U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 08-04-2017, 10:32 PM
 
6,181 posts, read 2,852,918 times
Reputation: 15655

Advertisements

Want? Vs conservative need.
I want millions!
I need about 600,000 to be able to retire early.
There will be no assisted living. That is a death sentence.
Reply With Quote Quick reply to this message

 
Old 08-04-2017, 11:41 PM
 
5,616 posts, read 8,546,901 times
Reputation: 7705
Quote:
Originally Posted by Cabound1 View Post
Financial advisors and insurance agents play to people's fears. Fearful people also tend to avoid risk. Put the two together and you get people who think they need $5 million because they could live to 105.

I just shake my head when I see people miserable in their 50's and 60's because they're worried about funding ages 90 -105. There's probably about a 10% chance of living to 90 and being ambulatory.

Depends on your family.....
I stand an excellent chance of living past 90.
Buddy of mine, all the men in his family die before 65
Reply With Quote Quick reply to this message
 
Old 08-05-2017, 01:59 AM
 
71,474 posts, read 71,652,652 times
Reputation: 49068
Quote:
Originally Posted by elnrgby View Post
In response to Mathjak107: I used the average inflation over 60 years precisely because it includes the 1970s years of massive inflation, so if anything, the average that includes those 10 or so years is most likely to overestimate the future inflation in my remaining lifetime. The inflation In the US since the mid-1990s has been very low, the situation similar to other developed countries with aging population (most extremely Japan). It is known how and why the inflation of the 1970s happened, so it is unlikely that anybody will repeat the Nixon-era approach to economy again. While inflation may (and probably will) go up a bit from the present minimal levels, a 1970s-sized inflation does not seem likely (where do you see it coming from? how?), so my estimate of inflation (with prices doubling every 20 years) is much more likely to be a super safe overestimate than the way around (I am a very cautious person, proven by the fact that I see ANY investment in stocks as playing the market. I based my retirement on annuities from large insurance companies that have their holdings in vastly diversified massive institutional portfolios, a billion times bigger that what I could possibly ever imagine having as an individual investor. True, New York Life or Pacific Life do not play the market, they own large chunks of of it - compared to what they can do with the market, all I could ever do amounts to just playing. That is why I left it to them to manage my retirement income via annuities. And because I don't care to waste my valuable remaining life on thinking about managing money).
where do i see a 1970's inflation coming from ?

the same place the worst case failures saw it coming from , left field .

inflation in 1965/1966 which is what the 4% safe withdrawal rate was born out of was a mere 2.50% . in 3 years it doubled , by 1974 it was 11% . no one ever expected a 4x increase that crushed retirees . markets and bonds took awful hits at the same time .

the 1970's inflation averaged out still will not reflect the real deal . it is the sequence that matters .using an average of 3 or 4% inflation over 30 years will produce no failures .in fact ready for this ?

no time frames that failed ever failed because of what happened during their 30 year periods . rather they all failed because of the poor sequencing and inflation in the first 15 years .


merely including the 1970's inflation in an average can leave you as much as 15 years short of how long the money really lasted . so averaging out inflation or any other numbers will not work -period .


in fact looking at 30 year actual time frames will not tell the whole story either . if we look at the actual sequence playout over 30 years even the worst of the worst time frames merely look average .

as you see here the 30 year numbers for the worst time frames really do not look bad at all .




1907 stocks returned 7.77% -- bonds 4.250-- rebalanced portfolio 7.02- - inflation 1.64--

1929 stocks 8.19% - - bonds 1.74%-- rebalanced portfolio 6.28-- inflation 1.69--

1937 stocks 10.12 - - bonds 2.13 - rebalanced portfolio -- 7.24 inflation-- 2.82

1966 stocks 10.23 - -bonds 7.85 -- rebalanced portfolio 9.56- - inflation 5.38

for comparison the 140 year average's were:

stocks 8.39--bonds 2.85%--rebalanced portfolio 6.17% inflation 2.23%

-----------------------------------------------------------------------------------------

now lets look at the first 15 years which is what killed those 30 year time frames off .

