Most personal financial sites or retirement advisors will work with you to come up with a magic number – the amount of money you need in order for you to be ready for retirement.

The magic number is calculated based on your expenses, the number of years you intend to live with the income, assumptions on inflation and investment returns. After inputting these parameters into the calculation, Voila, the magic number appears. Congratulations, you need $x mil in investment assets in order to retire by 60 years old.

While a magic number is useful to provide a target and acts as a guide, Tri-O Retirement Plan does not find the magic number useful. Assumptions are made, personal circumstances differ for each person and the magic number may turn out to be too big and it becomes demoralizing. There can be situations as well that folks who believe in FIRE (Financial independent, Retire Early) may hit the magic number and decide to retire early. They can realize further down the road that wrong assumptions are made on inflation or expenses and they ran out of money. Expenses can increase due to changes in family circumstances.

Tri-O Retirement Plan believes in managing expenses and investing the monthly savings in a consistent and discipline manner. Each person’s salary and expenses are different. Accumulation and decumulation phases take place over many years. Circumstances will change. Salary can increase, promotion may come, one may lose the job, one may fall sick and is unable to work, expenses can increase due to additions to the family, one may choose to relocate due to work or retire at a cheaper location. Macro economics may also change like inflation and risk free yields. So forecasting a magic number may become a fruitless exercise.

So when does one retire if there is no magic number? One can look at retiring when the regular income from the INVESTMENT “O” exceeds expenses.

Expenses could also decrease due to home mortgage fully paid up, kids being independent financially or the decision to move to a lower cost country. We have also all the necessary insurances to take care of medical expenses. There is also a well funded RESERVES “O” which can be used to fund one-off large expenses during retirement, like fixing the house or buying a new car, that may not be calculated in the monthly expenses. We can also continue to work if we enjoy what we are doing to further strengthen the INVESTMENT “O” or take on an retirement job.

Following the Tri-O Retirement Plan will give you to confidence that you have enough to retire when the time is right.

TRI-O RETIREMENT PLAN is a simple way to help you get started on your retirement planning. Learn the FUNDAMENTALS and HOW TO GET STARTED. There is also a spreadsheet to help you CALCULATE your monthly savings and your project monthly income at retirement. You can check out our BLOGS on topics pertaining to retirement planning. Feel free to CONTACT US if you have any questions or comments.