How Much Money Do I Need to Retire? What’s My Magic Number?

Does the Magic Number Really Work?

Not every financial planner thinks “magic numbers” are a good thing—or that they even exist.

Scott Weiss, a certified financial planner and the director of financial planning for Weiss Financial Group in Mahopac, New York, does not believe in a “magic number.” In fact, sometimes having a “magic number” in mind could be detrimental, he says.

“If you are not regularly assessing your financial situation, having a single number stuck in your head could be counterproductive to your success,” Weiss says.

Instead of concentrating on your “magic number,” Weiss recommends building a solid retirement plan, setting a goal to save between 10% and 20% of your income, investing your money, and regularly reviewing and revising that plan.

“In order to more accurately determine how much to set aside for retirement, you need to have a clear idea of how much you are spending annually to support your current lifestyle,” Weiss explains.

Also—your magic number can change over time, as you get older.

The nearer you get to retirement the more accurate your “magic number” predictions will be, Weiss explains. When you are younger, however, you can still work with approximations and run monte-carlo simulations, or probability simulations, on your numbers, he says. Weiss suggests revisiting those approximate numbers on a regular basis to account for changes in your spending habits, income and lifestyle.

“There are many quick ‘what is your number’ calculations,” Weiss says. “I think it is more nuanced than that. It should be a conversation.”

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