Quora Answer: If I Want to Retire with $1 Million, How Much Must I Set Aside?

The following is my answer to a Quora question: “I am 22 years old.  Taking inflation into consideration, if I want to retire with a nest egg equivalent in value to $1 million today, how big must my nest egg be in 40 years?”

Assuming an inflation rate of 2.5%, which is quite reasonable, you would need to have around $2.7 million to have the purchasing power of $1 million.  That is not a lot.  If I assume your life expectancy to be 80 years, you are looking to spread that amount over 18 years.  You are looking at around $150,000 per year.  To put that in perspective, in today’s purchasing power, you have, in effect, just over $55,000 per annum to spend.  A reasonable amount for you to look at would be four times that amount, if you want some comfort, or a continuous means of passive income that earns while you are retired.