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Old 03-25-2016, 03:33 AM
 
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my own opinion is simple answers to complex questions are generally going to be the wrong answers .

wall street does the same thing with their basing investment allocations on age .

most of the time , wrong answer . you saw that when so many youngin's were heavily invested in equity's in 2008 because they were told they are young and they didn't have the pucker factor for it so they were scared out and lost money never to return . on the other hand just wait until bond rates rise and seniors look at the damage on their bond fund portfolio's . they will freak .

trying to do things with standardized answer's generally will end up being poor advice .

why see an adviser or pro for a consultation to get a canned answer ? that would not make much sense .

personally i would never give one size fits most answers to questions that are so highly unique to each one of us . all our wants , needs and reasons are going to be so different from each other .

unless i worked off expenses as well as knew a whole lot about that person or couple i would never tell them what percentage of income is satisfactory .

i know if anyone told me 70 to 80% i would be well underfunded , aside from the fact in many cases final years income may not be representative . i know quite a lot of people who cut back days and hours in their final year or years so what income are we using ?

Last edited by mathjak107; 03-25-2016 at 03:51 AM..
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Old 03-25-2016, 05:36 AM
 
Location: Mount Airy, Maryland
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The one thing that is hard to factor is inflation, a couple of high inflation years could really chamge things. At 57 I'd like to think I have 30 more years, then I think about what everything costed in 1986 and I get concerned about my figures. Suddenly that $X amount per month isn't so much.
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Old 03-25-2016, 05:48 AM
 
Location: NC Piedmont
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Quote:
Originally Posted by mathjak107 View Post
my own opinion is simple answers to complex questions are generally going to be the wrong answers .
You know all generalizations are wrong, don't you?

The counterpoint is that sometimes it really is a simple question poorly phrased or with variables that don't really play in.

Quote:
Originally Posted by mathjak107 View Post
trying to do things with standardized answer's generally will end up being poor advice .
Absolutely agree this is often true, especially with finances and investments.

Just having fun picking nits with philosophy; the real issue that you brought up is one of interest to me.

Quote:
Originally Posted by mathjak107 View Post
i know quite a lot of people who cut back days and hours in their final year or years so what income are we using ?
I have been in the same position over 20 years with regular raises and it is a contract position so the rate was above the norm for a salaried position to start with. What that means is that I am very fortunate to be making substantially more than most people performing the same job for other employers. My luck is likely to run out before retirement. Not much before, but before. I could see a 40% drop (possibly more) the last 3 years.
We started our family late-ish, so I have 4 young drivers on insurance, a couple of extra cars, college tuitions and other expenses that should no longer be on my expense list when I retire (yeah, odds are good I will need to help one or two) so the current higher income is a blessing that allows me to budget a lot like my peers whose kids have left the nest. I don't have the home or lifestyle most people would expect based on income. It's a good thing I don't IMO.
Anyway, if the contract does get extended all the way to retirement, then the % of income I would consider adequate would definitely be under 50 and probably under 40. If my income gets normalized prior to retirement, then the % might also look more normal. In a nutshell, this is why I am one of the eye rollers when it comes to using % of income as any sort of meaningful statistic. If you are in a salaried long term position, it may be different.
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Old 03-25-2016, 07:15 AM
 
71,971 posts, read 71,997,171 times
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Quote:
Originally Posted by DaveinMtAiry View Post
The one thing that is hard to factor is inflation, a couple of high inflation years could really chamge things. At 57 I'd like to think I have 30 more years, then I think about what everything costed in 1986 and I get concerned about my figures. Suddenly that $X amount per month isn't so much.
it wasn't poor markets that created the worst case scenario the 4% rule is based on , which is based on 1965/1966 . it is the fact inflation soared in just a few years to double digits . that killed retiree's as they excessively spent principal to survive the first 15 years of a 30 year retirement .
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Old 03-25-2016, 09:37 AM
 
Location: Boise, ID
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Those numbers also assume that people spend all their income. I don't use 80% of my income for expenses NOW, so definitely don't need that much in retirement.


I live on about 1/3 of my gross income now, or 33%. When I retire, my mortgage will be paid off, but I expect medical expenses to make up that difference. So I should still need about 1/3 of my current income to live on.


For me, the two big uncertainties are medical bills and inflation. I'm still at least 20 years from retiring, and a lot could change between now and then.


All I can do is save what I can while still living the way I want to. I hope to have enough to retire in my 50s, but if not, I can keep working longer if necessary.
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Old 03-26-2016, 01:10 PM
 
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Originally Posted by capitalhockey View Post
I am in my mid-30s but want to plan for a comfortable retirement for myself and my wife. We are about 25 years away from the finish line. Both of us are putting in maximum contributions to our 401k. I have a pension for my job that will cover about 35% of my salary when I retire. We also put away funds in a taxable investment account - I told my wife, this will be our "fun account" for travels when we are retired. My work allows me to keep my health insurance in retirement. That will keep health care costs down since we plan to retire before Medicare kicks in. Our house and cars will also be paid off before retirement.

You mentioned later that you are planning on having kids shortly. This will change your spending/saving a lot. I think we love in the same metro area. Childcare can easily run $1000 - $2000/mo per kid for infants/toddlers. If you need to get a nanny that can be $30-$50k per year. Au pairs are cheaper but still over $10k/yr, and would likely not be an option for you with 2 kids in a 3br townhouse. There are a lot of other expenses you are not even thinking of, especially as they get older. Travel sports teams, tutoring, clothes, electronics, braces etc etc can be huge money. Also, I know a ton of people who thought they'd stay in their townhouse/condo after they had kids, but ended up moving to a 4br single family house in the suburbs. What is your plan for child care? How good are the schools where you currently live?


Even with good medical insurance, there are a lot of things you have to pay out of pocket. You'll need to budget for this in retirement.


Do you and your spouse have long term care insurance? Long term care can be another significant cost in retirement.

Quote:
Originally Posted by capitalhockey View Post
I had an interesting conversation with someone who was 60. He told me that you don't need as much money as you think you do. His main premise assumed that you have your house/car paid off and only needed to cover property tax, insurance, food, etc. My old assumption was to try to replace 80% of our household income when we are retired. After this conversation, I went home and did a spreadsheet of my current expenses without a mortgage. The expenses came out to be 15% of our household income. If this is the case, this is lower than my 80% income replacement model.
It really depends on your retirement lifestyle. If you are content to stay home and do low/no cost activities, then you need a lot less than you will if you are frequently traveling, going out to eat, golfing etc.


Don't sweat this too much. You're off to a great start and are asking good questions.
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