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Old 12-10-2016, 02:25 PM
 
Location: Mount Airy, Maryland
10,486 posts, read 5,949,749 times
Reputation: 16207

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Quote:
Originally Posted by golfingduo View Post
If we are just talking 401k straight funds. If you get about $300k to $400k you should be able to pull $1k per month in income with a 3% growth rate and it should last you 30 to 40 years. What is going to be the question is will that be all you need in 22 years. I don't know if that point was made to you but I suspect not. If you are living frugally you should try to put aside $500k to $700k and if I guessed right that should be able to provide you an income stream that would be equivalent to that $1k per month now. If you are a couple you will want to have at least twice that for income unless you have access to a pension to compensate.
Hey man I broke out a compound interest calculator to help a brother out, you just kind of winged it. And we both came up with roughly the same numbers. LOL. But I'm guessing the opening poster has Social Security in addition to this $1,000/month
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Old 12-10-2016, 02:27 PM
 
Location: NE Mississippi
13,721 posts, read 8,612,921 times
Reputation: 19981
Quote:
Originally Posted by goodlife36 View Post
How much do I need to put away each month to draw $1000 per month during retirement? It will be saved over 22 years. Thank you.
Put everything away. Then draw from it every month.

Here's how:
Open a Money Market account.
Send your paycheck to that account. ALL of it.
On the first day of every month, draw out what you will need for that month. No more.
Do that for the rest of your life.

In time, you will learn to invest to increase your return so that your money grows. Or you may find that investing is not for you. If that's the case, just stick to your plan.

I am not a fan of 401(k)'s unless your employer has a very good plan.
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Old 12-10-2016, 02:56 PM
 
Location: Mount Airy, Maryland
10,486 posts, read 5,949,749 times
Reputation: 16207
Quote:
Originally Posted by Listener2307 View Post
Put everything away. Then draw from it every month.

Here's how:
Open a Money Market account.
Send your paycheck to that account. ALL of it.
On the first day of every month, draw out what you will need for that month. No more.
Do that for the rest of your life.

In time, you will learn to invest to increase your return so that your money grows. Or you may find that investing is not for you. If that's the case, just stick to your plan.

I am not a fan of 401(k)'s unless your employer has a very good plan.
Not a fan of the tax deferred growth a 401 can give you? Interesting take. Your "plan" will offer no growth at all, to get to $1,000/month the poster will have to deposit his entire check, then sell stuff on eBay and maybe donate some plasma.
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Old 12-10-2016, 03:06 PM
 
Location: Central Massachusetts
4,800 posts, read 4,858,884 times
Reputation: 6379
Quote:
Originally Posted by DaveinMtAiry View Post
Hey man I broke out a compound interest calculator to help a brother out, you just kind of winged it. And we both came up with roughly the same numbers. LOL. But I'm guessing the opening poster has Social Security in addition to this $1,000/month
I agree that the OP is considering SS in income projections and that will be okay. However I would urge the OP to hit that $700k mark and not try just for the $1k income level.

Quote:
Originally Posted by Listener2307 View Post
Put everything away. Then draw from it every month.

Here's how:
Open a Money Market account.
Send your paycheck to that account. ALL of it.
On the first day of every month, draw out what you will need for that month. No more.
Do that for the rest of your life.

In time, you will learn to invest to increase your return so that your money grows. Or you may find that investing is not for you. If that's the case, just stick to your plan.

I am not a fan of 401(k)'s unless your employer has a very good plan.
That is why I and the boggleheads on ERFI website I mention in another thread came to blows. Poo pooing all 401k plans is like cutting your nose off to spite your face. 401k plans probably don't like you. Honestly here is my take on them. Even if you can only get an average of 4% interest annually a 401k plan gives a saver the opportunity of putting away $18k annually as opposed to $5500 annually. Now more than ever 401k plans offer Roth options and even if the only money that can go Roth is your money and the employer's match (if any) must go traditional it gives money a bigger base to grow from.

