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Nest Egg

November 16th, 2014 at 04:27 am

I've been contemplating what our number "nest egg" is. People always say 25x expenses or 4% withdrawal rate. Maybe 33x expenses or 3% withdrawal rate for early retirees.

So assuming we need $40k/year to live on, a little more than we do now, we need $1M or $1.3M to retire. I go back and forth on whether we should count SS as part of the $40k, especially if we retire early. Or should we just assume we'll have to provide all of that income in retirement.

Another assumption for us is that $40k is a paid for home. Right now that seems so out of reach, but if we moved we could very well have a paid for home.

So I guess the question is when can we retire? My gut says 10 years at 45. Why? Because I think our house will have appreciated enough and we can sell it for a lot more, while paying down principal. And we'll have had 10 years of saving and investing which might bring us to surpassing our nest egg number of $1.3M. Currently we are at about half that number but the next half should go faster since our investments will start to generate more savings and our income should increase to allow us to save more while we curb our spending.

What was your nest egg number?

In an aside it's day 11 of my detox/cleanse and it's been both easy and hard. Hard not eating out and preparing exact meals. Easy in that meal planning is done for me and the food is quite filling considering it's fruit and veggies mostly. I guess I'm done 7 lbs.

4 Responses to “Nest Egg”

  1. KellyB Says:
    1416155738

    If you plan to retire at 45 you will need way more than $1 - 1.3m. Remember that is only for 25 years, so that will only get you to 70. You need to plan to 90 or 95. Hate to tell you, but if you retire that early you will need more like 2 - 2.5m.

  2. doingitallwrong Says:
    1416162909

    It's 25 years if there is no growth in your portfolio, you get no other income (social security, etc.), and your expenses stay the same rather than (as is typical) decrease over the years. Most retirees will have growth, other income, and decreasing expenses, so the 4% rule in general will provide for retirement needs without touching the principal investment. MMM explains it pretty well:

    http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

  3. patientsaver Says:
    1416164380

    I plan to retire at age 60 and preferably, I'd like to have $1.25 mm but realistically, I will probably wind up with something in the neighborhood of $1 mm.

    Your annual expenses could go up if there is a badly timed stock market correct/crash right before you retire or in your earliest years of retirement. Also, if you plan to do any travel, that will up your expenses as well.

  4. scfr Says:
    1416364969

    When calculating expenses, have you calculated in the replacement cost of any benefits currently provided by an employer, such as medical insurance? Just medical insurance for a family of 4 could easily be 25% or more of that $40K budget.

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