Finding Your Magic Number for Retirement: How Much Do You Really Need?

This article was originally published on Forbes.com on August 6, 2025.

As a financial advisor, I am often asked how clients will know when they’re able to retire. While there’s not one answer for everyone, a simple principle that anyone can lean on is to forecast their retirement income. This involves determining how much monthly income you would need to live on and how long that would need to last.

I recall working with a farmer who was tired and worn out from his physically demanding career. Emotionally, he knew he was ready to retire, but he wasn’t sure if he was ready financially. He came to us for guidance with the decision. We suggested he practice living on his retirement income for three months first. After living it, he decided to keep working to give himself more cushion before taking that next step.

Stories like this one are excellent examples of a crucial principle of retirement preparation: income planning. How much will you really need to live on each month and how much do you really need to retire? Because these pre-retirees learned exactly what they needed to do to find their version of retirement success, they were able to have better-positioned retirement outcomes.

How do you know how much you need?
There are a few rules of thumb for finding your magic number. Some people love the $1,000 rule—the idea that for every $1,000 of monthly income you want in retirement, you should have about $240,000 saved. This kind of rule can be useful for general benchmarking purposes, but may not accurately predict your personal retirement needs. The most important factor that will help you determine your magic number will be picturing how you want to spend your time during retirement.

Ask yourself:

• What kind of hobbies will I want to enjoy in retirement?
• What are the associated costs?
• What about travel? How much will I need for that expense?
• Are there medical costs I should anticipate?

When you can picture what you want to spend your time doing, you can better plan how much income you’ll need each month or year. Once you know that, you can better identify your magic number. This benchmark will help you set a pace for yourself both before and after you retire.

I once worked with a couple who were planning to retire soon but were nervous about whether they had saved enough. Once we did an income plan and forecasted how long their savings would need to last, they realized they already had what they needed. With that confirmation, they confidently took their grandkids on a trip. The memories they made with their family during that trip became a much better investment than simply holding on to the money. We often refer to this as "memory investing."

How to start saving
The next step in your retirement road map is to start doing the actual saving. Many people worry that they didn’t start early enough, but the most important thing is to get started now. How young you start and how consistently you invest will make huge differences in your portfolio. If you think you are behind, start now.

Younger people may have a hard time envisioning their retirement because 30, or even 20 years, seems too far away. If you’re having trouble with the longevity of your plan, break it down into smaller chunks with these questions.

• What does the next five years look like?
• Where do you want your retirement savings to be?
• What other financial goals will you be working on during that time frame?
• What about the next 10 years?

You may find that your needs change as your situation changes, but with your overall income planning number in mind, you can continue to adjust and stay on track toward your goal.

What about debt?
Some are hesitant to prioritize their investments while they still have debt. It’s common to think that any extra money should be put toward paying down debt instead of saving for a faraway retirement. Math can make this decision easier.

Online calculators can help you figure out the interest on your debt versus the returns you would get from investing the money. When you see the numbers in black and white, it will be easier to decide if it’s wiser to prioritize investments above paying off debt as quickly as possible.

Emotions can also play a role in this decision. For some people, even the hard numbers don’t outweigh the stress of knowing you have debt nagging at you. In this case, it’s important to remember that the concepts and principles of finance are helpful, and these decisions are personalized to the individual. There may even be a middle ground, where you split the extra money toward both priorities. A qualified advisor can offer guidance on what’s most appropriate for your situation.

When to start working with an advisor
Just as there’s not one right answer about how much you will need in retirement, there’s not an exact right time to meet with an advisor. One basic principle is to work with an advisor before you realize you need one. Many people can manage their own investments during their working years, but need assistance making the transition into retirement and protecting their retirement savings long-term. Five years before retirement is a good recommendation on when to turn to professional help if you haven’t done so yet.

But if you’re someone who needs more guidance and wants to be confident that you’re making good financial decisions during your working and saving years, an advisor can help you define your magic number and set goals on how to get there.