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I Might Need $3,000,000 To Retire: What’s Your Number?

This article was written by in Investing. 34 comments.

ING Direct’s recent survey (now Capital One 360) results about retirement are scary. I don’t know what the world is going to be like in thirty years, the time I’ll be approaching “retirement age.” I do know that if my pattern of increasing expenses doesn’t change until then, and if I’m still earning primary income by trading my time and effort, a comfortable retirement is going to require a lot of saved and invested money.

If you believe the 4% safe withdrawal estimate, in order to live off the equivalent of today’s $50,000 a year, I’m going to need the equivalent of today’s $1,250,000 invested. Assume a modest 3% rate of inflation and I’ll need more than $3,000,000 in 2040 dollars. Unless I make major reductive changes to my lifestyle or move somewhere in the world where the cost of living is low, I’d prefer to live on more than today’s $50,000 a year. I’m going to need a bigger nest egg.

Banking Deal: Earn 1.75% APY on an FDIC-insured money market account at CIT Bank.

Although it sounds sophisticated, this is speculation based on assumptions that could be very wrong. I’m doing exactly what 53% of working Americans are doing according to the ING Direct survey: guessing the amount of money I’ll need to save for retirement. Even if I were to use an online retirement calculator sponsored or designed by banks, investment companies, or bloggers, my results would still be guesses, though most likely slightly more accurate.

Capital One 360 is offering a planning tool that takes into account the lifestyle you’d like in retirement, your investment style, and your assets and planned contributions, and presents a savings plan. According to my results, I am surprisingly on target for over $3,000,000 in 2040. This includes a number of significant assumptions about my future income and rate of return on stocks.

According to the ING Direct survey, one third of Americans age 55 and over think their number is $250,000 or less. There is a subtle implication that this won’t be enough for many retirees.

In reality, I don’t know what my retirement will look like in 30 years. I may never be able to stop working in order to afford expenses for my future family. The best we can do is set a target that makes sense for what we know and understand of the world today, and make choices based on the assumption that the nature of money and finance won’t change too much between now and then.

What is your retirement number?

Updated September 26, 2016 and originally published March 11, 2010.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 34 comments… read them below or add one }

avatar 1 Anonymous

GREAT tip. I sent this to my hubby and we’ll definitely take the survey. We’re both trying to figure all this retirement stuff out. :)

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avatar 2 Anonymous

Flexo, by 2040 seems like a reasonable goal for you. However, may I ask how you feel about 30 more years of earning money? That would put you in your early to mid 60’s, which is the standard retirement age. You OK with 30 more years?

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avatar 3 Anonymous

What’s wrong with 30 more years? Statistics show that many people are working beyond “traditional retirement age” because they want to — like starting a new business or consulting. People are living healthier lives for longer, and they’re not necessarily waiting to retire before they have a life.

It’s all about balance, and what works for different people, I guess.

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avatar 4 Anonymous

Your savings isn’t going to be your only source of retirement income. There are other sources such as social security (even if it’s not the full amount they promise), pensions, etc.

Also your income needs can decrease dramatically if you no longer have to pay a mortgage and will no longer need to save. (If your savings rate is 15% you’ll need 15% less income, etc.)

Figuring out your number can take a long time to truely narrow down. But please don’t wait till you’ve figured it all to start saving.

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avatar 5 Anonymous

I honestly wouldn’t even calculate Social inSecurity to be around at all. Anything that is available I would consider a bonus, and use for lotto tickets. ;-)

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avatar 6 Anonymous

Ben – sometimes I need to look up a word. Pension? An archaic term used to describe……
I know – there are some employers, government among them, that still offer a pension. They are getting fewer and farther between. More and more people will have only Social Security and what they save on their own. A 401(k) match if they are lucky, but that’s still money they see in their own account.
Simplest approach is to target 20X one’s current income. It self-adjusts as each year you track what your multiple is based on your income at that time. This will replace 80% of that income at retirement using the 4% rule.

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avatar 7 Anonymous

Also, read “Your Money or Your Life” (YMOYL) to find out when you can be financially independent and then do what you want–continue to work, volunteer, whatever. It requires paying attention to your income and expenditures and drawing a simple graph. Well worth it in terms of consciousness.

The higher figures are inflated if we assume a continuing escalating consumer lifestyle. Better to buy good quality stuff and keep, of course. YMOYL gets one thinking about the exchange of your limited hours on earth for a dollar amount.

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avatar 8 Anonymous

How much $$ will I need to retire on? There are so many variables. Firstly, I know I’ll never have a pension — a 401(k) is what I’ll be dealing with. As Sam said, what about age? Do I want to work another 30-35 years? Not really. In addition to savings and investments, I’d like to make use of passive income possibilities and pay off our mortgage before retirement. $1M in today’s money? Sounds daunting.

