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I am no retirement expert. My wife and I will soon get a total of 4 checks each month.. My plan because our debts are small and own our home ,cars etc is to take the 4 checks and use "2 for bills and 2 for thrills" That is my plan in a nut shell. Any devastating bills can be absorbed by an increase in our home equity loan and increase the payment later if desired. Our checks wont be tied to investment deals ,stocks, money market scams and all that. Our checks are fixed. rain or shine ,stock market crash or not....we get our money.
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?
its no different than when your working. trying to live above your income eventually catches up with you.
the big wild card is inflation too. i ran the numbers at 3%,. if its higher you will be broke alot sooner.
any time your money is gone before you are thats a failed retirement.
if someone didnt do their home work and just blindly pulled numbers out of the air and only planned for 20 years because of a chart and forgetting even 3% inflation will require you to withdraw double a month does deserve to fail.
its no different than starting a business with no business plan.
each one of us needs to tailor a working plan for ourselves that fits in budget . some may have no choice but to work part time as long as they can.
others may have to increase risk to increase income while others may have to turn to annuity products.
the bottom line is this:
the retirement graveyard is filled with failed retirements . unless you want to be one of them its imperative you learn,you plan and you work around realistically what you can spend.
in your case of 500k and only getting 2-3% i wouldnt count on getting more than 1k- 1200 a month first year retiring today under these no to low interest rate conditions and poor stock markets.
its not what you want to draw ,its what you can draw.
Last edited by mathjak107; 07-15-2012 at 02:42 AM..
I am no retirement expert. My wife and I will soon get a total of 4 checks each month.. My plan because our debts are small and own our home ,cars etc is to take the 4 checks and use "2 for bills and 2 for thrills" That is my plan in a nut shell. Any devastating bills can be absorbed by an increase in our home equity loan and increase the payment later if desired. Our checks wont be tied to investment deals ,stocks, money market scams and all that. Our checks are fixed. rain or shine ,stock market crash or not....we get our money.
IMO, you don't own your home if your home equity loan is active. The bank still owns it, unless that loan is at zero.
But with 4 fixed checks a month, you're in better shape than a lot of people.
IMO, you don't own your home if your home equity loan is active.
The bank still owns it, unless that loan is at zero.
The deal with the "own your home" advice is for people who must use a mortgage.
If you can afford to buy but rent or own and carry a mortgage/HELOC...
using that choice as a cash management tool is perfectly fine (and often wiser).
The key of course is actually having adequate assets somewhere else...
and (as in this case) enough regular income to afford the payment.
It's a rare combination in retirement.
I am no retirement expert. My wife and I will soon get a total of 4 checks each month.. My plan because our debts are small and own our home ,cars etc is to take the 4 checks and use "2 for bills and 2 for thrills" That is my plan in a nut shell. Any devastating bills can be absorbed by an increase in our home equity loan and increase the payment later if desired. Our checks wont be tied to investment deals ,stocks, money market scams and all that. Our checks are fixed. rain or shine ,stock market crash or not....we get our money.
are you talking about a home equity loan being your source of income? im lost ,what are these 4 checks you speak of?
IMO, you don't own your home if your home equity loan is active. The bank still owns it, unless that loan is at zero.
But with 4 fixed checks a month, you're in better shape than a lot of people.
Tax value on home aprox 200k and we have a home equity loan of aprox 23k with our state credit union. The equity availability is a good safety net and we have always used it very carefully. Our 4 checks will total a little over 60k . We should be ok and have something extra for a few trips and a new or almost new car as long as we can drive.
Location: Chapel Hill, NC, formerly NoVA and Phila
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Quote:
Originally Posted by Gandalara
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
::: shrug :::
This was such a good exercise! Thanks for the idea. I did it slightly differently. I took this year's expenses minus ones that we won't have in the future such as mortgage, preschool, college savings, 401(k) savings, etc and also subtracted out our health insurance since that is through my husband's work. These expenses did not include any federal or state taxes.
Then I called my parents who are in their early/mid 70's to find out what they pay for medicare/drug plan plus their long-term care insurance plan (wow - expensive!). I added in those healthcare expenses as if they were mine and totaled it up. Then I allowed 3% inflation for each year. I added up the dollar amount from each year for year 21 through year 45. (I assumed retirement at age 65 - 20 years from now - and living until age 90.) And the total was approx. $3.6 million!
After I did it, I realized that the long-term care insurance might be a constant amount per year and should probably be subtracted out before the inflation rate, and then added back in, but I need to double check with them on that. I think they bought their long-term care insurance in their 60's.
So the question becomes, is 3% inflation realistic?
If you want to make God laugh, tell him your plans...
With that being said, I'm shooting for 3 million in my retirement funds in future dollars. I also plan to supplement that with a pension from work, approximately $53k annually if the calculation holds true or still around. I've also got one rental property now and I hope to expand that to 5 by the time I retire in about 35 years. If SS is still around, maybe it'll pay for bait and beer.
Working towards that goal, I've been fully funding my retirement accounts . I still have leftover money to enjoy myself today. I go out to eat 2-3 times a week, I go on annual vacations even including overseas trips. The key is that I have really minimized my expenses, and I hope to be completely debt free by the time I retire. Currently my only debt is mortgage debt.
If all that fails, head back to the motherland and live as poorly as I can. My parents are living off their SS and small 401ks that they managed to save in their homeland. The COL of so low there and since they own their own home and land to farm on, they really have minimal expenses. They're only getting 2k total a month, but their expenses are less than $500. They still can afford to visit the US every year and visit the kids and grand kids for a few months.
This was such a good exercise! Thanks for the idea. I did it slightly differently. I took this year's expenses minus ones that we won't have in the future such as mortgage, preschool, college savings, 401(k) savings, etc and also subtracted out our health insurance since that is through my husband's work. These expenses did not include any federal or state taxes.
Then I called my parents who are in their early/mid 70's to find out what they pay for medicare/drug plan plus their long-term care insurance plan (wow - expensive!). I added in those healthcare expenses as if they were mine and totaled it up. Then I allowed 3% inflation for each year. I added up the dollar amount from each year for year 21 through year 45. (I assumed retirement at age 65 - 20 years from now - and living until age 90.) And the total was approx. $3.6 million!
After I did it, I realized that the long-term care insurance might be a constant amount per year and should probably be subtracted out before the inflation rate, and then added back in, but I need to double check with them on that. I think they bought their long-term care insurance in their 60's.
So the question becomes, is 3% inflation realistic?
i believe yes. according to the BLS study as we age our spending drops greatly. by 85 our spending is not increasing by inflation each year but falling greatly.
retirees are effected much less by inflation than you would be if you were still raising a family.
i believe the constant allowing for a yearly increase in spending built into these financial retirement calculators may not be correct and may be telling you that you need far more than you will end up really utilizing .
all things being equal its far better to over plan though.
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