<p>How long are you going to live, colorado mom?</p>
<p>If it is about 30 years…</p>
<p>Annual costs- pension- ss)/3</p>
<p>A ballpark number… Then you cam play with the annual costs…see how that affects your equation., similar to what IxneyBob does…</p>
<p>The denominator increases slowly if you are going to live less than 30 years and decreases slowly if you are going to live more.</p>
<p>Another formula that is simple…</p>
<p>(Annual costs - ss - pensions) x years you are going to live x 1.2= also close enough</p>
<p>Here’s a pretty good article by Fidelity. </p>
<p><a href=“https://www.fidelity.com/viewpoints/retirement/8X-retirement-savings”>https://www.fidelity.com/viewpoints/retirement/8X-retirement-savings</a></p>
<p>Fidelity says save 8 or 9 times your income and you are set?</p>
<p>Much simpler to follow Fidelity to see if you are on track.
</p>
<p>Age 65,</p>
<p>Fidelity wants investors to have 9 times their income?</p>
<p>4.5 percent after tax returns?</p>
<p>No pension? </p>
<p>SS?</p>
<p>Just making sure. :)</p>
<p>Everything Should Be Made as Simple as Possible, But Not Simpler</p>
<p>Fidelity is not without a vested interest</p>
<p>Ok … i see fidelity is expecting 2.3% inflation and a 3.2 percent return after inflation…</p>
<p>Yeah, I know Fidelity likes to taut that you need a lot more money to retire. This is just a rough check.</p>
<p>Posters think 8 to 9 times your income is going to cover your retirement?</p>
<p>I am way too conservative. :)</p>
<p>Forget my numbers. :)</p>
<p>It depends on whether you want anything left over or not. Maybe that’s the difference.</p>
<p>Don’t think our 401k/IRA balances will be at 5x by 55, but when I use coloradomom’s formula and include pension and SS, we are on target for 70% income replacement. 70% is probably generous because a big chunk of current income goes to tuition, our house will be paid off in a few years, and if we downsize, it will be to something less expensive. Biggest unknown variable for us is medical bills, depending on my health. We do have LTC coverage. Our plan is to live off pension and SS, and not hit 401(k) and IRA til we have to start 70.5 min distribs.</p>
<p>2.3% inflation might be right on average, but it only takes a short period of 5%+ inflation to mess you up. </p>
<p>3.2% return after inflation? I’m not religious, but the saying “from your lips to God’s ears” comes to mind. </p>
<p>I know I’m like a skipping record, but a multiple of current income is useless. My wife’s income increased dramatically in the past few years, but we didn’t change our lifestyle. So, why a multiple of current income?</p>
<p>If 8 to 9 times income works without a pension, I need to shut up. :)</p>
<p>Adding unneeded stress to people. :)</p>
<p>@dstark, I guess a lot depends on income trajectory. 9 times last year’s salary we would live like royalty. 9 times average salary, not as good, but with pension, paid off house, no more tuition, SS, we would survive. </p>
<p>Pensions do change the numbers. </p>
<p>Ok…i guess i should read more carefully.</p>
<p>I think in the example , lily has to save 11 times her spending and ss pays a big chunk of expenses.</p>
<p>"Let’s call our hypothetical worker Lily. We assume she starts saving at age 25, retires at 67, and lives until 92. Lily’s salary grows from $40,000 at 25 to $73,640 at retirement (with no breaks in employment). She defers 6% of her salary at 25, escalating to 12% within six years. She receives a 3% company match and takes no loans or withdrawals. We assume her investments grow at 5.5% a year (3.2% after assumed inflation of 2.3%). When she retires at 67, we assume she will spend 85% of her ending salary after taxes (tax rates stay the same), and get $1,918 a month in Social Security income.
Based on these assumptions, Lily would need to save $577,000 by age 67, or almost 8X her ending salary. This is the savings amount needed to cover $51,636 a year in spending, which is her total estimated annual expense, in today’s dollars, assuming an 85% income replacement and subtracting Lily’s estimated tax obligation, over 25 years in retirement.1 In this hypothetical, she would actually have saved $639,236 by age 67, more than her 8X goal, giving her a financial cushion for her retirement.</p>
<p>I don’t know how anyone can determine what they need based on X times their annual salary. Some people barely make it on their annual salary and get in greater debt every year. Some people save a large percentage of their salary, and don’t even use much of it. Others might massively downsize and live in a condo, others might buy their dream house on the beach. It is way too vague a measure.</p>
<p>Holy smokes…havent been back to this thread for a short time and nearly 1000 more unread posts! </p>
<p>^^And about 900 of them, I can’t understand!</p>