Ask the readers – How do you come up with that magical retirement number?

Ask the readers – How do you come up with that magical retirement number?

One thing I’ve taken a little slack for is right now my only public goal is that I want to have $100,000 in principal deposited by the time I reach age 30. This is a good goal and has been pretty popular with many of my readers, however as a couple of you have pointed out – it’s a short term goal and really says nothing about how, when, and how early I can retire.

I’ve been meaning to come up with a long range retirement goal, but honestly the task is a little daunting and I’m not sure the best way to go about doing it. Now I’ve projected my retirement savings out 30-40 years in the future with expected investment returns, inflation, and withdrawal rates in Excel, but I don’t trust myself and even then how do you really know when you hit that magic number? In theory it’s pretty simple, just find a number that you can safely withdraw your required retirement income (inflation accounted for) without running out of money before you die.

So I’ve started down this journey and have used some online calculators, but to be honest I’ve gotten a wide range of results and many of them don’t even fathom you retiring before age 60. This is a huge variable that can drastically affect your retirement requirements. The earlier you retire the longer you have to live off your retirement savings and the less time you have to let the magic of compounding work in your favor.

I really kinda want to retire early, sort of. By this I mean when I get into my 40s (hopefully earlier 40s, although from my initial projects maybe mid-late 40s) I want to be financially secure so that I can do whatever I want. This won’t mean sitting on my butt all day watching Oprah, I’ve actually got grand visions of possibly a career change – maybe teaching high school and coaching sports and having the entire summer off with my wife (who is a teacher) and our kids. We could travel in the summer and I really think I would enjoy giving back by being a teacher and a coach. I may want to start my own business, or volunteer more heavily in a service organization, whatever master plan I come up with I don’t want to have to worry about sacrificing my retirement or my families well-being just because Dad decided to give up his “real job”.

So I’m on a quest to find the magical number that will allow me to sort of put retirement savings on cruise control and start concentrating more on areas of my life that I might enjoy more than working in an office everyday. So do you know your retirement number? If so how did you figure out what it was, what tools did you use, what factors did you take into account?

I’m really curious to see which retirement projection tools I haven’t run across yet and what it really takes to retire early.