Calculating Your Retirement Savings Goal
What most of the households I work with want, when they ask "what is our retirement number," is not a calculator output. They want a defensible answer they can act on, and the confidence that the answer is right for their actual situation.
For most of the prospective clients I work with at Melby Wealth Management, the retirement number question has already been asked and partially answered. They have read the headlines, run a few back-of-envelope calculations, and arrived at a vague target that is either too high (and discouraging) or too low (and dangerous).
As a CERTIFIED FINANCIAL PLANNER® (CFP®) professional running a fee-only fiduciary firm in Nashville, my goal in writing this is to walk through how I actually arrive at a defensible retirement target for clients with real financial complexity. The Melby Money version of this post covers the consumer-facing framework. This piece is for the household that has more variables in motion than a simple 25x multiplier can handle.
The 25x Rule Is the Floor, Not the Answer
The 4 percent withdrawal rule, codified in the 1990s Trinity Study and refined many times since, is the starting framework for most retirement projections. For a household with a straightforward income picture, no equity comp, and a clear retirement spending estimate, 25 times annual spending (adjusted for Social Security) is a reasonable initial target.
For most of the clients I work with at Melby Wealth Management, the picture is more layered. The starting target is the same, but several adjustments are at play:
Higher tax brackets in retirement, which inflate gross spending requirements.
Equity compensation that has not yet been diversified.
Concentrated single-stock positions that distort the asset allocation.
Healthcare costs in the gap years between early retirement and Medicare at 65.
Pension or deferred compensation income streams with specific timing.
Real estate income, both productive and consumption-oriented.
Each of those variables can move the target portfolio by hundreds of thousands of dollars. A robust retirement projection accounts for all of them.
The Spending Estimate Is the Hardest Part
Generally speaking, the failure point in a retirement projection is not the math. The math is well-understood. The failure point is the spending estimate.
When I sit with a client to build a retirement plan, the conversation that takes the longest is the one about projected retirement spending. Most clients underestimate it, usually because they have never tracked their current spending in a meaningful way. A common pattern I see: a household earning $400,000 a year that has never sat down and added up the actual outflows, then assumes they can "live on $150,000 in retirement" because that is what feels right.
Sometimes that estimate is correct. Often it is not. The difference between a $150,000 spending estimate and a $200,000 spending estimate is $1.25 million in required portfolio. That is the kind of error that turns a viable retirement plan into a non-viable one.
Social Security Strategy Moves the Number More Than You Think
For higher-asset households, Social Security is often dismissed as a rounding error. That is usually a mistake, particularly for married couples.
The 2025 Trustees Report projects OASI trust fund depletion in 2033 with 77 percent of scheduled benefits payable thereafter, absent Congressional action. Even at a conservative 75 percent of projected benefit, a married couple can be looking at $55,000 of inflation-adjusted annual income from Social Security. At a 25x multiplier, that income offset is worth $1,375,000 in portfolio.
The claiming strategy matters too. Delaying the higher earner's benefit to 70 increases not only the lifetime benefit, but also the surviving spouse's benefit when the higher earner passes away first. For households with a meaningful earnings gap between spouses, this is one of the highest-impact retirement decisions to get right.
Where Professional Guidance Adds Value for This Topic
The 25x rule is accessible enough that any motivated reader can apply it. The work that justifies professional guidance is everything underneath:
Building the spending estimate from real data. Most clients are not in a position to do this rigorously on their own.
Coordinating tax-deferred, tax-free, and taxable buckets so withdrawals in retirement are tax-efficient.
Stress-testing the plan against sequence-of-returns risk in the early retirement years, where market losses do disproportionate damage.
Optimizing Social Security claiming timing for couples with unequal earnings histories.
Modeling Roth conversion windows in the gap years between retirement and RMDs.
Accounting for legacy goals (children, charitable) that change the required portfolio size.
For the consumer-facing version of this post, including the 15-minute exercise to run your own number, head over to Melby Money.
Worth saying clearly: roughly 71 percent of the people who schedule a first conversation with us have never worked with a financial advisor before. That is exactly who we work with. If you have been running the numbers on your own and want a second set of eyes on whether the plan holds up, that is most of our first conversations.
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About The Author
Shaun Melby, CFP® provides fee-only financial planning and investment management services in Nashville, TN through his company Melby Wealth Management. Shaun has over 15 years of experience as a financial advisor in Nashville. Shaun created Melby Money to educate the public about finances.
Full Disclosure: Nothing on this website should ever be considered to be advice, research, or an invitation to buy or sell any securities. Please see the Full Disclosure page for a full disclaimer.