Another way to look at how nest eggs work. Employing our savings.

  In the February 21st post I blogged some about rich people and how they think about nest eggs. The wealthy are just taking advantage of a concept called employing money. If we spend just the growth or interest from our portfolio, we keep the original balance, or nest egg, completely intact. A modest 3% withdrawal rate usually keeps us from dropping below our original balance, so I'll use 3% in the following examples. My cell phone bill is about $50 monthly or $600 a year. If I would like to have my cell phone bill paid forever, I need   X times 3%= $600 or $20,000. We can use this method to pay for anything we want permanently. I don't want to pay $400 a month for food. I need   X times 3%= $4800 or $160,000. When our nest egg can pay for all monthly expenses, we've reached a point at which we can retire or do what we want with our time. Looking at current monthly expenses and using the 3% formula gives us an excellent idea of how much we'll need to retire. If I need $5,000 a month to live the lifestyle I want, I need   X times 3%= $60,000 or $2,000,000.  I guess we should start a savings plan today. Finwiz.