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12-13-2016, 12:25 AM
 6,615 posts, read 3,742,110 times Reputation: 13667

I made the assumption you'd want the \$12k/yr to last for 35 yrs.
Inflation rate 3% avg.
Rate of return on your nest egg @ retirement of 5%, assuming it will be invested during those 35 yrs.

I used a calculator (Nest Egg Withdrawal Calculator) to determine:

You'd need about \$295,000 nest egg.
Assume you'll get 5% return on the \$295k as you withdraw it over 35 yrs.
At the end of 35 yrs, you'll have only about \$5 left.

To save that \$295k in 22 yrs would be tough, but here it is.
I used a calculator (Investment Duration Calculator - How Long Is Needed to Accumulate Your Nest Egg?) to determine:
To save \$295,000 in 22 years, you'd need to get a return of 6%;
You'd need to put into your investment account \$7000/yr. (\$583/month)

It's always possible you'll average a higher return while saving and withdrawing your nest egg, but it's also possible that inflation will eat that up.

You can use those calculators and play around with the numbers. Maybe you don't need it to last 35 years, or maybe you can save a couple more years.

Maybe it's time for you to become one of those frugal people, who never eats out, cuts his grocery bill in half (there are ways), never goes on vacation, etc., all to save for your senior years. It's amazing how much you can cut expenses, when you have to. There's a frugal forum here in CD.

12-13-2016, 06:19 AM
 Location: Mount Airy, Maryland 10,459 posts, read 5,922,719 times Reputation: 16151
Quote:
 Originally Posted by golfingduo Some times we just have to keep explaining the reasons for saving to your best ability.
All I did was respond to his post which said very clearly that investing post tax dollars in a money market account currently paying under 1% with taxable interest was a better idea than pre-tax money going into a tax deferred 401(k). Made no sense then, makes no sense now.

12-13-2016, 07:36 PM
 Status: "Gaining Stability." (set 9 days ago) 5,684 posts, read 5,930,974 times Reputation: 4432
Quote:
 Originally Posted by bpollen I made the assumption you'd want the \$12k/yr to last for 35 yrs. Inflation rate 3% avg. Rate of return on your nest egg @ retirement of 5%, assuming it will be invested during those 35 yrs. I used a calculator (Nest Egg Withdrawal Calculator) to determine: You'd need about \$295,000 nest egg. Assume you'll get 5% return on the \$295k as you withdraw it over 35 yrs. At the end of 35 yrs, you'll have only about \$5 left. To save that \$295k in 22 yrs would be tough, but here it is. I used a calculator (Investment Duration Calculator - How Long Is Needed to Accumulate Your Nest Egg?) to determine: To save \$295,000 in 22 years, you'd need to get a return of 6%; You'd need to put into your investment account \$7000/yr. (\$583/month) It's always possible you'll average a higher return while saving and withdrawing your nest egg, but it's also possible that inflation will eat that up. You can use those calculators and play around with the numbers. Maybe you don't need it to last 35 years, or maybe you can save a couple more years. Maybe it's time for you to become one of those frugal people, who never eats out, cuts his grocery bill in half (there are ways), never goes on vacation, etc., all to save for your senior years. It's amazing how much you can cut expenses, when you have to. There's a frugal forum here in CD.

It seems like such a large amount of money to save each month for such a small monthly return. I was given some really great news yesterday at my job. We will see how things play out. I am hopeful that I will be able to save this amount in two years. Hopefully. Who knows? Thank you.

12-13-2016, 10:24 PM
 6,615 posts, read 3,742,110 times Reputation: 13667
Quote:
 Originally Posted by goodlife36 It seems like such a large amount of money to save each month for such a small monthly return. I was given some really great news yesterday at my job. We will see how things play out. I am hopeful that I will be able to save this amount in two years. Hopefully. Who knows? Thank you.
In order to grow the savings, you need to invest in the stock market, considering the return you need. One growth fund, like VTSMX, and maybe a bond fund, for recessions. I don't like bond funds, but that's me, and they do serve a purpose. But you need growth to get return.

AND getting close to retirement age, you need to be careful not to have too much in that growth fund. The growth fund is for money you don't need for more than 10 years in the future, preferably longer. Because a recession can knock it down 35% or more.

When you get that close, you can consult with someone knowledge and make your account less risky.

How great that you've had good money news!

12-14-2016, 06:55 AM
 Location: RVA 2,164 posts, read 1,265,106 times Reputation: 4451
Without his 401k details, these estimates are worthless. Maybe I missed them. But does he get a somewhat typical 3% match on 6% saved. That instant 50% return goes a very long way to make it very possible. And why keep bringing up this \$560+ dollar contribution per. Month? Because the math is easier? If a 401k has no match, then it makes way more sense to open a Roth and tIRA and contribute there where chices are far greater and costs can actually be lower.

I don't know a single solitary person that starts a 401k with the same contribution amount they would end with 22 years later!! Thats stupid. That was the ENTIRE point of my post before I was accused of humble bragging. If you are in a job that will never get you a raise, then leave. Its a dead end. Start small. And allocate as described. Its painless, as time does the heavy lifting.

