MONEY Ask the Expert

I’m 32 and Expect to Have $1.8M By 67. Am I Set?

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Q: 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.

A: 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.

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?

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.

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