On May 7, 9:27 pm, Bill Woessner <woess...@[EMAIL PROTECTED]
> wrote:
> Plus, what's the point of contributing so much to your retirement
> accounts? Ensuring your children never have to work a day in their
> lives? Suppose you do invest $41K per year for 30 years with a 6.5%
> real return. You'll end up with $3.8M. That's enough to generate
> $255K income per year. Is that really the goal? Is it really worth
> it to deprive during your working years so that you can have more
> money that you know what to do with during retirement?
Using a 4% withdrawal rate, $3.8M gives an income of $155K. For
someone who could save $41K per year, $155K may not be enough for a
"comfortable" lifestyle.
Here's another way to look at it: If you want to retire at the same
standard of living you had prior to retirement, you will need
retirement savings of between 15 and 20 times your final pre-
retirement income. Using a 4% withdrawal rate, this savings will
replace 60% to 80% of your previous income. Add Social Security to
that and you should be able to replace 80% to 100% of your previous
income. If you think Social Security will not be around for you, then
aim for 20x to 25x your pre-retirement income.
One way to achieve 15 to 20 times final income is to start saving 10%
of your income in your mid-20s. If raises average 3% and your
investments average 8%, by age 67 you will have accumulated about 15x.
If your investments average 9%, you will have about 20x.
Dave
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