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FIVE million? Do I hear TEN, just in case? Seriously, I guess no one is really ever set to retire...how do people do it?
Starting early is key to doing it. We have told our kids that if they will put in just $2,000 a year starting at age 20 or earlier then by the time they hit 65 they will have the money to retire. Realize that if you just invest a couple thousand a year for 7 years and then stop, the average IRA should grow to over $1million by the time you hit 65. If you were to do that for the entire 45 year time frame you would have over $2 million. A couple that does this would easily have close to the $5 million mark.
like i said above , no one should be given an amount that they need .good calculators just take " your amount " and stress test it. fidelity's calculator ,firecalc and all the other good ones , stress tests what you tell it .
i think what happens is folks see articles written by financial morons who pull amounts out of the air . there is no competent planner who understands retirement planning who would just throw amounts out based on belief. .
I always wondered why the people that have millions feel the need to tell people over and over how well off they are. I don't know if it is the need to get that constant pat on the back or they just don't have anything left in their life.
Starting early is key to doing it. We have told our kids that if they will put in just $2,000 a year starting at age 20 or earlier then by the time they hit 65 they will have the money to retire. Realize that if you just invest a couple thousand a year for 7 years and then stop, the average IRA should grow to over $1million by the time you hit 65. If you were to do that for the entire 45 year time frame you would have over $2 million. A couple that does this would easily have close to the $5 million mark.
Thanks for the newflash but you caught me 35 years too late to work your program. I didn't have parents like you savvy with investments... my dad died while I was in school and my mom was very naive and needed help herself. But believe me, I'm not shaking in my boots planning to work until I drop - I'm retiring at 62 and have fully budgeted all my travel.
Sorry but it is just the most irritating thing to be talked down to about what I should have done 35 years ago....especially when few people have need for millions. I do detest the Calvinistic work ethic and the fear-mongering and lifestyle it dictates. Kids who manage to save a few thousand each year from 20 onward (while in college?!) more than likely have mom and pops helping out with that.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Originally Posted by reneeh63
Thanks for the newflash but you caught me 35 years too late to work your program. I didn't have parents like you savvy with investments... my dad died while I was in school and my mom was very naive and needed help herself. But believe me, I'm not shaking in my boots planning to work until I drop - I'm retiring at 62 and have fully budgeted all my travel.
Sorry but it is just the most irritating thing to be talked down to about what I should have done 35 years ago....especially when few people have need for millions. I do detest the Calvinistic work ethic and the fear-mongering and lifestyle it dictates. Kids who manage to save a few thousand each year from 20 onward (while in college?!) more than likely have mom and pops helping out with that.
While I see your point, the idea that kids can put a few thousand a year away is not that far fetched. They can work part time and/or work summer breaks.
My MIL did just fine living off an investment of under $500,000. She was very frugal and had a small survivors pension from her second husband in addition to Canada Pension Plan (CPP) and Old Age security (OAS). Her investment advisor was quite good, keeping her mostly in ETFs and unloading when crashes started and loading back up when the market started to recover. As a result, her returns were almost always above the market average. Toward the end she lived in an assisted living apartment that cost a bit over 3000/month with two meals a day provided. In her last two years she lived with us.
You don't need a wall of cash to have a decent retirement. What you need to know is how much you will be spending, which becomes more apparent as you approach retirement age. If all you have is retirement savings with no pension from work and government pensions like CPP and OAS still a ways off, I expect you'd want between 500k and a million to be comfortable with the option to travel a decent amount as long as you are good with your money. If you are more of a spendthrift, you'll need more. Also if you are in the USA, you'll need more to cover medical insurance as I understand you are robbed blind there for it.
I have an old acquaintance who retired on a pension of $900 a month somehow. He had friends he'd stay with, did caretaking duties for absentee owners in Hawaii and built a squatters cabin in the woods in the middle of nowhere. He just knew he didn't want to work for a living any more and was willing to make sacrifices and do what it took to make it on almost nothing. In the end, you really have to ask yourself what's really important (to you, not someone else) and figure what you need to make it so. Another poster said his/her investment advisor said you can expect to live off 4% of your investment capital so take your annual require income and divide by 0.04 and you know approximately what you need. Adjust your expenses in bad years to match your income and save in good years to offset the bad and you should be fine in the long run.
There's only one thing that there's always less of in this life and that's time. Use it wisely. The earlier you retire, the more you have to enjoy. For myself, my wife and I plan to retire early on less than half what we make working, although probably a bit more than half of the 'take-home' pay since there will be much less in the way of deductions. I'll supplement that with a hobby business and we have a couple of other income streams from rental property. We hope to have nearly 200k in savings and we can always sell our Snow Bird cottage (currently one of our rentals) for more if we need it. We'll travel a fair bit for the first decade or two, but we'll be frugal about it. We don't really get much out of going out for food and I enjoy cooking. Our hobbies are mostly outdoor activities that require a bit of initial investment (hiking, biking, paddle boarding, kayaking, hunting, fishing, soccer) but not much after that. We might not have a lot of cash when we retire, but we'll have enough to enjoy the commodity that's most important - time!
Interestingly, my annual budget is exactly the same as that of the OP, and I am one year older than her (ie, I'm 57 right now). I have been semi-retired since age 49-50, and not sure when I'll fully retire, but per my calculations (which take into account the average annual inflation over the past 60 years, and the fact that Soc Security will probably be paying me 75% of the estimated benefit, with average annual increase of 1.5 to 2%), I would have to have at least $2.5 million to retire now and continue living on the same budget as now. As someone already mentioned on this thread, Massachusetts has a really good state health insurance system, so as a resident of MA I expect to be paying for my health insurance (until the age 65, when Medicare kicks in) a somewhat lower premium than the OP would be paying for her employer-sponsored retirement health plan. I am very conservative with investing (because I don't think I am knowledgeable enough about it), so the major part of my retirement income (ie, about 40%) will be coming from annuities. The other 40% will be from the sale of properties that I own, plus Soc Security after age 70. I keep only about 10% of my assets in the market (ie, in mutual funds); and 8% in cash accounts. The 2.5M figure does not really include too much extra $ for very expensive emergencies, and assumes that I would have to live in low-income senior housing and on Medicaid if I live longer than the age of 105. So, I think the figure that answers the OP's question is the minimum of $2.5 million (more than 2.5M if you want to have a fund for expensive emergencies, or want to live on the same inflation-adjusted budget past the age of 100; probably less than 2.5M if you are very good with playing the market and are comfortable with investing in high-yield stocks).
i don't recommend PLAYING the market , but i highly recommend INVESTING in the markets . do you PLAY in real estate or do you invest in real estate ?
there is a huge difference between investing in the 500 largest companies in the country based on market worth and speculating in louies lemonade company .
i see you said you used the average inflation the last 60 years . never do that .
keep in mind average inflation means nothing when spending down . the worst time frames in history failed because inflation went from very low to double digits in a few short years . average inflation would have made those time frames just normal ,average time frames instead of the standard for stress testing portfolios.
what you need in order to pull about 4% inflation adjusted is a minimum of 2% real returns (after actual inflation ) over the first 15 years of a 30 year retirement .
never use average returns or average inflation when calculating a spending down situation . it is sequence risk that will hurt you not averages . the exact same inflation and average returns can span a 15 year difference in how long the money will last just based on the order the rates , inflation and market returns come in
Last edited by mathjak107; 08-04-2017 at 04:41 PM..
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