Calculating Your Retirement Number

Your Number Is Not $1 Million

Everyone has heard the retirement milestones: “You need a million dollars.” “Save 25 times your annual expenses.” “Follow the 4% rule.” These are decent starting points. They’re terrible ending points.

Your retirement number depends on your life — and no two lives cost the same. That’s where AI comes in: it takes your actual inputs and produces your actual number.

The Retirement Number Prompt

This is the foundation prompt for your entire retirement plan. Take 10 minutes to fill it in honestly:

Help me calculate my retirement savings target.

My situation (all numbers anonymized):
- Current age: [X]
- Target retirement age: [X]
- Current annual spending: $[X] (approximate)
- Current retirement savings: $[X] (all accounts combined)
- Monthly retirement contributions: $[X]
- Expected Social Security (estimate from ssa.gov): $[X]/month
- Pension or other guaranteed income: $[X]/month or none
- Housing: [own with mortgage / own free and clear / rent at $X/month]
- Location: [city/state — for cost of living adjustment]
- Health status: [general assessment — healthy, managing conditions, etc.]
- Desired retirement lifestyle: [similar to now / more modest / more active]

Calculate:
1. My estimated annual spending in retirement (adjusted for housing changes,
   healthcare additions, and lifestyle goals)
2. The total savings I'll need (accounting for inflation at 3%)
3. What Social Security and any pension cover
4. The gap my savings need to fill
5. Whether I'm on track at my current savings rate
6. What adjustments would close any gap (save more, retire later, reduce spending)

Assume: 7% average annual return before retirement, 5% during retirement,
3% inflation, plan to age 95.

Reading the Output

AI will produce a structured analysis. Here’s what to look for:

✅ Quick Check: Why does the prompt use 7% before retirement and 5% during? Because investment allocation typically shifts from growth-oriented (higher stock allocation, higher expected returns) to income-oriented (more bonds, lower volatility, lower expected returns) as you approach and enter retirement. Using a single return assumption overstates growth during retirement when your portfolio is more conservative. The split reflects how most financial planners model the two phases.

The Variables That Matter Most

Not all inputs affect your retirement number equally. Here’s what moves the needle:

1. Annual Spending (Biggest Impact)

Your spending determines how much you need more than any other variable. Reducing annual spending by $10,000 reduces your retirement target by roughly $250,000 (at a 4% withdrawal rate).

AI prompt for spending analysis:

Help me estimate my retirement spending. My current spending is
approximately $[X]/year. Adjust for retirement:
- Remove: commuting costs, work clothes, payroll taxes, retirement contributions
- Add: healthcare ($X estimate), more travel/leisure, potential home maintenance
- Adjust: lower/same/higher food budget, entertainment, gifts

What's a realistic annual retirement spending estimate?

2. Retirement Age (Second Biggest)

Each year you delay retirement both adds to savings and reduces the number of years you draw down:

Compare three retirement scenarios for me:
- Retire at 62 (early — need bridge insurance, reduced SS)
- Retire at 65 (standard — Medicare kicks in)
- Retire at 67 (full SS — maximum benefit)

For each: total savings needed, monthly income from all sources,
and the trade-off in lifestyle years vs. financial security.

3. Social Security Timing

When you claim Social Security dramatically affects your lifetime benefit:

The difference between claiming at 62 and 70 can be $1,000+/month for life. AI can model which strategy produces the most lifetime income based on your health and other income sources.

The Reality Check Conversation

Once you have your number, use this prompt:

My retirement target is $[X]. My current position:
- Savings: $[X]
- Monthly contributions: $[X]
- Years to retirement: [X]
- Expected Social Security: $[X]/month

Am I on track? If not, rank these options from most impactful
to least impactful:
1. Increase monthly contributions by $[X]
2. Delay retirement by [X] years
3. Reduce retirement spending by $[X]/year
4. Increase investment returns (adjust allocation)

For each option, show exactly how much it moves my projected outcome.

✅ Quick Check: Why is “reduce spending” often more impactful than “save more”? Because reducing retirement spending has a double effect: it lowers your target AND the money you don’t spend on lifestyle can be added to savings. Cutting $500/month in planned retirement spending reduces your target by ~$150,000 AND means you can save that $500/month now, adding ~$150,000+ in growth to your portfolio. That’s $300,000 of movement from one $500/month decision.

Key Takeaways

• Your retirement number is personal — it depends on your location, housing, healthcare, lifestyle, and income sources, not generic benchmarks
• Annual spending is the single most impactful variable; a $10,000 reduction in annual spending reduces your target by roughly $250,000
• Social Security timing (62 vs. 67 vs. 70) can mean $1,000+/month difference for life — AI models which strategy maximizes your lifetime income
• Always prompt AI for healthcare costs explicitly — they’re often 15-20% of total retirement spending and are commonly omitted from initial calculations
• The gap between your current trajectory and your target is a growth problem, not just a savings problem — compound returns do most of the work

Up Next: You’ll build an AI-powered savings strategy — finding extra money in your current budget, optimizing contribution allocation across account types, and maximizing employer matches.