Thanks Tod for the comment, you make very valid points, especially your first point is very true. I very much believe that your retirement fund should depend on your retirement life style.

Retirement Planning is not always an easy task to do and the further you are from retirement the complicated it will be. The best advice is to save as much as you can as early as you can.

1: The 75% rule is a myth. People retiring early frequently spend more on active retirements, and studies show spending declines in nominal terms with each decade of retirement. It is worthwhile to drop the rule of thumb and develop a budget based on your actual retirement plan. You could spend a lot less if your plan is to live the open road in an RV, and it could be a lot more if you are a world traveler. It also depends on your definition of “retirement” which could involve part-time work or a paid avocation/hobby. Build your budget based on your dream vision for retirement and drop the rule-of-thumb.

2: Inlfation: only recent history supports the 3% assumption. There have been decades of wide variance from that assumption when you look further back. Given the debt, deficits, and out of control entititlement program spending for our government it might be wise to assume a more aggressive inflation estimate in the future than what the recent past indicates. Underestimating inflation is a risk that can destroy an otherwise well planned retirement.

4: Life expectancy is another dangerous area of retirement planning. Expectancies are constantly rising and biotechnology advances promise to accelerate that process. In addition, using actuarial tables to develop life expectancy assumptions is meaningless for any one individual because the likelihood that your expectancy will be anywhere close to the average is minimal at best. Any one person’s life expectancy is not an actuarial event so it is misleading to plan it that way. There is no statistical validity to the approach. I encourage clients to budget for very long expectancies unless they have clear health reasons to assume otherwise. The danger is just too great.

Anyway, I could go on and on but there is just too much to include in a comment to a post. Hopefully these tips motivate readers to look beyond the standard assumptions and consider equally valid alternatives that could completely change how they approach retirement planning.

I hope that helps…

Todd R. Tresidder

Can you make Column B on the ‘Annual Savings Amount’ tab a bit wider?

After I plug-in all my numbers, I get this:

Annual Saving @ Beginning of the Year ##########
Annual Savings Amount @ End of the Year ##########

Thanks!

Thanks!