The 3 Retirement Numbers You Actually Need

0:00The best time to plant a tree was 30 years ago, but the second best time is today. Once you know your number, you can make a plan. Once you have a plan, you stop spinning your wheels. You stop wondering if you're doing it right. You just do the math, save the money, invest intelligently. Hello, friends. This is Tyler Gardner welcoming you to another episode of your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be.

0:43Welcome back, my friends, to the show that makes personal finance feel just a little less like a root canal and more like a conversation you'd actually maybe want to have over coffee or while joining me for a walk in the woods of Vermont. Although it's a little cold these days, so I'm taking this day to be inside. I'm your host, Tyler, and today we're tackling the question that keeps people up at night more than I think most of us would like to admit. How much money do I actually need to retire? Or to have options? Or to just stop feeling like I'm one bad month away from having to sell a kidney to fund my 70s?

1:21Great question, as always, because if there's one thing that truly does drive me nuts about most retirement advice, it's maddeningly vague. Save a million bucks. Aim for 10 times your salary, as if we only have one salary throughout our lives. You'll need 70 % of your pre-retirement income. Cool, cool, and cool. But what does any of that actually mean for you with your spending, your goals, your timeline? So today, we're going to calculate your actual number. Not just some generic target pulled from a financial planning textbook written in 1987 and still sitting on the coffee table of your financial advisor's office gathering a mild form of dust and shattered dreams.

2:08Your number, the one thing that gets you from, I hope this works out, to, at the very least, I know exactly what I'm building toward. And just a quick note before we dive in, and yes, this one's 100 % self-serving because it's also really exciting for me, and you know what? I'm proud of it, so I'm going to say it. A lot of today's content is adapted from my forthcoming book, With Norton, which will be published in early December, 2026. I'm incredibly pumped about this. And if you find this episode helpful, just know that about six months ago, I finally started listening to many of you and writing this all down.

2:45And I'm really pumped to share more about this journey as we get closer to pre-orders, but more on that later. Now, before we get into the actual calculations, and I promise we will, I need you to also do me one quick and very familiar favor. If you've been listening to this podcast and finding it helpful, would you please consider leaving a review on Apple or Spotify? It genuinely helps other people find the show, and it helps me know that this entire endeavor to make financial literacy accessible and quasi-digestible for all is actually moving the needle forward one day at a time. Okay, let's talk about your number.

3:27But we need to start by addressing the problem with save for retirement. Most people know vaguely that they should be saving for retirement. They've heard they need a million dollars or enough to withdraw 4 % annually or 25 times their annual expenses. They nod along when someone mentions these figures at a dinner party, and then they promptly ignore all of it because it feels abstract, overwhelming, and impossibly far away, even if we're already there. So they keep working, keep saving some arbitrary percentage of their paycheck, 10%, 15%, whatever their 401k auto-enrolled them at, and they just kind of hope it all works out.

4:10And maybe it will. But hoping for the best isn't exactly a plan. It's a coin flip with your future. The real issue is this. The concept of enough is completely useless without a number attached to it. It's like saying you want to drive to Portland without bothering to check if you meant Portland, Oregon or Portland, Maine. The destination matters and so does knowing how much gas you'll need to get there. And here's where it gets even trickier. There isn't just one magic number that solves everything. There are actually three numbers that I think you need to know, and which one you focus on depends entirely on what you want your life to look like.

4:52Think of it like Goldilocks. One number I'm about to show you, I think, is too hot, way too aggressive for most people. One is too cold, bare minimum survival mode, And one, to me, is just right. Enough security to give you options without requiring you to eat ramen for 20 years, unless that's your thing. So let's break down all three, and then you can decide which one makes the most sense for you. But first, and this is specifically for my 1.0 listeners, why your money needs to make money. At the risk of stating the obvious, bear with me, before we calculate any of these numbers, we need to understand the single most important concept in all of personal finance.

5:42It's not budgeting. It's not cutting lattes. It's not even saving itself. It's that your money needs to work for you. Because no matter how much you'd like it to be otherwise, you cannot save your way to retirement through discipline alone. The math simply doesn't math. Let me show you what I mean. Let's say you earn$95 ,000 a year and you save 15 % annually. That's$14 ,25 per year. If you do that for 40 years and just stick it in a savings account earning basically nothing, you'll have$570 ,000. But that's before inflation. In today's dollars, it would be more like$350 ,000. Now, depending on your spending, that might not be nearly enough.

