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Calculate how much money you’ll need to retire

What’s your magic number for retirement? Grab a pen and write it down: $___.

Have you taken all of your expenses and spending into account? Are you aiming too high or too low?

Asking for a magic number was a trick. There isn’t really a single number. Financial well-being exists across a spectrum. In his book, “Money: Master the Game,” Tony Robbins defines five levels of financial achievement, from security to absolute freedom.

Take a look at Robbins’ definitions and put a check mark next to the level you would like to achieve. Consider your current financial situation, your aspirations and the number of years you have to work.

Financial security: You do not have to work to pay for the basics.

Financial vitality: The ability to meet your financial security and half of the cost of small indulgences and luxuries without working.

Financial independence: The interest from savings and return from your investments allow you to maintain your lifestyle without working.

Financial freedom: You have financial independence and two or three significant luxuries.

Absolute financial freedom: The freedom to live and give freely without worrying about money or working.

Now that you’ve selected a goal, let’s see what it will take to achieve.


How much money do you spend on basic necessities? You can get that figure right off of your budget. If you don’t have a budget, check out my last column at http://bit.ly/1NlfI4q.

Calculate the annual cost of basic necessities: Monthly cost $___ x 12 months = ___. Subtract from your annual cost any pension and Social Security income you expect and divide the total by 5 percent (a conservative return on investment). That number is ___. This is the amount of money you would need to accumulate to meet your basic security needs from the return on your investments.

You can download a worksheet here: http://bit.ly/MoneySavvyMN.


To reach financial vitality, consider how much you spend each month on nice-to-have items and how much you set aside for less-than-monthly expenses. Add that total to your basic necessities and repeat your calculation.


To figure your number for financial independence, add the cost of a few luxuries to your vitality number and repeat your calculation.

Absolute freedom

For the final levels, add all extra known and potential costs to your independence number, such as added luxuries, travel and charitable giving.

If you are on track, congratulations. If you need to make adjustments to your saving’s rate, start now. Accelerate savings by eliminating debt, cutting excess or unnecessary spending or take a second job to increase income.


Durango resident and personal finance coach Matt Kelly owns Momentum: Personal Finance. Visit his website, www.personalfinancecoaching.com.

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