Dear Dave,
I make $80,000 a year, and I was wondering if there’s an easy way to determine how much money a person would need to live comfortably after retirement.
– John
Dear John,
A commonsense rule of thumb if you’ve got your money invested in good growth stock mutual funds, is to pull from those funds at a rate that is lower than which they are growing. Otherwise, you’ll destroy them, right?
I tell folks if they want to pull off 6 to 8 percent – I’m comfortable doing 8 percent – then you’ve got to decide exactly how much you want to live on and what that means for your nest egg.
If you want to live on $80,000 a year, it means you have to have a $1 million nest egg. If you want to live on $40,000 a year, then you need a half-million dollar nest egg for what we’re talking about here.
– Dave
