How many times have you heard that you need a specific amount of money in the bank in order to retire safely? Or that you can’t even think about retiring until you’re a specific age?
Now, how many times have you then thought about punching yourself in the face because trying to save that recommended amount is harder than having a civil presidential debate?
Totally random, but did you know that Marco Rubio’s net worth is only $100,000, according to Forbes? A chunk of you reading this right now have more than he does.
I came across this kind of retirement advice twice in the past week and it’s quickly becoming one of my biggest irritations. Not because people giving the advice don’t mean well and aren’t genuinely trying to get people to save more — they are — but because they gloss over the single most important factor in everything.
See if you can spot it.
Example 1: A Conversation I Had With a Long-Lost Friend
Friend: “Hey Jay, you love money, right?”
Friend: “Let me ask you something. Human resources had me sit down with a financial advisor the other week, which was awesome because it was free. But within minutes he scared the crap out of me. He told me in no uncertain terms that I need at least $3.5 million if I wanted to have any chance at retiring. Is that true?”
Me: “Did he look at your expenses?”
Me: “Then how the hell does he know how much you’ll need in retirement?”
My friend has fully paid off debts, barely spends anything because he’s a homebody, and will have his house completely paid off within 10 years. Sounds like he’s in trouble — watch out.
Example 2: A PR Pitch I Just Got in My Inbox
Subject: The New Retirement Number
Email: Two million dollars. That’s the minimum amount Generation Y and millennials will need just to retire comfortably. I thought you might have interest in learning more. Money doesn’t go as far as it used to, and according to financial site [redacted], $2 million isn’t even all that much. Millennial financial experts outline the reasons why you will need $2 million to retire and offer how-to tips and advice. I’m happy to provide the content for your review.
I took out the blog name because it’s actually a friend of mine’s, and I’m not trying to put him on blast here — something tells me it’s the PR person behind this, anyway. But yet again, this is another perfect example of a blanket statement without any reference to the most important piece of the puzzle. Though this time, with a much less scary amount than the $3.5 million figure.
Related: How to Master Your 401k in Your 20s
I get that this was meant to grab my attention and the actual details could be in the interview or article or whatever else they were hoping I’d do with it, but at the end of the day, it’s all nonsense and should be dutifully ignored, in my humble opinion.
The most important factor determining your “number” is your spending.
How can anyone tell you you’ll need $2 million or $3.5 million without having the slightest clue how much your lifestyle costs? Does a person living on $1,000 a month need the same retirement amount as someone going through $10,000 a month? Do we all have the same hobbies and dreams and future goals in life? Or do we all just suck so badly that we need to hoard as much money as we can because we’re all doomed? That would be a slightly more reasonable statement based on the way our country’s going, but still no dice.
The point is, without looking at your specific situation, this kind of advice is all noise — and you should do your best to ignore it. They mean well, but as our mamas like to say, we’re all unique snowflakes.
If you want to figure out what your own number is, do any of the following instead:
- Plug your numbers into a retirement calculator.
- Plug your numbers into a financial freedom spreadsheet.
- Multiply your yearly expenses by 25.
Any one of these three calculations will give you a much more accurate — but still rough — look at what you can expect down the line. And then you can determine whether you’re happy with it or if changes need to be made.
Related: 20 Tricks to Retiring Rich
Going back to the $1,000 a month versus $10,000 a month example: You’ll see this becomes the difference between needing $300,000 to retire safely — that’s $1,000 ?– 12 ?– 25 — versus $3,000,000 –that’s $10,000 ?– 12 ?– 25 — based on the generally accepted 4-percent Trinity study. Quite a drastic gap, if you ask me.
At the end of the day it all comes down to your expenses. And without knowing that, no one can tell you how much you’ll need to hang up the job when it’s time.
So make that your No. 1 mission this week if you’ve been putting it off like Kanye and his $53 million debt woes. Don’t let these forecasts scare you. Focus on your own specific situation, and if it turns out you really do need $3.5 million to comfortably retire, well, it’s time to decide if you finally need to make a change or not. But please don’t listen to the hype.
This article originally appeared on Budgets Are $exy.