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Retirement. It’s our passion to help clients retire comfortably so they can enjoy the fruits of their labor without worrying that money will run out.  Surprisingly, even though retirement can be a significant portion of one’s life (30 years or more), most people spend very little time thinking about how they’re going to be able to make the most of all those years. In fact, most people spend more time planning a two-week vacation than their retirement! Here’s the 101 on determining how much you will need to save to retire:

3 Steps to Calculating your “Retirement Number” 

While many people save diligently, most folks don’t actually know how much they need to retire. There are three fairly simple but telling calculations you can do today that can make a world of difference for tomorrow.  The idea is making a small tweak now could enable you to have the retirement of your dreams!

1. Your annual expenses in retirement

You may have heard the rule of thumb: retirement spending equals roughly 80% of your current income.  In actuality there’s a good chance that your retirement spending may not line up with this rule of thumb. Here’s a better way to figure it out:

First, what do you currently spend? Take a few minutes to jot down what you spend each month. You can use this handy worksheet if you don’t already have a tracking method.  Then go through those expenses and adjust for anything you think might be different in retirement (for example, your travel budget might go up and your housing expense might go down). You’ll then take this number and multiply it by 12 for your annual retirement expenses. Finally, you’ll want to consider the effects of future inflation.You can use this forward flat rate inflation calculator to get an idea of that inflation adjusted number.

2. Portfolio balance needed at retirement

Now you know how much you’ll spend annually, the next step is to subtract any income you know you’ll have in retirement. The one income nearly all of us should consider is Social Security. If you haven’t already, go to and create an account.  From there you can view your statement and an estimate of your benefits. Select the age at which you think you’ll take your benefit and multiply the monthly income by 12. If you have a pension, annuity, or other expected fixed income you can subtract all of these from your annual spending.  Now you have the amount you’ll need each year from your investment portfolio (before taxes).  But how do you know how much you’ll need to ensure you don’t run out of money during your long and luxurious retirement?  If you plan to manage your own investments in retirement, we recommend using the 4% rule.* Take the annual amount you need from your portfolio and multiply this net amount by 25. THIS is your Retirement Number.

* If you work with a financial advisor that specializes in retirement income, you could potentially take an even higher distribution rate! This means more income in retirement and/or less savings you need to reach your distribution needs.

3. Monthly savings to get to your Retirement Goals?

The last step is to figure out how much you need to save to get to your Retirement Number. Leveraging the growth of the markets means you don’t need to save every dollar. Market growth will do much of the heavy lifting for you. You can download this handy Excel calculator to enter what you have already saved and your number of years to retirement and it will tell you how much you need to save each month to get to your Retirement Number.

Does your Retirement Number seem doable? Great job! Does your number feel a little out of reach? That’s ok but now is the time to make some adjustments in order to achieve your goal. Try one or more of the following:

  • Increase your savings rate each time you get a raise
  • Reduce your expenses now in order to increase your savings rate
  • Reduce your planned expenses in retirement
  • Consider retiring a few years later
  • Consider taking Social Security at 70 or closer to 70 to maximize your monthly benefit
  • Consider earning some income during retirement
We think everyone deserves to have a secure retirement without anxiety or worry about money. Devising a good plan now will better ensure that can happen. Your future self will thank you!