My Sunday column on how much money you need to retire generated lots of questions and comments.

Q: Rex C. wrote, "Some discussion on the effect of taxes would have been helpful. Since 401(k)s are generally taxed at a higher rate than assets in non-retirement accounts, doesn't that play a part in how much one would need going into retirement?"

A: Yes, but for simplicity's sake I assumed that people nearing retirement have most of their money in pretax accounts such as traditional 401(k) and individual retirement accounts. (The Roth version of those accounts came along much later).

When money comes out of a pretax account, it is taxed as ordinary income, just like income from a job or self-employment.

That's why rules of thumb generally recommend saving a certain multiple (such as eight to 12) of your pretax salary. It's an apples-to-apples comparison.

If most of your money is in a Roth account, you probably could afford to retire on less because income coming out of a Roth account is usually tax free.

Likewise, if most of your income in retirement comes from capital gains in a taxable account, you might need less because capital gains are taxed at a lower rate than ordinary income.

In reality, many people have a mix of account types, which is why a personalized analysis always trumps a rule of thumb.

Q: Phil H. writes, "In your column about sufficient assets for retirement, I noted that an assumption by different sources is that retirement assets would earn 4 percent per annum, 5.5 percent and in one case, the assumption is 6 percent per annum. Please advise, where does one get that level of return today while keeping the principal safe?"

A: Nowhere. The most you can make in a "safe" investment ranges from 1 percent in a one-year certificate of deposit to 2.3 percent in a five-year CD, according to

However, most advisers assume that retirees will keep a portion of their assets in stocks, bonds and other assets that offer higher returns over the long term, albeit with higher risk.

The average person reaching age 65 can expect to live 21 years, according to Internal Revenue Service tables. Half of people will live longer than that. Most people with two decades of life remaining can afford to take some risk.

"Over a long period of time in a balanced portfolio, 4 to 6 percent is not an unreasonable assumption," says Jeffrey Levine, a financial planner in New York with Advanced Wealth Strategies.

For context, the average yield on a 20-year A-rated corporate bond is around 4.4 percent, according to

The Standard & Poor's 500 stock index, including dividends, has returned 9.64 percent a year over the past 20 years, but most of that came in the late 1990s. Since the end of 1999, the S&P 500 has returned only 3.9 percent a year, and half of that came from dividends.

In a recent study assuming an average rate of return over 30 years for participants in 401(k)-type plans, the National Association of State Retirement Administrators picked 6.5 percent compounded.

For the record, the 4 percent rate cited by T. Rowe Price in the column was not a return assumption; it was the amount a retiree could withdraw in the first year of retirement. Every year thereafter, the person could withdraw the same amount, adjusted for inflation, and have a good chance of not running out of money after 30 years.

"It was derived from modeling a wide variety of potential market scenarios," says Stuart Ritter, a financial planner with T. Rowe Price. And it works "for a wide range of reasonable asset allocations."

4% rivalry

The 4 percent rule has ardent fans and foes, in a rivalry approaching the Giants-Dodgers. So it's not surprising that I heard from several readers lambasting the rule, including Kenneth Steiner, a retired actuary who lives near Yosemite.

The problem with the rule, he said in an interview, is that it does not account for changes in your portfolio. If it goes down, you could be spending too much, and if it goes up, you could be spending too little.

It also provides "no flexibility" for one-time expenses, such as a car that exceeds your 4 percent limit.

Steiner has a tool on his website that he thinks provides a more customizable solution. You can find it at (click on Excluding Social Security 2.0 and ignore the password request. Hit OK). But as you can see, it's a bit more complicated than the 4 percent rule.

Mailings to resume

Finally, my column mentioned that the Social Security Administration stopped mailing annual benefit statements to workers in 2011 to save money. In April, it announced that it will resume mailing printed statements in September to workers when they turn 25, 30, 35, 40, 45, 50, 55 and 60 or older (if they are not yet receiving Social Security benefits) if they have not registered for an online account at
