Here's part 11 of our series on the 12 financial rules that should (or shouldn't) be broken:
Rule No. 11: As long as you have a nest egg of $1 million, you can retire comfortably.
Verdict: Thumbs down. That may be true, but you might need even more. A million bucks ain’t what it used to be, and by itself the number has no bearing on your actual expenses in retirement.
A nest egg of $1 million may be enough if you’ve paid off your mortgage, live in a low-cost area and have a comfortable pension. "The $1 million will safely generate $40,000 per year," says Ritter from T. Rowe Price. "So if you can live on $40,000 plus your other income sources, then it’s enough. If you can’t, it isn’t."
First figure out how much money you think you’ll spend annually in retirement, then work backward to calculate how large a fund you’ll need.
You can't set an arbitrary amount and say "that's enough" for sure (unless you set it at $1 billion, then you can be pretty confident that the amount will be enough), you have to do the math as they suggest.
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