• First, given the normal downs and ups of the markets, only a small percentage of one's nest egg can be used for expenses each year, or one will quickly run through all one's resources. Suppose there were a major downturn in the equity markets soon after retirement, as indeed happened with me (twice) and with many others over the past few years. Maybe one started with $300,000, which became $200,000 after 2002 and $125,000 after 2008. Even with modest annual gains later, if one were to take one's needed $30,000 or so a year out of that net asset value, everything would probably be gone in less than five years.
  

• Second, while we of course cannot be certain of it, life expectancy after retiring can be longer than in one's primary career. About a third of women who retire at 65 live on to 90 or older. One needs a nest egg large enough to provide income for a sufficient duration. It is all "well and good," in one sense, if a nest egg of half a million bucks has been set aside and then one drops dead the year after retirement. One's heirs, at least can benefit. However, far worse is the situation of someone who outlives her or his resources only a few years after retirement. One hears horror stories of old people living without heat in winter or AC in summer, even sharing a pet's vittles, to just get by from one monthly Social Security check to the next because they burned through their nest eggs early and then still lived on many more years.

• Finally, inflation is a grim fact of life most of the time, and even modest levels of it can make a huge dent in one's buying power. At an average 3% a year inflation rate, a dollar's worth of initial buying power is worth only 54.38 cents after 20 years. With as much debt as many, and not least the federal government, are carrying these days, inflation could well be higher than 3% in subsequent years. Once again, if not careful about offsetting the incursions of inflation, a retiree could be sharing the dog's or cat's food in a couple decades.

• By starting in one's younger years, the power of compounding can be relied upon to enhance one's investments. If one had to save $600,000 by setting aside $30,000 a year, with no return on the money, it would take twenty years, and how many have $30,000 a year to set aside for a generation!? Yet if one's investments go up on average at a 10% annual rate, the time required falls to just eleven years, and if one has that original twenty years to achieve the $600,000 target in tax-deferred accounts at 10% a year return, one would most of the time only have to set aside $9550 year.

• Often a person will have a spouse helping with the savings and investing. Since two really can live cheaper than one, the amount the two of you may average per year toward retirement can be greater.

• One or both partners living in retirement may choose to work temporarily or part-time either because they are doing what they love or to supplement retirement income. This can of course make a big difference in how much one needs set aside in investments.

• There could also be inheritance amounts or other gifts that might bolster the net nest egg and/or reduce one's needs to live off investment income.

• In addition, other measures might come in handy. For instance, by moving from a larger urban setting to a pleasant but more rural small town one 20-30 miles away, one can often economize on expenses without significantly lowering one's living standards. One may also find that the house one needed for a growing family is now a little too large, that one actually only needs one half or two-thirds as large. By selling the first and buying the second at a discount for cash or by getting a fixer-upper and using some of one's extra time in retirement on "homework," one could add to his or her liquid nest egg.

Primary source:
How Much You'll Need to Retire. Brent Arends, "The Wall Street Journal," in MSN Money; January 26, 2012.