Page 154 - Ready Set Retire

Stephen J. Kelley

what payout factor should we use to get a 100% chance of
success?

Many Wall Street planners now recommend that instead of
using a 4% payout, that to be safe you should figure on about
2.5% to 3%. Get that. You have $500,000 socked away and
your planner will only recommend you take out $15,000!
Further, according to that Morningstar study, 2.8% provides
only 90% chance of success. Taking any less, however, seems
ridiculous, so we must settle for that.

So using the 2.8% number, to get $55,000 a year in income at
age 70, you must have the following.

$55,000/.028 = $1,964,285

So what rate of return do you need to get over the next 10 years
to accumulate $1,964,285, starting with $500k?

According to the future value calculator on Investopedia.com,
you must have a steady return of 14.66%, every year for the
next 10, net of fees, to reach your savings goal. How likely is
that?

Why is all this so important? Simple, because it allows one to
actually make a plan. We have a saying: “Until you remove risk,
it’s not planning, it’s hoping.” And we are planners, not hopers.
If I create a plan, I will write it down, on paper, and give it to

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