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!

Finance Books

Rich Dad Poor Dad by Robert T. Kiyosaki

Quote: “The rich focus on their asset columns while everyone else focuses on their income statements.”

Takeaway: Build passive income streams so you’re no longer reliant on a 9-5.

The Next Millionaire Next Door by Thomas Stanley

Quote: “Income is what you bring home today. Wealth is what you have tomorrow. And the next day. And the next day.”

Takeaway: There is a big difference between income and net worth. You do not need a high income to become a millionaire. Those who consistently live below their means, are weary of consumerism, and automate savings will turn into millionaires.

Unconventional Wealth by Mike Conlon

Quote: “I know that money isn’t the only source of happiness, but I can tell you that money can get you one of the most important gifts we have in this life – freedom!”

Takeaway: Mike Conlon is a self-made millionaire. He has built a business that provides affordable housing options for many Americans who need it. Mike’s enthusiasm for the industry and for wanting everyone to see that it’s possible comes through in this book.

The Four Pillars of Investing by William J. Bernstein

Quote: “With relatively little effort, you can design and assemble an investment portfolio that will prove superior to most professionally managed accounts.”

Takeaway: If you’re going to invest your hard-earned dollars in the stock market, you don’t need to know much. You don’t even need a financial advisor. Define your portfolio mix (domestic/foreign, stocks/bonds, small cap/large cap), get started and let it grow.