I'll Be Ready to Retire When I Save $3.5 Million

Retirement is one of those milestones that seemed light-years away just 10 years ago. Now, it feels as if it's coming at me like a freight train. This is why I spent the time figuring out our retirement number.

For my spouse and me, that number is $3.5 million. While that might sound like a lot, it's not a number we plucked out of thin air -- it's rooted in a careful look at our current investment accounts, an understanding of the type of retirement we want, and the 4% rule that many retirement experts swear by.

Here's how we arrived at this number and why it feels right for us -- at least for now.

Why $3.5 million?

The 4% rule, a popular retirement guideline, suggests that you can safely withdraw 4% of your retirement savings a year without running out of money over a 30-year retirement. For us, that amount would generate $140,000 per year.

This amount isn't just about covering the basics. It's about living the type of retirement we want, filled with travel, new experiences, and freedom from financial worries.

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I don't know that we'll need quite this much money each year, but I worry about one of us needing nursing care in the future, health scares, and inflation. We'd also like to leave our kids with a nest egg that gives them a slight leg up in the world.

Factoring in healthcare

Healthcare spending is a wildcard in any retirement plan. While we have good health now, I know healthcare costs are likely to increase in retirement. That's why we've been contributing to a health savings account (HSA) alongside our other retirement accounts.

This tax-advantaged account is earmarked for medical expenses, and I plan to let it grow untouched until we need it. We also invest a portion of it, which allows the funds to grow even more. It's a comforting buffer that helps me feel confident about our $3.5 million target.

Why I don't count Social Security (yet)

You might have noticed my calculations don't consider Social Security retirement savings. That's on purpose. We've heard for years that it won't be around by the time we retire.

I suspect it will be, in some capacity, but at age 40, I've got a long way to go. I'll reevaluate my numbers once we're closer to retirement and have a better idea of whether it will pay and how much we'll each receive. I'd rather be a little conservative on my numbers and save a little more than I need.

But I also don't want to waste my life working for money I never have time to spend. Which brings me to my next point.

Taking our foot off the gas after 55

We plan to roll back savings efforts after the age of 55. By that point, our savings should have reached a point where the compounding interest does the hard work. Our contributions will be drops in the bucket compared to the growth.

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This will allow us to scale back at work; perhaps we'll go part-time or take on lower-paying passion projects. We'll have to figure out what to do for insurance if neither of us has a full-time role, and we'll still need to cover our daily living expenses. But we should be able to spend more time traveling and doing things we enjoy rather than chasing a paycheck.

It's a few years off, so I have time to think about what I want my life to look like, but we don't plan to work ourselves to death for retirement savings. We're both very aware that life is short and retirement is not a given. I don't want to trade my todays for uncertain tomorrows.

My number isn't set in stone

Saving $3.5 million is a big goal, but it's also a shared one. My spouse and I are in this together, and we've mapped out a path that feels achievable. By sticking to our plan, leveraging tools like our HSA, and letting our investments grow, we're confident we'll get there.

But our number isn't set in stone -- as our lives change and we get closer to retirement, I'll be reevaluating. I suspect (and kind of hope!) that this current number is a little too high. But, for now, I feel like we have a good balance. We're saving and also enjoying life, which feels good.