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Old 02-24-2013, 10:40 PM
 
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The real challenge, as others have noted, is getting a good return on that $1M once you do attain the capital. No amount of thrift will compensate for a choppy market, yet it is extremely unlikely that low-risk investments will generates sufficient rate of return. So once we attain the goal of being good savers, we have a yet more lofty goal: how to become good investors?
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Old 02-24-2013, 10:47 PM
 
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Quote:
Originally Posted by earlyretirement View Post
Sure there aren't any magical solutions but the more you can prepare the better. Any "back up" plan can have holes pokes in it. ANY. But at least your friend HAS a game plan. Yes, with his German parents, he can easily get a passport and get residency there. It's wise to have a 2nd passport. Even if all goes to hell in Germany, with his EU passport he can go to other EU countries to find work, live, have bank accounts, etc.

It's better than doing nothing. IMHO.
I think his backup plan is sh*tty to be honest. He is in his late 50s...who the heck is going to hire him in Europe if he loses his job here? Their unemployment rate is worse than ours! He still doesn't save anything for retirement even though he earns a decent income. He plans on working full time until age 70 and then living off Social Security. It's true no plan is bulletproof...but his plans are unrealistic to say the least (Not many people are able to work full time until age 70, even if they want to). I showed him a few years ago if he saved 10% of his salary in a balanced mutual fund for 15 years he could save 200K (based on the crappy returns of the last 10-15 years)...by age 70...not a fortune, but a heck of a lot better than relying 100% on government support (whether it be U.S. Social Security or the German welfare state). Of course, he didn't listen.
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Old 02-25-2013, 12:27 PM
 
3,812 posts, read 3,712,909 times
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Quote:
by the way you can not figure 28 years on 3.5% withdrawls inflation adjusted without equities as a given ,not that 28 years is enough to plan anyway.

not only do you need at least 30 but you may need way more then that ,plus you need money for emergencies and unexpected expenses.
You are being somewhat disingenous with the math for someone called mathjak. $1,000,000 / $35,000 a year = 28 years to run out of money. Notice there is no factor of return there. The money is in cash in your pocket for those 28 years, not invested in a bank. I'd agree that inflation would eat into that, but putting a million bucks in your pocket is dumb; it goes without saying.

$1,000,000 * 3.5% = $35,000 the same return that you are saying a pension gets. The money is invested in bonds or other low-risk investments.
Notice you don't touch the principle to get $35k a year. You can get $35k a year tax free essentially into perpetuity even now with the money market rate at almost 0%, so if inflation reared its head and then you would certainly be
able to maintain that return inflation-adjusted even if the interest rate rose to whatever.

You don't need to have a penny invested in equities to get a 3.5% inflation adjusted return; though if you were into equities and properly diversified, you could easily double that. There are probably at least 10 blue chip stocks that have dividend returns higher than 3.5%.

BTW, saying that $1m in the bank is equivelent to $35k pension with $0 savings and trying to counter with the fact that a pension gets inflation adjustments is just too silly to address with the way inflation and COL is currently computed and adjusted. If there were a realistic basis for inflation adjustments, then I'd be more likely to accept that as a counter argument.

Last edited by TheOverdog; 02-25-2013 at 12:41 PM..
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Old 02-25-2013, 01:27 PM
 
Location: Santaluz - San Diego, CA
4,484 posts, read 7,880,331 times
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Quote:
Originally Posted by mysticaltyger View Post
I think his backup plan is sh*tty to be honest. He is in his late 50s...who the heck is going to hire him in Europe if he loses his job here? Their unemployment rate is worse than ours! He still doesn't save anything for retirement even though he earns a decent income. He plans on working full time until age 70 and then living off Social Security. It's true no plan is bulletproof...but his plans are unrealistic to say the least (Not many people are able to work full time until age 70, even if they want to). I showed him a few years ago if he saved 10% of his salary in a balanced mutual fund for 15 years he could save 200K (based on the crappy returns of the last 10-15 years)...by age 70...not a fortune, but a heck of a lot better than relying 100% on government support (whether it be U.S. Social Security or the German welfare state). Of course, he didn't listen.

Oh make NO mistake. I'm not saying your friend's "back up plan" is a good one. My point was that it doesn't cost him anything (or close to nothing) to get a passport in another country and probably get permanent residency status.

Your friend sounds like he is being totally unrealistic just like many future retirees that are not prepared to retire. Sadly, I think in the future retirement might not be possible for vast amounts of people and a large % will have to work most of their lives.
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Old 02-25-2013, 01:29 PM
 
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overdog ,using a simple how long will my money last calculator i show pulling 35k , near zero return and 3% inflation to leave you bone dry in 20.7 years. that is pretax.

you want to try that for you and a spouse , think inflation will not do a number on you over 30 years ? more power to you . your wild card is going to be inflation, emergencies and unexpected expenses.
roll the dice!

i do not think many will be comfortable planning a 30 year retirement with that.

you can not say if a 3.5% return will last . you have no clue what inflation will be . you need investments that vary with inflation like tips or short term bonds if you are not going to use equities. .

if you do that you can do about 3% no question, 4% is a do but not a high success rate using some of the worst case scenerios to date.

if you doubt it argue it out with bill bernstein.

