Remember the dream of being "independently wealthy?"

It had such a nice sound to it, whatever your life style. Personally, I always thought Jane Austin's Mr. Darcy was a better role model than the contemporary one offered by Dire Straits.

"That ain't workin' that's the way you do it

Money for nothin', your chicks for free."

Well, no matter.   That was then. This is now.   Most of us are worrying more, working more, spending less, and wondering about our future. No Darcy, no country estates, no money for nothin,' either.   Only a week ago I suggested to a doctor friend that he might become the first Wal-Mart Greeter with a stethoscope.

Adjustments are in order. To help you with The Big Reset let's take a look at the other end of the scale. Let's figure out how much money we'd need to be independently impoverished instead of independently wealthy.

We should be able to do that in a walk, right?

Wrong. The retirement savings of most Americans will support them at a level well below the poverty threshold.

We start with a visit the Bureau of the Census. We find their table showing the income level that marks the official beginning of poverty.   We learn that in 2001 an income below $9,214 a year defined poverty for single households under age 65. The figure is $8,494 if you are an "unrelated individual" at least 65 years of age. For a two person household the corresponding figures are $11,920 a year under age 65 and $10,715 a year at 65 or over.

Then we visit John Greaneys' Retire Early Home Page where he has updated his "Safe Withdrawal" calculator. Now you can pick the actual month you retire. He has also added nice touches such as simulations for Treasury Inflation Protected Bonds and I-Savings Bonds as part of the possible assets.

All that work and things don't change much, however. The generally safe withdrawal rate is still right around 4.2 percent a year and the optimal portfolio is still about 60 percent equities, 40 percent fixed income.

So a retired single person will need $202,238 if they are going to have a Threshold of Poverty Nest Egg.   A retired couple will need $255,119 for a Threshold of Poverty Nest Egg.

Readers inclined to quibbling will notice that these figures are based on the poverty threshold for 2001. They don't reflect the inflation we've experienced in the current year, about 1.4 percent. The quibble prone will also notice that people under age 65 need more money and that 70 percent of all workers start taking Social Security benefits at age 62.

Bottom line: $202,000 to $255,000 is on the low side.

No matter. Most people aren't even close.

A recent study of defined contribution plans done by the Vanguard Group found that the average balance in all its accounts was $47,980. The median balance--- half greater, half smaller--- was only $15,360.

The average balance for those 65 and over was $117,643. The median balance for those 65 and over was $41,980. These figures, by the way, are representative of all defined contribution accounts--- studies by the Employee Benefit Research Institute have very similar numbers.

Fortunately, everyone who participates in the Social Security system has a virtual portfolio--- the value represented by the promise of a lifetime income from Social Security. According to the Social Security Administration website, the average retired worker now receives $882 a month. The average couple--- both receiving benefits--- receives $1,463 a month.

To have the same income benefits, a single person would need to have $252,000   in investments. A couple would need a whopping $418,000 . It's actually worth a bit less since Social Security income stops at death.

But it's still more--- way more--- than most people have.  

Connections on the Web:

Poverty Thresholds, 2001

Poverty Defined

History of Poverty Measurement

John Greaneys' Retire Early Safe Withdrawal Calculator

Average Social Security benefits

"How America Saves"