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December 27, 2016

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I agree, FMF. They're fine as a starting point, but so many assumptions. For most people that are not familiar with the concepts of personal finance, perhaps they are fine. I wonder what savings rate they are assuming?

The key missing piece is expenses. You could have enough to retire at 3x income if your expenses are low enough.

Reaching 1x by age 30 seems optimistic these days with bloated student loans and late starting careers. I think Fidelity's trajectory is more realistic for most of us--
http://business.time.com/2012/09/21/what-you-should-save-by-35-45-and-55-to-be-on-target/
That's 1x/3x/5x/8x at 35/45/55/67. It's 401k based with a savings rate assumption starting at 6% age 25 and ramping by 1% per year to a ceiling of 12%. Annual investment returns are assumed to be 5.5%.

I'd agree that an expense based formula is more accurate than either of these. If you get laid off and your income falls to zero, this doesn't mean a few bucks in the bank is enough to retire. Similarly if your boss suddenly triples your salary you're not necessarily stuck working (although I might add a year or two). My take is 33x of annual expenses less pension and social security income should do the trick.

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