The Magic Number: How much do you really need to retire?

A key piece of retirement planning is figuring out how much money you’ll need to live comfortably as you age. It’s different for everyone.

But no matter your lifestyle or circumstance, we all worry about the same thing: not having enough money to last us through retirement. This fear can be compounded if you don’t know how to consolidate your accounts or if you own a small business or practice.

The truth is, there’s no magic number to save or invest when it comes to retirement planning – and there’s no way to be 100% certain you’ll have enough. But a successful retirement plan comes down to how you handle your tax and investment strategies as well as your current income.

Having an experienced fiduciary professional guide you through the retirement planning process can most certainly help, but it’s also good to know what goes into creating a solid retirement plan. Here are a couple of tips to help you plan and save for the retirement you’re dreaming of.

Divvying Up Your Current Income

Retirement planning starts to get more complex in your higher-earning years as retirement inches closer. With a higher take-home pay, you might incur more discretionary expenses that could potentially take up more of your retirement income. This is especially true for business owners, such as physicians who own practices they’ll want to exit before retirement.

Many experts will tell you that you can expect to spend up to 80% of your current income annually during retirement. However, this amount can vary, depending on whether you receive Social Security benefits and/or a pension.

One way to figure out how much you might need to save is by using the 4% rule. To use this method, divide your desired annual retirement income by 4%. For example, if you have an annual desired retirement income of $150,000, you would need a savings of approximately $3.75 million. It’s important to note that this strategy excludes Social Security or any additional retirement accounts and does not account for changes in lifestyle or spending habits.

A Healthy Mix of Diversified Investments

When planning for retirement, it’s important to remember that you need a healthy mix of investments so your assets can have a balance of risk and reward. It’s good to have an IRA, 401(k), and a health savings account to protect and grow your assets. But it’s important that you don’t lose track of where you’re storing your money.

One of the biggest issues people have with retirement planning is financial fragmentation. When trying to diversify your investments, you might stretch your money too thin. Spreading your assets across different brokerage accounts can make retirement planning challenging for a few different reasons—the most important one being tax implications.

When you have assets in various accounts, you may be taxed differently for each one, which can increase your tax burden when it is time to withdraw for retirement. By consolidating your accounts, you’ll simplify your retirement planning process and still benefit from a diversified portfolio.

The Big Picture  

The good thing about retirement planning is that you don’t have to do it alone. People often miss tax-saving opportunities because they don’t consult with the right professionals early enough.

Overall, the goal is to save as much as possible and maximize your contributions whenever you can. Having a successful retirement requires you to discipline yourself and make the most of your earnings so you can benefit from long-term gains.

But, it’s also important to remember that life is short. While preparing for the future is crucial for a comfortable retirement, focusing on spending time with your loved ones and enjoying your life today should also be a top priority.

Consider reaching out to an experienced CERTIFIED FINANCIAL PLANNER™ professional who is a fiduciary and specializes in retirement planning, so you can spend more time doing what matters most to you.

Eric Braund, CFP®, CRPC® is the founder and chief financial officer at Black Walnut Wealth Management, a financial advisory firm providing counsel and fiduciary investment services to individuals, families, and private foundations throughout the Traverse City and Northern Michigan region. He holds a bachelor’s degree in finance from Hillsdale College and is a CERTIFIED FINANCIAL PLANNER™ professionaland a Chartered Retirement Planning Counselor™. Braund is an investment advisor representative with Dynamic Wealth Advisors dba Black Walnut Wealth Management; all investment advisory services are offered through Dynamic Wealth Advisors. Contact him at (231) 421-7711 or visit