Last edited by mathjak107; 02-25-2013 at 02:45 PM..
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Old 02-26-2013, 01:40 AM
 
64,758 posts, read 66,247,630 times
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here is a nice guide that at least was figured using real world conditions . zero % stock is actually 100% intermediate term bonds not 100% cash at zero .

the data is from the ibbotson/morningstar sbbi data base, it is one of the most comprehensive data bases of asset returns.


Last edited by mathjak107; 02-26-2013 at 03:10 AM..
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Old 02-26-2013, 03:20 PM
 
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It's a great book I picked it up in November. It gives you an insight on who the rich really are, I have to peek back in it every once in a while for inspiration lol.
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Old 02-26-2013, 05:34 PM
 
24,757 posts, read 26,832,393 times
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Quote:
Originally Posted by earlyretirement View Post
Oh make NO mistake. I'm not saying your friend's "back up plan" is a good one.
Ok, that wasn't clear from your previous post.

Quote:
Originally Posted by earlyretirement View Post
My point was that it doesn't cost him anything (or close to nothing) to get a passport in another country and probably get permanent residency status.
Yes, that's true. He's also looking at Puerto Rico and other places in Latin America. That strategy isn't without its risks, but I think it's a better one. I still wish he'd put 10% of his salary in his 401K. It wouldn't be that much of a sacrifice and it's always better to have 50K or 100K saved for retirement than nothing. I'm sure you agree.

Quote:
Originally Posted by earlyretirement View Post
Your friend sounds like he is being totally unrealistic just like many future retirees that are not prepared to retire. Sadly, I think in the future retirement might not be possible for vast amounts of people and a large % will have to work most of their lives.
Yes, he really is unrealistic, unfortunately. Drives me crazy! The thing about "not retiring" is that few people can work until they drop dead. Due to unhealthy eating & lifestyles, we have a huge % of the population who are overweight/obese who will be forced out of the workforce for health reasons. They will live many years with those chronic diseases, though. My friend is in pretty good health, so that's less of an issue for him, but you can still very easily be forced out of good paying work in your 50s & 60s, despite your best efforts.
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Old 02-27-2013, 11:14 AM
 
Location: Santaluz - San Diego, CA
4,484 posts, read 7,880,331 times
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Quote:
Originally Posted by mysticaltyger View Post
Ok, that wasn't clear from your previous post.



Yes, that's true. He's also looking at Puerto Rico and other places in Latin America. That strategy isn't without its risks, but I think it's a better one. I still wish he'd put 10% of his salary in his 401K. It wouldn't be that much of a sacrifice and it's always better to have 50K or 100K saved for retirement than nothing. I'm sure you agree.



Yes, he really is unrealistic, unfortunately. Drives me crazy! The thing about "not retiring" is that few people can work until they drop dead. Due to unhealthy eating & lifestyles, we have a huge % of the population who are overweight/obese who will be forced out of the workforce for health reasons. They will live many years with those chronic diseases, though. My friend is in pretty good health, so that's less of an issue for him, but you can still very easily be forced out of good paying work in your 50s & 60s, despite your best efforts.

Oh no doubt I TOTALLY agree with you mysticalyger. So no worries there. We're totally on the same page about your silly friend.

The thing is that people that plan to save less and live abroad and use that as an excuse not to save almost always will fail unless they have some "safety net". For example, in many parts of South American and Latin America there is a huge support system where kids take care of their families. Heck, in many countries the kids live at home well into their 30's or until they are married. And if they don't get married many times they live at home with their parents indefinitely.

Also many families in Latin America don't have mortgages on their properties. They own them free and clear and they just pass them down from generation to generation and their kids don't sell them. They live in them.

Living abroad can and does work but typically when you at least have a decent amount of monthly cash flow. Sure it's more affordable in many countries but many countries are also difficult to adapt for people that have been living in the USA forever. It just depends.
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Old 02-27-2013, 11:22 AM
 
1,862 posts, read 2,879,129 times
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Many of your points here apply to Asia as well. Those who might find it more difficult to make cultural adjustments, but still want to try Asia should consider the Philippines. Massive numbers of Americans there-mostly military retirees.

Quote:
Originally Posted by earlyretirement View Post
Oh no doubt I TOTALLY agree with you mysticalyger. So no worries there. We're totally on the same page about your silly friend.

The thing is that people that plan to save less and live abroad and use that as an excuse not to save almost always will fail unless they have some "safety net". For example, in many parts of South American and Latin America there is a huge support system where kids take care of their families. Heck, in many countries the kids live at home well into their 30's or until they are married. And if they don't get married many times they live at home with their parents indefinitely.

Also many families in Latin America don't have mortgages on their properties. They own them free and clear and they just pass them down from generation to generation and their kids don't sell them. They live in them.

Living abroad can and does work but typically when you at least have a decent amount of monthly cash flow. Sure it's more affordable in many countries but many countries are also difficult to adapt for people that have been living in the USA forever. It just depends.
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