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You can setup just about every major fixed income class to pay you interest every month rather than adding it to the principal for compound growth. So if you have $18k a year in interest payments and $18k a year in social security payments, before taxes that's $36k a year to play with.
We don't know what inflation is going to be. But like I just told the other guy, the vast majority in my Generation will not make enough to put away the $10,000 PER YEAR requirement that I laid out. It just won't happen.
Cost of living, lack of wage growth, etc., will have it to where if the vast majority (I'm talking over 70%) will want to "save for retirement" they might have about $1,000 PER YEAR to do it on. $1,000 PER YEAR just isn't going to grow to much man, maybe it will grow to $100k in 25 - 30 years but $100k isn't something you can retire on.
600k in fixed income only , drawing an initial 18k a year (3% draw rate ) , in firecalc shows it failed 15 different actual 30 year time frames to date falling well below the 95% success rate that is considered an acceptable risk for a retiree to take . . you would be foolish to try to pull 3% using no equity's . you need to drop to around 2% inflation adjusted to get a high enough probability of making it through your time frame ..
zero failures to date would give you the highest probability . my plan is based on a draw of 3.50% inflation adjusted with equitys and fixed income and zero failures to date .
FIRECalc looked at the 116 possible 30 year periods in the available data, starting with a portfolio of $600,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 116 cycles. The lowest and highest portfolio balance at the end of your retirement was $-168,330 to $2,702,316, with an average at the end of $423,074. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 15 cycles failed, for a success rate of 87.1%.
Last edited by mathjak107; 06-10-2016 at 02:32 PM..
600k in fixed income only , drawing an initial 18k a year (3% draw rate ) , in firecalc shows it failed 15 different actual 30 year time frames
But MathJak....who cares what some guy over at Fire Calculator has to say lol? If I have $36k in total monies to pay with during the year, as long as I manage my expenses properly, how am I going to fail with that? It's just basic math.
that is where you are wrong . it is not basic math . not for a second is it basic math .
inflation and your returns battling it out yearly will not always result in spending just interest . you will be eating principal in many years .some years will be negative real return years . cutting expenses has a bottom after which life gets pretty miserable .
that eats up next years principal and income generation . sequence risk is the greatest risk you face living off a portfolio that has to fight inflation and returns along the way.
you better care how your plan would have stood up and survived the last 116 30 year cycles which faced depression , wars , high inflation , recessions and every scenario in between .
if you had a high failure rate of lasting in the past how good is that same plan going to be going forward ?
this why modern retirement planning is based on what it is which is the data behind firecalc . the idea is to give you the highest probability of your money lasting through some of the nastiest stuff we have seen to date because it is anything but simple math . .
if you have not stood up to at least 95% of the past cycles without failing odds are pretty good you may fail all to easily going forward .
don't forget 95% means we are already subtracting off the fact you did not clear 5 or 6 of the worst 30 year periods to date as it is . so you are less bullet proof at 95% then 100% . 90% is subtracting off most of the worst time frames and assuming they won't happen . you are below that at 87% .
before shooting from the hip with numbers i suggest you get an education on this stuff first .
Last edited by mathjak107; 06-10-2016 at 02:58 PM..
Nobody knows what inflation is going to be going forward. And which would you rather have, $100k or $600k - $1 million? Like I've said on this forum before, MOST in my Generation won't have the damn $100k.
We'll see what happens......but a lot of you guys are out of touch with what's going on now. If you are using these insane numbers like I've heard on this forum before such as, "You need $3 million or you won't retire" then guess what? DAMN NEAR NOBODY is retiring then because very few are or will even be making enough in INCOME to put that away in savings to begin with.
For example, if $3 million is the number and let's say you have 25 years to accumulate that. You need to be putting away AT LEAST $50,000 per year for 25 years with a 6% CAGR. Now dude come on man, what percentage of my Generation (Millennials) are going to be able to put away $50,000 PER YEAR for 25 years?Less than 5% maybe?
I'm still a firm believer in the $600k in principal fixed income portfolio in combination with social security. You know why? Because it's actually attainable. It's about $10k being put away per year with a 6% CAGR for 25 years. A lot of people will be able to get that done, but $50k per year is way too excessive and if that's "retirement" then I guess less than 5% are retiring in my Generation then.
You need more than 25 years of savings. 1k a month @ 6% for 40 years is 1.99mm
that is where you are wrong . it is not basic math . not for a second is it basic math .