6:33So how does anyone retire? How does a teacher earning$60 ,000 a year ever accumulate seven figures? How does anyone turn$50 ,000 into a million dollars without saving another$950 ,000 themselves? The answer, I know many of you know this, is compound interest. Or as Einstein never called it, but let's pretend he did because it's more fun, the eighth wonder of the world. And here's how it works. When you invest money, it earns returns. And if you invest in a total stock market fund like Vanguard's VTI, you can over time fairly expect about 7 % in real terms. Note, I'll explain more on that later about why I always use 7 % as opposed to 10%.

7:19But that 7 % gets added to your account. But here's the magic part. Next year, you earn 7 % on the bigger amount. Your money makes money. And then that money makes money. And then that money makes more money. And you, meanwhile, don't have to do anything. Let me give you a quick real example. Say you're 30 years old, and you have$50 ,000 invested in VTI. If you never add another and your investments grow at 7 % annually on average, here's what happens. Age 35, you'd have about 70 ,000 bucks. Age 40, about 98 ,000 bucks. Age 50, 197 ,000 bucks. Age 60, 393 ,000 bucks. And age 65, you'd be projected to have about$551 ,000.

8:12You turned$50 ,000 into over half a million dollars without saving another penny. That's compound interest. But, and this is critical, it only happens if you put your money into vehicles that will actually grow. In other words, you need to invest, not just save. I see people make this mistake by putting too much money in emergency funds, by not investing money once it's in a Roth IRA or HSA, or even sticking to a default option in a 401k or 403b that is way too conservative for you and wouldn't be expected to return 7 % per year. So you right now need to own your allocations across all accounts and make sure your investments are 100 % aligned with what you want your money to do for you.

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11:41That's 20 more years of investing, but 10 fewer years of compound interest. That's why starting early matters so much, and why if you didn't start early, you need to contribute more aggressively to make up for lost time. Not because you're behind on savings, but because you're behind on compounding. But a very real note, for anyone listening and going, well, I guess it's too late. Let's just say you live another decade at least. Answer me, or more importantly, answer yourself this one question. In a decade, which will pass us by in a matter of seconds, would you rather have been invested for a decade or sitting in cash?

12:25Your call, you do you. So when we calculate your numbers in the next section, we're not just figuring out how much you need to save. We're figuring out how much you need to invest so that compound interest does most of the work for you. Because the goal is not to save a million dollars through sheer willpower. The goal is to invest enough that your investments grow into a million dollars while you go live your life, and then your investments fund said life without your having to save another penny. All right, let's figure out exactly how much enough actually is. Number one, traditional FIRE. To me, this is the too hot option.

13:12We'll start with the most aggressive number you could calculate. The traditional FIRE number, and FIRE stands for Financial Independence Retire Early, and this is the I never have to work again number. It's the amount you'd need invested to cover all your living expenses indefinitely without ever earning another dollar. It's the finish line for most people who genuinely want to retire early and permanently. And I'll be honest, for most people earning a normal salary, this number kind of feels impossible because, well, it kind of is. Here's how you calculate it. Start with your real or wishful annual spending, not your income, your actual spending.

13:57If you spend$60 ,000 a year and expect that to continue in retirement, that's your baseline. Now we're going to multiply that by 20. Why 20? Because of something called the 5 % rule, which used to be the 4 % rule until the guy who invented it updated it because, well, it was never a rule to begin with. The idea is if you withdraw 5 % of your portfolio annually, your money should last at least 30 years, probably longer, because your investments are projected to keep growing to cover inflation. Again, this is why you'd need to be invested in at least 60 to 70 % stocks so you can outpace inflation over time.

14:44A 75 or 100 % bond allocation is not going to get the job done for most people over time. So, if you spend$60 ,000 a year,$60 ,000 times 20 would be$1.2 million. That would be your FIRE number. If you have$1.2 million invested today, you could theoretically pull out$60 ,000 a year plus an annual inflation adjustment and usually never run out of money. Is this achievable for everyone? Not even close. Let's do some quick math. If you're 30 years old and you are luckily earning$95 ,000 a year, spending 60, and you want to hit 1.2 million, you'd need to save about$35 ,000 per year for roughly 18 years, assuming a 7 % growth.

15:36That's saving about 37 % of your gross income for nearly two decades. And note, it would have to be in a post-tax account, where the calculation goes out the window, as that$60k down the road would be taxed at ordinary income rates if you're using a pre-tax account. Not to mention, you can't do that, because if you were using a pre-tax account and wanted to tap into it before 59.5, you'd be taxed and penalized an additional 10%. Now, can some people save that much? Sure, tech workers in San Francisco making$250 ,000 plus and living in the Tenderloin, dual-income couples with no kids living in rural West Virginia, people who are genuinely happy living extremely frugally or out of a used van.

