Calculating a desired starting retirement balance

Boy, this is tough isn’t it? How to know what you need to retire on. I’m getting two wildly different numbers.

The Motley Fool says retire on 10X your ending income. Fidelity has my 401k, and their planner (online, and in-person discussion) arrives at a similar figure through a different means. They are reasonably in agreement with each other. I need roughly a 65% gain in my retirement balance.

Vanguard has my IRA, and their online calculator appears rather simplistic and seems to follow the 4% rule completely. If you want $X dollars per year in retirement, your starting balance will be 25X that (so that the withdraw is 4%).

There is about a $750,000 difference between those two targets for me, which is not a negligible sum of money.

What this means for me is, at 56, with a goal to retire at 65 (fingers crossed), has a noticeable impact on how much CAGR I need to strive for and thus the risk I take. Add in that I’m employed in tech with an 11 year old daughter (hello college in 6 years!).

At a time when I wonder if I can scale back the effort with a balanced fund, or a target date fund, I’m now doubting if I can do that, yet. In the next 7-10 years I am looking at an overall gain from 65% to 100% of my current balance.

It feels like I need a combination of “normal” market risk but with downside protection. (I don’t think I can handle another 35% loss, like last year). Anyone have thoughts on how you are approaching this type of thing?


It would seem logical that you should always start with determining the amount you will need in retirement and work backwards from there to determine the amount you need to save. Any other method, like the TMF method, is little more than a guess based on assumptions.

Absent a financial plan using something like the Monte Carlo* method, Vanguard’s tool is going to be most accurate of those you listed because it starts by asking the right question first - $X dollars in retirement - but is still way too simplistic by applying that 25x factor. is free and a lot of people here have used it. You might try it for a more detailed analysis. There are likely other free online monte carlo like functions.


Seems to me that understanding what your spending in retirement will be is a lot more important in knowing what you will need for retirement than what your current income is. Do the services suggesting you have a multiple of your current income have any basis in making that statement, like knowing what percentage of your current income you are spending, what percentage you are saving, how much of your current income you plan to spend in retirement, or what other sources of income you may have when you retire? If not, how are they making their prediction of how much you will need?

Well, this seems to start with a more realistic estimate, but again, it should be taking into account any other income that you will have in retirement, such as SS or pension income. It also should take into account any other accounts that you have, not just the IRA.

I would second @Hawkwin’s suggestion to use to do a more detailed analysis. Fidelity’s Full View planning app also has some useful scenario planning options.

In 7 - 10 years that seems completely doable, especially if you are still adding to your accounts. Compounding is your friend.

How does the 35% loss compare to how your portfolio performed in 2008/9, or even the market drop in 2020? The markets recovered from those drops. Do you think that the market won’t recover from this one?

Personally, I am continuing to rebalance to stick to my set allocation, as I did in the previous drops.



Hi @bjurasz,

You can play with various “models” and “simulators” but the bottom line come down to 3 very simple things that you need before you can play with those tools:

1. Retirement Income

2. Retirement Expenses

3. Retirement Income Shortfall

The first is your sources of guaranteed retirement income like a pension and Social Security. Things like rent income, royalties, dividends, interest, etc are not guaranteed and will fluctuate. I included them in my planning at 50% of value.

The expense side is every last cent you spend during a year. Included everything from taxes, groceries, fuel, rent, utilities, eating out, etc, etc. EVERYTHING!

The shortfall in the difference between the two. This is what your portfolio needs to supply.

The standard 4% planning number is applied to the shortfall. So if your shortfall is $50,000, you multiply $50K by 25 (4%) equals $1,250K.

Story: In 1996, we went to a professional, fee-only planner. He made a plan based upon a percentage of our income, as is the standard. It said we “might” be able to retire in 2016/17. “Might.”

I used the income/expense method. I knew every cent that we spent and looked at each category to decide:

  1. Will continue in retirement.
  2. Will be eliminated in retirement.
  3. Will increase/decrease in retirement.

We retired 6,505 days ago, in 2005. A full 11 years or more than the professional plan.

One of the most valuable tools that I used was the Lifetime Planner in Quicken. I used it for all our financial stuff from checking, savings, loans, mortgage and our investments. That way it had all the info in it to use. I added pension, SS, future one-time spending and other things.

