Calculating your retirement savings goal

Saving enough money to retire is a goal almost everyone shares (and those who don’t, maybe it’s time for a change). Also shared by most is the uncertainty of how much “enough” really is.

I’ll say up front that figuring out the exact number needed to retire comfortably isn’t a hard calculation, but it’s also a moving target. You can calculate it today, tomorrow, and next Wednesday and get three different answers, and all of them will be wrong.

So what do you need to know to determine your retirement nest egg needs?

It’s a simple time value of money problem (sort of).

If you know how much money you need each year to live comfortably, you can start your calculation. The dollar amount will be a multiple of this number, allowing you to withdraw this amount each year while remaining below a 4% withdrawal rate.

However, due to inflation and other factors, the amount you need to live on today will not be the same when you reach your target retirement age, even if only a few years from now. . You must calculate this dollar amount while taking into account certain assumptions, including inflation, cost of living, investment returns, future changes in income and others.

And I can almost guarantee that whatever numbers you use and whatever the outcome, it will be wrong.

Is it a waste of time?

The number won’t be exact, but that doesn’t mean you shouldn’t do the math. It is impossible to predict how inflation will act, what the cost of living will be and how the markets will evolve throughout your lifetime. If you could predict that, you would be very, very rich.

What you know right now (or at least you can easily figure out) is how much money you need to make each year to live comfortably. Your retirement savings goal will be a multiple of this number, so you can withdraw 3 or 4% each year without depleting the account.

What I recommend you do is look at this number regularly – once a year is ideal – so that you can continue to adjust your savings goal accordingly.

The number is scary.

It’s normal. This will be a large number, as it will be your annual expenses multiplied many times over. Don’t be intimidated by this.

If you stay at a 4% withdrawal rate in retirement, which I think is the maximum you should expect, you’ll need $1 million for every $40,000 in annual expenses. As time goes on and costs increase, $1 million will seem less and less expensive.

If you recheck these numbers every year, the growth will seem less severe than if you check it now and only come back to it in 10 years.


It’s impossible to know how much money you need for retirement, but having an idea of ​​a target number will make you feel more manageable and help you stay on track.

Do the math every year or so and don’t be afraid to hire a professional to guide you towards your goal.

The views expressed in this commentary are those of the author and do not necessarily reflect those of Kestra Investment Services, LLC or Kestra Advisory Services, LLC. It is for general information only and is not intended to provide specific investment advice or recommendations to anyone. It is suggested that you consult your financial professional, lawyer or tax advisor regarding your personal circumstances. Comments regarding past performance are not intended to be forward-looking and should not be taken as an indication of future results.

Securities offered by Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment advisory services offered by Kestra Advisory Services, LLC (Kestra AS), a subsidiary of Kestra IS. Brotman Financial Group, Inc. and BFG Financial Advisors are not affiliated with Kestra IS or Kestra AS.

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