How to find your magic number for retirement.How to find your magic number for retirement.

Is There Really a Magic Number for Retirement?

At least once per year, we see a news story about the “magic number” for retirement.  Just a few weeks ago, that number was $1.46 million, according to a recent survey conducted by Northwestern Mutual.

Last fall, a Schwab survey said the number was $1.8 million.

These conflicting figures can be confusing.  And for the 61% of Americans over 50 who worry they won’t have enough money to support them in retirement,1 these reports can create anxiety.

Where do these numbers come from? And why do they fluctuate so much?

There’s no universal magic number for retirement

First of all, know that these reported magic numbers are mostly based on feelings.

Survey respondents are asked how much they think they need to retire, and many of them respond with a guess.2

To be clear, these probably aren’t blind guesses. The people questioned likely did some rough calculations. But a closer look at the latest study shows that fewer than half of respondents nearest to retirement age had not done much planning for it. How accurate could their calculations be? See below:

Survey QuestionBaby Boomers+Generation X
“I know how much money I’ll need to retire comfortably.”49%40%
“I have a plan to address long-term care needs in retirement.”41%34%
“I have planned for the possibility that I could outlive my savings.”37%35%
Northwestern Mutual Planning & Progress Study, 2024

You’ll probably need more than savings for retirement.

Here’s the second reason why these magic number surveys are not very helpful: They presume that the key to financial security rests solely on growing a big enough pile of money.

But consider the real risks to your retirement savings:

  • The market fluctuates – The market will rise and dip – it’s not a matter of if but when. What if the market drops shortly before you plan to retire?
  • Future tax rates are uncertain – If the tax rate increases, that means less money in your pocket.
  • Inflationary periods – The cost of goods and services could be more than you budgeted for.
  • Healthcare costs – An unexpected illness or legal judgment could be a severe drain on your savings.
  • Longevity – Your savings may run out if you live longer than you had planned.

Any or all of the above events could affect your ability to pay for your daily needs or to leave money to your heirs.

Retirement savings and retirement income

Here’s another problem with the theory that there’s a magic number for retirement: It addresses only retirement savings, which is just one source of money in retirement. Retirees also need to plan for retirement income.

Retirement income comes in every month, regardless of what happens in the market. It’s money you can’t outlive. Think of it as similar to the paycheck you currently rely on.

The most common source of retirement income is Social Security. But pensions, income-producing annuities, and rental properties can also be sources of regular income.

What are the different parts of a retirement plan?

So far, we’ve talked about savings and income. A retirement plan will detail how your investment portfolio will be structured and how (along with guaranteed sources of income) the retiree can meet a monthly or annual expense goal.

Bu an effective retirement plan will also manage taxes, protect your assets, and set up the documentation necessary to distribute your wealth according to your wishes (estate plan).

How do you build a retirement plan?

Before you can begin the retirement planning process, you must know where you currently stand. Calculate your weekly (or monthly) expenses. You’ll use that information to estimate your retirement needs.

Once you’ve established your budget, gather all your financial papers. These might include bank and brokerage, retirement account statements for IRAs and employer plans, pension documents, your Social Security statement, and any life insurance policies.

These two steps are actually giant leaps toward creating a plan.

Uncover your magic number for retirement

As we learned from the Northwestern Mutual survey, many people are unprepared for retirement. And statistics show that the majority of those over the age of 50 have never met with a financial professional. Some people choose to do it themselves because they think financial advisors are only for the ultra-wealthy.

What if we told you it won’t cost anything to get advice from a financial expert? Just bring in your budget and your account statements, and we’ll create a custom plan for you. There’s no cost or obligation.

Tom Fortino, the founder and principal of the Alpha Wealth Group, has been helping clients map out their financial futures for nearly fifteen years. As an independent advisor and fiduciary, he’ll develop a comprehensive plan based on your custom needs and goals.

If you have any questions about our process, don’t hesitate to give us a call or send an email. Finding – and getting to – your magic number shouldn’t make you anxious. When you’re ready to get started, click here to set up your complimentary session.


1AARP Financial Security Trends Survey, January 2024