"Rules-of-Thumb" can help simplify a complex issue. The best answer to how much you will need in retirement is obtained by working with a financial planner.
The Rule of 72 states that: An amount will double by taking 72 divided by the number of years and then will equal the approximate interest rate. What?
So, for example, at 3% your "number" doubles in 24 years. (72/3=24 and 72/24=3%)
This may be good if you are watching your money grow but may be bad if you are spending your money. For example:
In retirement, if you need your investments (from your IRA's and 401k, TSP, 403b, 457 or whatever) to supplement your pension and/or social security, then whatever number you choose, it may need to be double that in 24 years.
If you are 50-60 and need $20,000 per year, then when you are 74-84 you may need as much as $40,000 per year. Obtaining a 4% withdrawal rate from $500,000 at age 50-60 is reasonable but are you prepared to take an 8% (double) withdrawal rate from whatever is left in 24 years? This is why moving all of your funds to safety of principal is not a strategy that works over the long retirement periods many of us will experience.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.