1907--- stocks minus 1.47%---- bonds minus .39%-- rebalanced minus .70% ---inflation 1.64%

1929---stocks 1.07%---bonds 1.79%---rebalanced 2.29%--inflation 1.69%

1937---stocks -- 3.45%---bonds minus 3.07%-- rebalanced 1.23%--inflation 2.82%

1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%

Last edited by mathjak107; 08-05-2017 at 02:20 AM..
Reply With Quote Quick reply to this message
 
Old 08-05-2017, 02:12 AM
 
71,474 posts, read 71,652,652 times
Reputation: 49068
why is sequence risk the biggest factor and why plugging in average returns or inflation will not work ?
.
DR MOSHE MILEVSKY wrote a very interesting paper a few years ago , RETIREMENT RUIN AND THE SEQUENCE OF RETURNS.

he took an example of a constant 7% return year after year based on a 7% average return over 30 years and drew 7% or 950 a month out starting at age 65 . the money was exhausted by age 86. this is typical of what uninformed folks do in an excell spread sheet or reverse amortization calculator when they have to enter a growth rate or inflation so they use an average.

he took 7% because he needed a high enough draw to exhaust the portfolio's under the best outcomes so they could all be compared .


next he took the same 7% average return and made it happen in different orders.

he made year 1 up 7% ,year 2 minus -13% and year 3 up 27% and repeated that pattern . the same 7% average return went broke at 83.


again , same 7% average return ,making the first year up 7% , next year up 27% and 3rd year minus -13%. you went broke at age 90. your money lasted 7 years longer than the example above with the same 7% average return.


next he did first year minus -13% , 2nd year up 7% and 3rd year up 27% . you were broke by 81.

that is also the same 7% average return

lastly he made 1st year up 27% ,2nd up 7% and 3rd year down 13% , same 7% average return and you lasted until 95.

that is almost 10 years longer than just figuring a constant 7% year after year ,.

the variation on the same 7% average return in how long your money will last is largely controlled by the order of those gains and losses.

in this case the same 7% average return most folks just throw in an excell spreadsheet and spend down didn't last until 86.5 like the spread sheet said. they went broke based on the order of that 7% average anywhere from 81 to 95.

as you see being down early on can drastically reduce your failure age by a lot even though the average return over time is identical. it isn't just the sequence of returns that has this effect ,it is the sequence of inflation too. now you have the two working against each other as well altering outcomes even more.

Last edited by mathjak107; 08-05-2017 at 02:39 AM..
Reply With Quote Quick reply to this message
 
Old 08-05-2017, 03:00 AM
 
71,474 posts, read 71,652,652 times
Reputation: 49068
Quote:
Originally Posted by hurricane harry View Post
A $200,000 annuity will produce $1000 a month for life at 58
which inflation adjusted over almost 40 years may not be all that much . you would need 3374.00 today to buy what 1000 bucks did 38 years ago and we had pretty low inflation over most of those years ..

you would have to count a whole lot on a natural spending decrease , but if your expenses are mostly non discretionary that will not happen very much .

so just how much growing older effects your spending is dependent on your own ratio of non discretionary to discretionary spending. you can't cut back if everything left is a need .

Last edited by mathjak107; 08-05-2017 at 03:39 AM..
Reply With Quote Quick reply to this message
 
Old 08-05-2017, 04:56 AM
 
71,474 posts, read 71,652,652 times
Reputation: 49068
Quote:
Originally Posted by luv4horses View Post
It is not the first year of retirement you need to plan for, but the last year. How long do you "intend" to live? Based on even a 2% cost of living increase, you probably need twice today's income as a minimum 30 yrs from now. And that assumes housing etc will not continue to be an even larger percentage of your income as buildable land etc. becomes more scarce.
typically we spend smile shaped .we spend more in the early years of retirement , then spending falls off a cliff , then as we approach 80 it tends to ramp up again because of healthcare issues .

much of what we no longer do or buy as we age offsets much of inflation . in fact if you have a high enough discretionary spending budget up until the smile starts to rise again very little inflation adjusting is needed because we stop doing and buying so many other things so that money helps cover inflationary increases .

one thing shows itself time and time again , retirees rarely need an inflation adjusted raise yearly. this is our 3rd year and we still have not needed one . for us ,whatever went up was offset by cheaper energy costs and lower rates . we just bought a new 2018 vehicle and it actually cost less than our 2012 one . me shifting over to medicare and a supplement in a few months will drop costs even lower compared to my plan now .

