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Housing is $500 a month.
We underestimated our desire/cost to snow ski thus limited ourselves to snow skiing 2-3x a month during the season.
MY Social Security is 1k a month. DH works half the year delivering propane
We will be financially stable when he takes his Social Security in a few years at 67.
It's a wonderful life for those who are wealthy enough. Otherwise it's required to be somewhat self sufficient to make up the differerence
COLA is high, especially groceries, but living on a budget can be done for some individuals
We have 2k saved but there isn't much to replace in our small, simple home. Only he drives otherwise we can take the bus into town
Take you current spending and adjust for retirement. Say 50,000 a year. Subtract your social security, pensions etc. Lets say 25,000. That means your assets have to give you 25,000 a year. Multiply the 25,000 by 25 to get 625,000 in assets needed.
Next step is to start refining but this is a ball park number. It relates back to the SWR 4% rule.
Is that formula based on a married couple's income factoring in two Social Security checks, pensions, etc. ? I ask this because I never or rarely see how these formulas play out when one spouse passes. For example in the scenario you gave if the deceased spouse contributed of that $25,000 which I am assuming is Social Security 74% which is $18,750 and the surviving spouse contributed 25% which = $6,250, the latter can move to the $18,750 benefit but in the process losse their $6,250 benefit. Say the deceased spouse died in year 5 of retirement and the surviving spouse in year 7 with inflation will need that $50,000/year in income, he/she will have to offset set that by $31,250 instead of the $25,000 offset as a couple. With that account depleted by $175,000 by year 7 leaving $450,000 of the $625,000, with drawing $31,250 annually those funds will run out in year 14 instead of 20. Unless there is a life insurance policy or other assets to make up for that $31,250 x 6 years = $187,500 or more loss if the surviving spouse lives longer than expected, the last years of their life may be very financially difficult.
Just today my SO was talking on the phone with his cousin from NC. Her mother is still living at 94, she has been a widow for 40 years, smoked most of her adult life until she had a few health problems in her early 80s that forced her to quit. Nobody ever imagined "smokey" auntie's nickname would live that long and independently in her own home. Her funds are getting tight now and each of her 5 children are going to contribute $100/month to help her out. She I guess you could say is lucky as she has kids to help her out financially but many others will not be so fortunate.
Is that formula based on a married couple's income factoring in two Social Security checks, pensions, etc. ? I ask this because I never or rarely see how these formulas play out when one spouse passes. For example in the scenario you gave if the deceased spouse contributed of that $25,000 which I am assuming is Social Security 74% which is $18,750 and the surviving spouse contributed 25% which = $6,250, the latter can move to the $18,750 benefit but in the process losse their $6,250 benefit. Say the deceased spouse died in year 5 of retirement and the surviving spouse in year 7 with inflation will need that $50,000/year in income, he/she will have to offset set that by $31,250 instead of the $25,000 offset as a couple. With that account depleted by $175,000 by year 7 leaving $450,000 of the $625,000, with drawing $31,250 annually those funds will run out in year 14 instead of 20. Unless there is a life insurance policy or other assets to make up for that $31,250 x 6 years = $187,500 or more loss if the surviving spouse lives longer than expected, the last years of their life may be very financially difficult.
Just today my SO was talking on the phone with his cousin from NC. Her mother is still living at 94, she has been a widow for 40 years, smoked most of her adult life until she had a few health problems in her early 80s that forced her to quit. Nobody ever imagined "smokey" auntie's nickname would live that long and independently in her own home. Her funds are getting tight now and each of her 5 children are going to contribute $100/month to help her out. She I guess you could say is lucky as she has kids to help her out financially but many others will not be so fortunate.
you may want to ask yourself this : if two people are working and they set a lifestyle based on both checks and now one dies , and they have little savings and little discretionary spending in the budget and no insurance , what formula could deal with that ? none , you need some form of insurance . either a policy or a moderate size portfolio matched to a safe draw rate .