16:20But for most people, this path requires extreme frugality, living on$30 ,000 a year so your fire number is only$600 ,000, or extremely high income earning 200K plus and banking half of it. And here's the other issue that most people in the pure fire movement don't seem to quite get. Most people don't want to not work. They just want options. They want to work less. They want to do work they actually enjoy instead of work that pays the bills. They want leverage. But I don't know many people in my life who genuinely want to retire at 35 and then live a lifestyle that costs$30 ,000 a year. So before you envy the fire crew too much, just take a moment to consider what enough looks like for you beyond money.

17:13And my guess is that for most of us, that still involves being involved and being useful to somebody somehow, somewhere over the next 30 to 40 years, which brings us to the second number. And this is the one I think most people should focus on. Number two, Coast Fire, the just right option. This is my favorite number, and it's the one I recommend to almost everyone I used to work with. Coast Fire asks a completely different question. How much do I need invested now so that if I never contribute another dollar, It will grow into enough for a comfortable retirement by age 65 or whatever age I choose.

17:58The beauty of Coast Fire is that it front loads your frugal and savings effort. You commit to saving aggressively for, let's just say, 5 to 10 years. Hit your number, and then you can stop. You're done. Retirement is handled. You still work because, again, most people don't actually want to stop working entirely. But you're no longer saving for retirement. You're just now covering your current expenses, which means all that extra income you were funneling into retirement accounts, now it's freed up for travel, hobbies, side projects, or just breathing a little easier, or just being able to tell your current job you don't want them to be your current job.

18:39Cut your hours, cut the job, and go truly have the freedom to do something you love, because this thing called retirement planning is done. You've solved that headache and you've done it early. Here's how you would calculate that number. Step one, start again with your retirement goal. We'd use the same calculation as traditional FIRE, so annual spending times 20. Let's just say that's 1.2 million. Step two, now we pick our desired retirement age. Let's say that's 60. If you're now 35, that's 25 years of growth ahead of you. Step three, work backward using compound interest. The formula is, and sorry, you might need a pen and paper for this one, or you can just trust me on this one.

19:31your Coast Fire number equals your retirement goal divided by 1.07, that would be our projected interest rate, raised to the years until retirement. So for our example, 1.2 million, that's our retirement goal, divided by 1.07, projected interest rate, raised to the 25th, because that would be the years that we would have until retirement. Working backwards, that's roughly$221 ,000. If you want to know the actual terminology, we're discounting a future value of money to be in present value terms by dividing the future term by the projected interest rate it would accrue over that time. Translation of the math beyond that, if you can get to$221 ,000 invested by age 35, you can stop contributing entirely.

20:32That money should grow to$1.2 million by age 60 without your ever adding another dollar, so long as it's invested in a total market fund. Otherwise, the 7 % is not an accurate interest number to use. You could not do this with a target date retirement fund. Let me say this all again because it's kind of wild. You save aggressively for a few years, hit$221 ,000, and then you're done. Retirement is on autopilot. Not many people think like that or save like that, but I promise it's so freeing if you think about it that way and just decide what's enough for later so you can then free up a ridiculous amount of time or money now.

21:16Now again, obviously getting to$221 ,000 by 35 isn't easy, but it is way more achievable than getting to$1.2 million outright. This is what I mean by the Goldilocks number. Enough discipline early on, enough freedom later. It's truly a balance, and I really like this number just as a goal. Now, if you're altogether allergic to formulas, I get it. Math is not everyone's love language. There are calculators that will absolutely do this for you. Just Google Coast Fire calculator, plug in your numbers. It'll tell you exactly how much you need to save to coast to your retirement goal. But note, it might not tell you what you need to be invested in, just the interest rate you would need.

22:06But here's the key to this entire insight. Coast fire doesn't mean you never work again. It means you're no longer working or saving for retirement. You're working for now, for the life you want today. And that's a completely different feeling. This episode is brought to you by Gelt. Here's a question I bet you've never asked yourself. What's the difference between a tax preparer and a tax strategist? A tax preparer shows up once a year, collects your documents, fills out forms, and tells you what you owe. That's it. Transaction complete. A tax strategist? They're calling you in October saying, hey, you're about to cross into a higher tax bracket.

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23:32It's actually organized, intuitive, and built for people who run businesses, not accountants who love pivot tables. So if you've been avoiding finding a real tax partner because you assume it's expensive or complicated, stop. Gelt can save you money and simplify your life. and they'll give you a free consultation to see if it's the right fit for you. Head to joingelt.com slash Tyler. That's J-O-I-N-G-E-L-T dot com slash Tyler. Number three, the bare minimum. This to me is the too cold option. Okay, maybe you're listening to this thinking, Tyler, I'm 50 years old. I have$40 ,000 saved. there is no universe in which I'm hitting either of those numbers, no matter how motivated I am or how much I work and save.

