Date: Mon, 31 Jul 2006 14:14:45 -0500
From: BreadWithSpam@fractious.net
Newsgroups: misc.invest.financial-plan
Subject: Walter Updegrave using 25x rule of thumb
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Just saw this and noted how closely it matches how we've
discussed spend-down in retirement here:

http://money.cnn.com/2006/06/30/pf/expert/expert.moneymag/index.htm

     (re: someone nearing 62 with $320,000 in an IRA)

   As a rule, if you want your nest egg to last at least 30 years, you
   should limit your draw in your first year of retirement to about 4%
   of your portfolio's value, or about $13,000 in your case.

   

   In addition to the $13,000 from your portfolio, you'll also have
   Social Security coming in. Since I don't know your current salary
   (let alone your salary history, which is instrumental in figuring
   your benefit), let's generously estimate that your Social Security
   payment comes in around $15,000 a year, which would be a decent
   estimate for someone earning $70,000 today. (You can get a more
   accurate estimate of your Social Security benefit by going to the
   Social Security benefit calculator.

   So with both your Social Security and draws from your portfolio,
   you're probably talking pre-tax annual income of less than $30,000
   a year.

  

Yikes.  All I can say is that (a) this person is probably way
better off than most folks nearing that age and a lot of folks
who will be getting there in the next decade or two - that's
a nice sized IRA, but it's clearly not a lot to retire on; and
(b) well, it's a very incomplete analysis - we don't know anything
about things like this person's actual income or the value of
her home or if it's paid off, etc.

Nevertheless, it's not a bad little column that a lot of people
out there might do well to read.  (not so much the folks who
hang out here - we talk about this all the time - but folks
out there who don't talk about it or think about it - they
might benefit from reading a simple, reasonably well written
column explaining a specific situation).




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