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Old 05-23-2015, 09:09 PM
 
Location: Los Angeles area
14,018 posts, read 17,744,100 times
Reputation: 32304

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Quote:
Originally Posted by TwinbrookNine View Post
Rule # 1: You never have "enough." Enblazen that in your mind, like, right now.

Rule # 2: Going back to work in case you "underestimated" is difficult for various reasons.

Rule #3: Expenses in general have been undergoing all sorts of completely unpredicted changes - especially in the past 10 years. It isn't 1990 anymore. Far from it. Way too complicated to specify here - just take my word for it. Calculate what you think it will cost - than times it by 2. My COL in the past 8 years has gone up over 1.5X without me doing anything different! Very important to note!

Rule # 4: Once you set, in your mind, a "standard of living" suitable to you, fully realizing that it's "suitable as long as I don't have to go to work," then stick to it. I know more than one person(s) who didn't do that, and today, when I visit with them, they are often in tears, still don't get why they are broke (it's obvious to me) and keep repeating the same financial behavior. It is NOT unusual, btw. Just difficult to reverse that hole you dug.
For people who follow rules 2, 3, and 4, rule #1 is simply hyperbole. Lots of us have not only enough, but more than enough. And no, I am not some fat cat, but a retired high school teacher who retired ten years ago. I lived below my means while working, and I continue to live below my means while retired. "Below one's means" doesn't have to mean uncomfortably; it just means one spends less than the income coming in, on average, over a year's time.

Rule #2 is especially true in most cases.

Rule #3 depends on a lot of variables. Fortunately, the 50 percent increase in cost of living you have experienced over the past eight years is not a universal experience. Over the past ten years, my cost of living has gone up about 25 percent. Of course there is a core truth in your warning - costs will go up over time and that has to be taken into account.

Rule #4 is certainly true. If people ignore their own plans for a standard of living in retirement, then they are damn fools. Exceptions might be winning a lottery or receiving a more than negligible inheritance.
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Old 05-24-2015, 04:06 AM
 
71,638 posts, read 71,777,271 times
Reputation: 49230
i can tell you based on what our budget could be vs the budget we set we do live below our means , but i have tell you i would have no problem maxing out any budget on hobbies , trips and going places , at least in our early stages.

no amount would be enough , i would just do more and buy more or live in even a better area. we have a lovely co-op around the corner called the bay club which i would love to live in if i could afford it , but it is out of budget .

i would love to live in one of the apartments we own over looking central park but it is out of budget .

i would venture to say you hand anyone here an extra million bucks they would have no problem spending it and they would chomp at the bit waiting for it to happen again as they would have lots of uses for the money..

so i do agree with #1 , as much as most of us could safely develop a budget around we would. so that is where #4 comes in.
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Old 05-24-2015, 09:02 AM
 
Location: Idaho
1,454 posts, read 1,156,015 times
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Quote:
Originally Posted by mathjak107 View Post

i would venture to say you hand anyone here an extra million bucks they would have no problem spending it and they would chomp at the bit waiting for it to happen again as they would have lots of uses for the money.

so i do agree with #1
We were raised to be frugal and many of my siblings are quite financially successful (have good education, careers, have like-minded spouses and some are either savvy or have been very lucky in real estate investments) and yet none of them have spent or lived the life of multi millionaires.

I don't mean to brag about my siblings but my observation is that several of them donate a heck more money to charity than spending on themselves. My least successful sister retired few years ago and her only source of income is her meager SS of something like $1K a month. She lucked out with her housing and bought a very nice short sale home in Florida at the bottom of the market for less than half what the previous owner paid (she paid cash with her 401K). I don't know how she does it but she donates thousands to charities every year. She grows her vegetables, fruits and makes her own clothes!

My most successful sister is an internist. With her surgeon husband's salary and their smart investments in medical offices/rentals etc, their asset is in the top 1 or 2%. They have been shopping at thrift stores forever, drive economical cars and most of their trips are medical charity missions. When I visited them years ago, they were spending their weekend laying the linoleum floor on a pharmacy office which they were about to open!

So if I just look at the life of my parents, PILs, siblings and myself, I have to say that rule #1 does not apply to us. We have always lived below our means, felt that we are more fortunate than many and have more than enough.
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Old 05-24-2015, 12:53 PM
 
29,782 posts, read 34,876,173 times
Reputation: 11705
Quote:
Originally Posted by mathjak107 View Post
i can tell you based on what our budget could be vs the budget we set we do live below our means , but i have tell you i would have no problem maxing out any budget on hobbies , trips and going places , at least in our early stages.

no amount would be enough , i would just do more and buy more or live in even a better area. we have a lovely co-op around the corner called the bay club which i would love to live in if i could afford it , but it is out of budget .

i would love to live in one of the apartments we own over looking central park but it is out of budget .

i would venture to say you hand anyone here an extra million bucks they would have no problem spending it and they would chomp at the bit waiting for it to happen again as they would have lots of uses for the money..

so i do agree with #1 , as much as most of us could safely develop a budget around we would. so that is where #4 comes in.
This is part of why I say give it seven years you hopefully will change. A very successful accumulatin stage followed by a great game over can create a Bada Bing stage as you age and face rising resources and age related declines in projected spending. Unfortunately so much of this is market dependent and the last six years has been awesome for many retirees. Not all but many.
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Old 05-24-2015, 02:16 PM
 
130 posts, read 101,412 times
Reputation: 539
Default A question for Mathjak

I notice you mention TIPS quite often when referring to investments. Are you aware you can purchase them directly from the US Treasury at treasurydirect.gov?

