1. What is the Retirement Magic Number?

The Retirement Magic Number is a simple calculation that helps determine how many years your retirement savings will last based on your annual withdrawal rate. It's a quick way to assess the sustainability of your retirement plan.

2. How Does the Calculator Work?

The calculator uses the Magic Number formula:

Where:

• \( \text{Savings Needed} \) — Total retirement savings in dollars
• \( \text{Annual Withdrawal} \) — Amount you plan to withdraw each year in retirement

Explanation: The result tells you how many years your savings will last if you withdraw the same amount each year (not accounting for investment returns or inflation).

3. Importance of Magic Number Calculation

Details: Understanding your magic number helps with retirement planning by providing a quick estimate of whether your savings can support your desired retirement lifestyle.

4. Using the Calculator

Tips: Enter your total retirement savings and your planned annual withdrawal amount. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's a good magic number?
A: Generally, a magic number of 25 or more is considered good, as this would correspond to a 4% withdrawal rate (the "4% rule").

Q2: Does this account for investment returns?
A: No, this is a simple calculation that doesn't account for investment growth, inflation, or changing withdrawal amounts.

Q3: How does this relate to IRS retirement rules?
A: While not directly related to IRS rules, understanding your magic number can help with Required Minimum Distribution (RMD) planning.

Q4: Should I include Social Security in this calculation?
A: This calculation is typically for savings withdrawals only. Social Security would reduce your needed annual withdrawal amount.

Q5: What are the limitations of this calculation?
A: It's a simplified estimate that doesn't account for taxes, investment returns, inflation, or changing spending patterns in retirement.