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Old 02-03-2016, 08:34 AM
 
Location: ☀️ SWFL ⛱ 🌴
2,447 posts, read 1,683,626 times
Reputation: 8781

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Quote:
Originally Posted by TuborgP View Post
You offer some good advice. If followed it is hard not to make it into the top third if you factor in the geography of where to work.
Geography is important and we didn't realize it. We moved to NY with a job transfer early in our careers. DH had more opportunities there than he ever would have had in IN, as did I. His division in IN eventually closed down, along with his office in NY. He transferred to another division in the company that had openings in the Northeast. DH transferred four years with his job again, this time to FL with no income tax.

The COL difference between IN and NY state was huge as was the income tax, but we were ready for a change, more than calculating on future benefits. The transfer to FL was to be near grandkids with retirement in mind and the no income tax was a bonus. I would love to say we planned it all, but it comes down to making decisions that started a domino chain that ended well. Yes, our decisions got us where we are, but being in the right place at the right time is not a sure thing. Is it luck or do we make our own luck? I honestly don't know.

Last edited by jean_ji; 02-03-2016 at 08:44 AM..
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Old 02-03-2016, 11:43 PM
 
6,353 posts, read 5,178,904 times
Reputation: 8529
Quote:
Originally Posted by ohio_peasant View Post
In desperate defense of the big-picture acceptability of the 1966-1982 morass, the second article cited in Robyn's post mentions this: "Most likely, the amount you save will have a far greater impact on your ending portfolio balance than a few extra basis points of investment performance". This is absolutely horrible financial advice!

The whole point of long-term investment is compound interest, where we gain returns atop of returns atop of returns, so that some decades after we start, our portfolios become self-sustaining... [snip description of a successful retirement]
The article said "a few basis points." If you could modify your portfolio to earn 15% instead of 3%, you should, and it would make a huge difference in your wealth - but you can't. No matter how hard you try, you aren't going to earn 15-20% annual returns like you did in 1982-2000. There is nothing you can do about the fact that that period is in the past and that future returns will be much lower. So you have to save more.
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Old 02-04-2016, 02:57 PM
 
7,991 posts, read 5,073,457 times
Reputation: 13671
Quote:
Originally Posted by Larry Siegel View Post
The article said "a few basis points." If you could modify your portfolio to earn 15% instead of 3%, you should, and it would make a huge difference in your wealth - but you can't. No matter how hard you try, you aren't going to earn 15-20% annual returns like you did in 1982-2000. There is nothing you can do about the fact that that period is in the past and that future returns will be much lower. So you have to save more.
Sure. No argument about the importance of saving more, especially in the present climate. But the article's assertion, dismissing the importance of "a few basis points", is facile. Consider the difference between 5% annual returns, and 7% annual returns, over a 40-year investment-lifetime of an initial investment of $1000. At 5%, we reach about $7000, while at 7%, we attain about $15000 - or more than twice as much!

The upshot is that (1) even for small rates of return, compound-growth means that the vast majority of our eventual holdings are earnings, and NOT savings; and (2) even a small difference in annual rate of return, will matter greatly over the long term. The latter statement is also the justification about clucking over how to minimize investment-fees. It also means that if our investment-horizon is very long, we're forced to rely heavily on equities, even if we detest volatility, and are horrified of risk.
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Old 02-05-2016, 05:23 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,969,752 times
Reputation: 6723
A "basis point" is one hundredth of one percent. It's a term that's commonly used when talking about interest rates. So a couple of basis points is the difference between 3% - and 3.02%. The difference between 5% and 7% is 200 basis points - which is more than a few basis points . Robyn
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Old 02-05-2016, 05:01 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,969,752 times
Reputation: 6723
Quote:
Originally Posted by ohio_peasant View Post
...It also means that if our investment-horizon is very long, we're forced to rely heavily on equities, even if we detest volatility, and are horrified of risk.
Very long - like I'm 25 years old? I'm close to 70. Many people here are closer to 75 than they are to 25 as well. Best I can tell - you're in your 40's - about 25-30 years younger than me and my husband. Correct?

Equities since about 2000 have - over the long run - had modest returns and been totally puke-worthy over shorter time frames.

