Why a Sunday-Best Guess Is Good Enough to Start
Okay. New module. We've spent this whole course on accounts, where they come from, which one to fund first. Now we're switching gears to a question people ask me all the time, usually with a worried look on their face: how much do I actually need for retirement?
Here's the thing. I'm going to give you a way to get a number today, in this lesson, by hand. It won't be exact. It's not supposed to be.
I call this a sunday-best estimate. Not your worst-case number, not your best-case number. Just a decent, dressed-up guess, the kind you'd feel okay writing down and showing someone. That's the whole bar.
Why I don't wait for the "real" number
I almost didn't teach this class. Standing in front of a room isn't something that comes naturally to me, and the idea of it made my stomach turn for weeks before the first session. But I kept thinking about my first three years at Rockwell Mutual, when I wasn't getting my full employer match because nobody explained it to me and I didn't ask. Nobody sat me down. I just went along not knowing, for three years, because the real information felt like it lived somewhere out of reach.
That's what happens with the "how much do I need" question too. People treat it like something only a financial planner with a fancy calculator can answer. So they wait. They tell themselves they'll figure it out once they talk to someone, once they have more time, once things settle down. Meanwhile no number gets written down at all, which is worse than a rough one.
A rough estimate you actually use beats a perfect number you never calculate. I'd rather you have a guess on paper today than a perfect plan you never get around to making.
The estimate, step by step
Grab a piece of paper. Actual paper, not your phone. I'll explain why in a second.
- Write down your current annual spending. Not your income, your spending. If you don't know it off the top of your head, look at three months of bank statements and average it. Round it. This isn't the lesson for precision.
- Multiply that number by 25. This comes from the idea that if you have 25 times your annual spending saved, you can generally pull about 4% a year and have it last. It's a rule of thumb, not a law of physics, but it's a solid starting point.
- Write that final number at the top of the page. That's your sunday-best target. Circle it if you want. I do.
That's it. Three steps. I told you it wouldn't take long.
Why paper, not a spreadsheet
I keep a handwritten ledger going on eighteen years now, and I still think the pen does something the screen doesn't. A spreadsheet lets you not feel the number. You type it, it sits in a cell, you scroll past it. Writing it by hand, in your own handwriting, in a size you chose, makes it land differently. You can't scroll past your own writing the same way.
I'm not saying throw out your spreadsheets. I'm saying do this one exercise on paper at least once, so the number actually sinks in before you go build the fancier version.
What this number is not
It's not guaranteed to be right. Nothing about the future is guaranteed, and I'd tell you that even if it made the lesson less tidy. Inflation, market returns, how long you live, whether your spending changes in retirement, all of that moves the real number around. This estimate ignores almost all of it on purpose.
It's also not going to account for taxes on withdrawals, healthcare costs that might jump later in life, or a mortgage you might still be paying off. We'll get into some of that in later lessons. For now, this is a starting marker, not a finish line.
One caution worth saying plainly: don't let this number talk you into panic or into complacency. If it's way bigger than what you have saved, that's information, not a verdict. If it's smaller than you expected, don't relax completely, either, because a rough estimate can be rough in either direction.
Small amounts still count
If your sunday-best number feels enormous compared to what's in your accounts right now, that's normal. Almost everyone's first reaction is some version of oh my heck. You don't have to fix the whole gap this afternoon. Small amounts count, and you don't have to fix it all at once. This module is going to walk through how to turn that big number into something you can actually work toward, piece by piece.
Before next time
Do the three-step math on paper before our next session, even if it's messy. Bring the number with you, circled or not.