Every time he spouts that particular bit of “wisdom” I cringe because he’s going to mislead some into some extremely optimistic assumptions about sustainable withdrawal rates.

I really don’t understand why he sticks to that nonsense. I know he’s not a stupid man and I really think he’s more financially sophisticated than that. But he stubbornly keeps saying the same thing.

Maybe it’s also important to clarify whether that money is taxable. $50k/year from a Roth IRA with zero income tax is equivalent to what, $80k/year from a traditional 401(k)?

Thanks for your comment. Point taken on your comment regarding my calculator. I just wanted to say that the calculator is a basic calculator and that there is no way to include everything involved in retirement planning into a single calculator.

When the question asks:

“How much money do you think you need to retire?”

I think we have to assume that each person is projecting out into the future that they need $1.2 million and that inflation has not been taken into account. The question would have been MUCH BETTER had they asked:

“In today’s dollars, how much money do you think you need to retire?”

$1.2 million may be okay today, but it’s a different story if it’s 15 – 30 years down the road.

To each his own. If someone’s comfortable living on $41,000 to $50,000 per year, more power to them.

Wilson:

My purpose is to MAKE PEOPLE THINK ABOUT THEIR GOALS and to PLAN AHEAD!

My guess is that a lot of the respondents just picked 1 million as that seems to be the popular number for retirement. I doubt that very many has done the analysis. In fact the dominant google search phrase on my site is something like “can I retire on 1 million” with 2 million seeing increasing popularity.

The “monetary needs” to create the same level of perceived comfort would also vary quite a bit between hyper-consumers and less materialistic lifestyles.

I am hoping to retire in about 10 years – I am 49. When I used the calculator I specified 70% of my 110K income, figuring that I’ll get the rest from the pension from my employer ($2800 a month if I retire at 60 if my company’s tool is correct). This is the current pension as it stands – I am fully vested and my employer froze all pension plans as of the end of last year, so this is all I’ll get. Maybe I don’t need as much – I am living on less than half of my income now and I do travel and such, but I am allowing for higher health care costs.

Sam, do you really keep it all in cash like bank CDs/money market/bonds and none in the stock market? I have about 650K (half in 401K with a little in Roth, half in non-retirement investments) plus a paid off home worth about 400K, but the value is likely to go down. Everything is a little down from last year because of the stock market performance. About 2/3 of my money is invested in the stock market. With my current savings rate I should be OK unless we have a crash, but I am considering reducing the percentage in the stock market. The trouble is the CDs and bond rates are so low, I think commodities are overvalued, so there is no good safe place to put the money.

One flaw in the calculator is that it doesn’t divide the current money into tax deferred, tax free and regular investments. Yet, when you withdraw money in retirement the distinction is important.

“Hope those retirees had not given their savings to Fannie & Freddie, Citi, Lehman, Wachovia, IndyMac” – none of my money is in those guys except through index funds in 401K. The only bank stock I have is USB which lost a little since I bought it but is in no danger of going under. Outside of 401K I have a couple of mutual funds, cash and some individual stocks which on the average were doing way better than S&P lately. Way too much in my employer stock (IBM). I did plan to reduce my exposure to my employer’s stock and to sell just as much as I can every year and still avoid AMT, but with the way IBM was doing relative to other stocks, I just am not sure what to do with the money after selling it.

as of 2004, the median net worth of the 65 some retiree household was less than $0.25M, conceivably with their median liquid assets well below $0.125M in 2007 $$$s each retiree.

If I were one of them and had read JLP’s statements above, I would have scared to death or just committed suicide to dodge the financial nightmare.

In effect, this thread is really a nice piece of work to scare people into investing, or “devesting”:)

I’ve been wondering what those wealth management firms have been doing recently. Hope those retirees had not given their savings to Fannie & Freddie, Citi, Lehman, Wachovia, IndyMac, etc, where the factual or potential loss of their money may not even be salvaged by FDIC …

BTW, I noticed the bond fund I purchased has been buying Fannie Mae and Freddie Mac debt recently, and that Secretary Paulson has been proposing unlimited bail out of my investment at the cost of the tax payer. My casual trading in my cash accounts has rendered returns of 30% and 43%, respectively, since late May. I’m gonna buy short term T-Bills in the next few weeks, anticipating the next financial debacle. I’d express my gratitudes to the LONG term INVESTORS for letting me make some quick money:)