Do you recommend that people have a certain goal percentage or dollar amount saved for retirement?
Well, life doesn’t generally happen in linear fashion. In my opinion, your overall goal—closely and constantly adjusted and monitored—should go something like this: Build a nest egg that you can live off about eight percent of. If you have $500,000 stashed away, then that would mean about $40,000 a year. If you’d rather live on $80,000 a year at retirement, you’d need $1 million. Otherwise, you’re liable to start counting on the government. And we all know how well they handle money…
Want to know where I got this figure? Throughout the history of the stock market, the Standard & Poor 500 has averaged between 11 and 12 percent. Some folks don’t think it will average that in the future, but they didn’t think it would when it was booming, either.
But, if inflation runs about three or four percent, and you’re making 11 to 12 percent, you can pull out eight percent, and you’re still leaving enough in there to give yourself an inflation raise every year and not touch your nest egg.
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