24:26Fair. So let's talk about a third option, the bare minimum. This isn't about financial independence or early retirement. This is about calculating the smallest number that keeps you from working until you die. It's not sexy, but it's real, and knowing it is better than not knowing it. Here's how you would calculate it. Step one, you're going to estimate your social security. You'd start by going to ssa.gov, create an account if you haven't already, and look up your projected benefits. You'll see different amounts depending on whether you claim at 62, at your full retirement age, 66 or 67, or at 70.

25:09The longer you wait, the higher your monthly check. Let's say it's$2 ,000 a month or$24 ,000 a year. Step two, now we would want to calculate what's called your gap. If you need$55 ,000 a year to live and Social Security covers $24 ,000, your gap is about$31 ,000. Step three, multiply the gap by 20. That's$620 ,000, the amount you'd need invested to cover the shortfall. Now, is$620 ,000 still a big number if you're 50 with$40 ,000 saved? Of course, but it's a hell of a lot more realistic than$1.5 million, and it gives you a concrete target, even if that target means working longer than you hoped and saving or investing more aggressively than you planned.

26:05The point isn't that these numbers are easy. The point is that they're real, and knowing them, even if they're intimidating, is infinitely better than just hoping it all works out. Now, why did we use Social Security in one calculation but not the others. You might have noticed I included Social Security in the bare minimum calculation but not in fire or coast fire. That's intentional. Here's my philosophy. Always build your financial plan on the most conservative assumptions you can stomach. Plan for the worst, hope for the best. If things go better than expected, you get to be delighted instead of desperate.

26:48For the bare minimum calculation, we include social security because if you're 50 or 60 with limited savings, you don't have the luxury of ignoring it. You need every possible income stream just to make the numbers work. Is it risky to count on it? Sure. But the alternative, pretending it doesn't exist and trying to save an impossible amount or invest in a way that is way too risky for you. That's way worse. For fire and coast fire, though, we don't include Social Security. Why? Because if you're 30 and planning your financial future, Social Security is 35-plus years away. A lot can change in 35 years.

27:30Benefits could be reduced. Eligibility could shift. The program could be restructured entirely. I have no idea what Social Security will look like in 2060. Neither does anyone else, no matter how confident they sound on cable news. So we build fire and coast fire as if Social Security doesn't exist. Think of it as your floor, not your ceiling. If you calculate that you need 1.2 million and you get there, and then Social Security kicks in with 24K a year, fantastic. That's gravy. Extra travel money, gifts for grandkids, whatever makes you happy. But if Social Security gets cut by 25 % and you were counting on it to make your plan work, now you're scrambling and you don't have the time to make up for it.

28:14So I'd rather you save assuming it won't be there and end up with extra than save assuming it will and come up short. One scenario means more vacations in your 70s. The other means you're back at work at 68. Now, another assumption is these numbers also assume you have nothing else. They assume you have zero other income streams, no inheritance, no pension, no rental properties, no side gigs or consulting work in retirement. And for most people, that's just not realistic. Odds are something else will show up. Maybe your parents leave you$80 ,000. Maybe you end up consulting a few days a month in retirement because you actually enjoy it and you want to be around people.

29:02Maybe you buy a duplex and the rental income covers your property taxes. All of that is great, but none of it should be in your baseline plan. Why? Because again, these are maybes, not guarantees. Your parents might need every penny for their own care. That rental property might have six months of vacancy. You might hate consulting and really want to retire and just play pickleball. So build your plan assuming you have nothing but what you've saved for yourself. If the extra income shows up, wonderful. That's margin. That's bonus. That's the universe being kind. But you don't need it. Your plan works without it.

29:49And that's the difference between security and wishful thinking. Now, let's get back to why I use 7%. This is your quick sidebar, and you probably noticed I keep using 7 % in all these calculations, and let me just tell you why. Historically, the stock market has returned about 10 % annually, but inflation eats roughly 3 % of that. So I use 7 % because especially in retirement calculations, I always want you to calculate these numbers in real terms, meaning actual purchasing power, not just numbers that look good on paper, but buy you less bread each year. Is 7 % guaranteed? No. Will some years be way higher and others lower?

30:39Absolutely. 2008 was brutal. 2021 was fantastic. But over 20 to 30 years, 7 % real returns is a reasonable conservative estimate. And don't worry, we'll talk about how to invest these returns in future episodes and we have in past episodes. But for now, just trust me, it's doable. To wrap up some of these calculations, here's how to actually calculate your number step by step. Enough theory. Let's try to make this practical. Here's your actual plan. Remember step one, we calculate our annual spending, not our income, our spending. You can look at your bank statements from last year. Add it up.