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Old 03-27-2015, 09:51 AM
 
48,516 posts, read 84,010,700 times
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I have no idea when late is late. But I started saving when young for college and just continued it when I got older and got a job after college. I am retired and still save. I actually got serious on retirement investments at 28 as I recall. IMO; its very important for parents to teach children about save for anything. The best lesson I learned on saving and fiancé; was when I was thirteen. I had seen a stereo at local furniture store. I had part tmie job and parents told to save for it. I had about half when they took me to store. They arranged for a credit type account they co-signed in my name for the stereo. I paid 13 dollars a month and would go down and pay it myself each month until paid off.

Last edited by texdav; 03-27-2015 at 10:00 AM..
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Old 03-27-2015, 09:56 AM
 
Location: Idaho
1,456 posts, read 1,158,755 times
Reputation: 5523
Quote:
Originally Posted by Petunia 100 View Post
I have never understood this guideline. Eight times final salary saved is only 32% salary replacement, assuming a 4% withdrawal rate. If you want to replace 80%, you have 48% to go. Where is that coming from? SS benefits won't get you there.

Details can be found here. Yes, SS is counted but also with assumptions of salary growth of 1.5% and expected rate of return 5.5% on account balances.

https://www.fidelity.com/viewpoints/...rement-savings


"The baseline 8X hypothetical assumptions in the interactive graphic are based on the following selections: starting age of 25 and starting salary of $40,000; retirement age of 67; pretax deferral rate beginning at 6% and increasing to 12%; annual salary growth of 1.5%; salary replacement goal in retirement of 85%; life expectancy of 92; the account balances grow at a hypothetical expected rate of return of 5.5%. All seven factors will change based on your selection of other variables. Addition assumptions for all: Assumes systematic withdrawal of savings in retirement; 85% replacement rate is for a hypothetical average employee and may not factor in all anticipated future living expenses or needs, such as long-term care costs; dollars expressed are in real dollars (all dollars in today’s 2013 dollars, not future value). All savings are based on pre-tax earnings, and taxes will be due upon withdrawal. The maximum annual qualified retirement plan contribution limits in 2013 are $17,500 (if age is 50 or older an additional $5,500 of catch up is allowed) and for SIMPLE 401(k) plan annual contribution limit is $12,000 (with additional catch-up contributions of $2,500 allowed for those 50 and older).

Social Security data from ssa.gov. In the base 8X case, a hypothetical worker who at age 25 commences his or her career with a $40,000 annual salary with an ending salary of approximately $72,000 at age 67, his or her benefit would be about $1,920 per month. For other retirement age selections, such as 63 or 70, Social Security payments may be higher or lower. Please see http://www.ssa.gov/estimator/.
Actual average annual income increases based on 1.5% real wage increases plus 2.3% inflation adjustments. Also assumes the participant took no loans or hardship withdrawals from his or her workplace plan."
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Old 03-27-2015, 10:02 AM
 
5,364 posts, read 6,009,750 times
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Lol at only have 50k. How many people period have 50,000 dollars saved up period
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Old 03-27-2015, 10:09 AM
 
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if you don't start early, like by age 24, you're going to be cooked (maybe literally) in the future when water costs as much as fuel.
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Old 03-27-2015, 10:36 AM
 
Location: Tennessee
23,649 posts, read 17,623,979 times
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Quote:
Originally Posted by tjasse View Post
if you don't start early, like by age 24, you're going to be cooked (maybe literally) in the future when water costs as much as fuel.
If water costs as much as fuel, retirement funds are going to be the least of any of our concerns.
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Old 03-27-2015, 10:37 AM
 
8,870 posts, read 5,149,988 times
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Quote:
Originally Posted by BellaDL View Post
Details can be found here. Yes, SS is counted but also with assumptions of salary growth of 1.5% and expected rate of return 5.5% on account balances.