For people who are in/close to retirement - I think it is better to work more years and save more money than relying on stock market returns. People tend to understand their jobs/careers better than their investments. For people who are retired - and have no possibility of returning to work at anything other than perhaps minimum wage - live on what you can earn in terms of safe returns. Whether you're talking about social security - pensions - high quality fixed income - annuities - whatever.

The people I know who got decimated the worst post-2008 were seniors who were relying on high "safe dividend" paying stocks - especially in the financial sector. So you have to be super careful when it comes to things like dividends. If you plan to rely on dividends for a part of your income these days - the yield on the SP500 today is about 2.3%. So that is the dividend yield I would keep in mind and plan for.

Welcome to the "new normal". Slow or no growth - low or negative interest rates. It is very hard to generate any kind of "alpha" in the current environment without taking on a lot of risks that most seniors can't afford to take. People your age - a couple of decades away from being seniors - might not really understand this. Robyn
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Old 02-05-2016, 08:01 PM
 
Location: Florida
4,385 posts, read 3,726,321 times
Reputation: 4126
Quote:
Originally Posted by jean_ji View Post
. I would love to say we planned it all, but it comes down to making decisions that started a domino chain that ended well. Yes, our decisions got us where we are, but being in the right place at the right time is not a sure thing. Is it luck or do we make our own luck? I honestly don't know.
Yes luck is part of all the out comes. It could be good luck or bad luck. But I think you will find that those that work hard and plan well will have more of the good luck than the bad.
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Old 02-05-2016, 08:57 PM
 
12,825 posts, read 20,183,733 times
Reputation: 10910
Quote:
Originally Posted by Robyn55 View Post
Very long - like I'm 25 years old? I'm close to 70. Many people here are closer to 75 than they are to 25 as well. Best I can tell - you're in your 40's - about 25-30 years younger than me and my husband. Correct?

Equities since about 2000 have - over the long run - had modest returns and been totally puke-worthy over shorter time frames.

For people who are in/close to retirement - I think it is better to work more years and save more money than relying on stock market returns. People tend to understand their jobs/careers better than their investments. For people who are retired - and have no possibility of returning to work at anything other than perhaps minimum wage - live on what you can earn in terms of safe returns. Whether you're talking about social security - pensions - high quality fixed income - annuities - whatever.

The people I know who got decimated the worst post-2008 were seniors who were relying on high "safe dividend" paying stocks - especially in the financial sector. So you have to be super careful when it comes to things like dividends. If you plan to rely on dividends for a part of your income these days - the yield on the SP500 today is about 2.3%. So that is the dividend yield I would keep in mind and plan for.

Welcome to the "new normal". Slow or no growth - low or negative interest rates. It is very hard to generate any kind of "alpha" in the current environment without taking on a lot of risks that most seniors can't afford to take. People your age - a couple of decades away from being seniors - might not really understand this. Robyn
I'm in my early 50s and completely understand it.

And it freaks me out.
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Old 02-05-2016, 10:37 PM
 
39,330 posts, read 20,439,979 times
Reputation: 12810
Quote:
Originally Posted by Robyn55 View Post
Very long - like I'm 25 years old? I'm close to 70. Many people here are closer to 75 than they are to 25 as well. Best I can tell - you're in your 40's - about 25-30 years younger than me and my husband. Correct?

Equities since about 2000 have - over the long run - had modest returns and been totally puke-worthy over shorter time frames.

For people who are in/close to retirement - I think it is better to work more years and save more money than relying on stock market returns. People tend to understand their jobs/careers better than their investments. For people who are retired - and have no possibility of returning to work at anything other than perhaps minimum wage - live on what you can earn in terms of safe returns. Whether you're talking about social security - pensions - high quality fixed income - annuities - whatever.

The people I know who got decimated the worst post-2008 were seniors who were relying on high "safe dividend" paying stocks - especially in the financial sector. So you have to be super careful when it comes to things like dividends. If you plan to rely on dividends for a part of your income these days - the yield on the SP500 today is about 2.3%. So that is the dividend yield I would keep in mind and plan for.

Welcome to the "new normal". Slow or no growth - low or negative interest rates. It is very hard to generate any kind of "alpha" in the current environment without taking on a lot of risks that most seniors can't afford to take. People your age - a couple of decades away from being seniors - might not really understand this. Robyn
People old enough to be retire get SS, pensions, invested in high growth stock market, low housing cost. Most, fortunate enough to have responsible kids who supported themselves once they left home.