Quote:
Originally Posted by DaveinMtAiry View Post
Not a fan of the tax deferred growth a 401 can give you? Interesting take.
I never understood that argument. I had a discussion with a young person the other day that said he was not going to put money in the 401k that the employer offered because he thought that he was giving money to the government to just hand it back to him in the years to come. He was planning on buying gold and coins. LOL what a plan.
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Old 12-10-2016, 03:19 PM
 
Location: Mount Airy, Maryland
10,486 posts, read 5,949,749 times
Reputation: 16207
Quote:
Originally Posted by golfingduo View Post
I agree that the OP is considering SS in income projections and that will be okay. However I would urge the OP to hit that $700k mark and not try just for the $1k income level.



That is why I and the boggleheads on ERFI website I mention in another thread came to blows. Poo pooing all 401k plans is like cutting your nose off to spite your face. 401k plans probably don't like you. Honestly here is my take on them. Even if you can only get an average of 4% interest annually a 401k plan gives a saver the opportunity of putting away $18k annually as opposed to $5500 annually. Now more than ever 401k plans offer Roth options and even if the only money that can go Roth is your money and the employer's match (if any) must go traditional it gives money a bigger base to grow from.



I never understood that argument. I had a discussion with a young person the other day that said he was not going to put money in the 401k that the employer offered because he thought that he was giving money to the government to just hand it back to him in the years to come. He was planning on buying gold and coins. LOL what a plan.
Hopefull he wakes up before it's too late. If he thinks a 401 is "The Governement" I'm not liking his chances
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Old 12-10-2016, 03:29 PM
 
Location: Central Massachusetts
4,800 posts, read 4,858,884 times
Reputation: 6379
Quote:
Originally Posted by DaveinMtAiry View Post
Hopefull he wakes up before it's too late. If he thinks a 401 is "The Governement" I'm not liking his chances
I agree. Oh and by the way how I figure it out is I have a good mind for money. I am taking right now from my $550k 401k about 3% right now and that is $1500 a month. It is funny cause my wife was trying to tell me that I am taking too much out of it. I laughed cause so far I have not touched principle yet. I started at $553k and I am still at $554k and it has been 6 months so far. I made a change for next year to draw $1800 because I am no longer collecting unemployment insurance and I am only getting about 60% of my pre-retirement after tax income. It will be October before I can get my second pension income coming in.
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Old 12-10-2016, 05:08 PM
 
5,685 posts, read 5,947,917 times
Reputation: 4432
Quote:
Originally Posted by DaveinMtAiry View Post
An annuity is a deal where you save for a lifetime, then take a portion of your savings, give it to a company who then pays you out a monthly check, either for life or for 20 years in the example above. It doesn't really answer your question but it got started with the example of how $200,000 will generate $1,000 a month. But of course there are fees and as asked what do yu do after 20 years and the checks stop coming.

Now let's try to figure out your situation. The safe rule of thumb is you can take out 4% from your 401 at retirement and be fairly safe, at least for most people. . That withdraw can be adjusted for inflation, so if inflation is 3% you can afford to give yourself a 3% raise or $30 a month more. The figure to gemerate $1,000/month looks like $300,000. Now how do you get to $300,000 in 22 years? Well it all depends on your returns. I am using 6% which is a fairly safe return with 60% stock funds and 40% bonds. What I am coming up with is $560/month for 22 years at 6% growth will give you $300,989.

