The Six-Step Method

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The Six-Step Method to Determine Your Retirement Number

Use this six-step process to translate your retirement vision into clear numbers and a practical savings target.

Step 1 · Retirement Number 1

Annual Retirement Spending Estimate (Today's Dollars)

For the most accurate starting point, build your annual retirement spending estimate based on your real-life experience. Write down your current annual spending. Subtract spending that may decrease or disappear in retirement, such as mortgage payments, commuting costs, work-related expenses, and professional wardrobe. Add spending that may increase or appear for the first time in retirement, such as healthcare costs, travel, hobbies, and family support.

Current annual spending

Less: Spending that goes away in retirement

Plus: New spending in retirement

Current − Goes away + New —

Step 2

Adjust Retirement Number 1 for Inflation

Inflation is one of the most important and most overlooked factors in retirement planning. The purpose of this step is to adjust your annual retirement spending estimate from Step 1 to reflect future purchasing power. These calculations use a 2.5 percent long-term inflation assumption, but inflation can vary from year to year. Over time, inflation reduces purchasing power, which is why it is wise to review your retirement numbers regularly and update your assumptions as conditions change.

Years to retirement

Inflation factor (2.5%) —

Spending estimate × Inflation factor —

Step 3

Annual Retirement Income From Other Sources

The more income you receive from other sources, the less your savings will need to provide. Common income sources include Social Security benefits, pension payments, rental property income, part-time work or consulting income, and other income streams. For a personalized estimate, create a my Social Security account at ssa.gov and review your Social Security Statement. If you need a placeholder because retirement is still far away, use a broad planning assumption and refine it later.

Step 4 · Retirement Number 2

Retirement Savings Goal

This step converts your retirement spending plan into a clear savings target. First, calculate how much annual income your savings will need to provide. Then translate that annual income need into a retirement savings goal using the 25× planning rule. A common planning shortcut ties a 4 percent starting withdrawal framework to the 25× relationship; this is a baseline, not a guarantee.

Inflated spending − Other income —

Your Retirement Savings Goal

Step 5 · Retirement Number 3

Projected Value Of Current Savings at Retirement

This step estimates how much your current retirement savings may grow by your target retirement date. It does not include future contributions. Those will be incorporated when you calculate your monthly savings goal in Step 6.

Current retirement savings

Expected annual return

Current savings × (1 + r)^years —

Step 6 · Retirement Number 4

Monthly Savings Goal

This step turns your long-term retirement target into a practical monthly savings number. First, calculate how much more you need to accumulate by retirement. Then convert that gap into a monthly contribution that can help close it over time.

Savings gap at retirement —

Your Monthly Savings Goal

Coach's Note A large monthly savings goal can feel discouraging at first, but you usually have more than one way to improve the numbers. Consider increasing savings gradually rather than all at once, delaying retirement by a few years to significantly improve the math, reducing planned retirement spending by revisiting your lifestyle assumptions, pursuing higher returns carefully with risk management and diversification, or creating additional income streams during peak earning years or in retirement. Breaking a large goal into a monthly number makes it easier to act on. Most people find that once it is automated and built into the budget, it becomes part of the rhythm of everyday life.

About these numbers This calculator uses the precision formulas the book describes for use with a calculator. Results may differ slightly from the worked examples in Chapter 4, which apply rounded values from the inflation and monthly savings multiplier tables. The precision approach gives you the most accurate result for your specific years to retirement and return assumption.

For educational purposes only. This calculator is not a substitute for personalized financial, tax, legal, or investment advice. Consult qualified professionals before making decisions based on your specific circumstances.

Your 2026 Quick Reference

Numbers change every year. Your plan does not have to.

The Current Guidelines Snapshot brings together the 2026 figures readers reference most often, all in one place. Whether you are pinning down your contribution amount, checking a tax bracket before a Roth conversion, or planning around Medicare premiums, you will find it here. Bookmark this page so it is ready when you need it.

~Lynn