Today, pension are rare, SS may not be there. Late boomers (the Joneses) started adulthood with double digit inflation, sky high interest rates. Housing skyrocketed. Both husband and wife must work. Are now the sandwich generation... kids in college or boomerang kids and because people are living longer, they help support and care for elderly parents (who get SS, pensions, invested during high growth stock market ect as mentioned above). And now... the "new normal", slow or no growth.

There is a lot of responsibility placed on middle aged and near retiree's. Just a thought.

Last edited by petch751; 02-05-2016 at 11:33 PM..
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Old 02-07-2016, 02:09 PM
 
Location: Grove City, Ohio
10,149 posts, read 12,418,021 times
Reputation: 14013
Quote:
Originally Posted by petch751 View Post
People old enough to be retire get SS, pensions, invested in high growth stock market, low housing cost. Most, fortunate enough to have responsible kids who supported themselves once they left home.

Today, pension are rare, SS may not be there. Late boomers (the Joneses) started adulthood with double digit inflation, sky high interest rates. Housing skyrocketed. Both husband and wife must work. Are now the sandwich generation... kids in college or boomerang kids and because people are living longer, they help support and care for elderly parents (who get SS, pensions, invested during high growth stock market ect as mentioned above). And now... the "new normal", slow or no growth.

There is a lot of responsibility placed on middle aged and near retiree's. Just a thought.
If SS isn't there it will be the last thing to go having watched everything else go before it. If the time comes when it isn't there I feel it would be the least of everyone's problems.

If SS disappears and you think Trump is volatile then you ain't seen nothing yet. SS is a promise, a promise everyone has worked towards for 50 years only to have it taken away by a political yahoo? Yeah, right.

Quote:
Originally Posted by dbsteel View Post
This is very true. We've run the numbers and if you have a million dollars, and can hold of retiring till 65-67, you will have a decent retirement if housing is under control you aren't going to spend like crazy. I gotta think the average couple in America isn't getting to that million mark though.
The average monthly Social Security retirement benefit for December, 2016:

Retired workers $1,341.77
Spouses of retired workers $690.30

That's a total of $2,032.07 for the average couple.

In some areas of the country that small amount would be a death warrant to living homeless on the street but in some areas of the country it is possible for a couple to live OK. Not live large you understand, I said OK.

To compare to high cost of living areas in rural Georgia you can own a very adequate home in a safe neighborhood and not have income taxes more than $100/month.

If you don't own a home you can get a pretty decent one bedroom/one bath apartment for $525 and a two bedroom/two bath apartment for $625 and this is not section 8 or rent subsidy. They're clean, they're in a safe area and having lived there for 8 months when I first moved south I know all utilities run about $150/month.

So more than anything else I believe it is where you live. How much would an apartment like that run you in New York?

I know some retired couples that live normal lives on a total retirement income of $2,500/month.

As a couple what would you rather have?

$500,000 in the bank with $2,500 monthly ss benefits or $0 in the bank with $4,300 monthly ss benefits?

Think what you want but I would pick the $4,300/month in benefits because the last thing I want to worry about when I do retire is worry about my investments, the stock market of if inflation will rear its ugly head like it did 35 to 40 years ago. I could be wrong in my choice but I don't think I am because it fits me and you have to have what fits you.

Where I live the median household income is but $35,000 for $2,916/month and for a retirement income of $4,300 I know a couple can live very comfortably without anything remotely close to the magical million dollars.
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Old 02-07-2016, 02:45 PM
 
11,954 posts, read 20,437,857 times
Reputation: 19389
Quote:
Originally Posted by jasperhobbs View Post
I can't fathom paying 12-18K a year for property taxes. Moving to a lower cost of living area might be a better option when retired.
Not if you're moving from family, friends and a lifestyle. In our case, we will be moving back to family. Overall the cost of living will be a little smaller, but our property taxes will be higher. But not only will we have family, we will have lots of lifestyle boosts. My quilting, sewing, genealogy pursuits will be greatly enhanced by moving home.

Life is not all about the bottom line. Quality of life must be considered.
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