What's your number? Working out financial independence

What "your number" means

Financial independence isn't a feeling, it's an amount. It's the sum that, once invested, could cover your living costs without you working. Past that point, working becomes a choice.

Most people have never worked the figure out. They save what's left at the end of the month and hope it adds up. A target changes that: it turns saving into something you can measure progress against.

How to work it out

Start with what you spend in a year, not what you earn. Then divide it by the rate you'd withdraw from your investments each year.

Your number = annual spending ÷ withdrawal rate

At a 4% withdrawal rate, that's the same as 25 times your annual spending. Someone who needs $60,000 a year is looking at roughly $1.5 million. Someone who needs $40,000 a year is looking at $1 million.

Where 4% comes from, and why to treat it carefully

The 4% figure comes from American research published in 1998, which tested how much retirees could withdraw over a 30-year retirement without running out. It's a useful starting point, not a law.

Reasons to be cautious with it:

• It was based on US market history, and a specific 30-year window.
• Retiring into a market downturn hurts far more than the same downturn later on, because you're selling while prices are low.
• A retirement that starts at 50 has to last much longer than one starting at 65.

Many Canadian planners work with something between 3.5% and 4.5%, and revisit it as circumstances change. Lowering the rate raises your number: at 3.5%, that $60,000 of spending needs about $1.7 million rather than $1.5 million.

What makes the Canadian number different

Your target isn't as large as the raw arithmetic suggests, because your investments don't have to carry everything.

• CPP and Old Age Security will cover part of your spending from 65, or later if you defer them for larger payments. Whatever they cover, your portfolio doesn't have to.
• Where the money sits matters. $1 million in a TFSA is worth more to you than $1 million in an RRSP, because RRSP and RRIF withdrawals are taxed as income while TFSA withdrawals aren't.
• A workplace pension reduces the number, sometimes dramatically.
• A mortgage that will be paid off lowers the spending figure you need to cover.

This is why two people with identical savings can be in completely different positions.

The part people miss

A target assumes you keep contributing. A serious illness, a disability, or the loss of a partner's income can stop that, and it usually happens during the years when the plan depends on it most.

That's why protection comes before accumulation. Disability and critical illness coverage keep your contributions going when you can't work, and life insurance keeps your family's plan intact if you're not there. The number only means something if the plan behind it survives a bad year.

Start with the number

Knowing your target does three things: it tells you whether you're on track, it shows what changing your savings rate actually does to the date, and it turns a vague worry into a plan.

Blessing offers a complimentary FI number assessment. It's a conversation that puts your own spending, savings, pension and government benefits into the arithmetic, and gives you a target built around your life rather than a rule of thumb. Book a free consultation and bring your figures.

This article is general information for people in Canada, current as of September 16, 2026. It isn't financial, tax, legal or insurance advice. Limits and rules change, and the right choice depends on your situation. Book a consultation to talk it through.