UK Researcher Develops Retirement Nest Egg Formula

June 8, 2005 ( - Workers trying to figure out how much they will need to save for a happy retirement can find the answer by using the formula CI x {55 - (A/3) - (RA/7)}, according to new UK research.

A news report in The Guardian said CI stands for current income, A for current age and RA the retirement age in the formula by Edmund Cannon, a senior lecturer at the University of Bristol, for financial services company JPMorgan Invest.

“It is not absolutely accurate but it will give you a rough idea,” Jonathan Watts-Lay, director of JPMorgan Invest, told The Guardian. “It’s a calculation you can do on the train because you only need three pieces of information and they are all things you know.”

According to the formula, a 40-year-old employee on a salary of $50,000 and looking to retire at 65 would need savings of $1,619,000 to continue to live the kind of lifestyle he had while working. Likewise, a 35-year-old worker earning $60,000 and looking to retire at 65 would need a pension fund also worth over two million ($2,042,400) to enjoy retirement.

Watts-Lay said he expected people to be shocked by how much they would need to fund a comfortable retirement, and that there was “an element of being cruel to be kind” in providing a dose of financial realism. “No-one wants to go into retirement and have to give up their satellite television or going on holiday,” he told the newspaper.

A survey for the company found that 66% of people would be unwilling to give up buying clothes in retirement and 72% would be unhappy if they had to give up digital television. However, 60% said they expected to be worse off in old age.