Date: Fri, 20 Oct 2006 09:04:55 -0500
From: "FranksPlace2" 
Newsgroups: misc.invest.financial-plan
Subject: Re: How to calculate retirement $
   posting-account=Ed2GEg0AAAATfcdCkaA3VbVEfJXjoX25
	iQBVAwUARTjXh/l/I4+O31e5AQE9fgH+L3OWjvHO+AWJE/4i6Ze0/pACIARijLt6
	coa77PjRm+kzslLRrW70DM1tvZMThX9Py/ra5A9jSedOaa36Iy4X9g==
	=tMF3


chip wrote:
> I am a little confused on how to calculate TOTAL $ needed for retirement.
> How do you include pensions and SS (and yes, I believe we have nothing to
> fear, but fear itself) into the figure?
>
> I have read a lot about having 20x your annual living expenses including
> taxes as a reasonable goal to have at the beginning of retirement.  Let's
> say that is $100K/year, so I need $2M.  However, if I count pensions and SS
> are $75K/year x20=$1.5M, right there.  So I need $500K in investments over
> and above the pensions and SS or do I need $2M in investments alone.  If
> pensions and SS are for life ,shouldn't they be counted differently.  If so,
> what is their multiple?
>
I believe the 20x is based on a 5% withdrawal rate from your
investments to cover living expenses (20 * .05 = 1).  That come from an
analysis like this:

http://www.fpanet.org/journal/articles/2004_Issues/jfp0304-art8.cfm

So as pointed out above, if 30% of your living expenses come from
elsewhere, then your needed investment is 14x (14 * 0.05 = .7.) 

Frank