A Realistic Retirement Number

There’s been a lot of talk about finding one’s “retirement number,” how much you need to save before you can reasonable retire and still maintain a close standard of living. People throw out rules of thumb like the 4% withdrawal rule and the like but is that really the answer?

Walter Updegrave recommends working backwards to reach the number. First, determine how much you’ll need by just assuming you’ll need a percentage of your salary, he recommends 70-90%. From there, you can pull in the 4% rule and calculate how much you’ll need in order to maintain that lifestyle on 4%. That should give you a retirement number.

In the article, they work with someone who thinks they will need approximately $130,000 a year in retirement, $30,000 of which will come from Social Security and a pension. The remaining $100,000, at 4% withdrawal a year, will have to come from a nest egg of approximately $2.5 million.

So, how do you get to that retirement number? That’s an issue for another post. 🙂