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How much do I need to retire?

When thinking about financial freedom and retirement, we often forget why we want to free up our time.

One of the best exercises is to create your ideal day and see how much it costs. 

Here’s mine:

  • 06:30 AM: Wake Up
  • 06:45 AM: Meditate
  • 07:15 AM: Read/Write
  • 08:00 AM: Take kids to school
  • 08:30 AM: Play golf
  • 12:15 PM: Workout with a friend
  • 01:30 PM: Picnic lunch with wife
  • 02:15 PM: Pickleball with wife/friends
  • 03:30 PM: Pick up kids from school
  • 03:45 PM: Snack/Homework Help
  • 04:30 PM: Play
  • 07:00 PM: Family Dinner
  • 07:45 PM: Build a Fire
  • 08:00 PM: Family Dessert (s’mores)
  • 10:00 PM: Fall asleep reading
determine how much it costs to have your ideal day 

For me, 11 of the 15 parts of the day are free. The remaining is $49:

  • Play golf: $35
  • Lunch: $5 (groceries)
  • Dinner: $8 (groceries)
  • Dessert: $1 (groceries) 

For me, a years worth of ideal days costs me $17,885 ($49×365).

The Equation

Add your annual ideal day cost to your:

  • Annual Living Expenses (mortgage, insurance, car payments, gas, taxes, etc.)
  • Annual Travel Budget (for the really ideal days)
  • Annual Savings (college fund, etc.)

Now you will have a good idea of how much you need per year in order to retire.

Now, multiple your yearly number by (100 – retirement age goal). This gives you the TOTAL amount needed, assuming you live until 100.

Now it Gets PErsonal

Congrats! You have your total amount needed in order to retire: the magic number!

This is where it becomes very circumstantial on when you can actually retire. It depends on your age, your health, passive income level, investment portfolio, risk tolerance, debt, among other factors.

Two people of the same age, who both have $6M as their magic number may be a decade (or more) apart on their ability to retire.

Don’t forget about your ideal day

It’s easy to get lost in the magic number. To get lost in spreadsheets and what-if’s.

Don’t forget your why. Don’t forget about your ideal day!

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