so unless the lifestyle and non discretionary budget was based on the lowest check there is no formula to deal with this .
so these formulas apply to only day 1 of retirement ... it gives a starting point based on income , assets and current marital status . it also assumes we are not talking living hand to mouth. , these formulas are based on a portfolio providing a chunk of income which can also act as a buffer or insurance.
it is an issue when the couple lives hand to mouth on social security , maybe some pension money and not much in invested assets acting as the buffer .
you can't get blood from a rock , so if there is no portfolio as a buffer and they are living hand to mouth there is no formula that can fix that . that just requires setting a life style based on the lowest income level between the two , there is little flexibility or choices . the same applies to those who have a portfolio but no equities . they have to watch that portfolio draw carefully because there is little to no growth over decades of time .
the same applies to cases where there is a pension that is the bulk of support and does not carry over .
for someone with a moderate amount of savings in a portfolio it is not usually going to be a problem with the loss of a spouse because in practice only 5% of the time does a retiree drawing 4% inflation adjusted even end with less then they started with 30 years earlier with a 50/50 or 60/40 portfolio .
life expectancy is such that most won't make it 30 years in retirement themselves .
we also tend to spend less as we age WHEN WE HAVE A HEALTHY RATIO OF DISCRETIONARY MONEY TO NON DISCRETIONARY so much of what we stop doing or buying offsets a lot of increases in what we do .
for the most part the idea of these formulas deal with INCORPORATING A PENSIONIZED INCOME FROM INVESTMENTS , where there is other income sources that grow .
so if i hypothetically need 100k a year as a couple and ss was 40k and pension 20k i need to fill a 40k shortfall .
25 x 40k equals 1 million dollars . so i need to have 1 million dollars and checking the safe withdrawal rate chart i see i need about a min of 40% equities .
there is only a 10% chance i would end 30 years later with less than that 1 million .
so if that budget of 100k had a health ratio of 40-50% discretionary spending the loss of one ss check would not be an issue .
.
Last edited by mathjak107; 07-30-2019 at 02:47 AM..
Though this question has been asked many different ways, I am going to try and limit the responses to those over 62 and fully (or nearly) retired.
The questions are for those doing it.
How much in Total Assets do you think the average person needs to have to retire reasonable comfortable?
How much Monthly Income do you think the average person needs to have to retire reasonable comfortable?
John, what makes your question hard to answer is that besides savings, are you eligible for any monthly income that has nothing to with saving. For example, I retired at 55 and have received a pension check since then and forever, If I leave the planet before my wife, I opted to take a lower payment now, so she will get the same amount as long as she lives. I will be eligible for full FULL SOCIAL SECURITY benefits in 2020 when I turn 66. Some will argue to take it now. Why? So I can pay MORE taxes? My wife has been a teacher for nearly 25 years, but at a non-profit so she will not get a pension but a moderate annuity every year. Then in 2021, she'll turn 66 and will be eligible for FULL SOCIAL SECURITY benefits. However, in NJ my pension, her annuity and both our SSI payments are taxed as ordinary income.
So before I could answer what do you need saved, are you eligible for any government SSI income?
Second answer involves DEBT?
Do you have a mortgage? Car Loans? Credit Cards? Need to help children or grandchildren with college tuition? Are there are charities and/or faith-based places of worship you feel compelled to make a weekly contribution? These might sound a little silly. Forgive me if I appear to sound boastful, but I married the right girl who doesn't like to spend frivolously. Our 2 sons had 529 College Funds setup a week after they were born. Fortunately they both received scholarships (one to USC Go Gamecocks), so that will go to my grandchildren. We paid off a 15 year mortgage in 12 years by not taking vacations. My wife still drives a 2004 automobile. So for more than 40 years, we took advantage of our employers 401K in my case and 403B in hers. Now if I told you we have no debt and a healthy account in the bank, would that be great? It might be, but we have 2 sons, a daughter in law and 3 grandkids. While I don't want them to be arrogant trust fund babies, in this economy where both their mom and dad have to work to pay the bills, I might need to step up to the batters box if EITHER of them were unemployed.
