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YOU'RE 45. MIDLIFE FINANCIAL CRISIS OR EASY SAILING NOW?

JONATHAN CLEMENTS

It's halftime. What's the score?

I just turned 45. By my reckoning, that puts me halfway through my working career and hence halfway to retirement.

How big a nest egg should a 45-year-old have? Here's a look at who faces a midlife financial crisis - and who might be able to retire early.

Suppose you have a $240,000 portfolio, equal to three times your $80,000 annual income. To retire in comfort, you ought to save a manageable 12 percent of income every year for the next 20 years, calculates Charles Farrell, a financial adviser with Denver's Northstar Investment Advisors.

That savings rate - which would include any employer contribution to your 401(k) - will give you a retirement stash equal to 12 times income at age 65, or $960,000 in today's dollars. If you then use a 5 percent initial annual withdrawal rate, your savings will kick off $48,000, or 60 percent of your old salary. Add in Social Security and you might be hauling in a respectable 80 percent of preretirement income.

All this assumes you can clock an after-inflation investment return of 5 percentage points a year during the next two decades. To hit that target, keep a healthy sum in stocks and a tight lid on investment costs. (If you don't have precisely 20 years to retirement and want a sense of whether you're on track, try the retirement planner at www.dinkytown.com.)

What if you have savings of four or even five times income? Amassing enough for retirement should be a breeze. If you have savings of five times income today and you never saved another dime, you would hit 12 times income at age 63.

But if you have amassed a hefty nest egg at 45, you're probably a diligent saver, and you might look to retire early. Let's say you salt away 20 percent a year.

At that rate, if your portfolio today is equal to four times income, you will hit 12 times income at age 59, Farrell calculates. Similarly, if you have five times income saved, you should be set by age 56.

True, that means retiring before you're eligible for Social Security. But if you are a diligent saver used to living on a small portion of your income, that shouldn't be a big sacrifice.

On the other hand, maybe you haven't been so thrifty. The annual savings rate required to amass 12 times income by age 65 is 20 percent if you have two times income saved - and a whopping 27 percent if your nest egg today is merely equal to your annual income.

Can't do it? Instead, you could scale back your retirement goals, delay retirement or both. Suppose you have savings equal to twice your income. If you sock away 12 percent of income per year, you could retire at age 69 with 12 times income.

Alternatively, you could call it quits with 10 times income at age 66. Again, imagine you earn $80,000 a year. If you retire with 10 times income, or $800,000, and use a 5 percent withdrawal rate, you will have $40,000 a year from your portfolio, equal to 50 percent of your old salary.

Meanwhile, if you have a nest egg of just one times income and you can't see cranking up your savings rate to 20 percent or more, you will likely have to curtail your spending fairly sharply in retirement, unless you work well past 65. For instance, to retire with 10 times income, you would need to salt away 12 percent of your pretax income every year until age 71.

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