So what do I mean by “THE NUMBER? This is the number you could spend each year grown by inflation today based on your current investable assets. The number that if you just wanted to walk away from your job, you could.
Do you know this number?
So how do you determine this number? No, an excel spreadsheet won’t work.
A better approach is to use a methodology is called Monte Carlo. Monte Carlo an analysis that relies on repeated random sampling to obtain numerical probability results. Here is an example:
The couple wants to spend $250K per year.
Scenario 1: Spend $250K per year and extra amount for health insurance.
Scenario 2: Social security was taken out of the analysis
Scenario 3: Reduced rate to 4% and no social security
This is one page of a 40 page plan. It displays the probability of success.
Why is knowing this number important?
If you could maintain your lifestyle with THE NUMBER think of the peace of mind you will have knowing you work because you want to work. If THE NUMBER is lower than you aspire to, you still have time to make a plan: Spend less, save more, work longer.
My goal is that all my readers know THE NUMBER. If you don’t, I am happy to help. Feel free to contact me at firstname.lastname@example.org.