How to Know If You’ve Saved Enough for Retirement (Use This $3M Nest Egg Rule)

Retirement planning doesn’t need to feel complicated. If you’re wondering whether you’ve saved enough—or how much you should have saved—this quick formula can give you a surprisingly solid starting point.

Step 1: Estimate Your Annual Spending in Retirement

The single most important number in your retirement plan is how much you plan to spend each year. No need for perfection—rough estimates are fine at this stage.

For example, let’s say your retirement spending is projected at $200,000 per year. This figure includes everything: housing, travel, healthcare, and taxes (yes, taxes still exist in retirement).

Step 2: Subtract Guaranteed Retirement Income

Now account for any predictable income streams you’ll have in retirement. This could include:

• Social Security
• Pension payouts
• An installment payment from the sale of a business or practice

In this example, let’s say your guaranteed income adds up to $80,000 per year. Subtract that from your annual spending target:

$200,000 – $80,000 = $120,000

This $120,000 becomes the gap you need your personal savings to cover each year.

Step 3: Apply the 4% Rule

To determine your rough savings goal, divide that income gap by 4% (0.04). This is a common, conservative estimate used by financial planners to estimate sustainable annual withdrawals from your retirement portfolio.

$120,000 ÷ 0.04 = $3,000,000

In this case, your retirement savings “nest egg” goal would be $3 million.

A Note of Caution

This is back-of-the-napkin math, not a replacement for a detailed retirement plan. But it’s a great way to quickly check if you’re in the right ballpark. And remember, the accuracy of your inputs (spending, income) makes all the difference.

Final Thoughts

If you’re unsure whether you’re on track—or want help refining your own numbers—feel free to reach out. I’m happy to offer a free call to walk through it with you.

📩 Just send me an email at Dan@forwardthinkingwm.com to schedule your complimentary session.

PS: Not sure what your spending will look like in retirement? That’s the first number to figure out. I’d be happy to help you start the conversation—email me anytime.