Your Retirement Number: How to Know What “Enough” Really Means

Allan Malina

Retirement planning often begins with a deceptively simple question:

How much money do I need to retire?

You may have heard $1 million. Or 10 times your salary. Or some other benchmark tied to your age.

Those numbers can be useful reference points, but they don't answer the question that matters most:

How much do you need to support the life you want to live?

Your retirement number depends on your spending, Social Security benefits, pension income, taxes, healthcare needs, investment resources, longevity, family responsibilities, and—perhaps most importantly—what you actually want retirement to look like.

At Servus Capital Management, we believe retirement planning should begin there.

Not with someone else's number.

With your life.

Retirement Is a Lifestyle Decision Before It Is a Math Problem

Consider two families approaching retirement in Central Virginia.

One couple wants to travel several times each year, help pay for their grandchildren's education, give generously, and maintain their current home.

Another couple envisions a quieter retirement in Forest or Bedford County. Their mortgage is paid off, they expect to travel occasionally, and their anticipated expenses are relatively modest.

They could have similar incomes today and yet need dramatically different amounts of money for retirement.

Neither couple is necessarily planning incorrectly.

They're simply planning for different lives.

That's the weakness in trying to answer a personal retirement question with a universal savings target.

The better approach is to define the life first and then determine what financial resources are necessary to support it.

Start With the Retirement Income Gap

At its core, retirement-income planning can be organized around a straightforward calculation:

Annual Retirement Spending
− Reliable Retirement Income
= Income Your Portfolio Must Provide

Suppose, for example, you determine that you want $80,000 of annual income to support your retirement lifestyle.

If Social Security and pension income provide $55,000, the remaining $25,000 has to come from somewhere.

That could include investment accounts, retirement plans, cash reserves, rental income, part-time employment, or other resources.

The objective isn't simply to accumulate the largest portfolio possible.

It's to understand what job your portfolio needs to perform.

Once that becomes clear, your retirement number starts becoming much more meaningful.

Step 1: Define the Life You Want to Fund

Before determining how much retirement will cost, consider what you're actually planning to do.

Your retirement budget might include:

• Housing, property taxes, insurance, and home maintenance
• Groceries and utilities
• Transportation
• Healthcare and Medicare expenses
• Travel and vacations
• Hobbies and recreation
• Dining and entertainment
• Charitable giving
• Gifts to children or grandchildren
• Financial support for family
• Large future purchases
• Home improvements or downsizing

Some expenses may decline when you retire. Others may increase.

That's why simply assuming you'll need a predetermined percentage of your current income can miss the point.

Instead, ask:

If I were retired today, what would it realistically cost to live the life I'm describing?

That creates a much stronger starting point.

Step 2: Identify Your Retirement Income Floor

Next, identify the income you expect to receive without relying primarily on portfolio withdrawals.

Depending on your circumstances, that might include:

• Social Security
• Employer pensions
• Government or public-sector retirement benefits
• Rental income
• Part-time employment
• Other dependable income sources

For Central Virginia families, pensions can be particularly important. Employees and retirees from organizations such as Centra Health, BWXT, Framatome, Liberty University, area school systems, municipalities, and other employers may have retirement benefits that need to be coordinated with Social Security and personal investments.

These income sources create what we might call your retirement income floor.

The greater the portion of your lifestyle funded by dependable income, the less your investment portfolio may need to provide.

But the amount isn't the only consideration.

Timing matters too.

When should you claim Social Security? When does pension income begin? Are there different pension elections available? What happens if one spouse dies? How does retirement timing affect the income plan?

Your retirement number should be evaluated alongside those decisions—not separately from them.

Step 3: Determine What Your Portfolio Must Accomplish

After estimating spending and subtracting your income floor, you have a clearer picture of the annual income gap.

For example:

Desired annual retirement spending: $60,000

Social Security and other reliable income: $40,000

Annual portfolio income needed: $20,000

Now the question becomes:

How much capital is necessary to reasonably support that $20,000 annual need?

This is where retirement planning becomes more complex.

