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I've really started thinking about retirement very seriously this year. I'm 33 and have $50K saved - I know I'm behind, but I have a plan!
I've run some calculators online and the numbers just seem to hypothetical to me. The other thing that I noticed in the calculators is that it only counts the individual. How do people on this forum calculate their retirement goals - individually or with your spouse. I do plan on having two of us when we retire, so obviously that makes a big difference since we only will need one rent payment, possibly one car payment, and other shared expenses.
I am curious to see the other answers you get because I don't know. But I wanted to chime in that I think no matter what, it's always going to be hypothetical until you get closer to retirement. For example, those calculators are based on a percentage of return a year... that could be 3%, 5%, 8%... but how can anyone know for sure how much return they are going to get if they are in mutual funds or other popular retirement vehicles. The only guaranteed returns seem to be in very safe, very low return investments.
And then, how much will you need to retire? I've heard 80% of what you spend now to live comfortably is a good rule of thumb. But I don't intend on having a house payment when I retire--my house will be paid off. That's a huge part of my current expenses that just won't be there in the future. Sure I will still have property tax and upkeep... but even that will be less because most likely, I will move into a retirement condo or something. So do I still need 80% or can I really live off 50% or such?
Good question! Again, I can't wait to see more answers.
I am curious to see the other answers you get because I don't know. But I wanted to chime in that I think no matter what, it's always going to be hypothetical until you get closer to retirement. For example, those calculators are based on a percentage of return a year... that could be 3%, 5%, 8%... but how can anyone know for sure how much return they are going to get if they are in mutual funds or other popular retirement vehicles. The only guaranteed returns seem to be in very safe, very low return investments.
And then, how much will you need to retire? I've heard 80% of what you spend now to live comfortably is a good rule of thumb. But I don't intend on having a house payment when I retire--my house will be paid off. That's a huge part of my current expenses that just won't be there in the future. Sure I will still have property tax and upkeep... but even that will be less because most likely, I will move into a retirement condo or something. So do I still need 80% or can I really live off 50% or such?
Good question! Again, I can't wait to see more answers.
Yes, my thought process is exactly the same!!
We plan to have a paid off condo - not sure I want to deal with a house. Ideally we would have a small place and travel for part of the year and work a seasonal job the other part of the year. Nothing extravagant for travel, go stay with our kids or road trip, that kind of thing. I suppose health insurance is a big consideration, but I'm hoping some reform in the system in the positive direction in the next 20 years.
How much you need at retirement is a guess but currently I do calculate the figures based on my wife and I because that's is currently how our expenses are figured. How much you need of your current income depends on many factors but a large one is if you are a big saver you don't need nearly as much of your current income conversely if you aren't saving much now either you will need close to your current income or lifestyle changes. Debt obligations also play a big part in it. Currently my wife and I save 50%+/- of our gross income so there is no realistic reason as to why we would need 100% of our current at retirement
First off, if you think you're behind, try this little exercise:
Step away from these financial forums and talk to some of your friends. Ask them about their saving habits, budgeting methods, etc. You'll feel like richest person ever.
About online calculators -- every one of them is hypothetical. So is every spreadsheet and estimate you do. Think of those more as 'finger in the wind' type tests, not "I can retire on November 10th, 2039 at 4:33 PM."
With that being said, I couldn't find any calculators online that are designed for the non-financial guru and robust enough to include what you're looking for. So put a spreadsheet together that includes configurable sections for the following:
Income, Income % increase per year
Inflation %
Pre-tax retirement savings (percentage of income)
Post-tax retirement savings (percentage of income)
Age
House value, mortgage, home appreciation
4% rule safe withdrawal each year
I didn't include social security, because who knows what that'll look like. Anyway, this gives a rough idea of when we can retire, given the assumptions above, and our expenses/lifestyle doesn't change from what it is now (wife and 2 kids). Try going that route to see if it helps for you.