These are very rough figure and of course we have no idea how te stock market will return. But as a novice at this please don't make the rookie mistake of picking safer investments. If you are in a lot of cash for safety your return will be not even close to 6% so your monthly contribution to get to $300,000 will need to be 4 or 5 times higher than the $560 figure.
I appreciate your response. That is a little too much for me. I will just put away what I can afford. Thank you.
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Old 12-10-2016, 05:30 PM
 
5,685 posts, read 5,947,917 times
Reputation: 4432
Quote:
Originally Posted by golfingduo View Post
If we are just talking 401k straight funds. If you get about $300k to $400k you should be able to pull $1k per month in income with a 3% growth rate and it should last you 30 to 40 years. What is going to be the question is will that be all you need in 22 years. I don't know if that point was made to you but I suspect not. If you are living frugally you should try to put aside $500k to $700k and if I guessed right that should be able to provide you an income stream that would be equivalent to that $1k per month now. If you are a couple you will want to have at least twice that for income unless you have access to a pension to compensate.
Thankfully, I have a pension. I do not believe I will be able to save that much. I am going to have to pay off a 30 year mortgage in 22 years. I heard if you pay an extra month of your mortgage each year it will shave 7 years off the life of the loan. That should help make up for the deficit. Thanks.
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Old 12-10-2016, 06:44 PM
 
Location: RVA
2,174 posts, read 1,272,632 times
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Odd that I saw no one figure in the normal way (but I may have missed it, there was a LOT of quoting going on) that is often recommended and the one I followed, where one saves in a 401k a percentage, not an amount. That percent will start low, usually just enough to get the company match or a bit more, and then increase slowly each year, typically a third of whatever your raise is. Well, to be fair, other posters did say to save what you can, tonget the company match and go from there, but didn't take it much farther.

At now 58, I save over $1700 a month in just my 401k, and over $35k annually in just retirement savings. And I miss not one cent of it, because I started at a much lower number as ampercent of my income, and lived on the remainder. I have always lived below my income by essentially living as if make 20% less than I do. In over 30 years of 401k I have averaged better than 17%/yr which has included the 3% company match, and should be at about $1M when I retire at 62,mwith a paid off home worth over $450k. That savings will be used as income (in addition to my pension) to replace the equivalent SS estimated amount I would get at 69 (inflation adjusted) while I delay filing until then, and as Roth conversions to hopefully take advantage of my lower tax status. Without a house payment or rent. My income needs drop an i stant &1600/mo. When SS kicks in at 69-70, I stop withdrawing that amount, and realize the same income with no need for savings. Then my (now lowered) RMDs kick in, at 70.5, which shouldn't be too much, maybe $20-25k/yr, if I successfully rolled most in to my Roth, which would be invested in low tax dividend paying equities..That's the plan, anyway.
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Old 12-10-2016, 07:00 PM
 
Location: Central Massachusetts
4,800 posts, read 4,858,884 times
Reputation: 6379
Quote:
Originally Posted by goodlife36 View Post
I appreciate your response. That is a little too much for me. I will just put away what I can afford. Thank you.
Quote:
Originally Posted by goodlife36 View Post
Thankfully, I have a pension. I do not believe I will be able to save that much. I am going to have to pay off a 30 year mortgage in 22 years. I heard if you pay an extra month of your mortgage each year it will shave 7 years off the life of the loan. That should help make up for the deficit. Thanks.
goodlife36

first in your first quote here 560 a month is not a huge amount. You can even count match if you get that in the amount. Second if you have options that allow you to use equity you might not need to do that much if the funds are low fee. Here is how 560 a month is doable if you have matching you would need to reach about a 6% of a $50k a year salary and have a match of 4% to 5% from your employer. A good equity account that follows the S&P and the NASDAQ with a percentage in an international fund will go a long way. The power of compounding is enormous. Even if you average about an 8% annual growth you will reach that number fairly quick. The key is not to panic. Ride the wave. If you see your fund drop put more in. Do not back out unless the fund is a dog. There are some but if it is an index fund mostly it will follow the market. In example from 2008 to 2011 I doubled my fund going from 200k to 400k and I didn't add any more than what I just mentioned above. 6% of my 65k salary with a 5% match.

Second point is that pension will help and yes the extra mortgage payment does that. Having a paid off mortgage is huge in retirement. A paid off mortgage is huge anytime but it is especially true in retirement.
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