Planning for retirement can feel overwhelming — especially when you start asking the big question: “How much do I actually need in my retirement account?”
The answer isn’t the same for everyone. Your target depends on your lifestyle, location, health, and even currency exchange rates if you’re an expatriate. At Blacktower Financial Management, we’ve been guiding clients for nearly four decades, and one truth remains constant: the earlier you plan, the more flexibility and confidence you’ll have in retirement.
Why You Need a Retirement Savings Target
Without a clear savings goal, it’s difficult to measure progress or know whether your current contributions are enough. Retirement planning is not simply about building a lump sum — it’s about ensuring your assets generate sustainable income for the rest of your life.
A well-defined target:
- Gives you a roadmap for saving and investing.
- Helps you avoid running out of money later in life.
- Allows you to make informed decisions on when to retire.
- Helps you adjust for inflation and lifestyle changes.
Step 1: Define Your Retirement Lifestyle
Your first task is to decide what kind of retirement you want:
- Do you plan to maintain your current lifestyle, downsize, or upgrade?
- Will you travel frequently?
- Will you live in a high-cost city or a low-cost rural area?
- Will you remain in your current country, or relocate abroad?
These choices have a direct impact on how much income you’ll need. A retiree living in central London or Paris will have very different expenses compared to someone in rural Portugal or southern Spain.
Step 2: Estimate Your Annual Retirement Spending
Many professionals suggest you’ll need 70–80% of your pre-retirement income each year to maintain your lifestyle. For example:
- If you earn £100,000 annually before retirement, you may need £70,000–£80,000 per year in retirement.
- High-net-worth individuals may need more if their lifestyle includes significant discretionary spending (e.g., luxury travel, multiple properties).
Key costs to factor in:
- Housing (rent or maintenance, utilities, property taxes)
- Food and daily living expenses
- Travel and leisure
- Healthcare and insurance
- Taxes (including those in your country of residence)
- Currency fluctuations (if your assets and spending are in different currencies)
Step 3: Account for Longevity
With life expectancy increasing, many retirees can expect to live 25–30 years or more after leaving the workforce. Your retirement account needs to last — and possibly even grow — over this period.
Planning for longevity means:
- Assuming a conservative withdrawal rate (often 3–4% of your portfolio annually).
- Considering potential long-term care costs.
- Allowing for inflation — even modest inflation can erode spending power significantly over time.
Step 4: Apply the Retirement Savings Formula
One of the most widely used methods for estimating your target retirement account balance is the “25x rule”:
Multiply your desired annual income by 25.
Example:
- Desired annual income: £80,000
- £80,000 × 25 = £2 million retirement account target
This is based on the 4% rule, which suggests you can withdraw 4% of your portfolio each year (adjusted for inflation) without depleting your funds over a 30-year retirement.
However, this is a general guide — not a guarantee. Market conditions, interest rates, inflation, and personal circumstances can affect how sustainable that withdrawal rate is.
Step 5: Factor in Other Income Sources
Your retirement account isn’t the only source of income. Include:
- State pensions or social security benefits
- Company or government pensions
- Rental income
- Business interests
- Investment dividends or interest
If these income streams are substantial, you may not need as large a retirement account. Conversely, if they’re minimal, you’ll need to save more.
Step 6: Don’t Forget Taxes
The location of your retirement account, your residency status, and applicable tax treaties can significantly influence how much you’ll actually keep after tax.
For example:
- A UK resident drawing from a UK pension enjoys certain tax allowances but may pay more if they relocate to a country without a favourable treaty.
- US citizens remain subject to US taxation on worldwide income, even when living abroad.
- Expats may face double taxation unless there is a treaty in place.
At Blacktower, we help clients integrate tax efficiency into their retirement planning from the start.
Step 7: Adjust for Currency Risk (Especially for Expats)
If your assets are in one currency and your spending is in another, exchange rate movements can impact your income and purchasing power.
For example:
- If your portfolio is in US dollars but you spend in euros, a weaker dollar can reduce your available income.
- Similarly, a retiree in the UK with euro-denominated investments may find their income fluctuates as the GBP/EUR rate changes.
We help clients manage this risk by diversifying currency exposure and matching assets to spending needs where possible.
Example Scenarios
1. UK Resident Retiring Domestically
- Pre-retirement income: £90,000
- Target retirement income: £70,000
- Target account size (25x rule): £1.75 million
- Other income: State pension of £11,500/year
- Adjusted target: £1.46 million
2. US Expat Retiring in Portugal
- Pre-retirement income: $150,000
- Target retirement income: $110,000
- Target account size (25x rule): $2.75 million
- Other income: Rental income of $20,000/year
- Adjusted target: $2.25 million
- Considerations: US–Portugal tax treaty, NHR (Non-Habitual Resident) status, USD/EUR exchange rate
Common Mistakes in Retirement Target Planning
- Underestimating healthcare costs — especially when living abroad without state coverage.
- Ignoring inflation — even 2–3% annual inflation can cut your spending power in half over 25 years.
- Overestimating investment returns — assuming consistently high returns can leave you short.
- Failing to diversify — concentrating too much in one asset type, region, or currency increases risk.
- Not reviewing the plan — life events, tax changes, and market shifts mean your plan needs regular updates.
How Blacktower Can Help
Since 1986, Blacktower Financial Management has been guiding clients through every stage of retirement planning — from accumulation to decumulation — with a focus on:
- Cross-border tax efficiency
- Currency risk management
- Sustainable withdrawal strategies
- Estate and legacy planning
Our advisers work across multiple jurisdictions, ensuring your retirement plan is not only tailored to your goals but also compliant with local regulations wherever you choose to live.
Key Takeaways
- Start with your desired annual retirement income and work backwards.
- Use the 25x rule as a starting point, but customise for your lifestyle, location, and risk tolerance.
- Account for taxes, currency movements, and inflation.
- Revisit your plan regularly to stay on track.
Ready to Build Your Retirement Plan?
Whether your decades from retirement or just a few years away, the best time to start planning is now.
Speak to Blacktower Financial Management today to calculate your personalised retirement target and build a plan that adapts with you — wherever life takes you.
📞 Contact us for a confidential consultation and take the first step toward financial peace of mind.
Site Sources
https://www.dol.gov/general/topic/retirement
Disclaimer: This article is for information purposes only. Investment advice and investment advisory services offered and provided through Blacktower Financial Management US, LLC. This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, tax advice, tax recommendations, investment recommendations or investment research. You should seek advice from a professional before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Investment advice and investment advisory services offered and provided through Blacktower Financial Management US, LLC. This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, tax advice, tax recommendations, investment recommendations or investment research. You should seek advice from a professional before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.