How much you need at retirement is a guess but currently I do calculate the figures based on my wife and I because that's is currently how our expenses are figured. How much you need of your current income depends on many factors but a large one is if you are a big saver you don't need nearly as much of your current income conversely if you aren't saving much now either you will need close to your current income or lifestyle changes. Debt obligations also play a big part in it. Currently my wife and I save 50%+/- of our gross income so there is no realistic reason as to why we would need 100% of our current at retirement
Yes that makes sense of course. I am going to operate under the assumption that on the day I retire I will have no debt obligations. I think that is a very big consideration. You don't want to have a debt payment on fixed income. I think we can make it work with whatever amount we save - the difference can be made up in part-time work, or spending less. I think the issue might then be having that discretionary income to spend. I would think it would totally suck to be stuck in the house 24/7 because you have no money to go anywhere.
Most people think that they will need less in retirement vs during working years but often that is not the case, especially if you plan to travel, maybe have a second home in a different part of the country, etc. Generally no less than 80% of your highest 5 working year salary should be a target. The only way to really account for this is to project out your income based on your career goals to what it would be at 60, 65 whenever you plan to retire. So, say you are making 50K now but your career tops out at 200K, you would want to play for $160K in retirement (which adjusts for inflation as years go on obviously. Multiply that 160K by 30 years of retirement spending and you need about 4.8 million when you retire. Some people figure in social security so they would not need the full 4.8, others do not. That is more of a personal choice.
First off, if you think you're behind, try this little exercise:
Step away from these financial forums and talk to some of your friends. Ask them about their saving habits, budgeting methods, etc. You'll feel like richest person ever.
About online calculators -- every one of them is hypothetical. So is every spreadsheet and estimate you do. Think of those more as 'finger in the wind' type tests, not "I can retire on November 10th, 2039 at 4:33 PM."
With that being said, I couldn't find any calculators online that are designed for the non-financial guru and robust enough to include what you're looking for. So put a spreadsheet together that includes configurable sections for the following:
Income, Income % increase per year
Inflation %
Pre-tax retirement savings (percentage of income)
Post-tax retirement savings (percentage of income)
Age
House value, mortgage, home appreciation
4% rule safe withdrawal each year
I didn't include social security, because who knows what that'll look like. Anyway, this gives a rough idea of when we can retire, given the assumptions above, and our expenses/lifestyle doesn't change from what it is now (wife and 2 kids). Try going that route to see if it helps for you.
Thanks! I have a spreadsheet that I've started, but I feel so far removed from the actual retirement date that that number might or might not make any sense. Right now we are saving max to 401K to get to get the match and max to an IRA. My goal is to maximize tax benefits and this stretches us pretty thin at the moment.
The other thing is that one calculator I found assumes you will die at 90 - I honestly do not think I will live that long. I'm having a hard time imagining 75. My family history is not that great and my own behaviors, all be it in the past, didn't contribute to my life expectancy in the positive manner I'm sure. I find it really hard to sacrifice doing something today for the thought of having enough money when I'm 80! - so I don't. We do what we want within reason. YOLO!
Most people think that they will need less in retirement vs during working years but often that is not the case, especially if you plan to travel, maybe have a second home in a different part of the country, etc. Generally no less than 80% of your highest 5 working year salary should be a target. The only way to really account for this is to project out your income based on your career goals to what it would be at 60, 65 whenever you plan to retire. So, say you are making 50K now but your career tops out at 200K, you would want to play for $160K in retirement (which adjusts for inflation as years go on obviously. Multiply that 160K by 30 years of retirement spending and you need about 4.8 million when you retire. Some people figure in social security so they would not need the full 4.8, others do not. That is more of a personal choice.
SS will chop most people's need in half(maybe not half but a considerable amount) so if you needed 80% and you finished at 50k it would breakdown to something like this and while it's more complicated I think it's worthwhile to take a look at
50k in gross income taking the standard deduction and personal exemption for a single filer gives you the following
5718 in fed tax liability
3825 in fica
40456.00 in net income
If I estimated my ss benefits as a 50k earner retiring at 65 to be 19000.00 per year
80% of 40456 is 32,364 and ss would cover 19,000 or so leaving 13k plus fed taxes unaccounted for even if you rounded to 20k that's 40% of your working gross income.
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