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avatar 9 Anonymous

Retirement planners are backing away from the 4% Rule of Thumb as fast as they can. It wouldn’t have worked well in 2009 or 2010. My wife and I have been retired for a little over 2 years now and although we have the benefit of pension income which may not be available to everyone, the planning of our retirement was straight forward. The 70 -90% of pre-retirement income doesn’t really apply unless you did very little saving before retirement. The best prediction we did was to take pre-retirement *spending* (everything you spend on goods and services) and multiply it by 1.25 and then add in anticipated income taxes. This was our retirement income goal (adjusted for inflation) In our first two years we’ve spent less than we anticipated using this measure but it is a better measure than any analysis that includes pre-retirement income. So far this year we are spending approximately 79% of our pension income or 67% of our total income. Since three of our pension (USAF & SocSec x2) have a COLA component our income is inflation tolerant (never inflation proof) adding a small measure of confidence.
My Rule of Thumb: If a retirement planner starts by asking you how much you spend, there’s a good chance they are working on your retirement plan. If that start by asking how much you make/save/have saved, they might be working on their retirement plan ;-)

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avatar 10 Bob

That is the best retirement calculation I have ever seen. It makes the most sense. I have been saving and running retirement numbers for quite some time and even had a stint of retirement for about a year, then was asked to come back to work by a new employer on a gov’t contract. Fortunately I did not have to dip into savings and spent very frugally. I want to “officially” retire next January when I reach 66 however. I was wondering if the addl. 0.25 percent you added in was for vacations, and unexpected occasional spending? Thanks for sharing…

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avatar 11 Anonymous

I like this ING retirement calculator more than the older The PDF of the final output is pretty nice too.

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avatar 12 Anonymous

I don’t know if it’s a safe assumption, but the assumption is that your general expenses will be lower at retirement age than during your working life. The biggest part of this would be your home; you pay a mortgage during your working life and, by the time you retire, you *shouldn’t* owe any more money on your home. You also won’t be supporting your children.

I don’t think that $250k is enough, but $3 million sounds like a lot.

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avatar 13 Anonymous

This is not necessarily wrong but you need to separate spending from imposed expenses. Our spending increased slighly so far in retirement. In fact with the exception of that stinking tank of gas I had to put in my car every week to go to work very little changed. Imposed expenses decreased dramatically. These were: Government Imposed – Income Tax went down, SocSec-Medicare Tax, went away entirely. Self imposed – Retirement Savings ended. Although positive cash flow results in saving we have no “imposed savings plan”.

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avatar 14 Anonymous

But you may be supporting your parents.

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avatar 15 Anonymous

Over the next 10 years I hope to establish a new home and way of life for me and my family. Beyond saving, I plan to invest in self-reliance thus lowering my need for greenbacks. I have no idea how much I’ll need yet, but plan on my number being much lower than others.

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avatar 16 Anonymous

Thirty years from now is difficult to assess. The answer will always be the same: “save as much as possible, the sooner, the better”. To generate a $50,000 annual stream of income requires $625,000 principal returning 8%. Yes, you need $3,125,000 principal, and at 8%, will provide $250,000 annual income. This is not that difficult to accomplish assuming you have a house paid up. Treat your house equity as your bank. You can borrow against your equity at 4.5% and invest it tax free at 9%. Do the math! I’m living proof!

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avatar 17 Luke Landes

Treating your home equity as a bank is a dangerous proposition. I am not sold on this concept of retirement borrowing. And 9% tax-free is something no one should count on.

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avatar 18 Anonymous

That’s what I mean about planners. If they haven’t tried it, how would they know? We have a lot of skeptics in this profession!

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avatar 19 Anonymous

Felix –
Where are you getting a post-tax 9%? Your advice is counter to what nearly every planner suggests. As Steve mentions, even the 4% withdrawal rate isn’t without risk. Treat your house as your bank? Good luck with that.

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avatar 20 Anonymous

The planners aren’t doing a good job! Believe me, I read them all! Also, the planners aren’t interviewing successful retired boomers like myself! Let me ask you a question. If you had all the money in the world, and one of your main priorities is to minimize Federal income taxes and at the same time, earn a respectable rate, where would you nest a major portion of your money? The same place where billionaires are nesting: tax exempt municipal bonds. On the other side, if your house is all paid up, though you’d be saving money on mortgage interest, you’d still have a 100% home equity that isn’t earning you anything. Make your home equity work for you! Before retiring, we need to save, save, save! After retiring, we need to find ways to create income (besides pensions and 401K) without having to work that will outlive us. A few ways to do that: bonds, annuities, CDs, insurance, reverse mortgages, rentals, lotteries, a working knowledge of taxes, a rich spouse, an inheritance, a wealthy widow(er), unclaimed gifts, etc.

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avatar 21 Anonymous

I’m surprised the number of working Americans who are guessing at the amount they will need in retirement isn’t 100%, because I don’t see how you can possibly do anything but make an educated guess, unless retirement is right around the corner.

