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How Much Do I Need for Retirement? March 6, 2007

Posted by pf in Goals, Retirement.
Tags: , , , , , , ,

To begin this quest (although at 34 I am hardly beginning), I need to outline my long term financial goal. I have read a number of articles on this topic and although there are variations, the approach and questions to be answered are generally the same:

– When will you retire?

-When will you end retirement (I thought this was a nice way of saying dead)?

– How much income do you need during retirement?

Of course, there are tons of calculators out there – some very simple (only a table), while others much more detailed (pages of questions). I looked at number of them in hopes of finding some consistency in the answer.

Below are some of my basic assumptions / inputs:

Number of years until retirement: 28 (62) I think I’d really like to retire at 60 (or even earlier if it is my good fortune to do so)…but will go with this.

Number of years in retirement: 30 (92) This one is tough, but with the scientific advances of today, I don’t think entirely unrealistic? Even if a bit hopeful, it makes the target a bit more conservative as I would need the money to last longer, so age 92 it is.

Income replacement at retirement: My goal here is $100K annually in today’s dollars.

Inflation: 3% for calculators where I could input the amount. In some cases, I could not tell what the assumption was.

Rate of return on investments: 7% pre-retirement and 5% post-retirement. I struggled here, particularly as my current portfolio is fairly aggressive…but think this is probably a fair return. I am open to other opinions here.

Social Security – whatever the calculator estimates.

Do I Need An Emergency Fund? (Part 1)

Depending upon the calculator used, I got various results in terms of how much was needed to fund my retirement at $100K annually for 30 years. From a comparison standpoint, what made things even more difficult was the fact some calculators used current $, while others used inflation adjusted dollars. Some even gave both (a big help) which gave me some idea about how I might adjust the others. So, here is a summary of some of the results:

Free Financial Advice (http://www.free-financial-advice.net/retire-early.html) – $1.4M (today’s dollars)

CNN Money Planner (http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp) – $1.5M (today’s dollars), $3.5M (inflation adjusted)

BankRate.com (http://www.bankrate.com/brm/cgi-bin/Retire.asp) – $1.8M (today’s dollars), $4.2M (inflation adjusted)

Vanguard (https://flagship.vanguard.com/VGApp/hnw/RetirementSavings?FW_Event=page2) – $2.0M (today’s dollars), $4.6M (inflation adjusted)

Well, there is quite a spread here…and I suspect I would continue to get similar differences by using more calculators. I have decided to go with Vanguard’s estimate of $2 million. My primary reason is that by picking the higher target, I lean more toward the conservative side of estimates in the event my assumptions are wrong (returns are less, I live longer, etc). Even then, this is no guarantee, but it gives me a bit more confidence.

If anyone has come across a tool they have found to be much better than those I’ve listed here, please let me know and I’ll try them out. If I believe more credible, I may even adjust my target.



1. marcus anthony bynum - January 24, 2012

your return is filed or paid late. veteran-and service disabled veteran- owned small business . proposal bid preparation , business certifications. asset management and investment advice, payment transactions. co- ordination activities in connection with the inspection of products by inspectors. you must trust …. many who once were in this class are now among our members. since they have humbled themselves.

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