So how much did you really need for retirement? (conversation, inherit, wife)

[YorktownGal]

Originally Posted by TuborgP

Seems as if the many threads about how much you need to retire on and the arguments that you really don't need what others say you do have been replaced about ones on inflation eating into income/buying power.

Seems like a number of forum participants are seeing their lifestyle change as inflation eats into their income stream and forces changes in options.

Is it possible that folks underestimated what they needed to retire on and that perhaps some of the published guidelines etc had more validity then they were given in thread discussions?

As others have pointed out much depends on your investments. My husband's employer IRA grows very, very slowly. Our personal IRA is growing very fast.

My mother died in 2018 with social security and a pension which came to $2,500 per month. She also had $250,000 in an annuity (her entire savings). She paid off her mortgage and had reasonable property taxes under $3,000 per year. $30,000 a year was more than sufficient for her lifestyle.

My in-laws had about $500,000 in IRA/saving which was invested badly - they took a huge hit during the dot com bubble. They lived in a rented condo which is paid by social security and pension. Their food and expenses come from savings. There is not a extra cent for luxuries.

Part of their $500,000 savings was from the sale of a 1930's two family house in Brooklyn. If they had kept it and rented out both units, they would be raking in $5,000 or more a MONTH. They tend to be impulsive with their finances. The result is they are living very close to the edge financially.

It all depends on your investments and spending habits. My mother was more frugal than my in-laws. I'm not sure if renting is the best option for anyone.

[elnrgby]

Originally Posted by mathjak107

Proper retirement planning calls for an inflation adjustment yearly on income .

If your pension does not have cola adjustments you need to allow for it as well as keep in mind anything linked to the cpi will not match anyones personal cost of living either so provisions need to be made .

Usually amounts saved are in todays dollars and assumes a 90% chance of lasting when inflation adjusted .

However many seniors DONT INVEST OR INVEST PROPERLY and so they put themselves at the greatest risk to the ravages of inflation

The market has done exceptionally well for 25 years, which does not mean much in the history of the US economy (people had "invested properly" in the 1920s, but somehow that had turned out not to be so proper in the subsequent decade :-). You had an uncommon success with a highly speculative real estate deal in Manhattan, and I understand your wife received a substantial inheritance. That does not equal ordinary "proper investing" but excellent luck, so tone down the preaching please :-). Other people have an average luck, but that does not equal putting self at the greatest risk to the ravages of inflation. People do not live forever, and generally do not need full self-support from independent means for more than 30 years. I know of exactly nobody that had been ravaged by inflation even in the 1970s (I know of people who did spectacularly well selling their home post-inflation in the mid 1980s). If people get ravaged by inflation in large numbers, that will signify something much worse coming up than the ravages of inflation (see Weimar Republic), but hopefully we are not heading there. The inflation will be annoying for a few years, but it will not be ravaging even if it reaches the 1970s levels.

[matisse12]

This current information below outlines what a federal government employee receives.

Employees under FERS receive retirement benefits from three sources: the basic benefit plan, Social Security, and the Thrift Savings Plan, or TSP.

If someone could speak to the first source a federal employee receives which is Basic Benefit Plan and how apparently it is a set amount regardless of the amount they have contributed. ~ (it would be helpful to have this clarified)

The basic benefit plan is a pension in which the employee receives a set amount, regardless of the amount they have contributed.

"What Is the Federal Employees Retirement System (FERS) and How Does It Work?"
By TIM PARKER Updated December 22, 2020 https://www.investopedia.com/article...es-it-work.asp

"The Federal Employees Retirement System, or FERS, is the retirement plan for all U.S. civilian employees. The plan covers all employees in the executive, judicial, and legislative branches of the federal government.

FERS, however, does not cover military personnel or employees of state or local governments. Employees under FERS receive retirement benefits from three sources: the basic benefit plan, Social Security, and the Thrift Savings Plan (TSP).

KEY TAKEAWAYS

The Federal Employees Retirement System, or FERS, is the retirement plan for all U.S. civilian employees.

Employees under FERS receive retirement benefits from three sources: the basic benefit plan, Social Security, and the Thrift Savings Plan (TSP).

The plan covers all employees in the executive, judicial, and legislative branches of the federal government but not military personnel or employees of state or local governments.

Basic Benefit Plan

The basic benefit plan is a pension in which the employee receives a set amount, regardless of the amount they have contributed. The amount depends on the length of service and the "high-3" average. "High-3" refers to the highest three consecutive years of service. Often, those are the last three years you worked, but if you held a higher paying position earlier in your career, your high three could be during that time.

This calculation only takes into account your basic salary. Your years of credible service are reported on the SF-50 form you receive at least once per year. Then, the agency you work for adds a 1% multiplier to your high-3.4

However, employees who are 62 or older with at least 20 years of service will receive a multiplier of 1.1%. 4 The formula for the basic benefit plan is as follows:

High-3 Salary x Years of Service x Pension Multiplier = Annual Pension Benefit

If you worked for 25 years and earned $75,000 per year, your monthly payment would be around $1,560, according to the formula.

Social Security

Unlike some public pension plans, employees covered under FERS pay into the Social Security fund at the same rate as private employees. Anybody paying into Social Security will pay 6.2% of earnings with the agency matching the contribution.