If you use this approach, you need to insure you capture everything. Quicken helped with that by being able to look at all spending through credit cards, checks and cash. When we took cash from our savings account, it was “spent” as Misc in Quicken, so every cent was tracked.

Your retirement. Your risk.

You need to know it, inside and out.
Does that help you?

All holdings and some statistics on my Fool profile page (Click Expand)


I wonder if the Fool and Fidelity make assumptions about SS income. The Vanguard number is not 25x your needed spending, it’s 25x your spending after deducting SS and other pensions.

Look at some ballpark numbers. The internet says on average SS replaces 37% of pre-retirement income. The internet also says in retirement you need 75% of your pre-retirement income. So you need 75%, you get 37% from SS, leaving 38% from retirement savings. At 4% withdrawal, you need 25x but not 25x your full income, 25x of your required withdrawal of 38% of income. Let’s round to 40%. And 40% of 25x = 10x. Ta-da, Vanguard and Fidelity agree.

The take home message is that for something as important as this, you should look at your individual situation. For myself, I am going with 25x my projected spending needs after SS and pensions.


Byurasz - this is the key. The investment companies WANT you to invest with them, take more risk, pay the fees, whatever. So, @spinning 's one liner above is critical.

  • Figure out how much you’re just spending to live per month - mortgage, prop taxes, groceries (including alcohol), utilities, car payments, household, dining out, & miscellaneous - include TRAVEL! (A)
  • get from the SSA how much your payments will be at FRA and annually for the 5 years in advance (62.5, 63.5, etc.) (B)
  • are you going to get a pension? if yes, similar to B (annual starts). (C).
  • A - SUM(B + C) = your shortfall D (which will be different annually)
  • D / .04 = what you need for a “safe” retirement
    Then modify based on your individual circumstances: do you want to spend it all, or do you want to leave something? And, can you even project what end-of-life / nursing home / long term care requirements will be. You CAN change the asset allocation assumption to tilt toward growth.

FWIW - 10x my ending income would require selling my house and saving even more money with work through 65. And I’ve got a GOOD, well paying job. So, stop it. The above method says, for me, I could work part time doing ANYTHING I enjoy more / more socially redeeming value and leave the FT grind now - at 59 1/2.

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Hi @bjurasz,

I wanted to address this separately. I overcome this issue by cash management.

We keep a pool of cash in our savings account. I target an amount equaling 3 years of our income shortfall plus an adder for inflation and those “items that seem to appear occasionally. (10% to 15% extra)” I also add extra cash when I have a large expense to pay, like building this house.

Good example: In 2020, our portfolio more than doubled and in late October, we decided to move and build a new house. I sold portions of every growth stock position. When found found this place and made an offer, I moved part of the cash in Dec 2020 to our savings account. It was enough to buy our building lot but I was able to get a mortgage on the land for about 1/2 of the purchase price quickly without a lot of forms, investigations, etc. A few bills were paid for design, gravel, water, electric and telephone plus some to do things around our old place for “sale appeal.” In Nov 2021, I got the first of 16 monthly bills from the contractor, so far. (Almost all were “pay on completion”. Some had 50% down like for the shower glass and the pavers for the patios and walks.)

All that cash came from our Roth IRA’s and stock we sold mostly in 2020 and some in late 2021. Note that those were basically peaks.

Since retiring in 2005, we have managed that 3 year cash cushion. When the markets are doing well, I may trim a little or just move some dividend cash to the cushion to top it off.

Right now, our last cushion top-off was Dec 2021. Our longest period was from July 2007 to Oct 2010 between sales of stock to replenish our cash cushion. I did take some dividend cash from our taxable account. (Our IRA’s were still behind the 59 1/2 barrier (I did not want to do a 72(t) or other shenanigans))

So, bad times, feed off the cash cushion. Good times, add cash back to the cash cushion.

No monthly sales, quarterly sales or even annual sales.

Managing a cash cushion is easy and it completely removes the pressure to sell during terrible market times.

Imagine trying to build a house over the past year by selling stock every month. Just think about it! Our house might have cost us double the amount by doing that. Do understand that our plan to move/build was based on finances not the other way around.

Based on what I know now and have learned about cash management, I believe if I were planning on retiring tomorrow with our portfolio down like it is now, I might still go ahead and do it.

