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Sneak Peak

I am working on an upcoming article for my feature site JoeTaxpayer.com titled “Can you Save Too Much, Pre-Tax?” In a first for my blog (here) I thought I’d offer the blog readers a special sneak peak (thus, this post’s title) and ask for comments.

The point of the article is to illustrate that one would have to save a huge sum, especially as a percent of their income, to save their way into a higher bracket. I think the article makes the point pretty well, but just as I might ask a friend to proof read a feature story, I’ll ask you to take a look and tell me what you think. If the feedback is helpful, I may offer future ‘sneak peaks’.
Thanks!
JOE

{ 2 comments… add one }
  • erich October 26, 2007, 9:57 am

    If I follow, you are proposing that a couple with a 100k annual income can live comfortably in retirement with a $2M portfolio, drawing 4% of principle per year assuming 3% inflation and 7% annual appreciation.

    Considering medical expenses, food, fuel, and housing are (and have been) experiencing price inflations in excess of CPI, can you comment on the impact to your model of using more realistic price inflation numbers?

  • JOE October 26, 2007, 5:10 pm

    Actually, the 4% safe rate of withdrawal has its own origins, from my Retirement Links you can read The Trinity Study. This, and further studies using Monte Carlo simulation all point to the 4% being the safe rate of withdrawal to not outlive your savings. The studies use overall inflation rates, so I’d trust that the items you mention are components of the CPI already, built in to the 3% average I suggest.
    If you feel that actual inflation is higher than government stated inflation, then the 4% needs to be brought down, of course.
    I have another article I’m working on, “Retirement Needs” which takes a look at percent of pre-retirement income one needs for post-retirement living. I’m pulling data for that article, and will try to address your health care cost concerns.
    Again, thanks for reading my blog.
    JOE

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