1. What is the David McKnight Magic Number?

The David McKnight Magic Number represents the total retirement savings needed to sustain your desired annual retirement income based on a safe withdrawal rate.

2. How Does the Calculator Work?

The calculator uses the Magic Number formula:

Where:

• \( Retirement\ Goal \) — Desired annual retirement income
• \( Safe\ Withdrawal\ Rate \) — Percentage you can withdraw annually (typically 3-4%)

Explanation: The formula calculates the lump sum needed to sustain withdrawals without depleting your principal over a 30-year retirement.

3. Importance of the Magic Number

Details: Knowing your Magic Number helps set clear retirement savings targets and assess whether your current savings rate will meet your retirement income needs.

4. Using the Calculator

Tips: Enter your desired annual retirement income in dollars and your chosen safe withdrawal rate (typically 3-4%). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a safe withdrawal rate?
A: The percentage you can withdraw annually from retirement savings without running out of money. The 4% rule is common but may need adjustment based on market conditions.

Q2: Should I include Social Security in my retirement goal?
A: No, this calculation should be for the portion of retirement income needed from your investments beyond Social Security or pensions.

Q3: How does inflation affect this calculation?
A: Your retirement goal should be in today's dollars. The safe withdrawal rate already accounts for inflation-adjusted spending.

Q4: What if I want to leave an inheritance?
A: You may need a lower withdrawal rate or higher Magic Number to preserve principal for heirs.

Q5: How often should I recalculate my Magic Number?
A: Annually, or whenever your retirement goals or financial situation changes significantly.