So my success is FIRST of being blessed. With no more than a high school diploma, I managed to buy a home in one of the most expensive states to live in the country. We raised two sons, helped buy them cars, helped with the deposit on my married son's house. AND I took my wife Paris on our 25th Anniversary and to Rome and Florence on our 30th Anniversary. You see it's really never enough. It's knowing what you can do without, taking the coins out of your suit pocket when you get home and put them in a jar. Avoid needless expenses like traffic and parking tickets and save eating out for special occasions.
I hope that helps answer your question. Maybe find a reliable financial planner?
Good luck
ed
...there is no answer ....we all draw our lines in the sand in different locations and set the minimum standards we personally set for our individual lifestyles and amounts we have .
It is like asking how much do you need or want while working and trying to get one answer for the entire country ......there is no answer .... we all take what we have , back in to it and make it work
In another thread (Similar called "we'llbe poor in retirement)), I said we know we are late to the game ( me due to medical reasons I ended up homeless, my OH just out of bankruptcy 20 years ago when we got together) and we wont by any means have a lavish retirement, but we'll make due.
In just 20 years, we were able to buy a house 4 years ago ( now half paid for!! Because we put nose to grindstone), have savings and a first for my OH...a brand new car paid in cash. Mine needs to be replaced but will have to wait.
We DID finance updates and upgrades to the house, and finished off a bonus room, but that should be all paid for by next year. That all should jave been paid in cash and let the mortgage go, but its 3.95%, so camt really complain. But it was still stupid on my part.
We will be lucky to reach the $500,000 mark but we will make it work'!
Our chosen retirement locale is half as expensive and taxes are CHEAP compared to NY.
And since FIL is in a nursing home there wont be any inheritance there.
Not that we ever counted on it!
So we should do ok.
Like i said before and as mathjak says here, we WILL Make it work!!! We will have to!
(And i already draw SSDI)
Good luck to all who face a less than stellar retirement !!!
I know many who live all right on $2k a month on Social Security, but financial advisors want you to ignore them. My rule is take your rent or other housing, multiply by 3.33 to get a good number. Unless you worked off the book your entire career you will get Social Security. Figure that and subtract that number. Multiply by 240.
Let's say rent is $900. Amount needed = $3000. If your SS is $2000 you need $1000. To yield that $240k.
Last edited by pvande55; 07-30-2019 at 04:51 AM..
Reason: Add calculation
it really depends where someone lives and the area price structure as well as their housing situation . .
our rent is 2k ... 2,000 x 3.33=6660 less 3300 social security x 240 is 80,640 ... that is very light for pre tax, pre health insurance income in a lot of locations . perhaps it may work somewhere but that would not work in many places well. i certainly would not throw that out as general advice regardless of location or expected lifestyle minimum standards .there are quite a few right here in this discussion that would be pretty miserable living on what would be left after all the expenses that were non discretionary were paid .
there is a huge difference as example between renting and owning ... it can go either way ..... urban areas can be cheaper to rent an apartment in a high rise then buy a single family home .
on the other hand it may be cheaper to own a co-op depending on individual circumstances ... my ex lives in a co-op in queens that we used to have as a rental . she lives there for under 650 a month for maintenance since it is paid off ....
on the other hand we rent for 2k but we have better cash flow then if we buy a co-op because the money we would spend in our case generates more then we would save . plus if we wanted a single family home they start at 7 figures . so you have the same area with housing costs all over the map .
so you can't have a general rule
Last edited by mathjak107; 07-30-2019 at 07:03 AM..
I would say at least $2M for a couple and minimum of $10K/month. For a single person, probably 60% of that.
you do realize 80% of retirees won't even have 1 million and do fine . throwing numbers out that you think are right for you makes little sense when you throw them out for others . no one can say what is right for someone else .
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