Last edited by mathjak107; 08-05-2017 at 05:06 AM..
Reply With Quote Quick reply to this message
 
Old 08-05-2017, 07:59 AM
 
1,694 posts, read 608,532 times
Reputation: 1756
Reply to mathjak107: we seem to be talking about two different things. Your discussion pertains to stocks & bonds based portfolios (with the the Milevsky analysis showing how long these funds would last with certain assumptions about % return at different times during retirement). I am talking about annuities-based retirement, with several different annuities starting at progressively higher ages (to compensate for inflation). The income from life annuities never gets entirely exhausted - you may get poorer if there is a galloping inflation, but you'll never be entirely broke (again, I don't see where that kind of inflation would come from nowadays. The 1970s inflation did not come from the left field, but from certain too radical monetary policies which have been subsequently thoroughly studied and understood, and therefore will not be repeated. If worse comes to the worst, the dollar could always be linked again to the gold standard, which would stabilize any potential catastrophic slide into inflation. But again, this is a very complex subject, and my head hurts from thinking about it. Spending time on calculating economic models and the place of my puny little stash of assets in the grand scheme of national finances is NOT my preferred type of entertainment. I am content to have a crude approximation of the inflation-adjusted funds that would have been sufficient to people who are 105 years old now to live on comfortably for the past 50 years).
Reply With Quote Quick reply to this message
 
Old 08-05-2017, 08:07 AM
 
71,474 posts, read 71,652,652 times
Reputation: 49068
the only thing i will add and this is general advice , is never confuse your personal cost of living adjustments needed with the price change index (cpi) that is used to adjust inflation adjusted incomes .

the two can be far a part as far as your personal rate of inflation and what the cpi basket reflects .

that is why thinking TIPS or inflation adjusted annuities will keep someone financially okay is a myth .

personal rates of inflation take in more than the price changes of the things we buy and use which is what the cpi index does ..our personal rates also take in to account not only the price changes but how many times we personally buy the item . the quality of the item counts too. higher end items may last longer but see higher rates of infflation in price increases .

so never assume any inflation adjusted anything will match your needs . i think folks who are already on social security realize this . the cola's never reflect what each one of us experiences .

you need real growth assets to go with any inflation adjusted assets for best results and safety .

personally i don't recommend inflation adjusted annuity products . you give up to much cash flow for that mediocre inflation adjusting ..

studies show your own investing coupled with a non inflation adjusted single premium immediate annuity yield much better results .

Last edited by mathjak107; 08-05-2017 at 08:24 AM..
Reply With Quote Quick reply to this message
 
Old 08-05-2017, 08:37 AM
 
1,694 posts, read 608,532 times
Reputation: 1756
My annuities are all fixed, not inflation-adjusted. Additional annuities get added every 5 to 10 years, which accounts for keeping up with reasonably expected inflation. If annuities are high enough (as mine are), they will keep with the the increase in the cost of things that I might want to buy. By my present age of 57, I have pretty much figured out what the things are that I might want to have; after a lifetime of being perfectly satisfied with public transportation and occasional rental of a Nissan Versa, I am not worried that at 77 I might suddenly develop a need to start collecting Porsches and Bentleys, so no worries about disproportionate increase in price of high-end items :-).
Reply With Quote Quick reply to this message
 
Old 08-05-2017, 08:44 AM
 
2,443 posts, read 2,068,483 times
Reputation: 5690
Quote:
Originally Posted by SportyandMisty View Post
That's a good planning assumption. That was my assumption when I was 21. I'm now 60, and I'm still not planning on SS being there for me, as I suspect it will become even more progressively means tested than it already is.



Mine didn't either.




You're guess is as good as mine. Note that Obamacare & Trumpcare are not about health care. They are about health care insurance. Forget about who pays for a moment and ask "who is going to actually deliver health care over the next 30 years." The answer is not obvious.

You hit the nail right on the head regarding Obamacare and Trumpcare.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top