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44 and 46 years old... hoping to retire in 18-20 years.
I made the following assumptions:
that our house will be paid for by retirement <- reasonable
that we won't be collecting Social Security <-pessimistic
that we will make conservative returns on our money (6%) <-optimistic
so... on average your assumptions may actually balance out
Is $4M a realistic number to shoot for in retirement 20 years from now or does that seem high?
It's certainly at the very high end for today... but my crystal ball is broken.
It also depends on how you define "comfortable".
Quote:
Has anyone else figured out "their number" that they are shooting for in retirement?
Calculate what the two of you would need TODAY.
If you aren't working... what sort of home do you need? Auto's? Clothing? And so forth.
Don't forget some travel and the medical stuff too.
With no debts and your kids launched... how much would you need to retire TODAY?
Start with that solid and knowable number...
then guesstimate the effects of inflation over the next 20 years.
I ran some of my own (possible) personal retirement numbers in a few different calculators and some said I needed 2.3M, others said I needed 5M, and I thought I used similar assumptions for all of them. I agree with Escort, be careful how much faith one puts into these calculators. I was assuming a lifestyle which is equivalent to a 90k USD salary today (with little/no house payment), so I am not talking about a lavish lifestyle, but with a retirement age of 60.
I don't know how accurate this will be in terms of our actual retirement age or actual lifestyle, but it brings up a point to how much money the different calculators say you will need. Personally based on everything I have read/observed/studied about finance, 5M is WAY overkill for a 90k a year lifestyle in today's dollars (this would be like saving 2.5M-3M today to live on 90k), especially when you assume you will get social security.
Most of the retirement calculators seem to assume 3% for the inflation rate. If the market really does so poorly that it returns 5-6% in the next 20-30 years, I would argue that assuming 3% for an inflation rate is too high. To say that stocks will only return 6% in a 3% inflation environment over a 30 year period is pretty ridiculous in my mind. Not impossible, just extremely unlikely.
My opinion is I think the calculators generally overshoot what one needs. But if you want the calculators to spit out a number assuming a 98% or 99% confidence interval, it's going to require you to save a LOT of money in order to retire. There is generally going to be a 5% (IMO) chance that the market does pretty god awful over any 20-25 year period, and you will miss your target. But the way I see it, personally, is I would rather plan at an 80-85% confidence interval, and if that 5-10% worst case scenario repeats itself, just work a few extra years rather than trying to save like a fiend to protect against something that is pretty unlikely. But that's me.
When we reach what is called retirement we have to start thinking different. The key word NOW is sustainability . Time has passed for saving and investments in spite of what the money managers who want in you pocket say. Unless you want to leave the kids something they didnt earn you owe it to yourself to spend every dime you have paying your bills and doing things you want.. Dont worry about dieing and have a loan on your home. So the kids inherit it and can not turn 100% into cash and must pay the loan off first.......they still are getting something are they not.Most kids will just sell the home for quick cash even if they have to discount the house.is that what you want to sacrifice now for? You are just helping someone else get a bargin later when they buy the house.
I ran some of my own (possible) personal retirement numbers in a few different calculators and some said I needed 2.3M, others said I needed 5M, and I thought I used similar assumptions for all of them. I agree with Escort, be careful how much faith one puts into these calculators. I was assuming a lifestyle which is equivalent to a 90k USD salary today (with little/no house payment), so I am not talking about a lavish lifestyle, but with a retirement age of 60.
I don't know how accurate this will be in terms of our actual retirement age or actual lifestyle, but it brings up a point to how much money the different calculators say you will need. Personally based on everything I have read/observed/studied about finance, 5M is WAY overkill for a 90k a year lifestyle in today's dollars (this would be like saving 2.5M-3M today to live on 90k), especially when you assume you will get social security.
Most of the retirement calculators seem to assume 3% for the inflation rate. If the market really does so poorly that it returns 5-6% in the next 20-30 years, I would argue that assuming 3% for an inflation rate is too high. To say that stocks will only return 6% in a 3% inflation environment over a 30 year period is pretty ridiculous in my mind. Not impossible, just extremely unlikely.