That gets back to my previous note about knowing your expenses and income.

The more you know and understand how this works, the easier it will be for you in the future to make decisions about retiring and spending.

Does that help you?

All holdings and some statistics on my Fool profile page (Click Expand)

PS: Here are some galleries of our project here.

General photos of the land and maps:

Construction: From bare grass on October 5, 2021 to current.

Shop Construction


I would point out, at current contribution 401(k) contribution levels of $22,500 for deferrals, plus catch-up contributions of $10,000 for those 60 - 63, $7,500 for those 50 - 59 or 64 and over, plus IRA contribution levels of $6,500 plus $1,000 for those 50 and older, you will have the ability to add a minimum of $385,000 to your retirement accounts from ages 56 to 65. (Indexing of the contribution and catch-up limits to inflation is likely to increase this amount.) That takes a big chunk out of the extra $750k that you are concerned about. So, if you aren’t already, I would suggest concentrating on maxing out contributions to your retirement accounts.



The cash cushion is a mental comforter. Mathematically, putting a significant portion of your portfolio into a cash cushion will actually result in a lower portfolio in the long run. Research Reveals Retirement Cash Reserve Strategies Don't Work (

In your specific circumstance, it worked out favorably. But unless someone else needs to finance 2 homes at once, will it work for them? On average, it doesn’t work out as well.

That said, there is a significant sleep at night factor. So, if the only way that someone feels comfortable in retirement is that they need to increase their portfolio enough to create a cash cushion that is outside of their 4% withdrawal rate, then they should do that. But they should also recognize that in the long run, they are likely to end up leaving less to their beneficiaries.


  • In 5th year of early retirement without a cash cushion, and even with market performance over the last year and initial withdrawals larger than 4% for living expenses over 5 years, still has a larger portfolio balance than at retirement

It is easy to concentrate on cash and not what really matters – People need to purchase food and pay rent. People need money to get such items all year long.

Most investment plans generate income (especially taxable). If that income is reinvested or used for food and rent the taxes are the same.

My suggestion is look at total cash flow now and total cash flow expected in the future. If you earn $10K and save $1K your income needs in retirement are likely less than $10K - - darn few retirees and still saving for retirement.

Out of blind luck or habit we kept records of how we spend money. When view retirement we economics we knew how much we spent on groceries, business clothing, savings, etc. Some expenses will go up in retirement. Some people want to travel more in retirement.

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First, thanks for all the input. Everyone.

My thing about the cash cushion thing is: is this not, in fact, market timing? How do you know when to start pulling cash out? How do you know when to start selling investments to rebuild the cash buffer that you pulled from?

This gets at the heart of the difficulty in using a standardized percentage or amount based on final income. Needing 10x your last income doesn’t tell you: is this gross or net? does it consider that a certain percentage of SS tax will no longer be necessary? does it consider how much you are saving from both your before- and after-tax income, whether 401s, 403s, Roths, bank accounts, I-bonds, etc.?

While working, if you are spending every dollar of your income without any of these things, it seems that you would need a lot more in retirement than if you were saving via any of these other instruments.


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Oh my! FINALLY another person here at TMF that has used and benefitted from Quicken Lifetime Planner!

I have been a Quicken user for ages (20+ years?) and I have relied on the Lifetime planner for quite a long time as DW and I planned our retirement. The calculations are all configurable (interest rates, tax rates, inflation rates, etc.) and it uses all of the current balances in your accounts to know about your savings and investments and spending.

What is amazing about the tool is that you can play what-if scenarios until your heart is content. It does not have a good reporting feature though, so I found that by downloading each year’s calcs into Excel I could create a beautiful spreadsheet that showed exactly year by year our spending, our retirement income and our pre-tax and post-tax retirement withdrawals.

It projects that we are good to go and will leave our kids with enough to bury us. :grinning:

I’d also like to add that it is very important to know you and your DW estimated lifespan. The numbers can be all over the place with estimating your age at death. I have always chosen the latest one to make sure that our plan is as conservative as possible.

I also went to Fidelity and met with a rep and we reviewed the results from the Fidelity Plan to the Quicken Lifetime planner and they were very similar. He validated that the Quicken Lifetime planner was as accurate as could be (and conservative) and I needed to hear that as a “second set of eyes” on our plan to be reasonably assured that it was as realistic as possible.

