What is the most important number to know when planning for retirement?

These two beautiful ladies are rescued elephants living in Thailand at the Phuket Elephant Nature Reserve. The real truth is they are retired. Both worked hard in their younger years, they came from the popular elephant tourism industry, like giving rides to tourists. These things are not illegal in Thailand; thousands of elephants are in captivity in Thailand and are part of legal tourist businesses and some are used for labor in legal logging endeavors. So, when you hear of rescued elephants in Thailand, it isn’t that the authorities swooped in and rescued them from illegal activity, it is usually that the owners could no longer afford them. The organization we visited, and others like it will use money raised through donations and buy elephants to rehome them, hopefully into better living conditions like what I got to witness. Ethical sanctuaries like this one will still allow tourists to come look, but no touching, or forcing the elephants to do anything they don’t want to do. It was up to us to stay out of their way, we were visitors in their home, a sort of retirement village for elephants, which is home to 6 rescued elephants. But what does this have to do with how you or I will retire? You might be surprised how similar our retirement concerns are to those of these big, beautiful beasts.

In the wild, Asian elephants live around 50 years. In captivity with veterinary care, they can live to be 60, 70 and in some rare cases even older! Most of the elephants I met were in there 30’s and 40’s so they have 20-30 years of retirement that needs to be funded. Did you know that elephants eat for 16 hours a day to get enough calories which is roughly 5 to 10 percent of their body weight? And when you weigh 3 or 4 tons, that is a lot of fruit, veggies and other vegetation every single day. Elephants that are domesticated and not allowed to graze freely in the wild, have to be fed, and that is extremely expensive. This is the main reason these elephants were available for sale. Their owners could no longer afford to feed them. This surged during the pandemic with no tourists to charge for rides or other entertainment, the elephants could no longer support themselves by earning income and for some owners the best solution was to sell them. Since the entire industry was affected, typical buyers were in short supply. According to the Save Elephant Foundation, over 3,500 elephants across 260 camps that were tourist businesses were at risk during the tourism shutdown, and with lack of food, were at risk of starvation. Organizations like Save Elephant Foundation offered support and food through farming projects, but not all the elephants in the tourist industry were saved. Luckily for the 6 elephants at the reserve I visited they no longer are in the workforce and get to eat, walk and bath whenever they want, even long after the tourism shutdown crisis is over. But just like these elephants' owners, not having a plan for when work stops suddenly, like an emergency fund or adequate savings, puts supporting yourself at risk. One thing the elephant owners never factored in was, how much does it cost to care for an elephant when they can no longer work? For us humans the same question comes up often, how much money will I need to support myself in retirement?

So how do we know what that number will be when we are many years, maybe even decades from retirement? It definitely is more guesswork the farther you are from the actual age of retirement. And let's be clear, if you are decades away, the biggest focus is to invest in tax advantaged accounts consistently, your money will compound over time to a much larger amount. If you are within a decade or less and have a good idea what your monthly budget is currently, the first number you need to know is what your desired income will be in retirement.

When I look at our basic or fixed expenses budget including housing, insurance, property taxes, food, utilities, transportation, medical costs, and any other necessary living expenses, I can get a bare minimum estimate of what I might want to have in retirement coming in each month. Once I have this number, adding in lifestyle spending like travel, eating out, entertainment, gifts, hobbies, etc., I can add that in to see what a comfortable lifestyle might look like. When we first estimated this a few years ago, I estimated $5,000 for basics and $3,000 for lifestyle for a total spending of $8,000 a month. It was more of a guess than from real knowledge, because when our financial planner asked for this number, it was the first time I had tried to separate what we spend today from what we might actually spend in the future when certain expenses might no longer be a factor. For you, this might be a car payment, a mortgage, helping your kids with college, or even current saving and investment contributions, for example. Since then, I have fine-tuned our real number and have more confidence in it than I did when I first estimated these amounts. However, my initial estimate will work great to show an example of what this example budget would need.

This is where it gets tricky. Many calculators don't account for possible taxes in retirement, and even worse do not factor in guaranteed income, or other sources you know you will have coming in. And that makes the portfolio number needed highly inaccurate. So, let's dig in together and work through it to try to make it more of a reliable result. For this example, I started with a popular financial personality and used his website. Ramit Sethi aims to teach people how to live a rich life now and in retirement by helping you define what your "rich" life looks like and how to create a conscience spending plan. His information is thorough and very helpful. I saw he has a retirement calculator and plugged in our hypothetical numbers. Putting in needing $96,000 a year or $8,000 a month of spending for a 30-year retirement window, it comes back with the simple 4% rule answer: $2,880,000. Now one thing I do like about this calculator, is it is estimating needing to produce an income of around $115,000.00 to have $96,000 to spend, so it does estimate for taxes. Depending on whether your retirement accounts are tax deferred or after tax would change things, but I like to estimate on the high side for safety, just not unrealistically too high. For comfort, starting with this pre-tax estimated amount is a really good starting point. But we can't skip the headline here - 2.9 million, really?