My opinion is I think the calculators generally overshoot what one needs. But if you want the calculators to spit out a number assuming a 98% or 99% confidence interval, it's going to require you to save a LOT of money in order to retire. There is generally going to be a 5% (IMO) chance that the market does pretty god awful over any 20-25 year period, and you will miss your target. But the way I see it, personally, is I would rather plan at an 80-85% confidence interval, and if that 5-10% worst case scenario repeats itself, just work a few extra years rather than trying to save like a fiend to protect against somethingr that is pretty unlikely. But that's me.
The calculators are more than likley over figuring for most folks.
The reason is they figure about a 4% withdrawl rate inflation adjusted each year.
According to the BLS study spending decreases greatly as we age and we actually not only need a lot less money but we are effected by inflation far less than we were when raising a family.
Much of our discretionary spending is cut to a minimum by our 80,s.
There really isnt an accurate calculator in the bunch in my opinion.
As far as my own plan we may retire in two years when im 62 with 3 million dollars, a 20k pension my wife gets and social security.
My wife is 2 years older than me and will file early.
I will take half hers at 66 and let mine grow to 70 .
Thats the plan as it stands now.
We could decide to retire at any point sooner now since as of last week we sold the pocono home and are going to stay put in nyc for now.
Last edited by mathjak107; 07-14-2012 at 03:02 PM..
Honestly, I think you are overplanning a little. And I don't say that lightly! It's too hard to project what is really going to happen in 20 years. I seriously wonder if we won't have a depression within 20 years that will make the Great Recession of 2008-09 look like a walk in the park and that is no joke. I don't let that stop me from saving for the future....but at some point, you have to let it go.
If you can save a little more while still enjoying life, then go ahead and do it. If not, don't fret too much about it.
The one thing I will say, though, is that a lot of people get knocked out of their good paying jobs in their early to mid 50s....so it may not be realistic to assume your DH is going to keep making that good income into his mid 60s.
Different strokes for different folks but when thinking about an issue as costly and serious about retirement, overplanning is much better than underplanning!
I'd really like to retire 20 years from now (I'd be 51 at that point) but I also realize I'd be losing quite a bit of my possible earning potential by retiring so early. I figured a more realistic age to seriously ponder full-time retirement would be around 57 giving me an extra 6 years of income to stash away before calling it quits.
I think more important than having a "number" (net worth) in mind is having a revenue stream from a combination of interest/rental income/dividends/etc. If I only had a net worth of $1 million but had an annual retirement income of $70K/ year, I think I'd be just fine. Personally, my retirement goal is $3 million but depending on market conditions, it could end up being quite a bit less so I'm trying to plan for that as well.
What kind of lifestyle do you have? I'm assuming you'd want to maintain your current quality of life in retirement so you have to account for all current expenses plus a little extra for future needs (i.e. healthcare). Do you want to travel the world in retirement or are you much happier staying around your place of residence? Do you plan to become snowbirds or full-time RVers? Lots of different questions need to be asked.
My parents retired a few years ago and have two residences (Iowa and Arizona) and they enjoy spending their winters in the warmth of Arizona with friends and going back to Iowa for the rest of the year. If you asked them 20 years ago if they'd ever consider being snowbirds, they would've said "That's only for OLD people". It's funny how in retirement you start doing things you'd never have thought of when you were working.
I was assuming a lifestyle which is equivalent to a 90k USD salary today (with little/no house payment), so I am not talking about a lavish lifestyle...
No wonder people keep talking past each other in these threads. $90,000 per year in U.S. dollars is most definitely a lavish lifestyle. Perhaps in New York City or Honolulu, or maybe even in San Fransisco (the three highest cost of living cities in the U.S. according to the census bureau) one could argue that it's just a comfortable upper middle class lifestyle (not "lavish"). Are you not aware that the median family income in this country is somewhere around $50,000? Somebody posted the median family income in Beverly Hills, California and while I cannot recall the exact figure, it was between 70 and 80K. That's in Beverly Hills!! Not everybody is a doctor, lawyer, PhD, CPA, or middle to upper management type. Among that class of earners, I admit that 90k would be a modest salary, nothing to write home about, probably on the low side, even. And I also admit that in your particular socio-economic milieu, such a judgement as you have rendered would be accurate (since "lavish" is a relative term). I am just trying to point out what a skewed perspective that is if we are trying to consider the United States in general terms.
