rrosenkoetter wrote:rai wrote:I don't understand why people are saying save 25x of earnings. shouldn't it be 25x spending?

This is exactly right...

This is why one can retire on a million dollars and live very well... People here say "That only generates $40k a year! No way I could live on $40k a year! I make $100k today!"

But take away a house payment, take away having to save 15% of your income, lower your taxes, and suddenly you realize $40k gives you the EXACT same life you enjoy today.

I suppose I must be very arithmetically challenged here because I'm missing something. Shouldn't your today's spending be adjusted for inflation when projecting 25x spending in Y years?

Let's say a couple spends $40K net today which already includes their entertainment-travel budget, but excludes health-dental insurance premiums since they're paid with pre-tax $ through an employer.

Is $1Mln really all we need to save for our retirement, not including med. insurance? What about adjusting for "Y years" from today until the actual retirement?

Today I skimmed a pamphlet from TRowePrice and it was daunting what their numbers say. I'll just retype it here.

THE POWER OF PERCENTAGES (by TRowePrice)

Three 30y.o. investors earning a $50K salary end up with radically different incomes when they reach age 65 - and for the 30 years they may spend in retirement - depending on their savings rates (Assuming a 3% annual pay increase & an avg annual return of 8%).

Their goal should be to replace 50% of their preretirement income which will be $140,693 at age 65. Below we see the income their investments provide in the 1st year of retirement.

Investor 1 contributes 5%. Savings at age 65 is $679,634. Income from investments: $27,185 that replaces 19.3% of preretirement income.

Investor 2 contributes 10%. Savings at age 65 is $1,359,269. Income from investments: $54,371 that replaces 38.6% of preretirement income.

Investor 3 contributes 15%. Savings at age 65 is $2,038,903. Income from investments: $81,556 that replaces 58% of preretirement income.

I've used the above example because I'm trying to understand whether the financial industry is trying to scare me witless or are today's savers (including myself) are delusional being stuck on that 1 million dollars.....???