The previous three posts (Money Part I, Part II, and Part III) set the foundation for how we got to where we are – and maybe help give you some ideas about how to try to get there too.

But now it’s time to start talking like someone who is looking at an impending retirement. Someone like me.

So we have savings: my 401k, both our IRAs, both our Roth IRAs, and a little bit in personal savings (less than 10% of all our funds). I’m not going to dive too deep into this because there are plenty of money blogs and websites on the web that cover this. But what I will do is point out a couple minor gaps in some of those discussions.

First, too often there are posts about “retiring before 59 ½” and the penalties that one must pay. However, the IRA has a “Rule of 55” that provides “the following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA: Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55…” These posts that too frequent omit this option refer to the penalty associated to withdrawals before 59 ½.

Second, the conversation is typically “you should plan on living on 70-80% of your pre-retirement income.” Well… OK. I’ll use two salaries to cover my question / make my point, 50K and 100K (they are easy to do the math on). When I reference values in the next couple of paragraphs, I will comment like this: x / y, where X refers to the 50K salary and Y refers to the 100K salary (if this is unclear, keep reading, it’ll make sense in a second).

Let’s say your salary is 50k / 100K. 70-80% would then be 35-40K / 70-80K. Then to get this income with the “4% withdrawal rule”, you need 875k – 1,000K / 1,750K – 2,000K. Let’s see that in a table, maybe that would be easier to see:

Salary	50,000	100,000
70%	35,000	70,000
80%	40,000	80,000
Balance for 4% @ 70%	875,000	1,750,000
Balance for 4% @ 80%	1,000,000	2,000,000

Alternately, let’s also say you are able to save 20% of your salary in a 401k thus reducing your TAXABLE income. That would paint a different picture:

Salary	50,000	100,000
401K @ 20%	10,000	20,000
Net salary	40,000	80,000
70%	28,000	56,000
80%	32,000	64,000
Balance for 4% @ 70%	700,000	1,400,000
Balance for 4% @ 80%	800,000	1,600,000

As you can see, in the first table, you need considerably less – 20%, actually – if you use your NET income (less the 401K contribution) rather than your gross income.

Third, can you really have too much income in retirement? I mean, really. I get that one has to balance paying current bills and enjoying life now versus saving for retirement, but if you could save MORE for retirement, than why wouldn’t you? Even if you planned, you may – likely – will miss expenses, or how high those expenses will be, in your planning. So why not save more than you need. And if it turns out that you have more than you need when it comes time to use it, you can do MORE than you originally planned – travel, eat out, newer car, hobbies – and or leave it as an inheritance.

Recently (as of this writing) I saw a story about tax rates. It was talking about taking your tax rates into account now versus the future. If you earn a lower amount now and save enough, saving too much could actually cause your tax bracket be higher when you retire than it is now. Look back at the tables above. If you are making 50,000 / 100,000, save 20% to yeild 40,000 / 80,000 (taxable income), and target 70% – 80%, your income should be 28,000 – 32,000 / 56,000 – 64,000. But if you save 1,000K / 2,000K and withdraw at 4%, then your income will be 35,000 – 40,000 / 70,000 – 80,000. So your tax bracket will be higher when you retire.

But is that really a bad thing? Without getting too deep into this topic, I will say that this – THIS – is what a [Certified] Financial Planner (CFP) is paid to do: help you figure all this out. I’m just pointing out some of this because you may not want or can’t afford a CFP, but this may help point you in the right direction.

ADD-ON: (With no disrespect to the author) As this article from MarketWatch.com shows, “Good luck trying to figure out how much to save for retirement.” Even pros have a problem with this – so you can imaging how hard it must be for regular folk like us. It IS that difficult…

(I am NOT a CFP, and any action you may take as the result of my opinion you do at your own risk.)