Everyone wants to know what their retirement number is--the magical point at which they can choose how they participate in the working world. The best we can do is offer a ballpark figure, and here's how to find it.

1. How to Find Your “Retirement
Number”

2. Step 1: How much did you spend this year?
This might take some work,
but it’s important.
• You can use tools like
mint.com, or
personalcapital.com to help.
For the purposes of this
article, I’ll use my family’s
2014 total spending as an
example: $50,000

3. Step 2: Subtracting Rent/Mortgage

4. Step 2: Subtracting Rent/Mortgage
Many people expect to have
their homes paid off by the
time they retire.
• If that doesn’t include
you, ignore this step.
• Otherwise, subtract out
the amount you paid in
rent/mortgage this year
from your overall
spending.
In 2014, my family spent
$10,200 on this.
We expect to own our
home by the time we retire,
so we feel comfortable
subtracting this.
New spending total:
$39,800

5. Step 3: Subtracting Life or Disability Insurance

6. Step 3: Subtracting Life or Disability Insurance
The whole idea behind life and
disability insurance is that it
protects future cash flows in
the event of catastrophe.
• If you’re retired, there
aren’t any future cash flows
to protect.
• In some cases, however, it
still makes sense to keep
some insurance.
In 2014, my family spent
$3,240 on whole and term life
insurance, as well as disability
insurance.
We feel comfortable
subtracting this—knowing
that we’ll add in costs for
long-term care insurance in
step #5.
New spending total: $36,560

7. Step 4: Reducing Your Food Budget

8. Step 4: Reducing Your Food Budget
In retirement, you generally
spend less money on food—kids
have moved out and people
prepare more of their own food.
Depending on your age right now,
here’s how much the Bureau of
Labor Statistics found that food
and alcohol budgets shrunk for
those 65 and older:
– 25 to 34 years old: 17%
– 35 to 44 years old: 34%
– 45 to 54 years old: 35%
– 55 to 64 years old: 23%
In 2014, my family spent $5,750
on food and alcohol.
Currently, we are right on the
border of 34 to 35-year old
family. We go to our local coffee
shop often in the winter, to help
our one-year-old daughter get
out of the house. We feel
comfortable reducing this budget
by 20%, or $1,150.
New spending total: $35,410.

9. Step 5: Reducing Your Transportation Budget

10. Step 5: Reducing Your Transportation Budget
In retirement, folks generally
drive less since they are no longer
commuting. After the first couple
of years, they also tend to take
fewer long-distance trips.
Depending on your age right now,
here’s how much the Bureau of
Labor Statistics found that
transportation budgets shrunk for
those 65 and older:
– 25 to 34 years old: 26%
– 35 to 44 years old: 36%
– 45 to 54 years old: 37%
– 55 to 64 years old: 29%
In 2014, my family spent $7,000
on transportation, with half of it
being in the form of airline
flights.
Though I’d like to believe we’ll
still travel as much, I know that
likely won’t be the case. To keep
it optimistic, I’ll only reduce
costs by 20%—or $1,400—here.
New spending total: $34,010.

11. Step 6: Increase Healthcare Spending

12. Step 6: Increase Healthcare Spending
Here is the one area where
expenses normally do rise. Of
course, this will vary greatly, and
in some ways is unpredictable.
That being said, depending on
your age right now, here’s how
much the Bureau of Labor
Statistics found that healthcare
budgets grew for those 65 and
older:
– 25 to 34 years old: 130%
– 35 to 44 years old: 59%
– 45 to 54 years old: 33%
– 55 to 64 years old: 16%
In 2014, my family spent $7,430
on healthcare—including
insurance premiums.
I’d like to build in a margin of
safety, so I’m going to increase
our expenses by 100% in this
realm, or add $7,430.
New spending total: $41,440.

13. Step 7: Subtract out Social Security Benefits

14. Step 7: Subtract out Social Security Benefits
You can get a ball-park
estimate for your future
benefits by visiting this site
here.
It’s worth noting that if the
government doesn’t take any
steps to bridge Social
Security’s funding gap, experts
estimate that benefits will be
cut by 22% to 29%.
The Social Security estimator
tells me that I will receive
$22,800 per year if I retire at
65 and keep earning about
the same salary.
To build in a margin of safety, I
will reduce this number by
25% to $17,100.
New spending total: $24,340.

15. Step 8: Find Your Retirement Number

16. Step 8: Find Your Retirement Number
Take your total, and multiply it
by 25. Having this amount, in
theory, would allow you to take
out 4% of your nest egg in your
first year of retirement, and
adjust it for inflation every year
thereafter.
However, it’s crucial to
remember that these are just
ballpark figures. Remaining
flexible and finding a
professional to help are both
key ingredients for nailing down
your retirement goals.
After taking Social Security into
consideration, my wife and I
have a retirement number of
$608,500.
If we want to retire early, or
disregard Social Security entirely,
our retirement number would be
$1,036,000.
Does your number surprise you?

17. The Secret Behind the
Overlooked $60,000 Social
Security Bonus