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Old 05-16-2012, 11:34 AM
 
Location: Grosse Ile Michigan and Sometimes Orange County CA
15,820 posts, read 30,531,134 times
Reputation: 11730
In 1991 I was told by a financial advisor I would need 6.8 mm. That made me decide not to bother saving for retirment since i would never get there. Later I had to play catch up, but i will either never retire, or retire on a fraction of that amount.

I look at my father. He retired with abotu $250,000 in the late 1980s. It seemed like quite a bit at the time. Now he lives on something like $20,000 a year, but he does nto seem tto have that much difficulty. House paid for, car paid for, medical essentially covered, basically taxes, utilities and food.

 
Old 05-16-2012, 11:37 AM
 
Location: Grosse Ile Michigan and Sometimes Orange County CA
15,820 posts, read 30,531,134 times
Reputation: 11730
Quote:
Originally Posted by joe moving View Post
Won't this depend on WHEN you retire?

I sometimes use this calculator which is a little over simplified but easy to use:

Retirement Calculator - How much to retire?

Required Income (Current Dollars) $30000.00
Required Income (Future Dollars) $72817.87
Number of Years Until Retiring 30.00
Number of Years After Retiring 30.00
Annual Inflation (on Required Income) 3.00%
Annual Yield on Balance 5.00%
You will need $1675923.44 ($387770.89invested today)

Read more: Retirement Calculator - How much to retire? Retirement Calculator - How much to retire?


I am a little under this projection, so we'll be doubling down fora few years while I can.

One thing...

For those of us dealing MAINLY with Roth IRA... how will this positively affect our ability to retire? I guess these calculators are talking post-tax anyway.
What is not factored in is how much of it will the government take when they relalize they have millions of retired people with no money and not enough tax revenue to support them all. Look around for money and the only possible source is all of those saved up retirement accounts. You are going to have to share.
 
Old 05-16-2012, 12:05 PM
 
2,595 posts, read 3,689,257 times
Reputation: 2781
Quote:
In 1991 I was told by a financial advisor I would need 6.8 mm
To retire at what age? Living for how long? And with what yearly expected income?


Many experts say to first figure out what yearly income you need to live on (be realistic). So, let's say you figure you will need $100,000/year in future income to maintain your current 2012 standard of living. I don't know how realistic that amount is, whether it's too low or not too low. It's a round number, so let's go with that.

Ideally you would have amassed enough principle when you combine all your accounts so that you can draw down 5% of the principle on a yearly basis to meet your needs without reducing the principle. Why 5%? Well...according to experts that would be a realistic expectation of average market performance on your principle going forward when you retire. Your market performance could be better than that or it could be worse than that. You can run the numbers anyway you want and be more optimistic or pessimistic. My calculations do not take into account any benefits from social security or any other government program. The calculation does not take inflation into affect either. It's meant to be a simple figure for ballpark purposes.

So in this example, and using that 5% number to draw down and an average yearly gain of 5% through interest or appreciation, a person would need to have $2,000,000 by the time they retired in order to withdraw $100K per year and not touch their principle. ($100,000/.05 = $2M) This assumes your principle will continue to earn an average rate of 5% simple interest growth per year, and it does not take into account compounded interest.

If you want to look at a much more pessimistic view, let's say you think your investments will only earn an average of 2% gain a year once you retire. That's pretty dismal, but sure anything could happen.

Using the same yearly income goal of $100K per year that you need to live on... $100K/.02

In this case you would need to amass a total retirement amount of $5M in order to withdraw $100K per year and not touch the principle.

Again, these are hypotheticals. I'm not including social security benefits because who knows if they will still exist or not by then. I'm not adjusting for inflation, and I'm not considering that most people WILL draw down the principle as part of that yearly income. There are calculators for those scenarios.

Maybe the yearly amount needed will be $150K or $200K (considering inflation). I don't know, but you can play with the numbers.

This is a quick 'n dirty method to ballpark how much you should aim to amass to meet that yearly draw down requirement.
 
Old 05-16-2012, 12:23 PM
 
1,956 posts, read 2,195,708 times
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it is way too far away for me to have any idea. i doubt i will live that long anyway, so i'm just going to contribute to a 401k up to the point that i get a full employer match
 
Old 05-16-2012, 04:15 PM
 
4,217 posts, read 3,143,631 times
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Quote:
Originally Posted by chicagotodc View Post
Whats good about it? Its my ideal state, not what I have!

