Using this method for finding your retirement number shouldn't require too much paperwork.
Ah, the magical "retirement number." Everybody wants to know what it is, and no one can quite pin it down.
For those unfamiliar: In theory, once your retirement portfolio reaches this number, you are free and clear to retire. In reality, life doesn't abide by our assumptions very often. That's why the best we can do is get a ballpark figure, work in a margin of safety, and remain financially flexible.
In its simplest form -- using the 4% rule-- your retirement number is derived from figuring out how much you'll spend per year in retirement, subtracting out any income from pensions or Social Security, and multiplying this number by 25.
For those looking for the easiest possible answer to what their retirement number is, I point you toward the Bureau of Labor Statistics (BLS). According to the BLS, the average consumer unit (household) over the age of 65 spends $41,403 per year. Concurrently, the Social Security Administration says the average retired American receives the equivalent of $15,119 per year.
That means the average American over 65 needs about $26,284 yearly to pull on from retirement savings. Multiply that by 25, and we get a retirement number of $657,100.
Of course, the only problem with this is that almost no one will fit this "average" profile perfectly. If you'd like to see how to calculate your own retirement number, check out the slideshow below, which shows how I figure out my own family's figure.
Photo: Social Security Administration.
The article How to Figure Out Your "Retirement Number" originally appeared on Fool.com.
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