The Problem with Your 'Magic' Retirement Number
Calculating how much to save for a secure retirement has one major flaw: To do the math, you have to rely on averages. The problem? You aren’t average.


It is fashionable in the community of retirement advice-givers to talk about your “magic number” for retirement. That’s the amount of money you should accumulate by the time you retire so that your savings will last the rest of your life, or some fixed period, like your projected life expectancy.
This magic number is based on a number of assumptions, including your achieving certain average investment results over the long term. And perhaps that will work out. The stock market in which your savings are invested might hit the average return of the past several decades. And you might not live longer than average.
Planning for averages
Or maybe it won’t work. It is disconcerting to plan for “average” when you realize how average might work to your disadvantage.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Take this example: A small pond could average 3 feet in depth. You might plan to walk from one side to the other. You enter the water at the sandy beach, where the depth averages just a few inches. You take several steps toward the center of the pond with no problem. In fact, you can walk for another several yards without the water level rising to your knees. Then, the bottom starts to drop away. You find that as you approach the center of the pond, it is much deeper than 3 feet there, and as you keep walking you will be in over your head.
If you are wearing a flotation device, or you are confident in your swimming skills, you will make it to the other shore. Otherwise, in this pond of 3 feet average depth, you could drown.
Add guaranteed lifetime income to your retirement
Your goal, as always, is to develop enough income in retirement so that you don’t outlive your money. It is fine to put some of your savings into the market, with the hope that averages will climb higher than they have been for the past few years. If you develop a plan to create guaranteed lifetime income with a portion of your money, however, you may not have to depend on the market.
Social Security and pensions are the main sources of guaranteed income for many retirees. The other main way to create another source of guaranteed monthly payments is with the purchase of income annuities, which shift the risk of living beyond your average life expectancy, or the risk of below-market returns, to the insurance company backing the annuity.
Income annuities allow you to plan for all the stages of retirement: Early retirement, when you are looking to travel, babysit the grandkids and volunteer, followed by later in retirement when you might anticipate increased medical expenses and wish to stay in your home and avoid becoming a burden on your children.
To avoid the equivalent of drowning during retirement, forget the magic number based on averages. Instead, take control of your future by determining what income your savings will produce. That requires creating a guaranteed lifetime income strategy — your flotation device — unique to you.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.
-
Higher Summer Costs: Tariffs Fuel Inflation in June
Tariffs Your summer holiday just got more expensive, and tariffs are partially to blame, economists say.
-
Don’t Miss Alabama Tax-Free Weekend 2025
Tax Holiday Ready to save? Here’s everything you need to know about the 2025 back-to-school Alabama sales tax holiday.
-
New SALT Cap Deduction: Unlock Massive Tax Savings with Non-Grantor Trusts
The One Big Beautiful Bill Act's increase of the state and local tax (SALT) deduction cap creates an opportunity to use multiple non-grantor trusts to maximize deductions and enhance estate planning.
-
Know Your ABDs? A Beginner's Guide to Medicare Basics
Medicare is an alphabet soup — and the rules can be just as confusing as the terminology. Conquer the system with this beginner's guide to Parts A, B and D.
-
I'm an Investment Adviser: Why Playing Defense Can Win the Investing Game
Chasing large returns through gold and other alternative investments might be thrilling, but playing defensive 'small ball' with your investments can be a winning formula.
-
Five Big Beautiful Bill Changes and How Wealthy Retirees Can Benefit
Here's how wealthy retirees can plan for the changes in the new tax legislation, including what it means for tax rates, the SALT cap, charitable giving, estate taxes and other deductions and credits.
-
Portfolio Manager Busts Five Myths About International Investing
These common misconceptions lead many investors to overlook international markets, but embracing global diversification can enhance portfolio resilience and unlock long-term growth.
-
I'm a Financial Planner: Here Are Five Smart Moves for DIY Investors
You'll go further as a DIY investor with a solid game plan. Here are five tips to help you put together a strategy you can rely on over the years to come.
-
Neglecting Car Maintenance Could Cost You More Than a Repair, Especially in the Summer
Worn, underinflated tires and other degraded car parts can fail in extreme heat, causing accidents. If your employer is ignoring needed repairs on company cars, there's something employees can do.
-
'Drivers License': A Wealth Strategist Helps Gen Z Hit the Road
From student loan debt to a changing job market, this generation has some potholes to navigate. But with those challenges come opportunities.