Best of Luck!


Hi @bjurasz,

Sure! In a way, it is market timing but then again, it isn’t.

It isn’t market timing in the traditional sense. I am not looking for a market top to sell and a market bottom to buy for trading.

I look for times when selling makes sense!

Let’s say you need cash to buy groceries. When do you sell:

  1. When stock in a company is down 30%?
  2. When it has made a new 52 week high 5 times during the last 10 market sessions?

I go with #2.

Option 1 is Bad times and option 2 is Good times. Actually quite simple.

The judgement part is do I actually sell at that point? Do I need cash? Is is better just let it alone?

Those are investing decisions that are always present.

Part of my portfolio program is a report I call Fool_Stats. It is what I paste into my profile after market close on every market day. Toward the bottom is a section called " 52 Week Highs today" If a stock we own makes a new high that day, it is listed. I keep the reports and it is a simple matter to look for a pattern of new highs.

A cash cushion is a tool. Nothing else. No magic.

My primary reason for it is to keep things simple for DW. She does not invest. She doesn’t do stock analysis. She doesn’t do portfolio management.

Every bit of planning I have done for retirement I have ever done has a primary goal of protecting her financially if I die.

Her pension is 100% to her. We could have reduced her benefit by choosing a percentage for me. All for her, none for me.

When I had a pension, I chose a 100% to her on my death. Reduced the benefit to me but gave her the maximum.

I use a cash cushion because she is comfortable with it. She knows where it is and can move money to checking. She nominally has up to 3 years after I die to read and implement my instructions in my “Letter from a Dead Husband,” a simple set of instructions to sell certain stock and to transfer cash when needed plus a variety of other financial things.

A tool to be used if it makes sense to you or ignored if not.

Does that help you?

All holdings and some statistics on my Fool profile page (Click Expand)


This is the “sell your winners, let your losers ride” strategy. I think historically this strategy provides lower returns over the long-term.

I also keep a [large] cash cushion in retirement. But not for timing purposes, just to reduce the number of decisions I have to make at any given time. I fully accept that keeping all that cash reduces my overall long-term return significantly.

Hi @aj485,

I have read a number of studies in both directions. I mentioned why I use this tool in the reply to @bjurasz above this one.

Not sure what this references. I paid cash to build this house and our previous house in 2005 when we retired, not 2 at once.

The only way I could do that is to eliminate market risk. Build the cash beforehand then spend it.

  • In the 17th year and 9th month of retirement with a cash cushion:

I will use the comfort.

All holdings and some statistics on my Fool profile page (Click Expand)


Hi @38Packard,

Agree with all you wrote.

It is also responsible for starting my Roth conversions which significantly changed our lives.

I am sure all the “non-conversioners” will now talk about taxes being the same either way but having more money by not converting.

In the chart of the planner, I always noted the growth of our taxable account. Those yellow line just arched up faster as the green and red IRA lines got shorter (Now aqua, lavender & green). I tried a number of things but it did not make much of a difference.

In 2010, I finally dug into it. I looked through the Income & Expense Summaries for each year. I made a spreadsheet and logged a few numbers from each of a set of years to find the trends.

Then it hit me like the proverbial ton of bricks, RMD’s. Our taxes more than tripled once RMD’s began. The proceeds were split between paying tax and the excess beyond our needs was dropping into our taxable account.

Then I read about the changes made regarding Roth conversions. I manually added a transfer from my trad IRA to my Roth in the planner plus a 15% tax payment. The RMD’s reduced. I added 4 more in the next 4 years and the drop in taxes was quite noticeable.

I continued to play with this and made a plan to do annual conversions. I split the amount by 10 and decided to do those conversions annually going forward. First DW’s accounts, then mine. Oct 2010 was our first conversion.

As we got closer to RMD age and did our annual conversions, the planner was reducing those “future taxes” to more reasonable levels, dramatically lower than the numbers in my spreadsheet.

I missed the start of my RMD’s in 2020 due to the change to 72. In 2022, I made my first and last RMD, finishing the conversion of my trad IRA a couple days later.

I reduced the taxes I paid by using highly appreciated stock in our taxable account as donations to charity to offset taxes due each year like Netflix (NFLX) up to $396/share donation value that had a cost basis of $3.08 per share. No capital gains and less tax. And I know exactly how the money is used for a volunteer fire department operations and an animal shelter operations in perpetuity.

