[Excerpted from Money and Other Subjects, the sagely and entertaining blog of Andrew Tobias, author of The Only Investment Guide You'll Ever Need, and other best sellers.]

Judy Bailey:  "I see that by the terms of Richistan my partner and I just make it.  We have, by living frugally and modestly, and by having valuable hobbies such as sewing, tile setting, and carpentry, accumulated a nest egg of about $800,000. Adding the value of our house, about $400,000, we are there, even though our income has always been very modest. Most of my working life, I was paid like a clerk, a free-lance editor, or a librarian. But consider my friend Terry, who has been a teacher all his life.  I am sure his savings do not enroll him in the ranks of Richistan, but in many ways he is richer than me by far. He is working in a special teaching environment which allows him to make $80,000 per year – more than twice my income – and he need not save a penny of that, for when he retires in a few years, he will have a tidy income guaranteed for life, and including generous health insurance.

Meanwhile, my partner and I will have only the income that can be generated by our nest egg, plus Social Security payments based on the low wages we’ve made all these years, and we must go onto the open market for health coverage. So who is richer? Folks who work for the government and in those fewer and fewer industries that have traditional pension plans have a kind of security that the rest of us only dream about.  Why is it that they are not included in Richistan?  And how do you figure that a nest egg of a million dollars will generate $72,000 between 65 and 95?"

Andrew Tobias: Several years ago I announced somewhere that it now required $5 million to be a millionaire.  Today, it probably requires $10 million or – if we’re talking millionaire (with the kind of italics the word used to deserve) – $25 million.

That said, having a $1 million nest egg to supplement Social Security is still vastly better than what most people will have at 65.  (Most people, sadly, will have next to nothing.)

Meanwhile, the $72,000 figure I used is what you could withdraw each year for 30 years if, over those 30 years, you were earning 6% on the funds that remained.  (Think of it as the reverse of a 6% $1 million mortgage that would be paid off after 30 years of $72,000 annual payments.)  But 6% after inflation in a Roth IRA (say) – while not pie-in-the-sky – is in no way guaranteed.  So this was a fairly aggressive illustration designed to encourage people to be frugal and build a nest egg.  I wanted to get to a dazzling, but not totally bogus, number to inspire people to save.  But the implication of your question is spot on: once you do retire, the frugal thing to do is not to withdraw $72,000 a year from each million you’ve saved up, because you might not be able to earn 6% after inflation – or you might live past 95.  And I hope you will.

Bunny Lytle:  "My understanding is that one can only safely take between 3% to 4% annually adjusted for inflation if you don’t want to go broke eventually.  (May not be true as brokerage firms are my source.)"

Andrew Tobias: No – I agree, and have always urged people not to assume they will be able to earn more than 3% after-tax-after-inflation.

In the retirement section of my software, may it rest in peace (ohhhhh how I miss the gigantic royalties, ohhhhh how I miss the fun of sending wish-lists to programmers who’d grant them brilliantly, ohhhhh DOS, sweet DOS; but I digress), whenever anyone assumed a higher than 3% return above inflation, they’d get an error message:

It’s no cinch to outpace inflation by even 3% over the long run.  You have chosen yields that outpace your inflation assumption by [whatever they entered %].  We hope you’re successful, but if you wish to change your entries, press ESC and do so now.

So the 3% idea is valid.

But remember that if you don’t need the money to last forever, you can take more.  A 90-year-old expecting not to live past 108 could (obviously) withdraw a lot more than 3% a year.