Today’s Guest post comes from Kara Stevens of The Frugal Feminista, 1/5 of the The Frugal Fab 5.

I have a friend that lives for relaxation and vacation. Every time I hear about her, it never seems to include employment. Seriously. She stay chillin’ on beaches, on somebody’s couch, just living the life… I guess.

I say, “I guess,” because if there is no trust fund or Suga Daddy or Momma hanging around, my friend will be in some serious financial problems the older she gets, brought on by her inability to work, save, or plan for the future.  There is a saying, “Old fools were once young fools.”

I have to admit, though. I get a itty bitty pang of jealousy—the temporary jealousy that the ant from the Ant and the Grasshopper might have felt when she saw the grasshopper, legs crossed, laid up in a leaf as she labored to prepare for the winter—as I hear about the life of leisure that she presents to the world, especially when this damn New York snow has my commute doubled and frustration level tripled. But I know, deep down, that my efforts to make a future of myself by being financially responsible are smart, enduring, and the way to go.

Until recently, though, I had no idea what the price tag on my “future” was. I have been a money hoarder, side-hustle hustler, an investor, but for what goal? I never really thought about the actual number that I would need to retire.

Currently, I am reading this book on investing, called Investing Made Simple by Mike Piper. He says that there is NO real way to get the exact number that you would need to retirement with, but there is a process of approximating roughly how much you would need.

Here it is:

Step 1: Take your current annual income and subtract the amount that you’re currently saving each year toward retirement. So, for example, if you make $50,000 and save $10,000, then the number is $40,000. Then adjust that amount either upward or downward based on the lifestyle that you expect to live when you retire. Do you expect to travel more, have kids in college, still have a mortgage, or be in decent health? It is important to think about those lifestyle factors because they all impact how much you will be spending in the long run.

Step 2: Adjust for inflation. Even though we don’t know what inflation will be like twenty years from now, we know that inflation has been about 3% in the U.S. historically. Piper talks about using the following formula to inflation-adjust your spending needs.

R= Retirement Spending Needs

C= Retirement spending needs in today’s dollar

I= Projected annual rate of inflation

T= the number of years until you retire.

For example, if you expect to need 40,000 per year during your retirement and you are 15 years away from retiring, and you expect inflation to average 3% over those 10 years, then you would calculate your future annual spending needs to be:

   R= C x(1 +I)T  (T is a coefficient). or R=$40,000 x(1.03) raised to the 15th power or $62,319

Click here for a calculator.

Step 3: Once you calculate your inflation-adjusted retirement spending needs, multiply that number by 25. Piper says that multiplying by 25 is a rule of thumb because multiple studies have shown that, “based on historical US market returns, a starting withdrawal rate of more than 4% per year has led to an undesirably high likelihood of running out of money over the course of a 30-year retirement. Therefore, you’ll want to ensure that your portfolio is 25-times (that is 1/ 4%)the amount that you expect to have to withdraw each year.”

In this case, this person’s magic number for retirement is at least $1,557,967 0r $62,319 x 25. 

Promise me that once you figure out your magic number, you will memorize it, put it on post-its and place them in your car, in your wallet, at your desk at work, and on your computer. It will help you stay focused.

The lesson here: Start early. Imitate the Ant. Use Your Youth To Your Advantage.

Frugal Feministas– What’s your rough estimate for retirement? Share your number in the comments section. Are you getting yourself for the future?

This post originally appeared on The Frugal Feminista