Saving a million dollars for retirement (spouses, cartoon, psycho, ignorant)
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I thought it was for one person. I know my brother and his wife are in this category. My sister who didn't earn, never got married, very much came very close(last time I had to step in to help her work the numbers). I think it was the equivalent of pre 2008 crash, have half a million and a house paid off for a single person.
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I have earned. Other than that, I did what your sister did, but my misfortune was that my paid-for house, in which I was going to live until they carried me out, ended up sitting in a blighted area. Worth virtually nothing. I had to move. You never know what is going to happen.
I think my sister always invested 100% in stocks. I laughed when people came on CD and touted the virtue of investing in CDs. I know sometimes my sister only could put in 4% of her income for employers matching. So it's not all about savings, it was investing, or for some people it was gambling. Whatever it worked for her.
Our household income peaked 10 years ago and is unlikely to ever reach that level again.
Another complication is living in the Bay Area.
Due to the real estate costs we were not able to buy until the late 90s. Sure it's come up some since then, but all the rent paid prior to that plus expensive auto insurance, etc, prevented 401K maxing until a bit later. We're maxing now and have been for about 8 years. But it feels like too little too late. I dread the possibility of being early retired against my will. Of course I would get whatever crap job if that actually happened.
In any case our plans assume around 1/2 a mil plus whatever we squeeze out of our current house when we downsize and relo.
All the articles we read today say this is a myth. Well, okay then. But one question I've always had is whether this 'myth' was refering to each member of a couple, or a couple per se. A lot of retirement rules of thumb are geared to the couple. For example Fidelity says that a couple will on average spend $220,000 on health care after they reach 65. But back to this million dollar meme, would a couple need to have saved TWO million to retire carefree? Not looking to argue the arbitrariness of this number, just wanting to understand what the original intention was.
I never though of the question. But I viewed it as a couple. Basically you are saying you need $40,000 a year over SS and pension for your life style.
I think a lot of the rules of thumb are ok to get you started on your own plan but you have to refine them as time goes on.
what you need in retirement is usually a function of what your income was while working . some need a little less , some a little more . bbut it is usually based on both incomes so retirement is no different
I doubt most 5%ers come close to replacing their income. You need an enormous pile to generate that much passive income.
When I analyze where my money goes, looking at my base pay and ignoring bonuses which might or might not show up, 39% goes to savings between maxing out my 401(k) and what I save of my take home pay. 24% goes to taxes and payroll taxes. I'm only spending about 37% of my gross income. Even with the 37% I'm spending, a chunk is going towards home improvement/remodeling that I likely wouldn't be spending when I'm retired. If I replace 50% of my income, I don't see any real lifestyle change.
Not to sound crass or condescending, but one million dollars - even if one million per individual (so, two for a couple) is not a point at which one could attain comfort and security. Certainly it's nice to have! But it's not a point at which one could rest, ceasing one's further contributions towards retirement. No, this is no a tirade against inflation or what some people peevishly call "debasing of the currency". Rather, my beef is against an investment-climate where it's no possible to find passive income with sufficient rate of return - as has been the case for the 21st century thus far.
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Originally Posted by mathjak107
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what you need in retirement is usually a function of what your income was while working . some need a little less , some a little more .
Following Goeff's point, I'd say that what one needs in retirement is commensurate with the portion of one's income (while working) that didn't go towards savings. So a person who earns $100K/year but saves $50K/year (to use round but somewhat exaggerated numbers) would really only be concerned with replacing that $50K. That's not considering taxes and so forth. And that is assuming that one's employer-funded health insurance plan carries over into retirement.
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Originally Posted by DelightfulNYC
If you do all equities and have an employer giving you the 16K match and work till 67 you can most likely get to one million even starting at 50 if you have a strong bull market.
Bull markets are wonderful things!
Bear markets are horrible things!
Quote:
Originally Posted by DelightfulNYC
My wife only contributed 5% a year to her 401K for the 14.5 years she worked and her salary started at 28k and ended at 55k. She has around $400,000 in her 401k. ...
So much depends on long-term trends in the stock market. If your wife started in 1996 instead of 1986, making (for the sake of argument) twice as much money – to more than compensate for inflation – what would have been her ratio of contributions to gross accumulations?
Between 1986 and 1996, the US stock market went up how much - by something like a factor of 4, not even counting dividends? And how much has it gone up over the past 20 years?
I just did a rough estimate... if the stock market returns - magically! - somewhere in the mid-upper 20's percent every year, from here on out, then by the time that I official become a Senior Citizen, I'll be a Billionaire! That's with a capital "B", and with zero additional savings. But if the market returns, um, what it's been doing for the past 16 years, then I'll have considerably less.
Moral of the story: if you don't have much, then your eventual net-worth depends overwhelmingly on good habits and good discipline; it devolves to how much you save. If you already have a sizable portfolio, then nearly everything depends on your prowess (or just plain good luck!) as an investor.
"The Millionaire Next Door" is a wonderful collection of advice, on how to be frugal and strategic about savings. But if somebody were to write "The Billionaire Next Door", then it wouldn't be about personal habits at all. It would be about... come to think of it, I haven't the foggiest notion!
Save what you can and when retirement happens deal with it. A good idea would be to be debt free. From what I have seen first hand is save especially if you don't have a pension, pay off the house, and be debt free. Just relying on soc. sec. isn't going to cut it. People have to start saving early and consistantly. Do the best you can and let the chips fall where they may.
That being said enjoy life because we can have the best laid plans and life can blow them up. If married have your estate plan in order and adequate life insurance in place.
Here's a couple of good sites to aid in preparation for retirement and how much you'll need. The average couple in the future will need upwards of 2 million dollars to live comfortably for about a 25 year retirement expectancy.
Following Goeff's point, I'd say that what one needs in retirement is commensurate with the portion of one's income (while working) that didn't go towards savings. So a person who earns $100K/year but saves $50K/year (to use round but somewhat exaggerated numbers) would really only be concerned with replacing that $50K. That's not considering taxes and so forth. And that is assuming that one's employer-funded health insurance plan carries over into retirement.
the big issue for most of us without employer healthcare anymore is healthcare costs . especially if you retire at 62 .
long term care costs also now become a new expense if you have anything worth protecting .
throw in the fact all healthcare costs are now after tax and not pretax and you can be right back again to the levels when you were saving money .
this year especially is rough for us because we got increased 300% on medicare , from 104.50 to 389.00 a month . they go off 2014 taxes , which not only were we both still working but we had a one time sale of a property and my wife and i were not even on medicare yet in 2014 .
so we saw our health insurance coverage jump to more than 18,000 a year between my wife on medicare with a f-plan for medigap , i am on a aca plan since i am 63 and our long term care insurance , and we are in great health .
that is all not pretax but after tax dollars . that is more then my catch up amount that went in to my 401k when you figure the 22k was pretax ..
once you add in the fact we have less deductions no longer raising a family and the fact with us time cost money and retirement gives us planty of time to do things our budget and expenses exceed our working years .
any savings we saw was eaten up by healthcare and time .
Last edited by mathjak107; 01-30-2016 at 03:59 AM..
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