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  • Writer's pictureKelsey

Retirement: a number, not an age

Updated: Feb 11, 2022

Contrary to popular belief, retirement is not an age, but a number. Society has conditioned us that at age 67 we can retire and enjoy our golden years, yet unfortunately many don't actually have the nest egg they need to retire at that age. The truth is many don't even know how much they will need - they cross their fingers and hope it is enough to sustain them until the end.

Do you know how much you will need in retirement? I'll be honest that I didn't know that number until recently (and I have a financial page!)

The equation is actually quite simple: take the amount you want to make annually in retirement (e.g. $40,000/year) and multiply it by 25.

$40,000 x 25 = $1,000,000 needed for retirement (at a minimum - this does not factor in inflation and taxes)

Looking to have $80,000/year in retirement? We'll need $2,000,000.

This is the golden number we need to work towards and once we reach it, we could retire relatively safely (though there are never any guarantees).

Now that we know that number, how do we determine when we can retire? This is where it takes a little bit of math. There are free calculators online, and I personally like SmartAsset.

In this calculator, enter the current value of our investments (401k, IRA, Brokerage). Input the amount we plan to contribute annually moving forward (e.g. if we max out our IRA that is currently a $6,000/year contribution).

For the rate of return, I like to use 7% to be on the conservative side. Some use 8%, some 9%

Below I entered in a starting portfolio of $100,000, contributing $6,000 annually, and a 7% return. To have a portfolio of over $1 million (making $40,000 in retirement), I would need to continue investing for 27 years (I put in a random guess of 20 years, and continued increasing until the investment total was over $1 million.)

At 32 years old, that puts me at 59 years old - 8 years before the "expected" retirement age!

Now, this number isn't foolproof. If I contribute to a Roth IRA / Roth 401k, that means I get to withdraw that money at face value with no taxes taken out since I am paying taxes on my contributions now.

If I contribute to a Traditional IRA / Traditional IRA, the money I withdraw is subject to tax, meaning I'd need MORE money invested to net the $40,000 annually after taxes.

If you'd like to see how a taxable (Roth) vs tax-deferred (Traditional) account would shake out, here is a more in-depth calculator from BankRate.

What if we find out we'll need to work until 85 to reach the number we want?

There are a few things we can do:

  • Lower our expenses in retirement (could we live on less in retirement? Change the $40,000 to $35,000?)

  • Contribute more money to our investments (and the earlier the better so compound interest can do the work!)

  • Plan to work past 67 in combination with the other two options above

Depending on our age, Social Security will help cover some of the gaps. Some say SS will run out by 2035, but there are many articles debunking that. I personally am not counting on SS for retirement, so any that I would get would be a bonus.

Now that we know where we stand for retirement, what action(s) can we take today that may allow us to retire earlier (if that is a goal), or just keep us on track? If we're off track, identify some short and long-term things that can be done to get closer on track.

While we may not like the number of years we have left to work to be at that golden number, knowing where we stand puts us way ahead of others. Knowing is the first step that allows us to implement change as needed.

In wealth,


**nothing above is intended to be considered financial advice. Please consult a certified financial planner for any personal questions related to your retirement

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