What Are You Actually Saving For? — Part 1: How Much Do I Need to Retire?

Before you can calculate how much you need, be honest with yourself about what you’re calculating for.

The question “how much should I have saved by 35” gets asked a lot. It almost always gets answered as if the goal is obvious: retirement. However, retirement is not only just one of many goals we all have, but more importantly, it’s one possible answer to a deeper question: “What is the money for?”

Don’t be afraid to pause here and think for a minute. Your answer changes the math more than most articles let on.

Some people are saving to retire at 65. Some are saving to retire at 45. Some are saving to buy a first home, or a second one. Some are funding a business they haven’t started yet. Some want enough cushion that a parent can stop working, or that a child has options at 18. Some don’t plan to fully retire at all and want a portfolio that supports a long, gradually shifting working life. Each of these are defensible goals, but none of them produces the same number.

This post is about that. Before you can calculate how much you need, be honest with yourself about what you’re calculating for. The rest of this series will do the math — but the math only works if the goal is named.

The goals change the shape of the calculation, not just the inputs

It’s quick and easy to treat goal setting as a matter of picking a different target number. Retirement at 65? Save $1.5M. Retirement at 45? Save $2.5M. Home down payment? Save $200K. Just plug different numbers into the same calculator.

That’s true to a point (and it’s important to figure that out) but it understates how much the type of goal changes the math. Different goals create different problems to solve:

Short-term goals (the next 5 years): I typically split this into two subcategories, which are goals for the next year or less and one to five years. Goals for the next year could be paying off your credit card, creating a balanced budget, a family vacation or a new deck for your house. The short-term goals that are a little further out are usually things like paying off student debt, a home down payment, a cottage or a planned career break. Short-term goals lean almost entirely on contribution rate, not compounding. Over five years, even strong returns barely move the needle compared to how much you set aside each month. Capital preservation matters more than growth. The math is closer to a savings plan than an investment projection.

Long-horizon retirement (20+ years out): This is your retirement, your children’s education, the car you always wanted, the house on a golf course in Florida, name your vision here…this is the classic financial projections case. Compounding does most of the work. Returns matter, time matters, the spending assumption in retirement matters. The math is a present value calculation against an annuity of withdrawals.

FIRE (financial independence, retire early): This looks like long-horizon retirement, but the math breaks differently. A 35-year-old retiring at 45 needs the portfolio to last potentially 50+ years, not 30. The standard PV formula starts to approximate a perpetuity calculation, which means the required portfolio scales sharply upward. A common FIRE rule of thumb is 25 times annual spending; the more honest math for very long horizons is closer to 30–33 times.

Indefinite working life: This is the inverse. If you plan to keep earning some income through your sixties and seventies — such as consulting, board work, a part-time role, building a small business or another type of passive income — the portfolio doesn’t need to fund 30 years of pure withdrawal. Even modest ongoing income can dramatically reduce the required nest egg, because every dollar earned is a dollar the portfolio doesn’t have to produce but also keeps earning returns.

Family security: This is the most nebulous goal but worth naming. “I want enough that my family is comfortable no matter what happens” isn’t a number, it’s a posture. While this is noble and very relevant, the closest mathematical translation is a portfolio that generates a target income stream without depletion. That’s a different calculation again (perpetuity-style, more conservative withdrawal rates, more focus on cash flow than on terminal value).

The same compound interest math underlies all of these. But the assumptions you plug in — time horizon, withdrawal rate, rate of return and expected ending value — produce wildly different answers. A 35-year-old saving for a 30-year retirement and a 35-year-old saving for FIRE could need portfolios that differ by a factor of two, even at the same income level.

Most people are saving for several of these at once

Here’s the part the rule-of-thumb articles tend to skip: most people aren’t optimizing for one goal. They’re working toward a small portfolio of them, often with conflicting time horizons.

A typical mid-thirties household might be:

• Saving for retirement (long horizon, compounding-dependent);
• Building a down payment for a bigger home (short horizon, capital preservation);
• Funding RESPs for children (medium horizon, mixed strategy);
• Maintaining an emergency fund (immediate access, capital preservation); and
• Considering whether one partner can step back from work for a few years (short-to-medium horizon, depends on portfolio yield).

Each of these has its own math. The total monthly savings rate must be a blend that serves all of them. The asset allocation must reconcile their different time horizons and risk/reward. And as life changes, there are significant events — such as a job offer, a relocation, a new child, an aging parent — that shift the relative priority of these goals.

This is part of why the “save X times your salary by age Y” framework is so unsatisfying in practice. It collapses a portfolio of goals into a single number, treats it as a retirement-only calculation, and ignores everything else you’re trying to fund. The number isn’t wrong, exactly. It’s just answering one question while you’re living a life that’s asking five.

So why anchor this series on retirement?

If I’m going to pick a goal that’s usually the focus, it’s retirement. It’s also the goal where the math is hardest to handwave, where the assumptions matter most, it’s the riskiest one to get wrong and the longer the time horizon, the greater the variability in results.

A five-year savings goal is mostly arithmetic. It’s what you set aside after every paycheque, added up multiplied by a modest return assumption. You can be off by 10% on the return and it likely won’t change your outcome materially. A thirty-year retirement calculation is the opposite. Small differences in spending assumptions, real return assumptions, and longevity assumptions compound into hundreds of thousands or millions of dollars of difference. If you can do the retirement math properly, every other goal calculation is a simpler version of the same exercise.

The rest of this series will work through the retirement case in detail. Part 2 walks through the present value math and shows why the standard American rule of thumb doesn’t translate cleanly to Canada. Part 3 covers sensitivity analysis — which inputs actually move the number, and which ones get overweighted by anxious savers. Part 4 builds the projection in the other direction: given a target, how much do you need to save and for how long. Part 5 closes the loop by tackling the question the FIRE discourse usually mishandles: what are you going to do with the time the math gives you?

For now: before you do any of the math, name the goal honestly. Are you saving for a defined retirement, or for the option to stop working? For a specific purchase, or for general security? For one of these, or for several? The math doesn’t tell you what to want. It tells you what your wants will cost.

The number you write down should answer a question you’ve actually asked.

This article is for educational purposes only and does not constitute financial, investment, tax, or legal advice. The illustrative examples use simplifying assumptions that may not reflect any individual’s circumstances. Consider speaking with a qualified professional about your own situation.