You mentioned “conservative” plan which is what I always used. I used 8% annual growth for investments and 3.8% inflation leaving a 4.2% growth margin. I used actual expenses plus 10% to start. I later dropped growth to 6% for an “acid” test. If our plan could work at that level, I did not worry about the actuals. That is what gave me the confidence to retire.

Yes, Q Planner is a valuable tool!

All holdings and some statistics on my Fool profile page (Click Expand)


Hi @MarkR,

Yes and No. I mentioned this:

Example: I sold some of our largest position, Enphase Energy (ENPH) (over 20%) from $311 to $317 per share. It peaked at $339.92. I added some back at $220, $227, $206 and a little yesterday at $201.

Initially, I sold because it was over my portfolio guide lines for position size. I added back shares later because it is an outstanding company I believe has future growth potential.

Was I wrong to do that?

I didn’t gut the position. I sliced off a bit and left the remainder.

Here are the guide lines I developed over the years to manage our portfolio. They provide a framework that I consult to manage our portfolio:

Portfolio Guide Lines

1. No rule is absolute!

2. Invest for the long-term.

3. No fast changes.  Move slowly.

4. Keep position sizes in reason:
  A. Normal positions, 10% or less.
  B. Fast growers at 15% or less.
  C. Very fast growers can run higher.
  D. Very selectively sell for size.

5. Manage portfolio for 2 purposes:
  A. Dividend/Interest: Keep income stream at 150% of Income Shortfall or higher.
  B. Growth portion:  Manage for growth only.

6. Manage an adjustable cash position.
  A. Size between 5% and 15% of portfolio
  B. Possibly use bond funds for a portion of the cash position larger than 5%.

7. Know what I am investing in.


  1. To make cash: I normally do not sell until our portfolio or a security is setting new highs. I do not use any external factors/indexes. This is infrequent. I will sell for our cash position or to top-off our expense cash cushion which is outside of our portfolio.

  2. For company reasons: This can occur at any time, any market/portfolio condition. I might sell all or part of a position. Company buy-out, accounting fraud, difficult business environment for a longer term, etc. The investment thesis of company changes to a point I do not want the business.

  3. Position size exceeds portfolio guide lines: This is flexible based on the type of company (fast grower, blue chip, speculative, cyclical, etc) and how it is doing business-wise. I normally limit a position to 10%, 15% for fast growers and beyond if I believe it may have an advantage.

  4. Based on price targets if it is a trading position: Occasionally, I will add a position strictly as a short-term investment. More often, I will take a small portion of a long-term position and buy/sell that portion. This is the only buy/sell that I use price as a guide.

Selling considerations for withdrawals

  • When I am selling for cash to withdraw, I look for the weaklings. I manage our portfolio in two categories: Income and Growth.

  • The Income portion, dividend payers, I normally keep as they are, selling only for cause in rules 2 - 4 above.

  • The growth portion is what I use for sales. I want to retain the best growers. The weaklings are what I trim. I look for reduced earnings or other things that tell me the future growth may be lower.

For selling, I use no formula. It purely is a judgement of future potential, the same reasoning that makes me invest in a company. I reverse the reasoning to look for what I believe will be “the worst performer going forward.” It is not an exact science and I am wrong at times. The same applies when I buy something, it doesn’t always work perfectly. I get over it.

Does that help you?

All holdings and some statistics on my Fool profile page (Click Expand)


Well, if you are counting the cash as a part of your portfolio, then, yes it’s market timing. If you consider that your portfolio is only your investments, not cash, then it’s not market timing. But if you are keeping a 5 year cash cushion, then your total of cash plus your portfolio will need to be 30 times expenses, not just 25 times if you want to use the 4% rule.

You would use cash for all of your expenses.

That’s the tricky part. How do you decide to time the market to refill the cash? Which is why I consider holding a cash buffer to be market timing.


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You have a paid for house, which means money sunk into an asset that you have chosen not to access, plus you are paying cash for building another house.

No. There are lots of ways to leverage the equity either or both houses without eliminating market risk. You chose not to.

Your choice. The numbers would likely be a lot larger if you hadn’t.


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