The answer depends on variables including the rate of inflation during their retirement, how much their investments earn each year after they retire and how long their retirement lasts. Each year, the couple must withdraw some money from their savings to meet living expenses. High investment returns and a low rate of inflation offer the highest real rate of return and allow for the highest withdrawal rate. For example, couples who earn an 8 percent return on their investments can afford to withdraw roughly 5 percent annually if the inflation rate is 3 percent. A financial planner can help you estimate the nest egg you need to keep up with inflation and meet your spending needs during retirement.
Mutual funds are an excellent place to start.
You'll need to invest a hefty portion of your savings in stock funds, choosing a diversified array that includes a range of market sectors - funds that invest in shares of small and large companies in the United States and overseas. Don't restrict your holdings to the most conservative funds. Maintain some fixed-income holdings to smooth out your returns. Finally, keep some cash on hand to comfort you during the worst times. That money also will allow you to snap up bargains in battered sectors from time to time.