Why Your Retirement Number Should Reflect Your Life—Not Someone Else’s
You may have heard someone say, “You’ll need at least $3 million to retire.”
It sounds like a solid target, but does that number actually apply to you?
Let’s consider three very different individuals:
- Wang, 40, is a high-earning professional with a stay-at-home spouse and three kids in private school. His retirement goal is to travel, help his kids with college, and maintain a high standard of living
- Li, 60, is single, mortgage-free, and lives a modest lifestyle. She enjoys gardening, doesn’t plan to travel much, and has no financial dependents
- Chen, 55, has worked in the U.S. for decades but plans to return to his hometown abroad after retirement. There, the cost of living and healthcare are significantly lower than in the U.S
Should all three target the same $3 million retirement goal?
Absolutely not. Their lifestyles, family situations, and retirement visions couldn’t be more different.
The Truth: There Is No Magic Number
Retirement planning isn’t about hitting a universal savings target, it’s about designing an income plan that works for your lifestyle, goals, and location.
In reality, some people can retire comfortably on $500,000, especially if they have a pension in place and modest needs. Others may need $4 million or more to support the lifestyle they are accustomed to, travel habits, or extended family.
Rather than obsess over one number, focus on what truly matters:
Can your assets produce dependable income to support your lifestyle for as long as you live?
Step 1: Define Your Retirement Lifestyle
Start by asking yourself:
- Will I live in the U.S. or abroad?
- Will I maintain my current lifestyle, or will I spend more on travel, dining, and leisure in retirement?
- Will I work part-time, volunteer, or fully retire?
- Will I need to support adult children or aging parents?
- Will I have medical expenses and the cost of care accounted for?
The answers will determine how much income you’ll need and how long you’ll need it.
For example, Chen may need far less to retire in a country where $2,000 a month covers all expenses, including healthcare. On the other hand, Wang may need significantly more to sustain his family’s lifestyle, even after retiring.
Step 2: Estimate Your Expenses
A common rule of thumb says you’ll need 70–80% of your pre-retirement income. That may be true for some, but it oversimplifies reality. Retirement expenses can vary based on:
- What will the different stages of retirement look like and how much will I need at each stage?
- Housing (mortgage, rent, property taxes)
- Healthcare (insurance, long-term care, out-of-pocket expenses)
- Travel and hobbies
- Family responsibilities
- Inflation
If you’re retiring abroad, include foreign exchange risk and differences in medical care systems in your planning. Many expats enjoy a high quality of life at a fraction of U.S. costs, but this comes with legal and financial complexity.
For example, if your children remain in the U.S., think about how you’ll stay connected. That could mean budgeting for regular travel, keeping a home stateside, or coordinating extended visits? Structuring your life abroad involves more than just a passport, it takes thoughtful planning to balance global living with family ties.
Step 3: Map Out Your Income Sources
Once you understand your planned retirement lifestyle and how much you’ll spend, the next step is mapping out where that money will come from. Common income sources include:
- Social Security
- 401(k), IRA, Roth accounts
- Pensions or annuities
- Brokerage accounts
- Rental or business income – May provide consistent cash flow presently, though its dependability could decline when active management is no longer feasible.
Each income source comes with its own tax implications, so it’s important to plan around your net spendable income, not just gross withdrawals. The goal is to match guaranteed income to satisfy essential needs (with inflation considered) and use variable or market-based income for discretionary spending.
Step 4: Evaluate the Reliability of Your Investment Plan
Having a large retirement account is only part of the picture. Think about which part of these assets can deliver consistent, sustainable income.
Ask yourself:
- How is my money invested?
- How much of it is exposed to market fluctuations?
- Will I be forced to sell investments in a down market to cover bills?
For example:
- A 100% stock portfolio may have high growth potential in the long run but could drop 20–30% right before or after you retire. (its potential impacts are discussed in last week’s article regarding sequence of returns)
- A portfolio that blends stocks, bonds, and income-focused investments may have a lower rate of return but can potentially add more stability and income consistency.
Strategies like:
- The bucket approach (separating funds into short-, mid-, and long-term needs)
- The 4% rule (adjusted for today’s market conditions)
- Income flooring (covering essentials with guaranteed income)
…can help manage your retirement savings for increased security.
A key concept in retirement planning is “probability of success” how likely it is that your assets will sustain your income needs over 25–35+ years. Financial planners use tools that simulate thousands of market scenarios to estimate whether your plan is robust. Usually, if your plan shows an 85% and above probability of success it’s considered strong.
Step 5: Prepare for Life’s What-Ifs
Even the best plans need to account for surprises. Common risks include:
- Living longer than expected – Many people underestimate how long they may live, increasing the chance of outliving their savings.
- Healthcare and long-term care costs – Medical expenses are a leading cause of financial strain in retirement, contributing to 60% of personal bankruptcies.
- Sequence of returns risk – Early market declines can negatively impact withdrawal strategies. (See last week’s article for more details.)
- Tax implications or policy changes – Shifts in tax laws or government policies can affect retirement income and asset distribution.
- Currency fluctuations – For those retiring abroad
Planning to Retire Abroad? Take Extra Steps
If you’re thinking about retiring abroad, you’re not alone. Many immigrants and expatriates choose to return to their home countries during retirement, drawn by lower living costs and the comfort of a familiar community and culture.
But there are extra steps to take:
- Understand how U.S. retirement income will be taxed abroad
- Be aware of foreign bank account reporting requirements (FBAR, FATCA)
- Research on how to access healthcare, and whether Medicare will apply
- Consider currency volatility and political stability
- Ensure your estate plan aligns with local laws
- Ensure that your long-term care (LTC) policy will pay for out-of-country care
These factors can either increase your retirement security or create expensive surprises if not planned for in advance.
Final Thoughts: Build a Plan That Works for You
To retire comfortably and confidently:
- Define your lifestyle
- Understand your spending needs
- Build a reliable income plan
- Invest with care, stability, and long term growth in mind
- Plan for uncertainty
- And seek professional guidance when needed
Your retirement should reflect your values, your goals, and your circumstances, not someone else’s projections.
Wondering how much you’ll need—and how to make your income last?
Let’s have a conversation. Because the right retirement number isn’t a guess. It’s a plan.
Sources:
1. https://www.citizen.org/article/medicare-for-all-prevents-medical-bankruptcies/