How much money will you need to save in retirement? Think you’ll need $2 million? You may be surprised, but according to a recent article on MSN, experts believe that $2M should be the new goal for most Gen Y’ers. In fact, they also suggest that Gen X’ers strive for a $2M nest egg as well.

Although I appreciate articles of this nature and understand that their intended purpose is to reach a broad general interest audience, there were a few things that raised a red flag:

1) $2M may be way more than some people will ever need.

2) The $2M goal is based on working until you reach age 70. Who wants to do that? What if your timeline is compressed so that you can retire earlier?

Using conventional wisdom, a $2M portfolio with a 4% withdrawal rate would give you $80,000 of income each year (excluding taxes). Sounds pretty good, but do you make this much now?

It’s not that hard to figure out how much income you’ll need in retirement (see my previous post on how to do this). All things considered, many experts believe you’ll only need about 80% of your current income to continue your same standard of living into retirement. So really that $80,000 figure applies if you’re making $100,000 each year right now! Making a little less than that? Then read on….

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