https://www.fidelity.com/viewpoints/...rement-savings


"The baseline 8X hypothetical assumptions in the interactive graphic are based on the following selections: starting age of 25 and starting salary of $40,000; retirement age of 67; pretax deferral rate beginning at 6% and increasing to 12%; annual salary growth of 1.5%; salary replacement goal in retirement of 85%; life expectancy of 92; the account balances grow at a hypothetical expected rate of return of 5.5%. All seven factors will change based on your selection of other variables. Addition assumptions for all: Assumes systematic withdrawal of savings in retirement; 85% replacement rate is for a hypothetical average employee and may not factor in all anticipated future living expenses or needs, such as long-term care costs; dollars expressed are in real dollars (all dollars in today’s 2013 dollars, not future value). All savings are based on pre-tax earnings, and taxes will be due upon withdrawal. The maximum annual qualified retirement plan contribution limits in 2013 are $17,500 (if age is 50 or older an additional $5,500 of catch up is allowed) and for SIMPLE 401(k) plan annual contribution limit is $12,000 (with additional catch-up contributions of $2,500 allowed for those 50 and older).

Social Security data from ssa.gov. In the base 8X case, a hypothetical worker who at age 25 commences his or her career with a $40,000 annual salary with an ending salary of approximately $72,000 at age 67, his or her benefit would be about $1,920 per month. For other retirement age selections, such as 63 or 70, Social Security payments may be higher or lower. Please see http://www.ssa.gov/estimator/.
Actual average annual income increases based on 1.5% real wage increases plus 2.3% inflation adjustments. Also assumes the participant took no loans or hardship withdrawals from his or her workplace plan."
So working backwards, (final salary is 72k, nest egg is 576k, SS benefits are 23k, 85% of 72k is 61k, nest egg to provide 38k) a withdrawal rate of 6.6% is assumed. Too risky for me.
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Old 03-27-2015, 10:48 AM
 
Location: Tennessee
23,649 posts, read 17,623,979 times
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Quote:
Originally Posted by Petunia 100 View Post
I have never understood this guideline. Eight times final salary saved is only 32% salary replacement, assuming a 4% withdrawal rate. If you want to replace 80%, you have 48% to go. Where is that coming from? SS benefits won't get you there.
Since I make $58k, eight times this is $464k. This is a lot of money, and if you're debt-free, reasonably healthy, and retire around 65, that should provide for a decent lifestyle. A 4% withdrawal rate rate from that is only about $18k, but it seems like you're assuming that $464k has no growth at all and is just a static amount being siphoned from. One is likely to have other sources of income/wealth, like home equity (if they downsize, they'll save on property taxes, insurance, utilities, etc), some pension funds, possibly rental property.

I know a lot of current retirees who probably made less than $58k, have less than $464k in retirement accounts, and are doing fine.
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Old 03-27-2015, 10:59 AM
 
71,798 posts, read 71,896,917 times
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many were doing fine but are now having their money eaten away by soaring healthcare costs .

Many retirees didn't need much inflation adjusting around 72-80 because what they stopped doing tended to cancel out the rises in what they still did and bought.

actual savings amounts needed were far lower than the calculators that figured yearly inflation adjusting.

But soaring health care costs now are wiping away that lack of needing inflation adjusting in a big way.

lately 7% average increases in healthcare have been what we are seeing.

many will run short of money because of it way before they run out of time.
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Old 03-27-2015, 10:59 AM
 
Location: Idaho
1,456 posts, read 1,158,755 times
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IMO, to know whether you are on track for retirement, you can start with these guidelines and adjust the assumptions to your own case.

The assumption of needing 80-85% of gross income for retirement is very simplistic and can be way overestimated. For example, if one net income (after federal, state, city, social security, medicare, 401K, HSA, insurance deduction) is only 70% of gross income, one would not need 80-85% of the gross income since: 1) federal/state/city taxes will go down 2) one no longer need to pay SS, medicare taxes 3) no 401K, HSA/insurance deductions. Other work related expenses like transportation, clothing, outside-of-home food consumptions will also go down.

One can also has the choice of moving to another location, state to reduce cost of living: downsizing, living in a temperate climate to cut down heating/cooling cost, find a state with no income tax or sale tax, lower property taxes etc.
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Old 03-27-2015, 11:10 AM
 
1,316 posts, read 1,737,802 times
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Due to life circumstances, we were not able to get serious until around 50. At that point, we began saving 50% of our net income to catch up. It has been hard sometimes doing without but I think we'll be OK retiring at 61-62 with what we have saved by then.
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