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Subject:  Re: Calculating how much I need to retire. Date:  1/22/1999  1:47 PM
Author:  TMFPixy Number:  7977 of 97415

Greetings, Suvarov454, and welcome. You wrote (in part):

<<I have only joined The Motley Fool in the past few months, but I already feel Foolish. Primarily, I've learned that I need to start saving NOW for when I retire (I'm only 28). While I've been reading the amusing, enlightening, and enriching stories on TMF, a question has come to my mind: "How much do I need to retire?"

You see, I don't expect that I'll need money after I die, so I don't mind ending up with zero. If I live too long, however, I'll end up broke. Broke and old does not sound very fun. Also, I'm married, and my wife will probably live longer than me. Then there's that whole "leaving stuff to your kids" thing.

Wouldn't it be nice to balance my investment returns against my distributions so I'll never run out of money? That way, I know I'll never be broke. Then again, I kind of want to retire as early as possible to enjoy it as much as possible, so I want to know what a reasonable target balance might be.>>

Aye, and therein lies the rub, don't it? Just how does one take the distributions to satisfy all these needs? Others have mentioned their thoughts and referred you to some excellent links that may be of use. I've done some analyses myself, which you can read about in the 23 or so posts on this board that start at . I'll be doing some more "what ifs" later this year after I retire. I wish I could give you a magic answer, but I truly believe one doesn't exist. Reality doesn't seem to correlate well with theories that use "averages." I also think that generalized approaches like Robert's Rule of Twenty provide a very rough guide, but they certainly don't provide a guaranteed solution. Life just ain't that simple, and much depends on the "when" of retirement, a person's ability to sleep at night, and one's desire to maintain purchasing power for income and/or principal.

As you struggle with this issue, keep in mind that much must, of necessity, be assumed for any long range forecast. Change one or more of the assumptions, and you radically change the results. I'll be playing with a bunch of scenarios starting in March. If I don't get distracted too much by the good life (or discouraged by the results of those analyses), I may even publish the outcomes. Personally, I think I, too, will arrive at pretty much the same conclusions: Taking 4% to 6% of the portfolio will allow for an inflation-adjusted income; however, it might not allow for the preservation of inflation-adjusted principal. We'll see.


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