I checked that Fire Calculator guy out and I don't know man....he just seemed like he was spitting out a bunch of random projections. Nobody knows what inflation is going to be.
I get that you think my $600k principal and social security plan won't be enough, I believe you are like many that believe $3 million is the starting point. The reality is that less than 5% (probably less than 2%) will be able to put away $50,000 per year for 25 years with a 6% CAGR.
So if we "run out of money" then what else is there? I don't personally believe the money will run out, but hell, we'll see I guess right?
Quote:
Originally Posted by Lowexpectations
You need more than 25 years of savings. 1k a month @ 6% for 40 years is 1.99mm
Right but that means someone needs to start putting $12,000 PER YEAR away at age 20 - 25 to see it by the time they are 60 - 65. With student loans, low entry level position wages, cost of living increases, etc., man it ain't happening for my (or should I say, OUR) Generation as a majority.
I would imagine most who will have the "luxury" of SOME type of "retirement" were like me and COULDN'T start putting money away until their very late 20's/early 30's. That gives us a good 30 years which is still GOOD but it's not 40 years.
At 30 years with $12k per year saved, with 6% CAGR, that's $1 million in principal. That's in that $600k - $1 million in retirement savings range I talked about which is going to be more attainable.
i don't count it in any kind of net worth calculations because i am not taking it yet , i am delaying . but the amount i anticipate is calculated in my cash flow projections .
it provideds cash flow and as such that is where its value comes in to play ..just like an annuity . it gets no value as some kind of lump sum if that is what you mean .
I checked that Fire Calculator guy out and I don't know man....he just seemed like he was spitting out a bunch of random projections. Nobody knows what inflation is going to be.
I get that you think my $600k principal and social security plan won't be enough, I believe you are like many that believe $3 million is the starting point. The reality is that less than 5% (probably less than 2%) will be able to put away $50,000 per year for 25 years with a 6% CAGR.
So if we "run out of money" then what else is there? I don't personally believe the money will run out, but hell, we'll see I guess right?
Right but that means someone needs to start putting $12,000 PER YEAR away at age 20 - 25 to see it by the time they are 60 - 65. With student loans, low entry level position wages, cost of living increases, etc., man it ain't happening for my (or should I say, OUR Generation) as a majority.
I would imagine most who will have the "luxury" of SOME type of "retirement" were like me and COULDN'T start putting money away until their very late 20's/early 30's. That gives us a good 30 years which is still GOOD but it's not 40 years.
At 30 years with $12k per year saved, with 6% CAGR, that's $1 million in principal. That's in that $600k - $1 million in retirement savings range I talked about which is going to be more attainable.
Our generation should not expect to retire at 60-65 it should be more in the range of 65-70
Our generation should not expect to retire at 60-65 it should be more in the range of 65-70
Me personally, I'm pulling Social Security as SOON as I can start pulling it because I have no idea how long I'm going to be alive. I'm BLACK....us black guys (poor, middle class, or higher class) don't tend to live that long .
It's still amazing how I was able to come as far as I did, considering where I came from and the fact that my immediate family couldn't tell you what the hell an MBA was....nevertheless an Index Fund.
Me personally, I'm pulling Social Security as SOON as I can start pulling it because I have no idea how long I'm going to be alive. I'm BLACK....us black guys (poor, middle class, or higher class) don't tend to live that long .
It's still amazing how I was able to come as far as I did, considering where I came from and the fact that my immediate family couldn't tell you what the hell an MBA was....nevertheless an Index Fund.
When you take SS doesn't change what I said. By the numbers people are living longer so on a average need to work longer
I guess if you have at least 30 years to save the $100 a month ($1,200 a year) and you get at least a 6% CAGR for the entire 30 year period. But that gives you about $98,500 in 30 years. That's more than NOTHING, but it's not something to retire on.
You want my opinion? People need to put away at least $15,000 a year for at least 20 years to have anything worthwhile in terms of a "retirement account". At 5% - 6% CAGR, this gives you $600,000 in 20 years. You could take that $600,000 at old age and put it in a fixed income portfolio doing 3% a year for $18,000 in interest. Add in let's say $18,000 a year from Social Security and you have $36,000 a year in spending power during retirement.
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Now that's something you can retire on as long as you aren't a big spender.
I agree, I know someone who is approaching 60 she spends money on things she doesn't need. For example 3 watches, always redoing her condo, etc. Yet she whines she will be working till 75.
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