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I'm like the OP too. Shoveling as much as I can in all tax deferred retirement accounts. Looking for 4 mil too, not assuming SS is going to be there. Inflation is what scares the heck out of me. When you're retired, it works so much against you. Thinking of taking a lump sum and buying an inflation protected annuity.
Has anyone else figured out "their number" that they are shooting for in retirement?
All of your numbers are income.
Have you done the same for expenses? How much are you going to need, compared to how much you think you're going to have?
If you like to overplan - take the last decade of expenses by year and make a spreadsheet, columns by year.
Then get an average of what you've spent per year on utilities, insurance, groceries, gifts, maintenance, medical, taxes, etc etc. *Everything - including cash in your wallet.*
Add 5% or 8% or 10% (whatever makes you feel comfortable) to each average cost. This is my version of inflation
Zero out the expenses you won't have in retirement (ie, mortgage, interest expense, Roth savings, etc etc)
Add in expenses you don't have now, but will have in retirement. (Part A, B, C, D medicare or whatever)
Add up this final column - there's a healthy estimate of what your expenses will be per year in retirement.
It's basically the operating expense part of a company's income statement. And yes, I had wa-ay too much time on my hands one weekend. But every January, I add a new column of numbers and see if my averages have changed
#1 rule of retirement is to keep your expenses LOW.
If you retire at 65 then you can expect to live until 85 based on life expectancy.
...it should last for more than 20+ years assuming you are withdrawing $2000 a month.
Uh-huh... What about when that assumption of living to 85 doesn't work out?
Will you still be able to pull the trigger on that .357 in the night stand?
Uh-huh... What about when that assumption of living to 85 doesn't work out?
Will you still be able to pull the trigger on that .357 in the night stand?
Assume you'll live until 120 then. its an ASSUMPTION
#1 rule of retirement is to keep your expenses LOW.
folks dont try this at home!
If you retire at 65 then you can expect to live until 85 based on life expectancy.
Example: If you keep your monthly expense at or below $2000 a month starting at 65 then $500K will last for 20 years.
$2000 * 12 * 20 = $480K
At 65, If you invest $500K at 2% or 3%, it should last for more than 20+ years assuming you are withdrawing $2000 a month.
inflation will double those expenses and double those withdrawls over time. you cant inflation adjust with those returns at all.
today you would be lucky to get 12-15k a year out of 500k
at 65, 20 years time frame is way to short to figure. 30 years is the standard . even if you dont live that long it leaves slack in your plan for error and expenses from left field.
with interest rates at the levels they are at and inflation adjusting ,your money will be gone way before you will .
according to a study by ibbotson a conservative mix of 30% equities /40% bonds /30% cash stands only a 31% chance of not failing over 30 years today.
those are horrible odds for retirees.
Last edited by mathjak107; 07-14-2012 at 07:26 PM..
Drawing 2k a month inflation adjusted on 500k with a 2-3% return would leave you broke in 18 years if everything went perfect in your budget.
Thanks for running the numbers.
Again, $500K is much more within reach for a lot of people than $4 Million.
What if you plan to save $ 4 Million by age 65 and you just can't? do you still deserve failed retirement or consider yourself a failure?
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