How much money do you really need to retire?

$2 million? $5 million?

The problem with those numbers is simple: whose retirement are we talking about?

Two people can have identical portfolios and need dramatically different amounts depending on their spending, Social Security, pensions, housing, taxes, retirement age and other income.

In this episode of Retire Free, I show you a simple four-step framework for finding your retirement number:

1. Estimate your annual retirement spending

2. Add up your reliable income — Social Security, pensions, annuity income, etc.

3. Subtract that income from your spending to find the gap

4. Divide the gap by an appropriate withdrawal rate

That's the basic math. How Much Do You Need To Retire …

Then we look at a hypothetical couple spending $200,000 per year with $45,000 of Social Security income. Their portfolio needs to cover roughly $155,000 annually, putting their target near $3.9 million at a 4% starting withdrawal rate.

Reduce spending to $180,000, however, and the target falls to roughly $3.4 million.

A relatively small lifestyle change moved the retirement number by approximately half a million dollars. How Much Do You Need To Retire …

We also cover:

• Why the 4% rule is a starting point, not a guarantee

• How Social Security fits into the calculation

• Why $4 million in a pre-tax 401(k) isn't $4 million of spending power

• RSUs, stock options and company-stock concentration

• Healthcare costs

• Why you should stress-test retirement against bad markets, inflation and longevity

• What to do if you're 5+ years out, 2–3 years out, or already retired How Much Do You Need To Retire …

Your retirement number isn't somebody else's headline. It's the number that supports the life you actually want to live.

Learn more at Freedom Day Wealth Management.

Freedom Day Wealth Management

More Than A Finish Line.

Educational content only. This is not individualized investment or tax advice.

Hey, folks.

Welcome to another episode of Retire Free, here on Exit Rich, Retire Free.

This, of course, is a show for those of you out there that are trying

to plan retirement and trying to figure out how to reach what you

call or what I call freedom day.

So on today's show, we're going to talk about the magic number.

How much do you really need to retire?

The funny part is, if you watch the financial press, if you talk to your

buddies at the coffee shop, if you talk to the folks around the water cooler at

work, if there is that anymore everybody's going to have their own opinion, and truly

it does differ with every single person.

When I watch the financial news and read the financial news, every

few months, a headline tells you the number you need to retire: two

million dollars, five million dollars.

And every time, I s- think the same thing: whose number is that?

Nobody lives on an average.

So today, I'm going to give you a number.

I'm going to give you a way to find yours, and it fits onto the back of an envelope.

This is not that complicated.

So picture two executives at this point with the exact same portfolio.

Each of them spends $120,000 a year.

The other…

or one of them spends 120 grand a year.

The other one spends 300,000 a year.

One has a pension, the other does not.

One has a paid-off house.

The other is carrying a mortgage into their 60s.

Same balance, completely different retirements.

So the first question is not how much do I need?

The first question is how much do I want to spend, and how much

of that is going to be covered by something other than my portfolio?

That one change turns a mystery into arithmetic.

Your retirement number is just the size of the portfolio, that can

fill the gap between your spending and your guaranteed income for as

long as you are likely to need it

So here's the framework.

Step one, estimate your yearly spending in retirement, including taxes.

Then skip, or then step two, list the income that shows up

no matter what the market does.

Things like Social Security, pensions.

If you have an annuity that's gonna generate an income

stream, include that as well.

Step three, subtract the second from the first.

So subtract your guaranteed income from what you need.

That's the gap the portfolio has to fill every year.

Or step three, you're gonna subtract that, and that's the gap that it has to fill.

Step four is you're gonna divide that gap by the withdrawal rate, and

you get the target portfolio size

Now let me show you with made up numbers.

A couple wants to spend $200,000 a year before taxes.

They expect about $45,000 a year from Social Security

combined, so the gap is 150,000.

At 4% withdrawal rate, which is a safe rate of withdrawal

150,000 or 155,000 divided by .04

gives you about 3.9

million.

At 3.9%,

it's just under 4 million.

So now watch what happens when you get honest about spending and decide you can

live comfortably on $180,000 instead.

The gap drops to 135,000, and the target falls to about 3.4

million.

A 10% change in spending moved the target by roughly half a million dollars.

That's why spending is the biggest lever in the entire plan, bigger than picking

the right fund, bigger than market timing

Now, one withdrawal rate that you hear is 4% rule.

It's a good starting point, not a guarantee.

Morningstar's 2026 research put a safe starting rate at 3.9%

for a 30-year retirement.

Fidelity talks about a range of 4 to 5%.

If you retire at 58, you may want to be lower because the

money has to last longer.

If you're flexible and willing to trim spending in a bad

year, you might go higher.

And on Social Security, be honest with yourself.

The formula is built to replace more than a, a lower earner's income

and less than a higher earner's.

For a senior executive, it often covers a modest slice of lifestyle, but it

is inflation-adjusted, which is good.

It lasts as long as you do, and it does not care what the market is doing.

Go to the Social Security website and pull your own estimate.

It takes about 10 minutes

Now, one, the balance of your statement may not be the balance that you spend.

Uninvested RSUs or unvested RSUs, underwater options, shares locked

behind trading windows, they all look like wealth on paper, but they carry

risk and usually a tax bill before they turn into spendable dollars.

Two, concentration.

If a big chunk of your net worth is one company stock, the one that

you work for, then your retirement number depends on one business.

A bad year at the wrong time changes the math fast.

And three is taxes.

Four million dollars sitting in pre-tax 401is not four million dollars of

spending power, because every dollar that comes out is ordinary income.

The mix of pre-tax Roth and taxable accounts matters

almost as much as the total.

The mistake I see most is guessing at spending instead of looking at

twelve months of real statements.

I hear this all the time.

Clients will come into me and I say okay, what is your--

what's your budget monthly?"

I think I spend around three thousand dollars."

"Okay, then you would have eighteen million dollars of savings at

this point if you only spent three thousand dollars and you make

two hundred and fifty a year."

So we know that's not right.

I make them go back and actually write down a budget of exactly what they spend.

That helps us get started from where we began.

You gotta treat your-- you gotta tell yourself the truth at the beginning.

Second is treating healthcare as just a footnote.

When Fidelity estimates a couple retiring at sixty-five, they're gonna need around

three hundred and forty-five thousand dollars after tax throughout their

life, and that doesn't even include long-term care counting uninvested equity

as if it were cash, and never stress planning or stress testing the plan.

What if the first five years of returns are weak?

What if inflation runs hot?

What if y-will you live to ninety-five?

You don't need to pass every test with room to spare or…

But you do need-- you should know if one breaks the plan,

what are you gonna do about it?

So if you're five or more years out, you want to start tracking your spending.

Pull your Social Security estimate, run the four steps at a couple of withdrawal

rates, and if you are two or three years out, build a real month-to-month

budget for a year, one that you know will cover the first few years.

If markets are down, if you're already retired, revisit the number once a year.

As I tell my clients, a good plan is the one that you follow when

the market's and the news is scary

So if you want help working out your own number alongside your equity compensation

and your timeline, that's exactly what we do here at Freedom Day Wealth.

The full write-up with sources and everything regarding this

is also on FreedomDayWealth.com.

I'll include that in the show notes the link to the blog article for this.

And I'm Jeff Kikel, exit rich, retire free.

This is for education and not investment advice, but if you'd like to talk through

your own plan, you know where to find me.

Thanks a lot, and we'll see you guys back here the very next time