The answer depends on factors including:

• Retirement age
• Life expectancy
• Inflation
• Investment returns
• Market volatility
• Taxes
• Healthcare expenses
• Future large purchases
• Legacy goals
• How flexible your spending can be

That's why the same $20,000 income gap could produce very different retirement numbers for different households.

What About the 4% Rule?

One commonly used shortcut is the 4% rule.

The general concept is that a retiree begins by withdrawing approximately 4% of a portfolio during the first year of retirement and subsequently adjusts withdrawals for inflation.

Using that simple calculation, a $20,000 annual portfolio-income need would correspond to roughly $500,000:

$20,000 ÷ 4% = $500,000

That's useful for understanding the relationship between income needs and portfolio size.

But it should not be confused with a personalized retirement plan.

Historical withdrawal research relies on particular assumptions about portfolio construction, retirement periods, inflation, and market returns. Your retirement won't necessarily follow those assumptions.

More importantly, life doesn't unfold at a constant 4%.

Markets change.

Inflation changes.

Tax laws change.

Spending changes.

Healthcare needs change.

And your priorities may change.

A withdrawal guideline can therefore be a useful planning reference, but the real objective is building an income strategy capable of adapting as circumstances change.

The Retirement Risk Many People Miss: When Returns Occur

Average investment returns don't tell the entire retirement story.

Imagine two retirees whose portfolios ultimately experience similar long-term average returns.

One encounters strong markets during the first several years of retirement.

The other experiences a major market decline shortly after retiring while simultaneously taking withdrawals.

Their outcomes can be very different.

Why?

Because once you're withdrawing money, the sequence in which investment returns occur matters.

Taking significant withdrawals from a declining portfolio can make recovery more difficult because fewer assets remain invested when markets eventually improve.

This is one reason retirement investing should not be viewed simply as an accumulation portfolio with withdrawals turned on.

The portfolio now has another job:

Help provide income while managing the risks associated with taking that income.

Taxes Matter Because Spending Money and Withdrawal Money Are Not the Same Thing

If you need $70,000 to live, you may need to withdraw more than $70,000 to produce it.

Why?

Taxes.

Retirement income may come from accounts with very different tax characteristics:

• Traditional IRAs
• 401(k)s and 403(b)s
• Roth accounts
• Taxable investment accounts
• Social Security
• Pension income
• Cash reserves

The source and timing of withdrawals can affect the amount you actually have available to spend.

This creates an important distinction:

Your retirement spending need and your portfolio withdrawal need may not be the same number.

That's why tax planning should be integrated into retirement-income planning rather than treated as a separate exercise.

Healthcare Deserves Its Own Place in the Calculation

Healthcare can become one of retirement's most significant expenses, particularly for someone leaving work before becoming eligible for Medicare.

Potential costs include:

• Health insurance before Medicare eligibility
• Medicare premiums
• Supplemental or Medicare Advantage coverage
• Prescription medications
• Dental and vision expenses
• Out-of-pocket medical costs
• Long-term care
• Assisted living or other future care needs

Long-term care introduces another planning decision.

Will you attempt to self-fund potential care?

Transfer some of the risk through insurance?

Use a combination of strategies?

There isn't one correct answer for every family.

But ignoring the question doesn't eliminate the risk.

A retirement number that funds everyday living expenses but leaves no room for healthcare and potential long-term-care needs may provide a false sense of security.

Your Retirement Number Should Include the Unexpected

A good retirement plan isn't built only for the year when everything goes according to plan.

Homes need repairs.

Cars need replacing.

Adult children occasionally need help.

Healthcare needs change.

Markets decline.

Inflation can make everyday expenses more costly.

Retirement planning should therefore distinguish between planned spending and financial resilience.

Having enough to meet next year's expected expenses is different from having a plan capable of navigating several decades of uncertainty.

What “Enough” Means Is About More Than Spending

There is another dimension to this question that spreadsheets alone can't answer.

What do you want your money to accomplish?

For some people, retirement means traveling.

For others, it's spending more time with family.

It might mean serving the community, supporting children and grandchildren, giving generously, pursuing meaningful work without depending on the paycheck, or simply having more control over your time.

