Christian Financial Advice and Biblical Stewardship

How Long Will My Retirement Nest Egg Last?

  • 2007 15 Oct
How Long Will My Retirement Nest Egg Last?

As the oldest baby boomers are now rounding the 60-year mark, more and more people are popping up their periscopes to check out their retirement accounts. Some people are very satisfied, and others are scared to death. The bad news: Many of those who think they are well set may be in for a nasty surprise.

As I travel around America teaching God’s people how to handle God’s money in God’s way at my No Debt No Sweat! Christian Money Management Seminars, I run into people who are dismally ill-informed about retirement and what it is likely to cost.

Sure, I’ve heard the same guys on the radio as you who pat us on our hands, and say, “Don’t worry, you can safely withdraw 8-, or even 10-percent of your nest egg each year in retirement — and never run out of money.” As much as I hate to be a party pooper, the fact is, that’s probably not true. 

The real experts in the field (not always the guys who are trying to sell you financial products) have developed some pretty sophisticated software that tracks the eventual outcomes of numerous retirement plan withdrawal patterns. And the facts are eye opening.

The best experts warn that retirement planning is an imprecise art. At best, we can only make educated guesses about the future. What will stock and bond markets do? What will CD rates be? How high will inflation run? How long will I live past retirement? What about my spouse? How will world events around the globe impact my retirement?

But many of these same experts do make suggestions based on computer models that are well worth our attention.

To begin with, there is a possibility that you could make annual withdrawals of 8-percent (or even more) and never run out of money in retirement. But there is a far greater likelihood that if you want at least an eighty-percent chance that your money will last thirty years or more (and, remember, these days lots of people are living that long into retirement), you may need to rethink that withdrawal rate. 

 “But,” you say, “What about all the stuff I hear about stocks returning ten and eleven percent over the last hundred years?” 

While that may be true, remember those are only average returns. The stock market is by its nature very volatile. Stocks may have averaged ten percent, but one year they’re up eighteen percent, then they’re down twelve percent, then they’re up nine percent, etc. And, if you happen to have all your money in stock related investments at retirement, and if that happens to be at a time that the market is going down, you’re long term retirement plan can be bloodied. So, while you may want to keep some stock related investments even in retirement (for the potential of greater returns), you may  decide to put more money into cash and bonds as you close in on retirement. These investments have had historically lower returns. 

Many experts believe that a safer annual withdrawal rate may be around 4- to 5-percent. Based on the studies that I see (and based on historic investment returns) this is probably more realistic. And, based on this rate, you could likely increase your withdrawals a bit each year to keep up with inflation. This means, if you want an income of $40,000 per year in retirement, you may want to try to set aside $1,000,000 in a well diversified retirement account.

I know this is a high bar to set, but if you’re young and still in your prime earning years, this may be the best reason in the world to skip the resort vacation this year and take a closer look at the Individual Retirement Account or 401(k) plan at work instead.


Steve Diggs presents the No Debt No Sweat! Christian Money Management Seminar at churches and other venues nationwide. Visit Steve on the Web at or call 615-834-3063. The author of several books, today Steve serves as a minister for the Antioch Church of Christ in Nashville. For 25 years he was President of the Franklin Group, Inc. Steve and Bonnie have four children whom they have home schooled. The family lives in Brentwood, Tennessee.


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