If you were born in 1975, earn $50,000 per year, and plan to retire at age 65, your estimated payments would be about $3,000 per month adjusted for inflation ($1,500 in today’s dollars).6

Thrift Savings Plan

Think of the Thrift Savings Plan as a 401(k). Congress established the TSP in 1986 and it offers the same types of tax benefits and savings as a 401(k).7 Each pay period, the agency you work for deposits 1% of your basic pay into your TSP. On top of that, you have the option of making additional contributions, which your agency will match (up to 5% of your pay).8

These extra contributions are tax-deferred and administered by the Federal Retirement Thrift Investment Board. Just like a 401(k), you can choose how these funds are invested. Upon setting up the TSP, you will be given a list of fund choices.9 8

If you earned $40,000 and had agency contributions of 5% and a 6% rate of return, after 30 years of service, you would have earned about $335,200, or about $1,400 per year for 20 years. Because the TSP does not function as a pension like the basic benefit plan and Social Security, your earnings after 30 years would be based on the funds you choose, the amount of money you contribute above the amount your employer deposits, and market conditions that are outside of your control.

Just like a 401(k), there is a limit to how much you can contribute to your Thrift Savings Plan.10 Because your agency only matches up to 5%, speak to a trusted financial advisor about how to invest additional funds. It might be better to invest non-matched funds into an IRA or other investment vehicle.

"The biggest federal employee mistake I see is not contributing up to the 5% agency match. Simply choosing to contribute 5% and leaving it in the G-Fund will guarantee an automatic 100% rate of return. No investor can consistently beat that," says Cooper Mitchell, president of Dane Financial LLC, in Springfield, Mo., and creator of FedRetirementPlanning.com."

If people could speak to the 'Basic Benefit Plan' described in the article where "the employee receives a set amount, regardless of the amount they have contributed" and is based on salary and years of service - while the 'Thrift Savings Plan' segment of the federal employee set-up is similar to a 401(k) with deductions from one's paycheck.

Clarification is needed.

[YorktownGal]

Originally Posted by elnrgby

(I know of people who did spectacularly well selling their home post-inflation in the mid 1980s).

I know many people who sold their house in the early 1980's when home prices were rockbottom. I brought my house at the height of the market, just before the 2008 housing crash. I sold it for less than I paid. A friend brought a house and with in year, discovered the foundation had to be replaced. It costed $30,000 in 1995 or about $55,000 in today's dollars.

There is so much luck involved in real estate.

[GrandmaChris]

Originally Posted by TNSLPPTSO13

What the heck do you eat to spend that little and how much do you eat????
Last week I spent $30 just on fruits and veggies.....plus $19 for a pound of roast beef,1/2 Lb. of salami and 1/2 of ham.I do shop at Publix in Miami(not cheap) but still....it frustrates me

That person said no meat, no alcohol - in a post a page or 2 back

[Teacher Terry]

I spend between 150-200/month on groceries. I eat meat daily. I don’t drink alcohol. This is in a medium COL. Luckily we have Winco which is only in 5 states.

[Mikala43]

Originally Posted by Teacher Terry

I spend between 150-200/month on groceries. I eat meat daily. I don’t drink alcohol. This is in a medium COL. Luckily we have Winco which is only in 5 states.

I've never been to a Winco, or an Aldi's.

Food is MUCH cheaper here than Hawaii.

[Teacher Terry]

Mikala, next time you come to Reno there’s one on the south end. It’s a employee owned company and a big store.

[Mikala43]

Originally Posted by Teacher Terry

Mikala, next time you come to Reno there’s one on the south end. It’s a employee owned company and a big store.

Roger that! Be that way in January and we'll check it out.

[mathjak107]

Originally Posted by elnrgby

The market has done exceptionally well for 25 years, which does not mean much in the history of the US economy (people had "invested properly" in the 1920s, but somehow that had turned out not to be so proper in the subsequent decade :-). You had an uncommon success with a highly speculative real estate deal in Manhattan, and I understand your wife received a substantial inheritance. That does not equal ordinary "proper investing" but excellent luck, so tone down the preaching please :-). Other people have an average luck, but that does not equal putting self at the greatest risk to the ravages of inflation. People do not live forever, and generally do not need full self-support from independent means for more than 30 years. I know of exactly nobody that had been ravaged by inflation even in the 1970s (I know of people who did spectacularly well selling their home post-inflation in the mid 1980s). If people get ravaged by inflation in large numbers, that will signify something much worse coming up than the ravages of inflation (see Weimar Republic), but hopefully we are not heading there. The inflation will be annoying for a few years, but it will not be ravaging even if it reaches the 1970s levels.

25 years ? Nope that is not true when it comes to retirement cycles .nor do you understand what is meant by proper investing in that regard if that is your answer .

Out of the 130 rolling 30 year retirements we have had so far since 1871 , only 6 failed to last at a 4% swr with at least 40% equites . So when it comes to retirement that is what is meant by proper investing .

Less than 35% equities failed far to many times to be considered safe

The failures would have been those who retired in 1907 , 1929, 1937 , 1965 and 1966 .

No other time frames were a problem.

90% of those cycles had you end with more than you started with and 2/3s of them had you end with 2x what you started with

You may have ended with a smaller balance left over in some but but 4% adjusted for inflation held up just fine , just as a pension would have, except in all but 6 cases it left a nice balance left over as well .

For the record , my wife didn’t receive an inheritance…she ended up having to buy her share in a family business because her share was questioned by the courts because of defective wills and trusts and she had to buy out some estranged step children and never got an inherited share .

I mentioned that a few times in the will and trust discussions .

As far as luck in my real estate venture ? That was carefully calculated and orchestrated to work out the way it did .

Success is where luck and preparation and a plan meet

So you got all that wrong too.

Perhaps stick to what you know as you stated many times you dont know investing