In fact, all securities offered by the Treasury can be purchased thru treasurydirect.gov, and there are no fees.

I personally perfer I Bonds over TIPS. Granted, you don't receive current income from I bonds, but you also don't have to report any interest earned on the securities until they are redeemed (or matured, if held for 30 years). My biggest complaint with TIPS is the fact that the OID (Original Issue Discount, the amount the principal increases in a tax year) must be reported each year even though it is not received until the security matures, or sold.
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Old 05-24-2015, 02:22 PM
 
71,638 posts, read 71,777,271 times
Reputation: 49230
Tips are no different than buying any other bonds. You can buy them directly from the treasury.

Tips are best held in retirement accounts because of the phantom interest.

But most folks have most of their investment money in sheltered accounts so it isn't a problem
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Old 05-24-2015, 03:01 PM
 
Location: Washington State
18,548 posts, read 9,592,797 times
Reputation: 15793
Quote:
Originally Posted by TwinbrookNine View Post
Rule # 1: You never have "enough." Enblazen that in your mind, like, right now.

Rule # 2: Going back to work in case you "underestimated" is difficult for various reasons.

Rule #3: Expenses in general have been undergoing all sorts of completely unpredicted changes - especially in the past 10 years. It isn't 1990 anymore. Far from it. Way too complicated to specify here - just take my word for it. Calculate what you think it will cost - than times it by 2. My COL in the past 8 years has gone up over 1.5X without me doing anything different! Very important to note!

Rule # 4: Once you set, in your mind, a "standard of living" suitable to you, fully realizing that it's "suitable as long as I don't have to go to work," then stick to it. I know more than one person(s) who didn't do that, and today, when I visit with them, they are often in tears, still don't get why they are broke (it's obvious to me) and keep repeating the same financial behavior. It is NOT unusual, btw. Just difficult to reverse that hole you dug.
Rule 1 - I pretty much agree and have targeted a minimum of $3M to have before retirement.

Rule 2 - Yeah this is problematic especially to go back to the level of income.

Rule 3 - Agree again that you should expect inflation as we see in our lives every year. One hedge in my income flow is having 4 rentals and my home all paid for which should increase rents over time and keep costs of housing less of an impact during retirement years.

Rule 4 - Again I agree. I don't want to be in a position where my wealth decreases but rather increases during retirement which is not statistically the norm.
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Old 05-24-2015, 03:03 PM
 
71,638 posts, read 71,777,271 times
Reputation: 49230
unless your withdrawals are so small ,without the ability to control markets , interest rates and inflation you have little control over #4 . there will always be down years and years interest rates turn negative and it can sometimes take many years to retrace.
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Old 05-24-2015, 06:38 PM
 
39,271 posts, read 20,371,115 times
Reputation: 12754
Quote:
Originally Posted by rjm1cc View Post
I think instead of asking what others did you will get better opinions if you give your information for the sources of income and your estimated expenses. At 52 you could be retired for 40 years or more so you investments would have to be several million or else you have a good pension. Remember the pension could be in ended or reduced if the payer ends up in financial difficulty.
I used to work in the medical field but started a business in 2006 with no business education or experience and the business is successful. Aways hearing about the economy and feeling like the economy or business could crash so I don't spend much. I'm now 54 and DH is 55. We are mortgage and debt free. He will get a small pension and we both qualify for SS with pre and post retirement investments. I used to struggle a lot and see others who still struggle without much hope of retiring, I worry a lot. The best thing I did was when the business took off is not to spend and to save and invest. Sometime I wonder, will I ever relax. Sometimes I wonder if my grandparents depression mentality rubbed off on me more than I would like to admit.

Always planning for what comes next, thank you for you all insight, it's been helpful.
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Old 05-24-2015, 08:48 PM
 
39,271 posts, read 20,371,115 times
Reputation: 12754
Quote:
Originally Posted by mathjak107 View Post
keeping the above in mind i can tell you how we figured the budget.

first off i did not look at maximum income levels we could pull from our portfolio. i backed in to that from the opposite view of finding a budget and then finding the lowest volatility asset mix that could give us at least a 90% success rate using both the fidelity rip planner and firecalc.
Is this what you used?

https://www.fidelity.com/calculators...income-planner
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