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Old 04-24-2014, 11:38 AM
 
Location: Waterville
332 posts, read 428,235 times
Reputation: 775

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Oh my, I'll probably get a lot of heat for this, but I want to emphasize that if I am guilty of anything it is merely stupidity. I am not trying to be offensive or confrontational.

Another caveat: It is overwhelmingly obvious that I know zip about economics. Money as subject matter is almost as boring as, oh let's see, as football. Bores me into catatonia.

In a current thread, a poster reveals her financial worth and asks if she has enough for retirement. It is a HUGE amount of money. And the talking money heads herein weighed in quite cautiously. IMO.

My question is this: what is all the money for? Let's assume that mortgage is paid and health insurance is in place. One is then left with the usual post-industrial necessities to pay for. Then what?

Travel seems to be a fetish that just keeps on collecting devotees. Okay, so most of the high rollers here can afford to travel. Then what?

All of us would like to have a healthy hedge against inflation. Okay. Then what?

Most folks, I hope, have some hobbies or recreational activities they indulge. Some can get expensive. Okay, but it is unlikely that anyone will be able to indulge those until they drop dead at 99.

I don't get it.
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Old 04-24-2014, 11:51 AM
 
10,817 posts, read 8,065,019 times
Reputation: 17029
Quote:
Originally Posted by foglover View Post
All of us would like to have a healthy hedge against inflation. Okay. Then what?
25-30 years inflation is not something I view lightly, nor is market turmoil. Then there's medical/dental care and LTC, skilled nursing, or home health care when the time comes. Some folks are OK with or at least resigned to the idea of Medicaid. I'm not.

What I don't spend will go to my sons' retirement funds. They're independent, hard-working adults but don't have employer pension plans.

I have enough income flow to support my travel habit and hobbies, am not depriving myself.
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Old 04-24-2014, 11:54 AM
 
Location: it depends
6,074 posts, read 5,335,268 times
Reputation: 5771
OK, so I know some people who get along very well on Social Security plus maybe a small amount of savings or a small monthly pension. Needless to say, granite countertops and bathroom renos costing tens of thousands and meals at expense-account type restaurants, five star or four star hotels, bicycles costing thousands, new vehicles on a routine basis...none of these fit. They all have the ability to be cheaply amused, many garden or hunt or fish or all three, some pick up odd jobs from time to time, all live in modest homes of modest size with low utilities and property taxes. And they live in low cost areas where small older homes are inexpensive.

Health is a wildcard, but when that goes you've got nothing anyway. Sort of a problem for a couple, where the poor health of one can bankrupt the other.

More typically, I see people with $250k or $500k, getting along fine with 5% withdrawals. They will leave peak wealth to their children.

The notion that $1 million is not enough does not fit the people I know.
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Old 04-24-2014, 12:09 PM
 
Location: Florida -
8,764 posts, read 10,845,692 times
Reputation: 16639
In addition to a significant inflation hedge, most people spend about the same amount in retirement as they did during their working years. So, all you need to do is factor-in how much you will spend annually, plus a sizable inflation expectation, plus your expected healthcare costs ... and, oh yes, multiply the total by the number of years you will live!

Retirement itself isn't as expensive as the potential lifetime cost of all those other things... particularly since you have a very low probability of significantly augmenting your income and assets by returning to the workforce.
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Old 04-24-2014, 12:35 PM
 
6,256 posts, read 4,734,369 times
Reputation: 12853
Part of costs and perspective about money come from where one lives. I decided to look up the OP's location of Scotia, NY. I have been in that area. It is a low-cost, economically-depressed part of NYS. If the OP was from a few hundred miles south in the NYC area, they would have a substantially different idea of costs.

Next the OP shows us a part of their character when they refer to travel as a "fetish." The OP also considers that some people may have expensive hobbies or activities they "indulge." WOW, I guess without the fetishes and indulgences one could just sit around the house in Scotia and get by with little money. I look at retirement entirely differently. I am not just trying to get by, but I want to enjoy life, continue to learn and even continue to contribute. I like to travel not as a fetish but because I want to experience different art, beauty and different cultures and activities that are not present where I live. And yes I also have some activities besides travel that can be expensive. Those would include photography which at a high level can get expensive.

I don't think anyone can say how much is enough and I would certainly avoid telling others that anything beyond the basics is a fetish or indulgence or even unnecessary.
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Old 04-24-2014, 12:50 PM
 
29,782 posts, read 34,871,258 times
Reputation: 11705
Tis better to have than not have. Accumulating money is a result of not spending all you have coming in. Isn't that good? The more you make the more you save at the same ratio of income/spending.
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Old 04-24-2014, 12:55 PM
 
Location: Jamestown, NY
7,841 posts, read 7,331,482 times
Reputation: 13779
Quote:
Originally Posted by foglover View Post
Oh my, I'll probably get a lot of heat for this, but I want to emphasize that if I am guilty of anything it is merely stupidity. I am not trying to be offensive or confrontational.

