(from the original article
From one extreme:
"Fidelity’s Retirement Quick Check calculator says that a 50-year-old person making $100,000 a year with $700,000 stashed in retirement accounts, saving $15,000 a year, would still fall short of the $2.8 million goal that would provide the necessary monthly retirement income of $7,408 that it sets. Its calculations do not include Social Security payments.
Fidelity actually recommends saving about $1,000 a month more. It also encourages this person to save more even when more than enough has been saved. It recommends putting away up to $9,749 a month on top of the $15,000 a year already being saved, an impossibility since that would more than consume the person’s entire gross income."
...to the other extreme...
"Mr. Kotlikoff’s ESPlanner software, taking real estate holdings and life insurance into account, says the person could cut back on savings by $10,000 a year and still have enough for a monthly income of $6,000 at retirement, the amount his calculations deems adequate to live on given prior consumption patterns."
Either Kotlikoff is yet another schiester (sp) or is truly ignorant. Fidelity's "Quick Check" (anyone else note the obvious in the Fidelity calculator's title? It's like comparing a raw block of marble to a Michaelangelo sculpture) simply looks at the total equivalent financial assets you'll need. Kotlikoff's program, on the other hand, apparently goes so far as to assume reverse mortgages ("taking real estate holdings") and - I think, but I'm just guessing - cashing in/loans against whole life insurance policies ("life insurance"). Sure, if you go to those extremes, I won't need anywhere near 25x income in my portfolio...because my investment portfolio will only be 2/3 of my total equivalent financial assets (the other 1/3 being a reverse mortgage and cashing in a life insurance policy). If you ask me, betting on what interest rates will be 30-40 years from now on assuming reverse mortgage cash flow would be perhaps the most difficult part of retirement planning.
Another sad quote:
"Indeed, their studies of the savings and spending habits of the generation born between 1931 and 1941 revealed that at least 80 percent had accumulated more than enough wealth for retirement."
Gee....considering that those 80% are receiving SS payments that far eclipse what they ever paid into it, I surely hope that they ended up accumulating more than enough wealth. Give me the same 5%-7% annual returns on my SS contributions that they ended up getting, and I'll be sitting pretty as well.
