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My husband and I have heard for years that a person should have at least 8-12 times the amount of their last salary in the bank when he/she retires. We have 10% of my husband's salary going into his 401K every week and his company contributes 6% and by our calculations we'll have plenty of money in the bank if we keep on the path that we're going on- we have 30+ years to go. This is not including whatever money I'm going to earn and contribute when I get back into the workforce outside of the home (I'm a stay-at-home mom now) so I'll hopefully also have a decent retirement option when the time comes.
Our biggest goal is to buy a house (been trying for almost 3 years now, it's been a nightmare) and have it paid off when we retire. My husband is adamant about that and keeps telling me that having a mortgage hanging over one's head when retirement comes about will drain an account fast. We just want to be smart and plan accordingly and be prepared for any surprises or life-changing events.
My husband has also been talking to his father about his (FIL's) retirement and my husband is astonished by how little he has in his 401K. Granted, my FIL has turned over half of his 401K to my MIL, as they're getting divorced, but given what he has in the account and what he has in liquid cash it's a lot less than what we expected, especially since my FIL is slated for retirement in 5 years or less.
He told my husband that he has 200K in the 401K, 100K in liquid cash (from an inheritance) and he owns 2 homes with my MIL, both worth about 450-500K, with one that has an 80K note left on it. From what we've heard, both homes are looking to be sold and the remaining mortgage is going to be split between them and paid off. My FIL also owns half of his father's house, which is worth about 600K, but that isn't going to be sold anytime soon.
We're concerned that he isn't prepared very well and is going to rely solely upon the sale of the homes as his "retirement". He's also been talking about buying a vacation home now and making that his retirement home when the time comes- he's been showing us homes he's seen that are going for 200K+. I told my husband that it concerns me that he'll run out of money and we'll have to be the ones to support him, as my SIL and her husband don't have any money saved for retirement at all so they won't be able to contribute.
So, how much should one realistically have when he/she retires and live comfortably? Should we be aggressive in our approach or more cautious and steady? And what the heck should we tell my FIL, if anything at all?
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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For people with a pension plus social security and either paid off or nearly paid off home, it's possible to get by with no savings at all. The big unknown to live off of savings alone is how long you will live after retirement, and how much the cost of living will go up during that time. Since no pension nor even social security is guaranteed, people under 60 now should be working on all possible methods of retirement savings/income. We have about 6-8 years to go and will have two pensions and SS, but also a 401k, and $400k equity in the house. I still expect to have to move to a smaller home in a lower cost area to survive, and as taxes and other costs go up or we last long enough to need assisted living, even with our long term care insurance it could get difficult. While our parents have managed on social security alone, I wouldn't expect that to work for people retiring now or into the future even if they get the maximum benefit.
Roughly, it sounds like your FIL still has about $1M in convertible assets, in spite of divorce and asset split. Plus he has another 5-years to prepare. Assuming he will also qualify for SS and Medicare, he is in much better shape than most folks ... but, also not as well-off as some.
Since you consider this 'ill prepared', how much do you believe he should have or that you will need? -- Frankly, as I stated in another post, much of the 'huge number hype' is being promoted by financial consultants with products to sell. Asking them 'How much is enough to retire comfortably' is like asking a shoe salesman if they think you need any more shoes!
My husband and I have heard for years that a person should have at least 8-12 times the amount of their last salary in the bank when he/she retires. We have 10% of my husband's salary going into his 401K every week and his company contributes 6% and by our calculations we'll have plenty of money in the bank if we keep on the path that we're going on- we have 30+ years to go. This is not including whatever money I'm going to earn and contribute when I get back into the workforce outside of the home (I'm a stay-at-home mom now) so I'll hopefully also have a decent retirement option when the time comes.
As my dear Mathjack says.....no one can answer that for YOU. YOU need to run YOU numbers...income, investments, expenses, cost of living, lifestyle, etc.
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Our biggest goal is to buy a house (been trying for almost 3 years now, it's been a nightmare) and have it paid off when we retire. My husband is adamant about that and keeps telling me that having a mortgage hanging over one's head when retirement comes about will drain an account fast. We just want to be smart and plan accordingly and be prepared for any surprises or life-changing events.
"Affording" a mortgage or anything else...depends on the money available and what other expenses there are. How much 'emergency money" or "rainy day fund" one needs also depends on one's expenses, and how "prepared" a person thinks s/he needs to be for "possible" life-changing events.....which of course may or may not ever happen.
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My husband has also been talking to his father about his (FIL's) retirement and my husband is astonished by how little he has in his 401K. Granted, my FIL has turned over half of his 401K to my MIL, as they're getting divorced, but given what he has in the account and what he has in liquid cash it's a lot less than what we expected, especially since my FIL is slated for retirement in 5 years or less.
Your FIL's situation COULD be dire then again it may not be. You have to run various scenarios...that's part of the planning process.
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He told my husband that he has 200K in the 401K, 100K in liquid cash (from an inheritance) and he owns 2 homes with my MIL, both worth about 450-500K, with one that has an 80K note left on it. From what we've heard, both homes are looking to be sold and the remaining mortgage is going to be split between them and paid off. My FIL also owns half of his father's house, which is worth about 600K, but that isn't going to be sold anytime soon.
Again -- figuring this all out is part of the planning process.
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We're concerned that he isn't prepared very well and is going to rely solely upon the sale of the homes as his "retirement". He's also been talking about buying a vacation home now and making that his retirement home when the time comes- he's been showing us homes he's seen that are going for 200K+. I told my husband that it concerns me that he'll run out of money and we'll have to be the ones to support him, as my SIL and her husband don't have any money saved for retirement at all so they won't be able to contribute.
You have too many unknowns AND haven't gotten all the info you need. Unknowns are fine, but at some point you have to workout various scenarios WITH NUMBERS!
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So, how much should one realistically have when he/she retires and live comfortably? Should we be aggressive in our approach or more cautious and steady? And what the heck should we tell my FIL, if anything at all?
That depends......Some of your concern might either -- be valid -- or be unwarranted....but guess what? You won't have a better grasp of that until.....you nail down some NUMBERS!
...He told my husband that he has 200K in the 401K, 100K in liquid cash (from an inheritance) and he owns 2 homes with my MIL, both worth about 450-500K, with one that has an 80K note left on it...
I actually think your father-in-law is well prepared for retirement. Much better than most. Of course, it depends on his standard of living and if he will get some help from social security. If he spends lavishly, goes out to dinner often, and takes frequent trips/vacations overseas, buys a new car every other year...then things might be tight for him. If he has a "normal" standard of living, he will be fine.
Our biggest goal is to buy a house (been trying for almost 3 years now, it's been a nightmare) and have it paid off when we retire. My husband is adamant about that and keeps telling me that having a mortgage hanging over one's head when retirement comes about will drain an account fast. We just want to be smart and plan accordingly and be prepared for any surprises or life-changing events.
This really depends upon what one considers "hanging over one's head." We took out a 30-year mortgage when we retired and moved to a new state. Our monthly cost including taxes and insurance is 12.2% of our monthly net income; 9.2% of our monthly gross. We don't feel that it's hanging, or we are either.
Exclusive of posh and international travel or extreme medical issues...
most retiring couples who own a house in good condition can get by on their SS income.
The distance between "getting by" and "being comfortable" will vary.
For some it will vary a lot.
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