Saving Adds Up

Most Americans will work for 40 or more years before retiring. Hopefully, they save enough money along the way, so that they can maintain their lifestyle for the remainder of their lives.

If a person started off earning $40,000, had 3% annual salary increases, saved 10% per year, and earned 8% on the amount saved, she would have just over $1.5 million at retirement. Her salary at retirement would be $130,000.

If she then retired and drew 4% per year from pool of savings, she would be able to received distributions of $60,000. These withdrawals could be increased for inflation and she would never run out of money.

You might note that $60,000 is less than half of her final salary. She would have Social Security. She might have a pension.