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You have two important variables nailed down--your monthly expenses and a $2K/month pension. Now you just need to know how much your Social Security will be and when you will elect to start receiving it. At that point, you can think of your retirement "number" as based on two phases. Phase I is the bridge that gets you from pension + investments to Social Security age. Phase II is pension + social security + investments. Once you calculate social security into your formula, the amount you need each month minus pension and social security is what William Bernstein calls "residual living expense." Take that number and multiple by 12 to get an annual amount, then multiple it by 25 to see how much you will need over the period of your retirement.
For example, you indicate that you need $6K/month. Subtracting your pension income, you now need $4K/month. If you eventually receive $1500/month in social security, you are now down to needing $2500/month. Multiple that $2500 x 12 and you get $30K/year. Multiple that number time 25 and you get $750K needed to fund your retirement. Add to that the years you are self-funding social security and that is pretty close to your number.
My ss plan is this. Since I'm a widow, I'm going to turn on my late husband ss at 62 and let mine grow until I'm 70. I think I should get 1800/month from him but Ive got to double check.
LOL, feeling the Monday morning blues on a Tuesday...
So I'm seriously considering retiring when I hit 58. If your living expense were $6,000 a month, what would be your comfort zone. the 6K includes everything, soup to nutz. mortgage, insurance, healthcare, kids college tuition and vacation fund.
Would not really want to move so for the foreseeable future, I'm stuck in a High cost of living area (Northeast)
Will have a pension of 2K
throw some numbers at me.....I may pass out but reach for the stars!!
6000 -2000 = 4000 x 12=48000 /.03=1,600,000. SS is a cushion as I did not consider it. This is a low number as inflation is not covered. Lets say 2 million as a rough guess. How long are you going to live?
So I take it that brava4 and foundapeanut never plan to retire???
My husband started our business in the 70's. We can't believe we get paid to do what we do. Still get paid for decisions we made 30+ years ago. Take at least 6 wks vacation a year, traveling the world. And we take a day off when we want.
We aren't tied to a desk trying to make it to 5 pm. In fact today I stopped at 2 to take a nap and out to dinner tonight.
We choose not to retire at this time. Don't want to sell our business now. We have the money to retire without selling the business.
Live where many people move to retire. What's to retire from? Successfully self-employed is a whole other animal than 8 to 5 jobs in most people's world.
My ss plan is this. Since I'm a widow, I'm going to turn on my late husband ss at 62 and let mine grow until I'm 70. I think I should get 1800/month from him but Ive got to double check.
One important thing I left out is inflation over time, which will dependably reduce the buying power of your savings, unless your investments grow faster than the rate of inflation. I ran your numbers through Firecalc.com, and using the $750K number as well as your pension and (projected) social security, you come out at about a 75% success rate, assuming a 30-year retirement. Think your retirement will be shorter or longer? You can adjust for that in the calculator. I believe firecalc accounts for inflation in the annual withdrawals you will need to make from your investments.
If you bump up a to higher social security amount (you mentioned waiting until 70 to collect on your own ss), your success rate rises, perhaps to 85% or more.
Does your expenditure figure of $6,000 include taxes? Is it possible you could live on less? Might you have part-time income in retirement? Those variables will all have a significant impact on your "number."
Do you have a plan for large purchases/emergencies in your budget that is outside of what you plan for income? I assume the 6k was net right so you really need maybe over 7k per month coming in?
My husband started our business in the 70's. We can't believe we get paid to do what we do. Still get paid for decisions we made 30+ years ago. Take at least 6 wks vacation a year, traveling the world. And we take a day off when we want.
We aren't tied to a desk trying to make it to 5 pm. In fact today I stopped at 2 to take a nap and out to dinner tonight.
We choose not to retire at this time. Don't want to sell our business now. We have the money to retire without selling the business.
Live where many people move to retire. What's to retire from? Successfully self-employed is a whole other animal than 8 to 5 jobs in most people's world.
6000 -2000 = 4000 x 12=48000 /.03=1,600,000. SS is a cushion as I did not consider it. This is a low number as inflation is not covered. Lets say 2 million as a rough guess. How long are you going to live?
My goodness, this is exactly the quick and dirty math I did but then chose not to post. Had to check the username to make I hadn't posted.
A couple years prior to retiring, it became obvious to me that for early retirees, there were 2 phases to retirement planning (pre "SS and Medicare " and post " SS and Medicare). I needed to plan for both phases individually. It also made sense, after a few calculations, that if I could control my present day expenses to match my present SS and Medicare numbers, retirement planning would be reduced to planning for only the interim period...between then and when I anticipated taking SS.
I immediately reduced my expenses to less than my anticipated SS payments. This meant paying off the mortgage and all other debts. I realize not everyone can do this, but I could, and did.
You following? If so...
This simplified the planning tremendously. Why? Because it changed an indeterminate amount of time to a definitive amount of time to plan for. I only had to plan from my current age until the day I took SS and Medicare.
For me, that was about 25 years. I set a number that I figured I needed as a nest egg to support my current expenses for 25 years.
I'm 13 years into retirement now and the "nest egg" is currently 125% of the original. And that was after a very unfortunate "sequence risk " of the 2008 financial mess. So I'm in better shape than I was when I retired. Doesn't mean I'm home free, but in way better shape than I anticipated.
My feeling is it's all about controlling expenses. I am naturally good at that. It's also about risk tolerance. Never been a scaredy cat......you need to assume some risk.... fixed income these days will never get you there....
LOL, feeling the Monday morning blues on a Tuesday...
So I'm seriously considering retiring when I hit 58. If your living expense were $6,000 a month, what would be your comfort zone. the 6K includes everything, soup to nutz. mortgage, insurance, healthcare, kids college tuition and vacation fund.
Would not really want to move so for the foreseeable future, I'm stuck in a High cost of living area (Northeast)
Will have a pension of 2K
throw some numbers at me.....I may pass out but reach for the stars!!
Your shortfall will be:
- 4K/mo after tax $6K/mo for 4yrs till SS so that's $288K
- shortfall after 62 will be $6k- 3.8/K after tax which would be about $4K/mo from 58 till say 88 so that's ($48 * 30)= $1.44M
So minimum would be $1.44M + .288M) = $1.728M
I figured that you can earn about what inflation will be on average.
If it were me, I would seriously consider moving to a lower cost place and stay healthy and enjoy life rather than staying in an expensive area like NYC. That amount would be much lower in a less expensive area.
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