Different strokes for different folks but when thinking about an issue as costly and serious about retirement, overplanning is much better than underplanning!
I'd really like to retire 20 d years from now (I'd be 51 at that point) but I also realize I'd be losing quite a bit of my possible earning potential by retiring so early. I figured a more realistic age to seriously ponder full-time retirement would be around 57 giving me an extra 6 years of income to stash away before calling it quits.
I think more important than having a "number" (net worth) in mind is having a revenue stream from a combination of interest/rental income/dividends/etc. If I only had a net worth of $1 million but had an annual retirement income of $70K/ year, I think I'd be just fine. Personally, my retirement goal is $3 million but depending on market conditions, it could end up being quite a bit less so I'm trying to plan for that as well.
What kind of lifestyle do you have? I'm assuming you'd want to maintain your current quality of life in retirement so you have to account for all current expenses plus a little extra for future needs (i.e. healthcare). Do you want to travel the world in retirement or are you much happier staying around your place of residence? Do you plan to become snowbirds or full-time RVers? Lots of different questions need to be asked.
My parents retired a few years ago and have two residences (Iowa and Arizona) and they enjoy spending their winters in the warmth of Arizona with friends and going back to Iowa for the rest of the year. If you asked them 20 years ago if they'd ever consider being snowbirds, they would've said "That's only for OLD people". It's funny how in retirement you start doing things you'd never have thought of when you were working.
When we retire and need to live off our nest egg its no longer about the pile of money as much as the income stream that pile of money generates.
Getting that income stream into a reliable stream takes lots of planning and design.
After all stock dividends tend to be cut or suspended just at the worst of times as we all saw.
If you have to end up liquidating shares of things at a loss to make up the income short fall that can spell a failed retirement.
I have already posted endless threads about developing that income stream so i wont cover it again.
Ill just say this:
An income stream that is soley dependant on the stock markets well being or the fact you will always have a tenant who pays the rent is neither going to be safe , reliable nor secure
No wonder people keep talking past each other in these threads. $90,000 per year in U.S. dollars is most definitely a lavish lifestyle. Perhaps in New York City or Honolulu, or maybe even in San Fransisco (the three highest cost of living cities in the U.S. according to the census bureau) one could argue that it's just a comfortable upper middle class lifestyle (not "lavish"). Are you not aware that the median family income in this country is somewhere around $50,000? Somebody posted the median family income in Beverly Hills, California and while I cannot recall the exact figure, it was between 70 and 80K. That's in Beverly Hills!! Not everybody is a doctor, lawyer, PhD, CPA, or middle to upper management type. Among that class of earners, I admit that 90k would be a modest salary, nothing to write home about, probably on the low side, even. And I also admit that in your particular socio-economic milieu, such a judgement as you have rendered would be accurate (since "lavish" is a relative term). I am just trying to point out what a skewed perspective that is if we are trying to consider the United States in general terms.
I guess we'll all have to agree to disagree on the issue of salary because I'm also of the mindset that $90K/ year is affords a middle-class lifestyle and nothing more. Once you factor in housing, car payments, food, entertainment, utilities, taxes, fuel, cell phones, etc etc; that $90k/ year doesn't really allow for one to have a whole lot left over to put into savings ESPECIALLY if you have children.
And as far as careers go, plumbers/electricians/mechanics/etc all can make upwards of six figures and many who are self-employed make a good chunk more than $90k/ year. My plumber probably makes more money than my CPA and myself combined. Upper-management in my company has a starting salary around $110k/ year while middle-management (regular shift supervisors) start at about $70k/ year and get an annual raise plus a COLA.
If you took a survey of individuals who have solid, middle-class positions, I'd imagine the average salary would be closer to $70k/ year than $50k. Demographics become skewed by people who are unemployed and/or who don't want to work or cannot work due to circumstances.
A retirement income of $90k/ year would allow for a decent and comfortable lifestyle (assuming no house payment) but it would be far from lavish in my opinion.
90k income is about the minimum i would want here in new york.
Anything less would have me to worried about unexpected expenses.
It would provide for a decent lifestyle but nothing lavish or even one i would call care free.
It would still require lots of budgeting and watching what you spend.
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Talking past each other
