How much do you actually need to retire? Finding your financial independence number.
If that question feels overwhelming or impossible to answer, you’re not alone. When it comes to retirement it often feels like there’s no clear target…just a vague sense that we should be saving more.
But when you know your number, everything changes.
The first time I calculated my financial independence number, everything shifted.
Before that, I was just saving because I knew I was “supposed to.” But I didn’t have a clear idea of how much I actually needed to build the life I wanted in the future. Once I found my number, it was like someone turned the lights on. I had direction. I had motivation. I had clarity.
Having a clear goal gives you direction. It helps you make smarter decisions with your money, because you’re not just saving but because you’re building toward something real.
This isn’t about perfection. It’s about having a starting point that helps you feel more confident and in control. Let’s break it down and figure out what your number might be.
We can calculate your financial independence number using the 4% Rule.
The 4% Rule is the financial principle that uses historical data to suggest that you can withdraw 4% of your retirement savings in the first year of retirement, adjusting the withdrawal amount each subsequent year for inflation, without running out of money in retirement.
For example, if you retire with a $1 million portfolio, you'd withdraw 4%, $40,000, in your first year. If inflation is approximately 2% that year, the next year you would withdraw $40,800, an increased withdrawal based on a 2% increase in inflation.
Based on historical data, this would make sure that you don’t run out of money in 30 years.
Right off the bat, I will tell you that you will see people challenging this rule all the time. You’ll hear financial pundits say “it should be 3%! We need to be conservative!” or “it should be 5%! 4% is based on outdated returns and assumptions.”
The reality is that because we don’t have a crystal ball, we can’t say for sure exactly which percentage will be right, but data says 4% is a really good place to start. You can always adjust from there.
It's important to view the 4% Rule as a flexible framework rather than a strict directive.
Each women’s financial situation is unique, influenced by personal spending habits, life expectancy, healthcare needs, and other obligations.
How to use the 4% rule to calculate your financial independence number.
The easiest way to use the 4% rule to calculate your financial independence number is to estimate how much money you want to have to cover your expenses or spending each year in retirement. Simply put, you need to figure out your annual estimated retirement spending per year.
Don’t overthink this! I suggest starting with a ballpark number.
For example:
Annual expense estimate = $70,000 a year. Considerations may include:
paid off house or downsized housing
money to travel
social security
inheritance
$70,000 *25 = $1,750,000 — your financial independence number.
My perfectionists are going to overthink the annual expenses number but remember, the power of calculating this number is to help you get on track to retire comfortably and to get you to take intentional action to get there. This number can and should adjust over time. You can also create a range if it helps with a minimum of what you’d be comfortable with and what you actually want.
Now once you have your number, WRITE. IT. DOWN.
A study published in the Journal of Applied Psychology found that writing down goals increased the likelihood of achieving those goals by 42% so seriously…write it down!
If you want a calculator and video explanation of this, grab the free mini-training here.
Limitations of the 4% Rule
Despite its advantages, the 4% Rule is not without its shortcomings.
The rule is based on historical data of market returns and inflation (things could change in the future.)
This rule also does not include the social security you will receive in retirement. Currently, social security is roughly ~$2,000/month on average as of 2024.
We also have to consider inflation, which is a pivotal factor in retirement planning. It erodes the value of money over time, which means that what you can buy with $40,000 today won't stretch as far in future years.
If we are using the 4% rule to estimate what we need in retirement based on our annual expenses, we should consider increasing our projected yearly expenses to account for inflation.
Another way to use the 4% rule? Use it to Coast.
Coast FI (financial independence) is actually the concept that gave me the clarity and the confidence to quit my job and dedicate my life to helping women learn how to invest.
It’s the point where you’ve already invested enough for your future so that even if you never put another dollar into retirement, your money would still grow to your full financial independence number by the time you need it. All because of compound interest is doing the heavy lifting.
When I realized I had hit my Coast FI number, everything changed. I no longer felt like I had to max out every account, hustle harder, or stress about whether I was saving “enough.” I had already done the hardest part. And from there, I could focus on building a life I actually wanted not just one that checked boxes.
How to Calculate Your Coast FI Number
If you’ve already calculated your full financial independence number using the 4% rule, you’re halfway there.
Let’s say your goal is to retire at 60 and live on $50,000 per year in retirement. That means your full financial independence number is $1.25 million (since $50,000 x 25 = $1.25M).
Now, instead of asking how much you need by retirement, Coast FI asks:
How much do I need invested today so it grows into $1.25 million by age 60 without adding another cent?
You can use a compound interest calculator like this one to do this.
Add up all your retirement account money (think everything in your 401k, Roth IRA, or brokerage if it’s earmarked for retirement.)
Input the total into the compound interest calculator where it says “initial amount”.
Put 0 for monthly contribution.
Input the amount of years until you want to retire.
Input ~7% as an estimate of future growth (average return of the stock market
If you already have enough invested in your 401(k), Roth IRA, or other retirement accounts to reach your FI number, you’ve technically reached Coast FI.
What that means is… you’ve bought yourself options. You don’t have to keep contributing if you don’t want to. You can downshift, pivot, change careers, take time off, or start something new without constantly worrying you’re falling behind.
For me, this was the moment I gave myself permission to make a change. I wasn’t financially independent yet but I was on track. And the math said I could coast the rest of the way.
You don’t need to be a millionaire today. You just need to know that your money is working for you while you live your life now.
Coast FI is proof that financial freedom isn’t all or nothing. You don’t have to wait until retirement to feel secure. You can build toward it while also creating more freedom in your life today.
What’s next
Navigating retirement need not be daunting. With the right tools and a bit of savvy planning, you can secure a future that's not just financially stable but also rich in possibilities and peace of mind.
Whether you're just starting to think about retirement or are looking for ways to optimize your existing savings, the 4% Rule and other strategic insights can help pave the way to a fulfilling and worry-free retirement.
Ready to learn more? Don’t miss my next free beginner investing workshop that will help you learn how to make the most of your hard earned money in the stock market. Learn more here.
