Small Business Owners: What’s Your Number?
For most of us, "retirement" is just a vague concept. We know we want to get there eventually, but in the thick of running a business, it often feels like a destination without a map.
Here’s the thing: Retirement isn’t an age. It’s a number.
It’s the amount of capital you need to have saved so that you have the option to stop working, knowing your lifestyle is fully covered for the rest of your life.
If you aren't sure what that number looks like for you, let’s do some "back of the napkin" math to find it.
Step 1: Determine Your Annual Cost of Living
Start with what it actually costs to be you. This includes everything: housing, groceries, travel, and—most importantly—income taxes.
- Monthly Cost: Let’s say you need $5,000/month to live comfortably and cover your tax bill.
- Annual Total: Multiply that by 12, and your target annual income is $60,000.
Step 2: Apply the "Rule of 25"
To figure out the total nest egg required to generate that $60,000 indefinitely, we use a simple multiplier.
- Take your annual need ($60,000) and multiply it by 25.
- Your Number: $1.5 Million.
Why 25?
This math is based on the 4% Rule. If you have $1.5 million invested, you can theoretically withdraw 4% each year ($60,000) to cover your costs while leaving the principal intact to grow and keep pace with inflation.
Now, How Do You Get There?
Knowing the number is the first step. The second step is the real work: How do you actually earn and save that amount?
That is exactly the kind of conversation I have with my bookkeeping and tax clients every day. We don’t just look at the past to make sure your books are balanced; we look at the future to make sure your business is actually serving your life goals.
I offer complimentary advising to my clients because I’m not just here to crunch numbers—I’m here to build real relationships. I want to see you hit that number.
If you’re looking for an accountant who wants to have "real talk" about your goals and help you build a machine that gets you to your number, let's chat.
