Retire on Less - With More Risk? Possibly...

Can you retire with $200,000 in savings?

A friend tells me that his financial adviser says that you CAN retire on $200,000 in savings, and take out $20,000 a year, if you get about 7.5% or more rate of return on your investment.

As the above table illustrates, he is right.  The money will last about 22 years, at that rate, provided you can get a regular rate of return of 8% on your money, which is a little risky, as it means you pretty much have to go into stocks - and fairly risky ones at that - to get that rate of return.

Playing the market in retirement is not something I think I want to do, frankly.

But the scenario illustrates one salient point:  Most of us will retire on what we have saved up, rather than save up to retire.

In other words, how much we end up in savings will be how much we end up with, not a target number we work toward.

And many Americans are retiring with scary small amounts in the bank - often pitifully small amounts less than $100,000 or so.  And many of these lower-income Americans will get little in the way of Social Security as well.

The train is headed for the trestle.  But the trestle rotted out and collapsed years ago.  And yet no one on board the train seems to care one whit.  Full speed ahead!

We worry about more immediate concerns in America - the price of gas to fill our 8 mpg pickup trucks.  But the real debacle for most Americans will occur in 3....2....1..... any day now.  Particularly when many realize they are laid off at age 55 - for the rest of their lives.

Ouch!