Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 672

Why I object to ‘hitting a number’ for retirement

This article originally appeared on the Morningstar US website. It has been amended for an Australian audience.

‘Did you hear that [mutual university friend] is retiring? He says he hit his number in the stock market.’

One of my friends shared that news with me the other day via text. And I’ll confess, all of my alarm bells went off. In fact, my alarm bells always go off when I hear about someone “hitting their number.” No, it’s not envy. Rather, I think it’s often a signal that the retirement plan isn’t as holistic or risk-conscious as it should be.

Here are my major objections.

Back-of-the-envelope planning

Too often, when I hear people discussing ‘a number,’ they’re using a simple heuristic like the 4% guideline to determine their portfolios’ viability. Or worse, they’re using their gut reaction to the number to determine if it’s enough. A $1 million portfolio seems like it should be plenty for many retirees, but it might not be if their tax-adjusted, inflation-adjusted spending is too high.

Dividing your number by your planned withdrawal amount is a good starting point if you’ve just begun thinking about retirement and evaluating whether your plan is on track—for example, if you’re 10 or so years from retirement. But if you’re getting closer, it’s worthwhile to create a more encompassing plan. That starts with thinking about how your spending might change in retirement; quantifying any non-portfolio income sources you’ll be able to rely on, like the age pension or working income; considering planned spending rate and portfolio positioning; and factoring in taxes, inflation, and investment costs. If your assertion that you have enough to retire rests on a single variable—your portfolio’s value—that’s your cue to develop a comprehensive plan.

Market highs invite risk

Risk also factors into my reflexive aversion to ‘hitting a number.’ Not only did my friend hit his number, but he hit his number in the stock market. Of course, people retire all the time when stocks are nearing new highs. Stocks go up more than they go down, and it simply feels better to switch from savings to spending mode when your portfolio is looking robust. Counterintuitively, if you plan to retire with a heavy complement of stocks, it’s actually better to retire after the market has been pummeled than to go out on a high note.

Valuations are the main reason. Even as your portfolio has gotten plumper, it’s also more susceptible to sequence risk, the possibility of big portfolio losses at the beginning of retirement. In our research on safe spending rates, we found in our Monte Carlo trials that nearly two-thirds of all-equity portfolios that experienced losses within the first five years of retirement ran out of money before year 30.

Our research on historical safe withdrawal rates also points to the value of retiring when conditions look crummy rather than retiring when your portfolio is riding high. In the mid-1980s, for example, most investors probably weren’t excited about the prospects for the major asset classes. Not only had stocks endured a punishing rout in 1973-74, but they also posted losses in 1977 and 1981. Bonds performed abysmally, too, thanks to the Federal Reserve’s successful campaign to tamp down inflation. But the mid-1980s were actually one of the best periods in modern history to have retired into. An all-equity portfolio would have supported a starting withdrawal rate of nearly 13%! That’s right, a $1 million portfolio would have supported a $130,000 withdrawal in year one of retirement, with annual inflation adjustments thereafter, for 30 years. Those rich withdrawal rates were owed to low equity valuations coming into the period, supporting strong stock market gains over the ensuing 30 years. Bond yields were high and trended lower, boosting bond prices, and inflation was generally quite mild. In other words, the mid-1980s retiree enjoyed a trifecta of good fortune in terms of starting withdrawals.

That’s not to suggest that new retirees and would-be retirees should assume that their prospects are dire today simply because equity valuations are high. As Amy Arnott noted in this article, ‘lost decades’ for stocks, like the one that prevailed in the 2000s, have been quite rare. Moreover, investors can make their plans more resilient by building in a complement of safe assets (cash and bonds) and spending less if their portfolios experience losses. In fact, the best thing that prospective retirees can do if they think they’ve hit their number is to lock down a portion of their gains in safer assets for protection. Treasury Inflation-Protected Securities, which deliver a boost to your principal in line with the Consumer Price Index, look particularly attractive today because they help defend against still-high inflation.

Lifestyle considerations

Finally, my most significant objection to ‘hitting a number’ is that it suggests that deciding when to retire revolves around money and numbers. Of course, financial wherewithal is inextricably linked to whether you can reasonably retire. And if your job is a miserable slog or you’re just plain exhausted, by all means concentrate on making the numbers work as soon as possible. Life is short, and staying put in a job you’re not enjoying could hurt your physical and mental health.

