Let’s start with the basics. Give or take, a nest egg of $1,000,000 will allow you to generate about $40,000 in income for at least thirty years or that’s what many simulations indicate.
Let’s accept that as fact. Can you live in retirement with a gross or possibly tax-free income of $40,000 plus any Social Security benefits?
Your answer may be yes, but beware this is a trick question.
Let’s say you are age 35 and earn $40,000 and expect to retire in thirty years at age 65. If your income increases at 3% per year, at 65 your annual income will be $97,090. Now what you really need is not $1,000,000 but $2,427,250 in future dollars.
Be careful when you read those articles throwing around lot’s of numbers that either make retirement planning too simple or two scary.