So, let's soak that in, yikes, almost 2.9 million needed to produce $115,000-dollar pre-tax income is a big number! That can be scary given that according to the Federal Reserve in 2022, the average amount of retirement savings for households aged 65-74 is $609,000 and the median savings amount is only $200,000. The same data shows that only around 2.6% of Americans have 1 million or more saved for in retirement. Does that mean that everyone else is living on really tiny incomes based on their portfolio amounts? Not at all! It is true that your retirement portfolio is extremely important and can make the difference between a retirement where you struggle and one where you prosper, but it is almost never the whole story. In fact, the average household retirement income according to the same source, the Federal Reserve, is $87,260. using the 4% rule just like the calculator did, assuming this is gross income, that would require a portfolio of $2,181,500, which is a very different amount than the actual average portfolio of $609,000. The question becomes, what are we missing?

The Federal Reserve data helps to fill in the rest of the story. They estimate that 80% of retirees have some source of private income, like from a 401k, IRA, savings or other personal account, so this does mean most people do have a portfolio which is what we are trying to uncover the needed amount of. However, 92% of retirees receive social security, which serves as guaranteed income for them. Another layer of information is that 47-54% of retirees have income from interest, dividends or rental income. And for older retirees, around 65% have some sort of pension. While that number is expected to get smaller for younger future retirees since most private companies have eliminated pensions, public employees still are earning and relying on pensions in the future. So how does that information effect you when estimating how big of a portfolio you will need to support you in retirement? That brings you to the second number you need to know when planning for retirement, and it is one a lot of articles and YouTube financial planning videos won't mention, that is your expected guaranteed income amount. Erin Moriarty from Erin Talks Money will very regularly explain why guaranteed income like Social Security needs to be factored in. She explains in her video posted in early 2026 titled "$3,000 vs $5,000 vs $10,000 a Month in Retirement - How Much Do You REALLY Need to Retire?", that it is important to use "data backed numbers, and not fear based numbers," to determine what you need to retire. I can understand why because those fear-based numbers can paralyze us and make us feel like we can never retire! And in most cases those big numbers are just not the reality of what is really needed.

Let's look at a more real-world example. Instead of using the Federal Reserve average income, we are going to dream bigger and use our previous example of $115,000 pretax income and assume some things about our example couple. This couple has the average household social security of $3,200 a month, and a pension of $1,000 a month for a total yearly guaranteed income of $50,400. That leaves a gap of $64,600 needed to be produced by their portfolio. Now they might have post tax accounts they can draw from like Roth accounts or might have tax mitigation strategies they have worked on with a tax professional or a financial advisor, but for this example we are going to assume it is all in a traditional IRA or from other pre-tax retirement accounts and use the pre-tax estimate from the calculator we used as the number they need the first year, adjusted for inflation annually. We are going to use the original safe withdrawal rate of 4% and also the updated safe withdrawal rate according to the creator of the 4% rule, William Bengen to get a portfolio range. We take the needed $64,600 gap amount and divide it by the estimated withdrawal rate. Let's start with the higher estimated safe withdrawal rate of 4.7%. Taking the $64,600 income gap divided by .047 gives us a needed portfolio amount of $1,374,468. Now let's use the more conservative withdrawal rate of 4%, which is the rate used in the calculator we found through Ramit Sethi's website. That would give us a slightly higher portfolio of $1,615,000. While it is bigger than the 4.7% estimated portfolio, it is still a lot less than the almost $2.9 million we originally thought would be needed. And if we take the average retirement income of approximately $87,260 with the same guaranteed income of $50,400.00 the gap is less, of only $36,860 a year, in that case a portfolio range of $784,255 to $921,500 would be sufficient based on a safe withdrawal rate between 4.7% down to 4% percent respectively.

Whatever your required or desired spending is in retirement, starting with what amount you want to have, minus any guaranteed income you expect to have will give you your personal retirement income gap, which ends up being the most important number you need to know for your retirement planning. I didn't stumble across this on my own, I learned it a few years ago while we were working with a financial planner on a comprehensive financial plan for our retirement. If you have not worked with a professional before I highly recommend it. If you have a workplace retirement account, or an IRA account, your account provider may give you access to one for no or little charge. They also might have more comprehensive online calculators and planning tools that take factors like retirement spending, guaranteed income, taxes and other information into account when estimating what portfolio size you will really need, and if you are on track or not for retirement. Guessing or taking internet averages is never the best way to proceed, it takes a personal more targeted approach to be confident. Having access to more comprehensive information from a planner is why I was surprised how many articles and videos don't mention guaranteed income at all, which is where the big multimillion dollar scary portfolio estimates come from.

What if you are actually on track to have a bigger portfolio than you might need? That is incredible and it just gives you more freedom to retire earlier or have a bigger income in retirement. It might mean you want to have a legacy plan for your heirs, or increase giving or spending now while you are working. It means you have more options and more freedom. The earlier you realize that the earlier you can dream bigger and feel confident that your plan is working. In the reverse, if you are behind, a professional can help you find you your best path forward to being adequately ready for retirement.

While knowing your potential income gap might be the most important number you need when planning for retirement, this is my own opinion and not to be taken as fact. You shouldn't apply my opinion or my estimations as actionable advice for your own situation. So, take this as a disclaimer, I am not a financial advisor, just a future retiree and retirement planning enthusiast. I recommend you seek your own professional advice and do your own research. I love sharing my husband and my journey with you and am very happy you are here! It is through conversations and learning other people's journeys that got me motivated to get on the active path to planning for retirement. My greatest desire is that the stories I share help inspire you to do the same. Until next time, be well and dream big!