Quote:
Originally Posted by MissNM
I can do the math to figure out what I need to do now to have $XXX available each month for retirement. My husband is pretty good at picking our investments - he always seems to know when to move to conservative funds. Wish he were that sharp 20 years ago - or maybe he was, and I didn't listen!
I am good at the full 401K contribution, so I have that part covered.
My real battle is figuring out how much $XXX should be. How much do we really need to live in 20 years. That's the real unknown.
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some folks like to figure 2x their non discretionary spending per year less any pension or ss . they then x that by 25 and thats a ball park of how much is enough.
that gives you the flexibility to cut spending on discretionary stuff if markets or lifes events move against you.
as an example if our non discretionary bills run 45k a year then a ball park income may be 2x that or 90k a year to cover everything we do and buy. subtract out ss and pensions and lets say thats 50k a year .
so the 40k shortfall x 25= 1,000,000.00 in savings needed.
that lets you cut discretionary spending by up to 50% if push comes to shove and is based on your own real expenditures..
no one knows what life will cost us down the road so about the best we can do is guesstimate a starting point and actively adjust things as time goes on.
with life expectancy always increasing more of us are living longer. we may not be living to an older age by much but more and more of us are living to an older age percentage wise.
depending on how many years you think long you think you need to prepare for ,the starting balance may be higher or lower. most planning figures 30 years but that may not be enough for some .
annuities are a good way to cut the amount needed up front as risk pooling can cut the amount needed in your nest egg.
not many of us can get our nest egg to a point where it can support us for 40 years with much certainty but by risk pooling with an annuity you can go out that long.
those who die support those who live.
about the best thing you can plan for is to take ss later as thats the best deal around for cutting how much you may need . no where on the planet can you buy a product for the amount of the 8 years of ss you give up from 62 to 70 that will give you an amount even close with cola adjustments.
i havent looked into it much but longevity insurance may help cut that amount way down too. you may not live past 85 but good planning dictates you figure out into your 90's.
longevity insurance kicking in at 85 is cheap and may cut your nest egg needed by quite a bit too.
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