Practically speaking, if you have no major debts, own your home, and only need to be paying your insurance, food, a nice vacation or two per year (no more than $3000/yr), and maybe even working part time at something you like, how much of a nest egg do you need to safely retire? I'm happy chilling by the pool and drinking some beers.
First of all, right off the top, keep in mind that retirement is (hopefully) a very loooooong time. Chilling by the pool is a fantastic way to start off retirement, but if you really, seriously think about it, don't you think you might be bored after a few months? I would build in enough "buffer" into your planning to allow for some unforeseen activities or new hobbies. Who knows what might happen after you retire? You might actually enjoy chilling by the pool for a good 5 or 6 years straight, then meet and fall in love with someone who wants to travel the world with you. Wouldn't it suck to not be able to seize that opportunity?
The Merrill Lynch automated adviser says I want 40K/yr which seems crazy high to me. I have absolutely no idea what goal I am working toward.
Here's the quick-and-dirty method I use:
1) Figure out how much you actually spend per year, on everything. Exclude expenses you won't have when you retire, like a mortgage, or saving for retirement (no need to keep saving for it once you've already retired). Figure out how much after-tax money it would actually take annually for you to maintain your current lifestyle today (minus the mortgage and retirement savings).
2) Adjust the pre-tax amount for taxes. How much income would you have to earn to generate the amount of money needed in step 1? For example, maybe increase it by 30% if you're in a 30% tax bracket.
3) Subtract benefits you'll receive when you retire, such as Social Security or a company pension.
4) Multiply the result by 25. This is how much you need in order to produce the money you need to maintain your current lifestyle, at a 4% Safe Withdrawal Rate.
5) Adjust for inflation. You're 31 now, so if you planned to retire at 60, then you'd need to account for 29 years of inflation at, say 3%. The calculation is 1.03^^29 = 2.36. So you'd multiply the amount in step 4 by 2.36 to figure out how big of a nestegg you need in order to produce enough income (in 2037 dollars) to maintain your current lifestyle.
That'll give you a rough estimate, but keep in mind there are other variables to consider, such as expenses you might have in retirement that you don't have now (like higher health insurance), and possible changes to the Social Security program in the future. But it'll give you a decent starting point to gauge whether you're on track or not.