How Much Is Enough? Calculating Your “Work-Optional” Number
By Andrew Comstock, CFA®
One of the questions we often hear when we’re out and about is, “How much do I need to have to retire?” It’s such a straightforward question; however, there isn’t a one-size-fits-all answer. Many of our clients are eager to retire earlier than the typical retirement age of 65, and they seek a specific number to feel secure. We love to encourage them that our ultimate goal is to reach a financial state where work is a choice rather than a requirement. In other words, when do you reach that “work-optional” stage of life?
Unfortunately, just as everyone’s needs and objectives are unique to them, so too is the “The Number” they ask about. There just isn’t a simple answer. To find out, though, requires an in-depth analysis that dissects what income, lifestyle needs, and spending will look like up to and including the retirement years to arrive at a reasonable figure.
Here’s how we analyze what goes into determining the “Work-Optional Number.”
Tomorrow Starts With Today
Aside from “bucket list,” travel and some extra leisure spending, one’s basic lifestyle tends to remain fairly consistent, even after the working years are over. Your best indicator of future spending is how you spend today. How much you spend in retirement is the key factor in determining your Work Optional Number.
Follow these action steps:
Review current lifestyle spending patterns. These may be complex and include children’s expenses, current travel/leisure, education expenses, etc.
Be specific. Assemble monthly budgets, include annual and one-time expenses, and designate discretionary versus essential spending (and be honest about which is which!).
Acknowledge that certain expenses (e.g., tuition, the mortgage, kids’ activities) may disappear or change dramatically by retirement.
At the same time, some additional spending for other expenses may appear by retirement. We find that retirees spend more on eating out and less cooking at home or taking more frequent, longer, and more luxurious vacations.
You Don’t Need to Replace Your Full Income
There are misleading statements circulating online claiming that you merely need to accumulate a certain multiple of your current income to retire. The truth is that it’s more nuanced than this and requires a careful assessment of what your retirement income needs to cover and what it doesn’t.
Here are adjustments after retirement to consider:
Once you’re financially independent, you no longer have to save aggressively—if at all. No more contributions to a 401(k) plan or Roth IRA: you’ve crossed the retirement Rubicon from “accumulation” to “decumulation.”
Your post-retirement income needs typically decline with time. You may travel less frequently, your purchases for clothes and material items may lessen, and overall spending may decline by 30%. Spending tends to be highest in the first 10 years of retirement, but declines as leisure expenses are replaced by medical expenses during the following decade and then a bit more late in life.
Taxes may also look different in retirement, reducing income needs further. You’ll need to plan for how much of your income in retirement will come from taxable sources versus income from non-taxable sources. One thing that is certain is that once you stop working, payroll taxes disappear immediately!
The Moving Target: How Your Number Can Shift
At Beyond Wealth, we emphasize that financial planning is not a “set it and forget it” proposition.
Life happens. Lifestyles evolve. Tax laws, inflation, and healthcare costs all change and play a key role in determining if your initial (and subsequent) Number will be enough (along with a margin of safety).
This is why we strongly recommend regular plan reviews as the sixth step of our dynamic planning process, including stress-testing of retirement income projections and integrated strategies that address potential changes in a three-decade retirement span.
It’s About Preparedness, Not Perfection
As much as we all would like a crystal ball to see our futures, those don’t exist. But it isn’t necessary to hit a bullseye Number either. Any traveler or adventurer will attest that the only certainty in a journey is uncertainty. Being prepared for the unexpected and building a strategy that gives you flexibility and options in the face of a changing landscape is smart planning.
Doing so can provide a sense of confidence in your future and readiness for any challenges that arise, especially in uncertain markets and changing life stages.
Ready to Embark on Your Quest for Your Work-Optional Number?
The Beyond Wealth team focuses on the most efficient strategies to help you pursue your objectives and life aspirations with confidence and excitement. Our independent advisory firm offers an array of services (focused on our clients) to help pursue a confident financial future.
Our goal is aligned with yours: Connect your wealth to your life’s objectives and empower you to choose and follow the financial road that feels right for you and your family.
Are you interested in discovering what your Work-Optional Number is? Give us a call (913) 871-7980 or email andrew@beyond-wealth.com to schedule an introductory meeting and start on a better financial path toward your own vision.
About Andrew
Andrew Comstock, CFA® is Principal & Wealth Advisor at Beyond Wealth, a fiduciary financial advisory firm in Overland Park, Kansas, dedicated to empowering clients to make impactful financial decisions. Serving the Kansas City metro area, Beyond Wealth specializes in helping wealth-building professionals and business owners navigate life transitions. With a mission to provide comprehensive wealth management services, Andrew’s proficiency lies in leveraging his background in institutional investment management to create tailored investment strategies. He provides research-driven portfolio management, focusing on helping clients build wealth for key milestones, whether it’s buying their forever home, purchasing a business, or funding their children’s education. Alongside Brandy, Andrew combines comprehensive planning with a long-term investment approach, helping clients grow their wealth while enjoying life.
Andrew began his career in institutional investment management, managing portfolios for insurance companies, pension funds, and mutual funds. Inspired by a desire to make a more personal impact, he transitioned to advising individuals directly, bringing his passion for financial empowerment to Beyond Wealth. Known for his commitment to high standards and always seeking to grow and discover, Andrew is dedicated to delivering thoughtful, tailored strategies for his clients’ unique financial needs.
Andrew graduated from the University of Tulsa with a BSBA in Finance and obtained the Chartered Financial Analyst® designation. Active within his professional community, he’s a member of the CFA Institute, Kansas City CFA Society, and the Overland Park Rotary Club. Andrew is a past president of his Rotary club, served on the University of Tulsa’s Board of Trustees, and was the National Board President of the Alumni Association at TU. He is the Investment Chair for the Catholic Foundation of Northeast Kansas. Outside of work, Andrew is a devoted Chiefs, Royals, Sporting KC, and Everton fan who loves exploring KC’s vibrant restaurant scene, especially the BBQ hotspots. With dual citizenship in the U.S. and Ireland and experience living in Switzerland, he’s an avid traveler who’s visited 37 countries and counting. Andrew is also a proud cancer survivor, a perspective that reinforces his commitment to helping families feel confident about their financial futures while embracing the present. To learn more about Andrew, connect with him on LinkedIn.