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Author: galtsgulch One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76397  
Subject: Re: Figuring retirement sum Date: 2/25/1998 10:29 AM
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<<Let's say I feel I can retire comfortably with an annual income of x. How do I go about figuring how much of a nest egg I will need?>>

The brief answer is…………(nest egg) * 0.04 = x……………In other words, don't draw down on your nest egg any faster than 4% per year. This is a very conservative number, if you retire at the beginning of a bull market (say 1982) you could draw down at 6% and not outlive your nest egg.

My answer comes from a thread of 23 posts (TMF_Pixy will remember the name of it) that discussed various ways to invest your retirement nest egg. The options considered were modern portfolio theory (a diversified approach using stocks and bonds), 100% stocks and a few others. The best investment strategy turned out to be 100% stocks. The worse case, historically, for any strategy, was for a person who retired in 1966. If they started with $100,000 and took out $6,000/year and tried to keep pace with inflation, they went broke in less than 10 years. However, if they drew out $4,000/year, they never went broke.

Cheers,
John Power
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