What Is My Retirement Magic Number, and Why Is It Important?

While a crystal ball would certainly 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 in order 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 for you 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 financial plan with your trusted financial professional is essential in making sure you’re not only heading in the right direction but, more importantly, will successfully arrive at your destination.


About Jeremy

Jeremy Wallace is founder and chief investment officer at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Jeremy has 20 years of experience in the financial industry and is passionate about helping clients preserve and enhance their wealth so they can pursue their passions. Jeremy graduated from Emory University with a degree in international economics and a certificate in financial planning. Outside of the office, Jeremy spends most of his free time with his wife, Julie, and their three children, Isabel, Lincoln, and Reid. He is an avid Chicago Cubs baseball fan, and  he enjoys golfing with his wife and traveling with his family. Learn more about Jeremy by connecting with him on LinkedIn.