What's your retirement nut?

[mwgr5]

Interesting post. Personally, I would rather not take the risk of having a low-income retirement that is significantly restricted by a lack of retirement income. Because of this I think having substantial assets to retire with is important. Others have highlighted the many problems such as inflation and poor market returns that can hurt retirement. Scorpio’s point about the horrible market performance from 68-82 is a great example, and I think a good emotional and financial acid test for people who want to retire early. It would be interesting to see how a well-diversified portfolio of US, international, REITS, and bonds would have performed in this period though, as it would be foolish to have a porfolio entirely composed of a large cap US index. Additionally, if I were planning to retire early today I would not count on the same amount of income from social security and Medicare.

Also, thinking that at age 40, for example, you will know what income you will need for the rest of your life maybe poor planning. It would be a shame to find an activity that really interests you in retirement that you cannot do because you can’t afford it on the 80K income you though you would need for retirement at age 40.

Also, each year you delay retirement your assets grow exponentially if invested. If the market goes down then you are simply buying more stock at lower prices instead of having to sell stock at low prices to fund your retirement. This is dependent on how conservative the portfolio is though.

Last, it seems like people are assuming that once you retire you cannot go back to work. If the worst-case scenario comes true or your assets don't prove to be enough to live on, you could always go back to work. Although this may be more difficult after a long time not working, you can always make money if your plan doesn’t work. Many people also have enjoyable part time jobs in retirement, which is another way to generate more income.

Overall, I would rather have a large nest egg before I retire so I know that I wouldn't ever have to work again after I retire.