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Bankrate's 2008 Retirement Guide
Turbulent times
Retirement plans for many are in jeopardy. Understanding the problem is the first step to recovery.
Turbulent times
How much is 'enough' for retirement?
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Finally, divide the remaining amount by 4.5 percent -- figuring that you can take, on average, 4 percent to 5 percent a year from your retirement nest egg.

The final figure represents the approximate pot of money you'll need to be able to withdraw your desired income over the long term, she says. You can also use Bankrate's retirement planning calculator and Bankrate's investment goal calculator to help clarify your retirement scenario.

Also be aware that the current economic situation has altered some of the long-established norms used in retirement planning.

Two big numbers that will affect your retirement nest egg are rates of return on your investment and rates of inflation. For a historical inflation average, many financial planners use numbers ranging from 2 percent to 4 percent. And, for rates of return, they generally look at numbers ranging from 4 percent to 8 percent.

And historically, there's a relationship between inflation and return, Tignanelli says. Typically, he uses a 2-to-5 ratio, figuring if inflation is 2 percent, clients likely can get a 5 percent return on their money. But "right now, we're in an unusual period -- I don't know that it's happened before," he says. "The rate of inflation is higher than the return."

As a result, "I've been telling every client in the past six months to be at least 50 percent in the safest thing you can find and invest the other 50 percent," he says.

Stein, who believes the stock market will rally, advises a similar philosophy. "Go back to the old saw of having roughly equal amounts in U.S. Treasury bonds and stocks," he says.

The third big number you want to analyze is the amount of money you will withdraw every year. The range here tends to be tighter -- from 4 percent to 5 percent -- but that varies with the individual, too. It also depends on your life expectancy and whether you want to leave any money to your children, Edelman says. But "most people will fit 4 (percent) to 7 percent," he says.

And not all retirement account balances are created equal.

But the most important thing, no matter where you put the money, is to keep putting it away somewhere. "The biggest hurdle in these times is starting to save," he says. "Too many people are not doing anything."

-- Posted: Nov. 10, 2008
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