“Retirement number” gets thrown around as if it’s a single formula everyone should use, but a realistic target comes from combining a few separate estimates — expected expenses, other income sources, and a safe withdrawal assumption — rather than one generic multiplier.

Step 1: Estimate Your Retirement Expenses

Start with your current annual spending, then adjust for what actually changes in retirement:

  • Decreases: no more retirement contributions, often a paid-off mortgage, lower commuting and work-related costs, sometimes lower taxes
  • Increases: healthcare costs typically rise, and many people spend more on travel or hobbies, especially in early retirement

A commonly used starting estimate is 70-80% of pre-retirement income, but this varies significantly by individual lifestyle — it’s a starting assumption to adjust, not a rule.

Step 2: Subtract Other Guaranteed Income

Your portfolio doesn’t need to cover 100% of your expenses if you have other income sources:

  • Social Security (estimated benefit amounts are available through official benefit statements)
  • Pension income, if applicable
  • Rental income or part-time work planned for retirement

Subtract these from your total expense estimate to find the gap your savings actually need to fill.

Step 3: Apply a Withdrawal Rate to Find Your Target

Once you know the annual amount your portfolio needs to supply, divide by your assumed safe withdrawal rate (commonly 4%, sometimes adjusted lower for longer retirements) to get your target portfolio size.

Target portfolio = Annual portfolio income needed ÷ withdrawal rate

Example: Estimated annual expenses of $70,000, minus $25,000 in expected Social Security, leaves a $45,000/year gap. At a 4% withdrawal rate: $45,000 ÷ 0.04 = $1,125,000 target.

Step 4: Work Backward to a Savings Rate

Once you have a target number and a timeline (years until retirement), you can calculate roughly how much you need to save and invest monthly to reach it, factoring in expected investment growth along the way. This is where a compound growth calculator becomes useful — the earlier you start, the smaller the required monthly contribution, due to the effect of compounding over more years.

Why This Number Should Be Revisited Regularly

Expenses, income assumptions, and investment returns all shift over time. A retirement number calculated at 30 should be treated as a working estimate, checked every few years — especially after major life changes like a mortgage payoff, a new dependent, or a significant income change — rather than a fixed target set once and forgotten.

Bottom Line

A realistic retirement number comes from estimating actual expected expenses, subtracting other income sources, and applying a reasonable withdrawal rate — not from a single generic rule of thumb applied to your current salary. Recalculate periodically as your real numbers become clearer.