23 Aug How much retirement income will you need?
One of the most important things you need to determine when saving for retirement is how much money you will need to live on when you retire.
Half a lifetime ago, my friends and I all seemed to be struggling with the question: “Is this the right career for me?”
These days, for people of my vintage, the questions have changed. Now, I often hear: How much money is enough to retire on? How long does my money need to last?
The 4% rule
You may have heard of the “4% rule,” a rough guide for making your retirement income last for 30 years by drawing down only 4% of your savings each year. There’s controversy about whether it will work in the future: The rule was developed in an era of higher interest rates, when you could expect higher returns from the fixed-income portion of your portfolio, and it doesn’t allow for different income needs at different stages of your retirement. Even right now, I can tell you two of its shortcomings:
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