12-14-2016, 09:59 AM
 Location: Central Massachusetts 4,800 posts, read 4,844,519 times Reputation: 6377
Quote:
 Originally Posted by Perryinva Without his 401k details, these estimates are worthless. Maybe I missed them. But does he get a somewhat typical 3% match on 6% saved. That instant 50% return goes a very long way to make it very possible. And why keep bringing up this \$560+ dollar contribution per. Month? Because the math is easier? If a 401k has no match, then it makes way more sense to open a Roth and tIRA and contribute there where chices are far greater and costs can actually be lower. I don't know a single solitary person that starts a 401k with the same contribution amount they would end with 22 years later!! Thats stupid. That was the ENTIRE point of my post before I was accused of humble bragging. If you are in a job that will never get you a raise, then leave. Its a dead end. Start small. And allocate as described. Its painless, as time does the heavy lifting.
Perry

First point. It is not worthless unless his choices are all bad. Second even if he does not get a match the fact that he can contribute up to 17k+ (not sure of exact amount) out weighs a max of 5.5k in a Roth or tIRA by a factor of 3.

The \$560 a month is a rough estimate of the amount needed to save over a 20+ year period earning a nice average of 4% to 5% annually.

You are absolutely right that no one ends their saving at the same amount that they started with. You are right it is stupid and not realistic. Most people will over time have pay increases. Circumstances will change and things are different over time.

You did however walk into the this is what I did and how I fared. It is fine that you did. It is a real world example of what can be accomplished.

The good thing is goodlife has time and it is on the OP's side. The most important thing they can do is begin.

12-14-2016, 10:15 AM
 Location: Florida - 8,763 posts, read 10,834,959 times Reputation: 16632
There is a critical flaw in the proposition of producing \$1000 per month, 22-years downstream. Based on inflation trends over the past 20-years, the buying power of \$1000 in today-dollars will likely be reduced to \$500 (or less) in then-year dollars.

If one's objective in 22-years is the equivalent of \$1000 per month in buying power today, one should probably think in terms of producing at least \$2000 per month 22-years down the road.

Based on the U.S. Inflation Calculator over the past 22-years http://www.usinflationcalculator.com/ - it would require \$1631 in today dollars to achieve \$1000 in 1994 buying power. With today's debt rate and spending deficit, the inflation rate over the next ##years will likely increase. For example, to produce \$1000 in 1968 buying power, one would have needed \$3756 - 22-years later in 1990. As Mathjak pointed out, inflation is a wild card!

Last edited by jghorton; 12-14-2016 at 10:28 AM..

12-14-2016, 02:49 PM
 Location: RVA 2,164 posts, read 1,265,106 times Reputation: 4451
He has already stated \$560/mo is way too much. So if he can't afford \$6700/yr, the 401k max is moot. If his 401k has no match, then it is a poor one, and will typically have higher admin costs, fees, and poorer choices. IIRC he said 300/mo which is only \$3600/yr. So far more and better choices, with more flexability in a tIRA than a 401k, by far. Unless there is a company match as questioned. A Roth only makes sense if his tax rate will be the same or higher....if he is single now and plans to be married, a Roth is a no go. Likewise, if married now, and plans to outlive the spouse, or expect higher taxes, a Roth is smarter than a tIRA.

Your point is the same as mine; just start. Anything is better than nothing and 20+ years is a long time.

12-14-2016, 03:03 PM
 10,058 posts, read 4,654,843 times Reputation: 15286
might have missed it, but if he hasnt taken social security, at 65, he could hit \$1k by delaying it to age 70.

saw annuity mentioned above, mathjak said it helps early on so you dont sell shares early in retirement, but also good if used to delay social security as well.

Quote:
 I made the assumption you'd want the \$12k/yr to last for 35 yrs. Inflation rate 3% avg. Rate of return on your nest egg @ retirement of 5%, assuming it will be invested during those 35 yrs.
the projections that someone at 65 will be drawing \$12k/year for 35 years fails to consider that he would be 100 by then. between 80-100 would be expensive for healthcare/assisted living if no family to help. retirement planning tend to focus on healthcare costs once they get past age 70 and not the monthly draw.

edit:using age 65 as the average retirement age

12-14-2016, 04:04 PM
 6,615 posts, read 3,742,110 times Reputation: 13667
Quote:
 Originally Posted by goodlife36 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.
I did an earlier post referring you to a calculator link. I made certain assumptions and did the calculator, which returned that you'd need about \$300k to be drawn down over 35 years. There are no guarantees with such calculators, though. It's more of a percentage game: You might be 100% assured of that, 90% assured of that result, or 30% assured of that result.

But I thought I'd tell you what I would likely do. It might not be appropriate for you, however. You need to research and ask opinions about it to see if it would be reasonable for your purposes.

I would try to save \$280,000, or close to it. Then I'd use about \$280k of it and invest that in several stock holdings or income funds that would get me the return I'd need for an annual income. At the end of 35 years, I would still have the principal amount (\$260k). I also have about \$20k cash not in those income funds, which I can use for other purposes.

Example: If I put \$260,000 in a fund like PIMIX, I would get over 5% return every year. That would give me \$13,000.

This is like having an annuity....without the annuity fees. This would require you learn not to pay attention to the share price too much. It will go up, and it will go down. Your concern would only be the dividend, which it would pay you monthly.
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