But in my experience, the best retirement plans don’t begin and end with the numbers. As Maria Bruno, head of US wealth planning research for Vanguard, shares in my book How to Retire, you need to be able to answer ‘the three haves.’ Do you have enough? (That’s the money piece.) Have you had enough? (Are you done with work, either because you’re exasperated or, better yet, because you’ve achieved everything you hoped to?)

The final ‘have’ is the most important: Will you have enough? That means, do you know what you are retiring ‘to’ and will it fulfill you? How will you spend your days, and what will give you purpose, identity, structure, and contact with other people? The most successful retirees put even more weight on those questions than they do on money matters.

 

Christine Benz is director of personal finance and retirement planning for Morningstar. She is also the author of How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement. This article does not consider the circumstances of any investor. Minor changes have been made to the original US version for an Australian audience.

 

  •   22 July 2026
  • 1
  •      
  •   

RELATED ARTICLES

Does an American retirement rule work for Australians?

The case for gearing beyond property

Are these assets the missing piece in Australian portfolios?

banner

Most viewed in recent weeks

It’s time for LICs to die

A high-profile dividend cut and a prominent fund manager’s apology have reignited a long-running debate. If investors can access similar exposures more cheaply and efficiently elsewhere, what exactly is keeping LICs alive?

Testamentary trusts survived the trust tax. The drafting battle has just begun.

The fight over testamentary trusts looked settled. Then the draft legislation arrived. Hidden in a technical detail is a question that could force many families to rethink wills they thought were already future-proof.

The new capital gains tax trap for your portfolio

Investors have long accepted one portfolio rule without much question. A major tax shift could change that calculation entirely, forcing difficult trade-offs between risk, discipline and an overlooked cost lurking beneath.

The retirement scorecard: how many of these questions can you answer?

From the maths of retirement, estimating spending and picking the right asset allocation to survive a poor decade, here are the questions every retiree – current or future – should be able to answer for themselves.

How the typical Australian Family could save $844,350 in taxes

The value of a testamentary trust is not determined by wealth alone. Depending on circumstances, it can reduce the tax burden on inherited income, create efficiencies and help build intergenerational wealth.

The housing slide could become a crash

House prices are sliding across Australia, yet the most dangerous ingredient for a housing crash is still missing. If job losses surge amid growing economic risks, today's correction could become a historic property downturn.

Latest Updates

Testamentary trusts: Treasury has picked the wrong reading

A decades-old estate planning tool has survived one tax crackdown only to be caught by another. The surprise isn't who the reform is targeting, but who could end up paying the price for drafting choices made years ago.

Latest from Morningstar

Does an American retirement rule work for Australians?

The 4% rule has survived decades of scrutiny, but Australia's retirement system changes the equation in ways most overlook. Before accepting or rejecting this rule of thumb, it pays to understand what really drives retirement outcomes.

Shares

Glencore lands on the ASX. Should BHP and Rio shareholders switch?

A coal-heavy miner with governance concerns isn't the obvious choice for investors. Yet, Glencore's ASX listing may offer something BHP and Rio can't. The challenge is working out whether the opportunity outweighs the risks.

Why does the system treat capital gains and losses differently?

Investors are often told not to let tax policy drive their investment decisions. Yet, under the new CGT rules, portfolio construction, volatility and even how assets are owned may have an outsized impact on their final outcome.

Economy

Three common sense reforms that Australia needs

What do frozen bank accounts, mortgage traps and pension penalties have in common? They're all symptoms of a system that makes life much harder. Yet the obvious solutions seem to have escaped the attention of Canberra.

Shares

The hidden cost of government debt for investors

Some of the important effects of rising public debt never make the headlines. Research shows the immediate effects may already be unfolding, influencing corporate behaviour in ways that many investors would never suspect.

Investment strategies

When do fundamentals matter?

Is fundamental investing losing its grip on markets? Investors continue to search for valuation-based explanations for every price move, but the dominant force behind short-term returns may be something else altogether.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.