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If you made ~$100K a year, you only need a small portion of that to equal the same take home pay. That assumes you maxed out your 401K, HSA and paid off your mortgage prior to retiring.
In the example below, you still need to account for taxes and healthcare, but at ~$35K, you do not pay much in taxes. I have free VA healthcare, so I can deduct it.
Description Amount
Salary $113,001
-FICA ($8,645)
-Health Care Sav ($4,350)
Less 401K ($24,000)
Tax Savings ($26,300)
Sub Total $49,706
Mortgage P&I ($16,836)
Annual Total $32,870
Monthly Total $2,739
Salary Equiv % 29.09%
Half the country is going to retire with nothing but their Social Security check, a bit of retirement savings, and some equity in their home. If they don't have children to do some kind of extended family housing, they have a big problem.
..........
I don't see that as a "big problem". Living on Social Security is very doable, provided one isn't trying to do it in a place such as New York City. Sure, frugality is required, and frequent eating out will not be possible, etc. I don't see that as a big problem. Sure, it my loom as a big problem personally to those who have been living high on the hog and now have to make painful adjustments, but that does not constitute a societal problem. In that case, all the previous high on the hog living is part of the problem.
The assumptions we make color our perception of the situation. If we posit the average SS monthly benefit amount of about $1,300, then yes, that is a big problem. But the average is skewed considerably to the low side by people who do not have a full work history under SS, such as me with my monthly $165 SS benefit. Most of my work history was not under SS and I am doing just fine at age 72. A person with a 35-year SS work history will get something on the order of $2,000 or more, and if there is a spouse who also worked, then that is icing on the cake.
I don't see that as a "big problem". Living on Social Security is very doable, provided one isn't trying to do it in a place such as New York City. Sure, frugality is required, and frequent eating out will not be possible, etc. I don't see that as a big problem. Sure, it my loom as a big problem personally to those who have been living high on the hog and now have to make painful adjustments, but that does not constitute a societal problem. In that case, all the previous high on the hog living is part of the problem.
The assumptions we make color our perception of the situation. If we posit the average SS monthly benefit amount of about $1,300, then yes, that is a big problem. But the average is skewed considerably to the low side by people who do not have a full work history under SS, such as me with my monthly $165 SS benefit. Most of my work history was not under SS and I am doing just fine at age 72. A person with a 35-year SS work history will get something on the order of $2,000 or more, and if there is a spouse who also worked, then that is icing on the cake.
This is wildly inaccurate and I am proof. Not everyone with a long work history had high paying jobs. I have worked since I was 18 and now in my 50's. My SS will be around $ 1100.00 according to my last statement that I received.
Yes, a spouse would indeed be "icing on the cake". I am single. My friend takes home more each month from her deceased spouses SS than I do working full-time. She said if not for his SS, she would be "destitute".
We both have the required 35 years of "service"...a recent letter from Social Security benefits, shows us both at $1,400 per month at 62...with that amount increasing if we choose to wait. We will be mortgage free in three months. (we are 4 years from our desired retirement date) We do plan on buying a retirement home, and will use the proceeds from the sale of our current home for down payment to minimize our new mortgage. (we calculate we can afford $1,500 per month)
Each person's circumstance is unique, and the possible variations are almost infinite. The best thing you can do now is to estimate your Expenses -- this is what will determine what YOU really need in retirement. Estimates for now, and track them over the next year to calibrate. If your retirement home is paid for, your Housing Costs are just Insurance, Utilities and Taxes.......big difference maker.
Also, study up on the benefits of waiting to collect SS. It's going to increase each year you wait. A key milestone is age 65 when Medicare kicks in stabilizing your Health Care costs. If you waited to collect SS till your FRA you could probably count on about $1800 a month.
A big factor is going to be the allocations you will use vs the draw you want.
You may need 2x the amount saved depending on your draw. drawing 2% inflation adjusted is no problem from fixed income and no equity's ,but drawing 4% may require 2x the savings
It is still the old expression: It is not how much you make, it is how much you spend. As I have no debt, I live quite well on less than many can. Also, as one ages (I am 74) they can spend their "reserves" more aggressively.
Let's talk round number.
Assuming no debt and no pension. ignoring equity in house, assuming social security for husband wife $2500 month. Savings (401 - etc) of $1 million....
If we draw 4% per year ($40,000 ) in additiion to the soc sec ($30K would be $70K roughly. I know that health insurance is the wild card...This seems realistic and doable to me.....
..but I am not sure what you are saying about if we draw 4% that we need 2x the savings. Can you explain? Thank you
Let's talk round number.
Assuming no debt and no pension. ignoring equity in house, assuming social security for husband wife $2500 month. Savings (401 - etc) of $1 million....
If we draw 4% per year ($40,000 ) in additiion to the soc sec ($30K would be $70K roughly. I know that health insurance is the wild card...This seems realistic and doable to me.....
..but I am not sure what you are saying about if we draw 4% that we need 2x the savings. Can you explain? Thank you
Sure, but a household net worth of $1 million at age 65 is about 85th percentile. 70th percentile household net worth at age 65 is maybe $350K to $400K and much of that net worth for most is home equity.
$30K in Social Security and $40K in retirement savings draw down is certainly doable. It's a top-25% retirement.
I think the moral of the story gamebird98 is to strive to have more then what you think you'll need. We just got hit with 3 property tax bills, a couple of insurance bills, a 2k car repair bill and had to buy a new oven.
No worries. There is still more then enough disposable income to take a nice trip if we want to in the fall. Then it will be time to continue to live below our means and have a huge cushion again to back up the back up money.
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