I've been thinking about something a lot of people get wrong when they talk about retirement. Everyone focuses on the big number, but most don't actually know how to work backwards to figure out what their personal magic number should be. After years working with clients on this, I realized the process is way simpler than people think.

Let me break down how I approach it. First, you need to get real about what you'll actually spend. The average American retiree runs through about $60,000 annually, but that's just a baseline. Your number could be higher or lower depending on your lifestyle, healthcare situation, and what matters to you. Don't just copy the average—use it as a starting point and then adjust.

Here's where most people miss a crucial piece: Social Security. I always tell clients to log into the Social Security Administration website and pull their actual estimates. In my own case, if I retired at 62, I'd get roughly $2,860 monthly, which works out to about $34,000 a year. That's income you don't need to pull from your savings. So if you're spending $60,000 and getting $34,000 from Social Security, you've got a $26,000 gap that your investment portfolio needs to cover.

Then comes the part that really clarifies your retirement number. There's this concept called the 4% rule that's been around for decades. The idea is simple: if you withdraw 4% of your portfolio annually, you've got a reasonable shot at not running out of money. Which means your portfolio needs to be 25 times whatever annual amount you need to withdraw. So take that $26,000 gap and divide by 0.04, and boom—you're looking at needing $650,000. That's your magic number for retirement in this scenario.

Put it all together and the process looks like this: estimate what you'll spend ($60,000), subtract guaranteed income ($34,000), then apply the 4% rule to that gap ($26,000 ÷ 0.04 = $650,000). Done. You've got your retirement target.

Now, here's the thing—this is a framework, not gospel. Your Social Security might be different. Your spending habits will probably change over time. Market performance, unexpected health costs, tax changes—all of that matters. The point isn't to hit some perfect number and call it done. It's to have a clear target you're working toward, which honestly takes a huge amount of anxiety out of the equation. Once you know what your retirement number actually is, you can stop worrying about whether you're saving enough and start focusing on whether your strategy is solid.

My advice? Pull your Social Security estimates, figure out your realistic spending, and work through this calculation. You might be surprised at what your actual magic number looks like. And if it feels overwhelming, that's exactly why this framework exists—to make something that seems impossible feel manageable. Regular check-ins matter too. Life changes, circumstances shift, and your plan should flex with that. But having that initial number gives you something concrete to build around. That peace of mind is worth more than you'd think.