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BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
First of a series
How much money does someone need to retire comfortably in New Jersey?
The answer, obviously, depends on your normal lifestyle. You'll need far less if you regularly eat at diners (when you do eat out) ... if you drive an old jalopy (or, better yet, take a bus) ... if your idea of a great vacation is a week at the Shore ... and if you shop for clothes at Wal-Mart.
Oh, and if you work to 70 or 75, or later, instead of retiring at 65 or 60 or even earlier.
Besides, some people are blessed with obscenely huge pensions; others have only piddling Social Security payments to depend on.
So it's not easy to come up with a specific amount of money most people would need to retire comfortably. Still, we found a few smart financial professionals willing to give it a try.The figure that Brian Kazanchy, CFA, CFP, MBA, came up with is: $1 million. Kazanchy, chairman of the investment committee at RegentAtlantic Capital in Morristown, is assuming that someone receives $25,000 a year from Social Security and enjoys a $50,000-a-year pension. After taxes, that's maybe $60,000.
"They would probably want a draw from their portfolio at least $40,000 to maintain a nice style of living," he adds. "At a 4 percent withdrawal rate, that means a nest egg of $1 million."
He goes on: "I would say that a $1 million nest egg should be about a minimum target for a comfortable retirement here. Many people don't have the benefit of a pension. Or they may want to spend more – so they would need a bigger nest egg."
Is that $1 million for one person or for a couple?
"The $1 million can cover two people, assuming that the spending level is for the couple."
Many people haven't reached retirement age yet. Should they figure that their nest egg will increase by roughly 10 percent a year – and that the amount they might need would grow in pace with the inflation rate?
Answers Kazanchy: "I would assume the nest egg can grow by the inflation rate, plus a spread of 2 percent to 5 percent, depending on how aggressive the investments are. The 
savings level is discretionary – 10 percent is good, but it's really a trade-off between current spending vs. having a larger nest egg to support spending in retirement."
The answer, says Scott P. Noyes, CFP, CFA, "depends up the definition of ‘comfortable.' I have clients who are quite happy because of a strong relationship with their spouse and friends – even without much money. I also work with wealthy families who whine about everything."
Okay, but how much?
"My best guess is $1 million allows a 70-year-old couple to live comfortably enough.
They can pull off $50,000 to $60,000 per year from this portfolio, plus Social Security and other benefits. This would result in pre-tax income of $80,000 to $90,000.
"If costs are well contained, this can work in New Jersey."
Noyes runs Noyes Capital Management in New Vernon.
Claire E. Toth, JD, MLT, CPA, who's with PointView Financial Services in Summit, first explained how to calculate (roughly) how much you need, then gave some figures.
Take out your current tax return and write down your "adjusted gross income" (the last line on page one).
Subtract any nondeductible money you currently save (for college costs, nondeductible IRAs, and the like). If you intend to have your mortgage paid off by the time you retire, subtract the annual amount of that as well.
Subtract your projected Social Security and pension benefits (if any). You get these statements in the mail each year.
If you are an optimist, multiply the resulting number by 20. If you are a pessimist, multiply by 25.
She concludes: "This may not be perfect, but it's a good start. For those who think that this takes too many steps, the answer will be in the range of $2 million-$5 million."
A rough rule of thumb is mentioned by Jerry A. Miccolis, CFA, CFP, who's with Brinton Eaton in Madison: Once you're in the "distribution phase" of your life (as opposed to the "accumulation phase"), you can comfortably spend 4 percent of your assets each year.
"This translates into your needing roughly 25 times your annual living expenses in invested assets," he says. "For example, if you average $5,000 a month in living expenses, before income taxes, that's $60,000 a year – which implies that you need a nest egg of $1.5 million." (4 percent of $1,500,000 is $60,000.)
For his clients, he does a detailed study, including a lifetime cash-flow projection that he updates regularly.
Finally, a semi-facetious response from Gerald Quigley, CFP, CLU, of Quigley Associates in Parsippany, a fellow graduate of Columbia College: "$940,000 would be my choice."
He elaborates: "When Professor Carey (Columbia College economics) was asked by the New Yorker magazine for the gross domestic product (GDP) number for 1832, he responded immediately – to the reporter's surprise. And since GDP records were not kept back in 1832, he dared anyone to challenge his number."
We'll have more replies to the question next week.
You are invited to send personal-finance questions to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
