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Assume no mortgage or other debts and no spouse.
25x salary? 40x? How much does a (small) pension reduce that number? I have seen lots of things about safe w/d rates but they seem to assume you are starting at an older age.
The thing that is mostly prompting this question is an older friend (64) wants to retire and was advised he "can't". He has a pension of sorts, which I think is fairly generous. No idea what he has for debt or other assets. But heck if 64 is too young what about the rest of us?
Assume no mortgage or other debts and no spouse.
25x salary? 40x? How much does a (small) pension reduce that number? I have seen lots of things about safe w/d rates but they seem to assume you are starting at an older age.
The thing that is mostly prompting this question is an older friend (64) wants to retire and was advised he "can't". He has a pension of sorts, which I think is fairly generous. No idea what he has for debt or other assets. But heck if 64 is too young what about the rest of us?
The comparison with your friend is not very meaningful because you don't have enough information about him. Who advised him he "can't" retire? What was the reason given? How generous, exactly, is a "fairly generous" pension? And like you say, you would want to know about his debt and other assets.
So the real question is about yourself. How much do YOU need? I trust our resident experts such as Mathjak will respond here.
there is no answer just like there is no answer as to how much is enough when you are working . we area all different , live in different areas and want different things out of retirement .
many of us want way more out of our retirements than getting by or just paying the bills .
I just can't see friends assets changing much in 2 years so don't see the point. His SS will increase but his pension won't because he is past max number of countable years of service so I was pretty surprised financial planner person told him no.
In my case, those rules of thumb like "replace x% of income" don't mean much because I live on less than x% now in most cases. . . And again most of them seem to assume you will work to 65 or more so would need to be adjusted somehow.
I think I am prepared to just wing it when the time comes but . . .
as far as the math , i can't tell you what you should do but i can tell you what we did .
i added up all the things that are non discretionary like rent , insurances ,utility bills , etc .
i will use easy hypothetical numbers .
say the non discretionary stuff came to 50k . we set a total budget of 2x that . time can cost money and one thing you have plenty of in retirement is time . it also gives us a wide margin to cut back if need be if investments do terrible .
so 50% of our budget is food ,clothes , trips ,gifts, and anything else we do that we have a say in .
so now we are looking at 100k .
if pension and ss is 60k than 40k has to come from our portfolio . multiplying 40k x 25 says we need about 1 million dollars .
now we want our portfolio that can generate that much and have at least a 90% success rate .
looking at the chart we see for 30 years a 50/50 mix works very well .
but for 40 years in retirement you need to stomach a 75/25 mix .
that is a bit volatile to say the least . nothing i would want .
so you may need to multiply by 30x instead and save more money to go more conservative . 30x your portfolio draw may be what you will need to support up to 40 years in retirement retiring at 55. there are a whole lot more awe crap's in a 40 year time frame then a 30 year one so you need the extra cushion .
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Last edited by mathjak107; 03-01-2017 at 03:12 AM..
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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very simple, but varies per individual. No one can GUESS for you, but anyone can calculate known the following:
1) What is your lifestyle / annual expenses?
2) What is your expected income?
3) How big is your nest egg?
fill in the details, crunch the numbers. (longevity will play into it, if you do not have sustainable cash flows)
In USA, some can live for <$30k / yr
Most live well on $40k - $60k /yr
Many can afford to sustain up to $100k lifestyle budget
a few have the resources to spend $100k+
I pulled the plug at age 49. (40+ yrs left for retirement (maybe)) Single earner family, hourly wage, no pension. Most would not agree to my lifestyle (frugal but fun). At the moment we are traveling >50% of the time. As we age, I suspect we will hang around home.
I never in my life thought I would be paying $48/ day in property taxes and 40% more than that for HC premiums (which we have chosen to NOT pay). I drive a $35 car that runs on free cooking oil (for last 40 yrs). I have a mortgage (as a bank for my commercial properties) This all suits me. I am not normal. (few people retire pre-age 50). We have already well out lived out predecessors, so been on 'borrowed time' for over 10 yrs. (still well below age 65)
Seriously what is the plan for coverage as you will be 10 years from Medicare?
^^^This.
My company downsized and they "retired" me at 55. I thought I was OK because I had significant assets.
However, I had a problem because both my wife and I had "pre-existing" conditions. This was pre-ACA.
I first got health insurance through my professional group, IEEE. However, that lasted about 2 years until they had to shut it down due to the adverse selection death spiral among the insured group, i.e. as rates went up, the healthy ones dropped coverage, the sicker ones increased claims driving the rates higher, etc.
After that, our only possibility was to get into our state "high risk" group. Our combined premium was $2K per month with a $5K each deductible. That means we could spend $34K before that insurance would pay anything.
By age 61, I decided to go back to work primarily to get group health insurance.
So, can you retire at 55? If the ACA gets repealed and the states go back to those high risk pools, and you or your wife get significantly sick, you could go bust.
I advise my friends to wait until Medicare kicks in at 65.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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Quote:
Originally Posted by DaveinMtAiry
2 words: health care coverage
Seriously what is the plan for coverage as you will be 10 years from Medicare?
If OP has no clue / solution for HC... then OP should seriously consider leaving USA until age 65. There are only 3-5 countries that cater affordable HC to USA elder exiles. ($300 - $1200 / month for private policies)
Medivacations / Medical tourism can work (as they do for 15M people / yr) if you are well enough to get out of USA to access care.
It's also a good idea to stay off motorcycles and scooters! (while uninsured) Whoops, BTDT
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)) Single earner family, hourly wage, no pension. Most would not agree to my lifestyle (frugal but fun). At the moment we are traveling >50% of the time. As we age, I suspect we will hang around home.
(few people retire pre-age 50). We have already well out lived out predecessors, so been on 'borrowed time' for over 10 yrs. (still well below age 65)
