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i agree , it isn't the planned expenses that make a retirement crappy or end up in the retirement graveyard. it is like owning a house.
folks look at the basics and rarely the soft costs that bombard you.
you don't need anything beyond a tent and a forest in life. it is the wants and not the needs that make life interesting and fun.
how much you need is as variable as what we like to eat. i know here in nyc if i only had a million bucks and 40-45k pretax income from it i wouldn't even try to retire here. could i do it? sure i could living in some area i wouldn't want to and cutting things i want from the list but would i? nope!
My point was $200/month for 40 years adds up to over $1m. We are talking 401k that is employer matched (so $400/month). This doesn't include other assets like brokerage accounts. I "got by" for most of my 20s...I'm not doing that in my golden years...don't have to...because i am being proactive, prudent, and reasonable....and the goals I've set are being crossed either on time or early.
My point was $200/month for 40 years adds up to over $1m. We are talking 401k that is employer matched (so $400/month). This doesn't include other assets like brokerage accounts. I "got by" for most of my 20s...I'm not doing that in my golden years...don't have to...because i am being proactive, prudent, and reasonable....and the goals I've set are being crossed either on time or early.
I think your scenario while doable at 400.00 a month making half of that employer match makes it more unlikely. That's 80k a year contributing 3% with a 1 to 1 match up to 3%
I think your scenario while doable at 400.00 a month making half of that employer match makes it more unlikely. That's 80k a year contributing 3% with a 1 to 1 match up to 3%
yep....and it's well beyond 8x the salary of $80k.
My spouse is doing the same....and we both will get pensions.
I am DONE @ 55. DONE. DONE. DONE. I've planned on being done since I was 24. I am giving my company 31 years. I am in the 14th year of employment.
As soon as possible I am moving to the sticks of Montana for the summers and a condo in Daytona for the winter...both places have been aquired and will be paid off in the next 10 years.
All the financial advisers/planners out there will not be able to keep their jobs if people will not buy into the myth that we all need $1 million in order to retire. No, we don't need $1 mil to retire. Assuming that someone retires in 2014, the mortgage and car are paid off so what's left for monthly living expenses of a person in present value are:
property taxes & insurance $500
monthly medicare premium $150
car insurance & gas $100
utilities & internet $100
prepaid cell phone $5
food $200
other expenses $250
That's around $1300/month for living expenses for one person (less if you have a spouse). A single person who has accumulated 30+ years of work must be receiving monthly social security check around $1000/month. Assuming a person will live for 30 years after retirement, he/she will need just $150,000 in the bank to supplement his/her monthly social security benefits, not $1 million
You forgot saving for the "lumpy" costs like vehicle replacement and big house repairs and big medical bills (the latter getting more frequent with age). Your $250/month "other expenses" will barely cover one prescription drug plus scheduled (read: expected) car and house maintenance, leaving you nothing for house repair or car repair or replacement or big medical bills.
i don'[t even want to talk about expenses that crop up.
since may it hasn't stopped for us. first we made a destination wedding for my daughter, then i needed 4 new implants for 12,500.00. we had an estate attorney do all new paper work and trusts for 5k , getting long term care policies and need to send out 7k . saturday was 1k for car repairs and yesterday was my wifes birthday so we took all the kids and grandkids out for dinner.
it has been a hell of a last couple of months for stuff not in the budget ..
For those who won't read the links, a few quick points:
How much you need to retire is based on your expenses, not your income.
The number you need to retire indefinitely (i.e. no matter how long you live) is based on the 4% withdrawal rate.
Basically, if you can live off of 4% of your investments indefinitely (so 25x your annual expenses), you're retired.
How much you save directly impacts when you can retire. The sooner you can save 25x your investments, the sooner you're retired.
Per some of the previous comments, yes, I save well over 50% of my (after-tax) income. Should reach financial independence in 9 years - 11 total years in the workforce.
4% inflation adjusted is not a guarantee at least in theory of anything lasting a lifetime.
The 4% theory is based on at least a 2% real return average over the first 15 years of a 30 year time frame. We can thank michael kitces for crunching the data to arrive at that conclusion.
In the lab those who retired in the year 2000 have still not gotten that real return and are on track to run out of money.
The uncharted conditions we are in of low interest rates and high stock valuations going forward have things looking kind of tough. Many researchers are now saying conditions have now turned 4% in to 2.80% withdrawals at best.
Remember though we are talking in the lab where human spending patterns don't exist so things are comparable without the effects of human decisions.
Last edited by mathjak107; 08-04-2014 at 07:16 PM..
Well, more of an admirer. I don't have a 50% after tax savings rate (more like 35%) so I don't qualify as a true Mustachian.
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