Here, late at night, are a few choice words about retirement savings (and how to withdraw from same) from Dr. William Bernstein:
Most of you have seen the nifty retirement software available from the likes of Vanguard and T. Rowe Price which provides the mathematical muscle to help you plan your retirement. Input your retirement age, expected lifespan, required annual income, rate of inflation and investment return, and hey presto, you find out that to avoid a golden years diet of Alpo you need the GDP of the average Central American republic. ...
Problem is, it may quite possibly be worse than that. These calculators all make the same erroneous assumption -- that your expected rate of return is the same each and every year. ... It turns out that if you have rotten returns in the first decade [of retirement] you will run out of money long before reversion to the mean saves your bacon in later years.
... If you can be ... flexible and spend a fixed percentage of your nest egg each year, then you can indeed keep your entire retirement stash in stocks and spend 5% annually. Just remember that your stipend will likely fluctuate wildly over the decades of your retirement. Keep a few cans of Alpo in the cupboard if you decide to go this route.
You're going to discover that to get into retirement in 21st century America, you're going to need a few things.
1) The cash flow (and iron discipline) to save 10-25% of each week's paycheck. (Always remembering to diversify, diversify, diversify.)
2) Luck that the markets start rocketing up as you near retirement. (Pray for a repeat of 1982-2000.)
3) The ability to moderate your life-style enough in your senior years to live on Social Security, annuities/pensions and your retirement stash until they plant you in the local cemetery.
These things sound like long-shots, but they're really not if you start planning and saving in your twenties and early thirties. When you have the luxury of time, building a cash hoard for the distant future is not super difficult. But if you start on your, say, fifty-fifth birthday, the challenge will be more difficult.
(Read both of Dr. Bernstein's articles on this subject, since he's got some simple but graphic charts that point out the dangers of withdrawing too much and putting away too little.)