Will saving $1.8M for retirement be enough?

  @Money November 18, 2013: 11:50 AM ET
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NEW YORK (Money Magazine)

I'm 32. I have $125,000. With 8% growth, that'll be $1.8 million at age 67. Am I set? -- Brent H., Crystal Lake, Ill.

Not yet, says Michael Kitces, publisher of Nerd's Eye View, a blog for financial advisers.

Even if your hoped-for 8% annualized returns pan out, your nest egg will be less impressive. Assuming 3% inflation and a safe 4% initial withdrawal rate, you'd have annual pretax income in retirement equivalent to $26,300 in today's dollars -- not exactly opulent.

Related: 'How I saved $1 million'

A more cautious forecast of 6% returns -- better safe than sorry -- translates into just $13,700 a year.

More snags: While the snowball effect of compounding returns is powerful, a string of bad returns, similar to that of the 2000s, would dash your dreams. And what if you can't work until 67?

Related: 'How I retired early'

To lessen your shortfall risk, advises Kitces, continue saving and create a balanced portfolio that won't need stellar returns to keep you in comfort. To top of page

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