Originally Posted by Unregistered

I used think it was just a tactic by insurance agents to scare people to invest in their products.

But then I find the numbers (projected expenses, inflation) they threw up are actually factual numbers based on simple mathematics. The numbers are also purely based on your inputs - ie, how much you expect you will need to maintain your desired lifestyle in retirement, how long you expect to live in retirement, inflation rate and what buffer you want to factor in for emergencies or unexpected expenses.

Lets use the couple who think that they only need $2400 pm at today's dollars. Thats $28,800 pa. Now the couple also think they want to retire at 50 and expect to live to 85 years old (35 years in retirement). Lets use inflation rate of 3%. This is what the couple will need over the years. For simplicity, lets say the couple is 50 yo and retire now.

Age______year_____Annual amt($)____Cumulative($)
50_______1________$28,800_________$28,800
55_______5________$33,390_________$155,475
60_______10_______$38,700_________$335,700
65_______15_______$48,870_________$554,625
70_______20_______$52,016_________$806,840
75_______25_______$60,300_________$1,087,630
80_______30_______$69,900_________$1,413,130
85_______35_______$81,040_________$1,790,480

The annual expense increases because of inflation assumed at 3% pa. The $1.79M should not include their home otherwise they will have to sell off their home at some point in their retirement.

As you can see, even for a very basic bare minimum lifestyle of $2,400 pm, you still need at least $1.79M to last 35 years. One solution is what the gahmen has been advocating - dont retire too early. Work as long as you can.

If you need $5,000 per month in retirement and want to retire at 50, you can straight away know it will cost you $3.6M for 35 years in retirement.

It is all simple mathematics. No special ingredient, no magic. If you are scared, you should start looking at how to boost your savings instead of bluffing yourself that it is not real!