Welcome, Reader. It's really so nice to have you.

Let's just forget the word retirement. Regardless of your age, one of your financial goals is to get your money working well enough to support you without the need for you to work.

In the financial world, we call this number the Financial Independence number, or "FI." The timeline for this is different for everyone. If you're 25 and hoping to be done obligatorily working by 40, your savings are going to be massive early on to hit that number. If you're a bit older and looking to retire after 67, hopefully you've been saving a bit since you started working and can rely on that nest-egg. Regardless, here are the numbers you need to know:

One year of you

What does it realistically cost you to live per year? You can reasonably assume this number to be your net income, unless, of course, you find yourself consistently in consumer debt (then increase this number). For the sake of our exercise, let's say you need $80,000 net to live your life per year.

Subtract mortgage, kid costs, retirement contributions, and any costs directly related to work (transportation, etc.)

Look at your expenses and remove anything that will no longer be applicable, such as your mortgage (maybe?), costs related to children that will go away, and your current retirement contributions. For our exercise, let's assume your annual expenses go down by 18%, moving our number to $65,600.

Add in healthcare and potentially long-term care

Before you get too excited, remember that healthcare costs go up for us as we age. According to Fidelity, the average retired couple today will spend about $12,400 per year on health costs. This is assuming the couple is on Medicare. So, for a single person, add back in $6,400, giving us a total of $72,000. (NOTE: Medicare and standard health insurance plans don't tend to cover long-term care. Consider getting long-term care insurance if you think you might want assisted living or in-home care).

Subtract Social Security if you're retiring after 60

Using an online calculator, I'm getting somewhere between $1,970 and $3,489 monthly based on our parameters. The amount is less if you retire at 62 and more if you retire at 70. Let's use $2,500 for our purposes today. Subtract $30,000 from the total for a total of $42,000.

What else will change?

Will you eat out more? Travel more? Buy a $70,000 RV? Help pay for your grandchildren's college? Live simpler? Sell everything and downgrade? Get real about how you want your life to change after you've wrapped up your obligatory work. I'll assume a $20,000 increase in costs due to travel, hobbies, and dining out expenses. This gives us a total of $62,000 annually. Please read this with a grain of salt and know that coming up with your retirement budget is HIGHLY PERSONAL and nuanced.

What's the FI number? One year of you x 25.

Multiply the total of $62,000 x 25. Another way to get to your FI number is to divide your annual number by 4%, or 0.04. Our total is $1,550,000. This chunk of dough will yield $62,000 per year, if you're withdrawing 4% from it annually. Many people see 4% as a safe bet for withdrawal without digging into the principal, assuming the stock market yields about 8% per year over time, with highs and lows.

Does this number freak you out?

Check this out: if you're 45 right now and you have $35,000 saved for retirement, start rocking $2,000/month and you'll hit the above goal within roughly 22 years. Remember how I earned an extra $2,000 in two weeks? This number is not out of reach. You just have to get super real and decide to reach your goal.

Alternatively, if you're 45 and have $350,000 invested, using the rule of 72 (72/interest rate = number of years for your money to double), your money will be worth DOUBLE when you're 55 if it's earning roughly 7%. This is without additional contributions. So, $700,000 when you're 55 and 1.4MM when you're 65.

It's time to get real about your situation and do the numbers. What is your number? Are you on track to get there? If not, how can you find a little extra income? Or, can you get creative in retirement and live a less-expensive life, without compromising your dreams?

Here are 3 investment tips for you today:

Max out your Roth IRA contributions each year. The max for 2025 is $7,000 or $8,000 if you're over age 50.

Then contribute to your invested Health Savings Account (these accounts are unicorns and are triple tax advantaged. You must use the money for health-related expenses, but, c'mon, when you're retired there shall be plenty). The max for 2025 is $4,300. To be eligible to open and contribute to a HSA, you must have a high-deductible health plan.

Then contribute to your standard taxable brokerage account for the remainder.

There are other ways to invest your money, such as real estate, businesses, and commodities. These avenues are considered higher risk and it's important to get some education before you start. But by all means, get that education. Your money works for you now.

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