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Subject:  Re: Are You Saving Too Much for Retirement? Date:  2/2/2007  7:32 AM
Author:  lizmonster Number:  128 of 116955

Why 4 percent, precisely?

AFAIK (and I will admit I haven't read the info myself, although DH has), analyzing data over a long period of time (something like 100 years - intercst, I apologize for butchering your research!) reveals that - no matter how lousy the economy was in any particular year - 4% would have been a safe rate at which to withdraw money from one's savings to ensure that one did not approach $0 (in 40 years, I think?). Certainly it's a conservative approach, but if you're not overly optimistic about the economy (we're not), it can help you sleep at night.

People need to use their heads and their calculators, and do what works for THEM

Well, yes, of course - but people also need to be relatively comfortable that their money is not going to run out. Since you and your wife are living largely on social security, it's definitely less of an issue for you. We've got 9-13 years to go before retirement, and we're not counting on SS existing at all. In order for us to be able to retire and actually relax, we want to save enough to make that 4% safe withdrawal rate workable.

And if we end up leaving a big chunk to our kids? That's actually OK with us. We're not planning on depriving ourselves in retirement either way.

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