Two retirees can each spend $5,000 a month and still face dramatically different savings targets. The difference may have little to do with their lifestyles and everything to do with how much dependable income arrives before either one touches an investment account.
Consider a simple example. Both households need $60,000 a year to cover their retirement spending. One receives $40,000 a year from Social Security and a pension. The other receives no guaranteed retirement income. Using a 4% withdrawal rate as an illustration, the first household needs roughly $500,000 from its portfolio to cover the remaining $20,000. The second needs about $1.5 million to produce the full $60,000.
