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Subject:  Re: Retirement Needs Formula? Date:  10/4/2013  11:30 AM
Author:  ptheland Number:  73419 of 81363

It all comes down to individual needs. If you know your expenses will be $50k/year, the 4% rule of thumb will say you need $1.25 million (25 times annual expenses.

So far, so good.

But that assumes you will not take from the principle and thus the retirement fund can last any length and in theory forever.

That's not correct.

The 4% rule of thumb says nothing about invading principal. You take 4% of your initial next egg the first year, then increase the withdrawal for inflation each year afterward. The historical statistics show that this strategy has a very high probability of the money lasting 30 years. So in the worst case scenario, your year 30 withdrawal takes the last of your principal.

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