While a crystal ball would undoubtedly make planning for the future much easier, the real world requires a more practical approach. For that reason, a retirement “magic number” has grown in popularity as a simple way of making sure you’re on track to meeting your retirement goals.
In short, your retirement magic number is the amount you need to save to live comfortably after your working years are behind you. While any such number will always be an approximation rather than a certainty given the number of variables involved, a magic number is still very useful as a quick and easy way to gauge how you are progressing towards your retirement goals.
How Is My Magic Number Calculated?
Although a single number might provide a seemingly simple goal for you to keep track of, the actual calculation of that number is surprisingly complicated. Between projected income, expenses, investment performance, inflation, and many other factors, your magic number is a single goal with many moving parts behind it.
Your Magic Number Isn’t Set in Stone
No matter how firm you think your future plans might be, life has a way of throwing surprises our way, sometimes requiring a reevaluation of goals. To that point, your retirement magic number is fluid, moving up or down as your goals shift.
For instance, while you might have always assumed you would live in your home forever, maybe empty nest syndrome is starting to take hold as your kids get older, so consequently, a smaller home for retirement now seems much more attractive to you. In other words, goals sometimes change, which means your magic number can change as well.
Keep Your Magic Number in Perspective
While your magic number can provide an extremely valuable sense of direction on your journey towards retirement, it is in no way meant to be taken as an absolute. Think of your magic number as a compass on that journey – it will give you a reading on your retirement magnetic north but can never provide the insight and increased precision of a map or GPS.
For that reason, establishing a comprehensive financial plan with a CERTIFIED FINANCIAL PLANNER™(CFP®) Professional is essential in making sure you’re not only heading in the right direction but, more importantly, will successfully arrive at your destination.
Do you know what your “retirement number” is? Let us help you calculate yours to see if you are on track or not. Simply click here or call (763) 445-2772 to schedule a complimentary consultation today!