2013-01-03 19:00 -0500
The problem with this is you can’t predict when you will die. On average, Americans live until about 80. But thats the average. Half of everyone will live longer than that. What will you do if you live to age 100?
Despite this, lots of retirement calculators and planning manuals tell you to enter in your age of death. But you can’t predict this. So don’t do your retirement planning like you can.
Instead, build enough of a nest egg that you can live off the return on your investments without drawing down the principle. This will sustain you indefinately.
Another thing to consider: If you retire at 50 and live until 80 you will spend 30 years in retirement. Thats a long time. You need to be thinking like a B-list celebrity. You made a small pile of money, but your career is over and no one wants to hire you anymore and you need to find a way to make that money last another 30 - 50 years which will probably include a big recession or even a depression or two. The way to do that is not spend down your principle.