At Servus Capital Management, we describe this as purpose-driven financial planning.

Money is a resource.

The purpose isn't simply to accumulate more of it.

The purpose is to use your financial resources wisely in support of the people, priorities, responsibilities, and opportunities that matter to you.

That changes the retirement question.

Instead of asking:

“Do I have enough?”

Ask:

“Do I have enough to support the life I'm actually trying to live?”

That's a much more useful question.

A Better Way to Find Your Retirement Number

Rather than beginning with a predetermined portfolio target, work through the decision in order:

1. Define your retirement lifestyle.

Where will you live? What will you do? What responsibilities and priorities will continue into retirement?

2. Estimate what that lifestyle will cost.

Separate essential spending from discretionary spending and identify expenses that may change over time.

3. Calculate your retirement income floor.

Identify Social Security, pensions, and other dependable income sources.

4. Determine the income gap.

Calculate how much your investments and other financial resources need to provide.

5. Account for taxes.

Determine how the accounts you own may affect the amount you actually need to withdraw.

6. Plan for healthcare and longevity.

Consider Medicare, insurance, long-term care, and the possibility of a retirement lasting several decades.

7. Stress-test the plan.

Consider what happens during difficult markets, higher inflation, unexpected expenses, or changes in your family circumstances.

8. Align the investment strategy with the income plan.

Your investment process should support the objectives and risks identified by the financial plan—not exist independently of them.

9. Revisit the number.

Your retirement number isn't something you calculate once at age 55 and never reconsider.

Life changes. Markets change. Your priorities change.

Your plan should change with them.

What This Means for Families in Lynchburg, Forest, Bedford County, and Central Virginia

National retirement benchmarks can provide context, but they cannot account for the circumstances of an individual Central Virginia family.

Your employer benefits may be different.

Your housing costs may be different.

Your pension may be different.

Your charitable goals may be different.

Your family responsibilities may be different.

And your vision of a meaningful retirement may be entirely different.

That's why determining whether you're ready to retire should ultimately be a personal planning exercise rather than a comparison exercise.

The important question isn't whether you've accumulated as much as someone else.

It's whether your resources and retirement strategy are aligned with your income needs, risks, responsibilities, and purpose.

Practical Takeaways

If you're trying to determine your retirement number, start here:

1. Don't begin with your portfolio balance. Begin with the life you're trying to fund.
2. Separate spending from income. Determine how much Social Security, pensions, and other reliable sources will provide before calculating what your portfolio must do.
3. Don't ignore taxes and healthcare. Both can materially change the amount of portfolio income required.
4. Treat withdrawal rules as planning references, not promises. Retirement requires an adaptable strategy.
5. Define what “enough” means for you. The goal isn't simply reaching a number. It's creating financial resources capable of supporting the life you intend to live.

So, How Much Do You Need to Retire?

There isn't a responsible universal answer.

You might need $500,000.

You might need $1 million.

You might need considerably more—or less.

The number by itself tells us very little without understanding the life that number is expected to support.

Your retirement number sits at the intersection of your lifestyle, income sources, investments, taxes, healthcare needs, longevity, family responsibilities, and purpose.

Once those pieces are organized, retirement stops being an abstract question about whether you've saved “enough.”

It becomes a planning question that can actually be answered:

What resources do I need to confidently support the life I want to live?

That is your retirement number.

Ready to Find Your Number?

If you're approaching retirement and aren't sure whether all the pieces fit together, Servus Capital Management can help you organize the decisions and understand what your retirement resources need to accomplish.

For families in Lynchburg, Forest, Bedford County, and throughout Central Virginia, the goal isn't to chase someone else's retirement number.

It's to understand yours.

Educational Disclaimer

This article is for educational purposes only and should not be considered individualized financial, investment, tax, or legal advice. You should consult with qualified professionals regarding your specific situation.

Purpose Driven Finances Podcast Episodes on this Topic

https://pod.co/purpose-driven-finances/your-company-retirement-plan-picking-investments 

https://pod.co/purpose-driven-finances/whats-my-number-retirement-edition