ING’s survey told me I’ll be spending $9000 per month in retirement to maintain the lifestyle I want. (And that’s with me saying I wanted to retire in 3 years, so it’s not due to inflation.) Since I spend nowhere near that now, I’ll go back to guessing :)

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avatar 22 Anonymous

All of the calculators and estimators try to simplify what is, in reality, a very complex time series of income items, taxes, savings items, debt payoffs, big life expenses (e.g. college years), changes in family (kids leaving home), etc. I was never happy with the calculators that boil it down to a “number.” Seemed like all it did was scare you into buying what someone else was selling.

Then I read a book called “Spend ’til the End” and ran in to the people. Their big thing is “Consumption Smoothing” in which you try to maintain an inflation-adjusted level of “net” consumption spending your entire life, taking out all of the items that ebb and flow. You end up with (essentially) a big spreadsheet that accounts for each year’s income, taxes, savings, earnings on savings, mortgage payments, big expenditures, changes in household, etc, etc and a column that grows slowly your entire life to indicate your true “discretionary” consumption spending. They believe THIS is the value you should try to hold constant during your life to not save too much or save too little. The process is much more accurate than simply guessing at post-retirement income needs. Takes in to account all SS rules (early ret, late, etc) and the effect of SS income on tax rates for other taxable income, etc. Understands Roth versus trad IRA. Allows what-if scenarios.

They sell a full-fledged version. I tried the free version but found it wanting, and I’m really cheap, so I did my own spreadsheet that (I believe) gets me 90% of the way there.

Worth a look.

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avatar 23 Anonymous

Flexo, you have 30 years to try to put at least some of that money into assets with a chance of beating inflation (e.g. rental properties, stocks, TIPS, etc).

It’s the inflation figure that makes the high number so crazy, but if income from your assets have some hope of keeping up with inflation you can possibly dial back on the total amount required.

As you get closer to the end (ahem) you’d probably want to see some and turn it into a fixed income, though. But don’t believe the hype – health care costs aside, most 80-90 year olds spend little money.

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avatar 24 Anonymous

17 years ago I had a solid net worth of $750,000 at age 40, that consisted of a thriving business, high value acreage and 2 houses.

I lost it all due to a severe illness of first spouse, divorce and downturn in my business.

Add an expensive divorce, a serve illness of my own and injuries that left me disabled and I went to $0.00. I live a very minimalist lifestyle,having shed myself of many material goods. I am not on SSDI and bring in about $1500.00 per month. I can work part-time at times, but doing so at great physical pain.

But unable to return to past occupations [and I have tried]. I am in my late 50’s and see that I can live an adequate lifestyle, but will have to live with roommates. Funny thing is that I am not alone, I have encountered many “walking wounded” in the same situation as mine.

Just wish to give another perspective – It is easy to lose everything you have accumulated at any time. Even when you have safeguards in place, like excellent health insurance, other insurance.

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avatar 25 Anonymous

Meant to say I am on SSDI.

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avatar 26 Anonymous

I’m sorry to hear about your story. What was the main reason, or percentage breakdown of the three reasons for your loss? What is your main advice for those who have similar assets on how to prevent the loss from occurring?

By deduction, I’m assuming that since you have health insurance and other insurance, that wasn’t the main cause. Divorce is -50%, so was it mainly liabilities from one’s business? Sorry if asking is wrong.

Your story scares me and I’m hoping to learn.



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avatar 27 Luke Landes

Thanks for sharing your story, Marc. We can plan as much as possible, expecting life to continue along a path we’d like, but there are certain things you cannot prepare adequately for.

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avatar 28 Anonymous

My number is about $3M also….. about halfway there….. I’m assuming Social Security will be bankrupt by the time I retire. Most people have no clue how much they need to save to live in the style they desire.

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avatar 29 Anonymous

Since I am going on 81, I think $3,000,000 will almost take care of it after Obama is done
messing things up.

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avatar 30 Anonymous

This is the funniest comment I’ve read so far. I guess “funny” isn’t the norm on a blog about retirement, but I appreciate it. I’m 60 and worried about retirement also. I guess it comforts me somewhat to see how I’m very much not alone ! By the way…great site!

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avatar 31 Anonymous

The future is very unshure in view of recent events. Our future is in the Lord’s hands.

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avatar 32 Anonymous

Every day it appears that the country is going down a slippery slope.

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avatar 33 Anonymous

I might as well kill myself now – thanks to my “investment advisers” my retirement fund plummeted a few years ago, so why should I take the advice now when they can not seem to even get more than 4% rate of return… retirement – ya right, someone is making money but it is not the average American, most of us are feeling good to get a few dollars into some type of savings, there are no pensions, Social security sucked out all my earnings and will be bankrupt before I retire, I paid fees and taxes for anything I put into retirement plans and will pay when I take it out. Everyone is talking about needing millions of dollars and I am over 50 with just $50000 total in my “retirement fund”. There is no retirement, the biggest hope is have the mortgage paid after the kids get through college, and find some job that will give you insurance and keep you fed. If you have millions, drop a few coins to the shelters, because they are going to be full of boomers that will be unemployed and not making it.

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avatar 34 Anonymous

I went and tried this calculator and it told me my number was “more”. Maybe I am living too far beyond my means :(

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