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November 12, 2007


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Sounds like a good plan to me.

Good advice. FMF, I took a look at your Retirement Fund calculator and was a bit surprised by the numbers. Looked like you took a very conservative approach. What did you assume about what you would be earning in terms of returns during your retirement years? Looking at your math, it looks like you assumed 0% (unless you were planning more years than the 25 and used the 25 as a rough proxy for some assumed rate of growth and number of retirement years). The number your method gave me is close to three times what any professional retirement planner has ever told me I need.

You misquoted Marotta. It is every 6 years, not every year. He says: "Every six years you delay funding your retirement you cut in half your standard of living during retirement."

1. I did take a conservative approach.

2. I assumed no SS benefits.

3. I used a return of 6%.

For all the details/assumptions, see these two posts:

Richard --

Good catch. I changed it. Thanks.

Ah, I see. I was focusing on the four percent approach. I realize now that that was one of the items you included in your average to arrive at your number. Not knowing all the other methods, I'm not sure how much this was counter-balanced, but clearly this is a conservative approach. Because, unless you did something in the math, the 4% approach that you included in the average assumes a 0% growth rate during your retirement years.

One important variable to consider is how long you expect your retirement to last. Most of the rules of thumb for estimating how much you need to save (such as 25 x retirement income) implictly assume a given number of years in retirement. 25 x retirement income will be a good number for many people, but if you retire early, it may not be enough.

The other factor is the risk of below average returns (or even negative returns) on your investment in the early years of retirement. This scenario can derail the best of retirement plans.

I may be overly conservative here, but with a possible need for our savings to last 50 years, I will not be comfortable with any retirement plan that assumes any draw down of capital.

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