Another caveat: It is overwhelmingly obvious that I know zip about economics. Money as subject matter is almost as boring as, oh let's see, as football. Bores me into catatonia.

In a current thread, a poster reveals her financial worth and asks if she has enough for retirement. It is a HUGE amount of money. And the talking money heads herein weighed in quite cautiously. IMO.

My question is this: what is all the money for? Let's assume that mortgage is paid and health insurance is in place. One is then left with the usual post-industrial necessities to pay for. Then what?

Travel seems to be a fetish that just keeps on collecting devotees. Okay, so most of the high rollers here can afford to travel. Then what?

All of us would like to have a healthy hedge against inflation. Okay. Then what?

Most folks, I hope, have some hobbies or recreational activities they indulge. Some can get expensive. Okay, but it is unlikely that anyone will be able to indulge those until they drop dead at 99.

I don't get it.
The poster in question didn't have a pension plan and won't qualify for SS for at least 6 more years. She hasn't yet determined what her SS benefit would be. She seems to expect to live well (she mentioned things like trips and remodeling) on only $24,000 a year that comes from her investments, which is a nice lump sum, but if she's got that invested in CDs, she's going to suck out a goodly portion of it before she reaches 62. If she's got it invested in higher earning investments, she runs the risk of her investments not performing as she expects.

I'm a greedy person when it comes to retirement as I've been poor in the past and don't intend to be poor in the future. I have a secured pension and I know how much I'll get in SS ... which is why I decided to work until FRA (66) rather than retire at 62. To each his/her own.
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Old 04-24-2014, 12:56 PM
Q44
 
Location: Hudson Valley, NY
895 posts, read 766,093 times
Reputation: 1761
"Then What?" - I don't know, I have no idea. I have no role models before me to look to and say OK, that's how you do it and you have enough. I want everything on your list, mortgage paid, health coverage, travel, and hobbies. And like Biscuitmom, I want more than enough to leave behind to the offspring.

In the absence of any real knowledge I'm letting my obsessive compulsive nature handle the savings and retirement issues.
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Old 04-24-2014, 01:02 PM
 
Location: Florida and New England
1,233 posts, read 1,418,186 times
Reputation: 1681
Quote:
Originally Posted by marcopolo View Post
More typically, I see people with $250k or $500k, getting along fine with 5% withdrawals. They will leave peak wealth to their children.

The notion that $1 million is not enough does not fit the people I know.
I think $1 million is enough for a straightforward retirement (no expense account or foreign travel frills), _IF_ the retiree has a health strategy -- some kind of method to pay for health care and insurance until Medicare kicks in. I know retirees on Medicare who are managing on half of that, in low-cost areas.

Inflation, investment risk, government risk, increased taxation: there are a lot of unknowns in the near and medium term in the US. We are exiting a low-tax, low-inflation environment that has been around for 40 years. I suspect the US economic future will be much more challenging. I, for one, am a believer that one million would provide a minimum "guaranteed comfort level" for a FRA retiree, but even more than that would be needed for someone who is retiring before age 62.
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Old 04-24-2014, 01:02 PM
 
Location: it depends
6,074 posts, read 5,335,268 times
Reputation: 5771
Quote:
Originally Posted by jghorton View Post
In addition to a significant inflation hedge, most people spend about the same amount in retirement as they did during their working years. So, all you need to do is factor-in how much you will spend annually, plus a sizable inflation expectation, plus your expected healthcare costs ... and, oh yes, multiply the total by the number of years you will live!

Retirement itself isn't as expensive as the potential lifetime cost of all those other things... particularly since you have a very low probability of significantly augmenting your income and assets by returning to the workforce.
I don't think that's right. In retirement:

1. No more 7.65% payroll taxes
2. No more $1,500 monthly 401(k) contributions (or whatever)
3. No more IRA deposits or pension plan contributions.
Bottom line, when you retire you can stop saving for retirement. For many, that means 75 or 80% of pre-retirement income is the SAME disposable income when retired.

Also, a newly retired 62 year old spends more than a 72 year old or an 82 year old, on average. Spending tends to decline in retirement, on average.

Also your formula totally ignores investment income; I say you can average 9% on a diversified portfolio, take 5% for income and still have some growth in capital AND income to offset inflation. So if you have capital of twenty times your annual net cash need after SS and pension, you can invest on a permanent endowment basis. But you have to do the investments right.

Also, if your spending is so restrained that SS takes care of most living expenses, you HAVE a big inflation hedge as SS is indexed above the COL.

My opinion, it is a free country, you can disagree.
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