = Ksh960,000 × 25 = Ksh 24,000,000

With Ksh 24M invested, withdrawing 4% gives you: Ksh960,000 per year or Ksh80,000 per month.

Example 2: Middle-Class Nairobi Lifestyle

Monthly expenses: Ksh 150,000
Annual expenses: 1,800,000

FI Number = 1,800,000 × 25 = Ksh 45,000,000

Withdraw 4% per year and you get: Ksh1.8M annually and Ksh150,000 per month.

Example 3: Luxury Lifestyle

Monthly expenses: Ksh 300,000
Annual expenses: 3,600,000

FI Number = 3,600,000 × 25 = Ksh 90,000,000

Withdrawal of 4% per year = Ksh 3.6M or Ksh300K per month.

Why the Rule of 25 Works

1. It Simplifies Retirement Planning

Instead of blindly saving, you have a clear target to work toward.

2. It’s Based on Your Lifestyle

Two retirees earning the same salary today may need completely different retirement amounts. The Rule of 25 tailors the target to your expenses.

3. It Promotes Investing, Not Just Saving

This rule assumes your money stays invested and continues growing — rather than sitting idle in a low-interest bank account.

Steps to Use When Using The Rule of 25

Step 1: Know Your Retirement Number

Work with your ideal lifestyle target at retirement age.

If your goal is Ksh 150K/month → you need ~Ksh 45M
If the target is Ksh 80K/month → you need ~Ksh 24M

Step 2: Save & Invest 

Leverage the power of investing. If you are 25 years old and you are to retire at 60, and you invest Ksh15,000 per month in a Money Market Fund or any other investment vehicle offering a net return of 10%, you will have approximately Ksh55 million by the time you retire.

If you are to withdraw 4% annually for expenditure that will be Ksh2.2 million, which translates to Ksh183,000 per month.

Step 3: Build Assets That Reduce Costs in Retirement

Aim to eliminate major expenses by age 55 by owning a home or building upcountry to reduce the rent burden. Also own a car outright to avoid loan payments. Additionally, invest in medical cover early.

‍Final Thought

Retirement isn’t just about stopping work — it’s about having the freedom to choose how you spend your time. The Rule of 25 gives you a clear, personalized roadmap to that freedom based on your lifestyle, not on guesswork.

The earlier you start, the less you need to save and the more your money works for you.

You can retire with dignity, not through hope, luck, or dependency, but through a strategy that starts with one question: “How much will I need annually to live comfortably?