I'd like to hit it by 60 and retire "early".
Depending on your life style, that is a lot of money still compare to what others goals are. So you want to retire about 5 years early?
 
Old 05-16-2012, 04:17 PM
 
4,217 posts, read 3,143,631 times
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Quote:
Originally Posted by modhatter View Post
You realize you multimillion dollar savers are scaring the poor folk off this board. Of course I'm all for saving all that you possibly can Just keep in mind there are many single parents with ordinary jobs that will never be able to save that kind of money.

Some people reading this thread might start to really get depressed.
Whose fault is it that she had that kid? It is mostly the Mother's fault. Not only she was immature to get pregnant but did not take advantage of Abortion.
 
Old 05-16-2012, 04:34 PM
 
Location: Grosse Ile Michigan and Sometimes Orange County CA
15,820 posts, read 30,531,134 times
Reputation: 11730
Quote:
Originally Posted by lottamoxie View Post
To retire at what age? Living for how long? And with what yearly expected income?

.
They figured retirement at age 65 and living to age 85 I think (not sure about the 85 - 1991 was a while back).

The expected income was based on their calculation of my projected income and then a calcualtion of the income needed to maintain my lifestyle that I woudl be accustomed to upon retirment. I do not remember the numbers but I do remember that the projection of increase in my income seemed unrealistic to me, but for a time at least, it was pretty much spot on. The had my income levelling off at a certain point which it did, but then they showed continual small increases while my income has progressively decreased to a total of about 30 % less in the past four years (comparing 2011 to 2008, not 30% per year). They did not predict that. Maybe I only need $4 million now since I am making less and therefore accostumed to living on less. If I can manage to continually decrease my income, I will not need much at all to retire.

I do not know whether they factored in that my kids would be grown in hopefully independant, my house should be paid off, my business related costs woudl decrease and I will no longer be doing some of the activities that cost a lot of money when I am 65 or 70.

THe 5% is pretty accurate. Depiste the recent crash, since 1990 (when I opened the oldest account that i still have), my 401k has averaged 5% Some funds did better, but some averaged -2%. So I think that 5% is pretty realistic.

What is not realistic is thinking that I will need to or possibly could save enough to keep my current income level adjusted for inflation in 15 - 20 years. My guess is $4 million would be pretty close, probably low. However I will not need anything near my current income to maintain my lifestyle after I retire. My expenses will be substantially lower. Further saving that much is simly not realistic for me and never was. If I am lucky and if I am able to dump a ton of money into my 401K after the kids all get through college, I might have $1 million in there. Probably not since the last kid will complete undergrad when I am 59. Maybe if I work to age 70.

The reality is that I will have to work until age 70 at least and like my dad, I will have to live on a fraction of my current income after retirement. My Dad's retirement income was 1/3 of his pre-retirement income (which was simply middle class level). He took a job that he enjoyed (probably at minimum wage) to supplement and he has been living comfortably on his retirement for 25 years.

Last edited by Coldjensens; 05-16-2012 at 04:48 PM..
 
Old 05-16-2012, 04:36 PM
 
Location: Grosse Ile Michigan and Sometimes Orange County CA
15,820 posts, read 30,531,134 times
Reputation: 11730
Quote:
Originally Posted by Info Guy View Post
Whose fault is it that she had that kid? It is mostly the Mother's fault. Not only she was immature to get pregnant but did not take advantage of Abortion.
She still can take advantage of abortion if she wants to kill her child, she can do it now as easily as she could then.
 
Old 05-16-2012, 08:20 PM
 
4,217 posts, read 3,143,631 times
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Quote:
Originally Posted by Coldjensens View Post
She still can take advantage of abortion if she wants to kill her child, she can do it now as easily as she could then.
Abortion discussion is a whole new topic but from the financial point of view, it is a lot cheaper to abort a child then to keep one and with that, the baby is never born.
 
Old 05-16-2012, 08:23 PM
 
Location: Moscow
1,276 posts, read 1,235,683 times
Reputation: 1338
I, for one, am finding it a bit troubling that we are talking about abortion from a financial perspective. Seems like we have strayed too far from the OPs intent.
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