How Much Do I Need to Retire?

Jan 25 / Matt Gray, CFP®
How much do I need to retire?” may be one of the most commonly asked questions among those turning their eyes toward retirement. I vividly remember the ING campaign from 2008 that catered to this common question with the “What’s your number?” advertisements that suggested something as complex as retirement planning could be summed up in a number.

Deciding which came first, the question or ING’s ad campaign may be the chicken and the egg debate, but defining a number may be more of an educated guess than a scientific pursuit. Additionally, this number may change based on how your goals change such as choosing an earlier retirement or wanting to move abroad when you leave the 9-5 grind behind.
Let’s evaluate some of the methods used to determine how much you need and which method is best based on your specific goals.

The 4% Rule

Pros: Easy to calculate, quickly provides a very rough estimate of what is needed.
Cons: Often is too simplistic, may result in living further below your means than necessary.

The 4% Rule is simply a calculation to determine how much income your portfolio can afford to generate each year with running out of funds. Ultimately, the idea was that if you take 4% or less of your portfolio out in the first year then adjust that amount by inflation each year, there isn’t a 30-year period of history you would have run out of money.

Unfortunately, as is often done on the road between academics and popular science, this was oversimplified and translated as taking 4% of the portfolio each year. You can probably see how a game of telephone has made this “simple rule” murky, at best.

That said, if you want a simple, tangible number to aim for to be able to retire, consider how much you need your portfolio to generate in income and then multiply it by 25. (Example: $50K per year time 25 would be $1.25MM).

Pure Annuity Model (AKA: Die With $0+ Model)

Pros: Great for Childfree people to leave nothing behind, live the fullest life, aggressive spending model.
Cons: Aggressive spending model (yes, this is good and bad), must prepare for longevity risk, vulnerable to prolonged downturns.

No one actually calls this the Pure Annuity Model outside of financial plannings NERDS (I’m a financial planning nerd…)! The interesting thing about this model is it is the most aggressive model but it is also the most frequently used by financial planners. I would even argue that most financial planners don’t know this is the model they are using.

This way of calculating how much you need is actually the less layman friendly version of the 4% Rule we just discussed! It answers the same question of “Based on my spending, how much do I need to not have negative money when I die?”. It really is the framework we use.

You can consider this the 4% rule but more interested in the actual cash flow numbers than the percentage of portfolio. There is a stronger consideration of things like taxes, alternate income sources, and other financial aspects beyond the portfolio and the income the portfolio would generate.

This model works well for people who are risk tolerant, are willing to buy insurance products, can moderate spending, or who are forced into retirement. It may not work as well for those trying to leave an inheritance, a significant charitable donation, or are particularly wary of running out of money.

Capital Preservation Model (AKA: Only Spend Growth model)

Pros: Builds in more of a “safety net”, allows the more conservative investors to feel comfortable, often allows for some splurge expenses, leaves money behind to be shared or donated.
Cons: Playing it this safe can lead to not spending for happiness (travel, helping friends, bucket list items), Money left over for Childfree folks.

This method of figuring out how much you need assumes that you want to have as much to give away as when you stopped working. Very simply, if you retire with $1 Million, you’d like to die with $1 Million.

This sounds like a very generous thing, in theory, and it is, but the little secret with this method is that inflation actually wears away the buying power of that $1 Million. If you could have bought a 4-bedroom house the year you retired, maybe it now only buys a 3-bedroom house.

Ultimately, this calculation means you are preserving the number of dollars you started with but not necessarily the VALUE of what you retired with. I bet you can’t guess the final calculation method…

Purchasing Power Preservation Model (AKA: Grow Portfolio model)

Pros: This allows you to grow your money in retirement to allow for the same VALUE to be passed on
Cons: Usually means you have a ton of money or live in austerity

The final model covered is the model of austerity! Not really, but this is more often used for people who are creating generational wealth. Maybe a previous generation started a business they wanted to keep growing and hand off to the next generation. Maybe someone came from a poor background and built considerable wealth and want to leave that to their kids while living simply.

Purchasing power preservation refers to needing to grow the value of the portfolio so that it maintains its economic power instead of just the dollar value.

Ultimately, this method is less common without a vision as to why someone wants to leave so much behind. Most people would opt to stop working earlier or live more lavishly. This is particularly uncommon for Childfree people because they often value freedom more than money and it is likely most of you wouldn’t pursue this method.


Hopefully, you see that the question of “How much do I need in my portfolio?” is a hard question to answer. It depends significantly on goals, lifestyle, needs, and wants. Your situation as a Childfree person is very different compared to “traditional families” and so your needs may vary. That said, if you want a target to aim for and to be in the right neighborhood, consider how much income you need from your portfolio and multiply by 25.

Want a better number that reflects you? Schedule a meeting with a Childfree Wealth Specialist®!