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How much do you need for a decent retirement? (1 Viewer)
- Thread starter JohnnyU
- Start date
AAABatteries
Footballguy
Totally variable based on where you live, how many people you are still supporting, how long you will be retired and what you plan to do during your retirement.
There's some retirement calculators out there that are probably a good starting place for you.
There's some retirement calculators out there that are probably a good starting place for you.
JohnnyU
Footballguy
My situation will just be my wife and me. We are looking to settle in Lexington, Ky. Is a million + SS enough, or do I need to keep working? Our home in MN is almost paid for and housing in Ky is cheaper.
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BroncoFreak_2K3
sucker for Orange
What age do you plan on retiring?
GreenNGold
Footballguy
It all depends on your expenses.
JohnnyU
Footballguy
I get SS at 66 and 10 months. I'm currently 62 and my birthday is in June. I could retire at 65 but probably won't until 66. My wife is older and is already getting SS but mine would would be much higher. The big tickets are the pension and 403b.
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AAABatteries
Footballguy
There's still way too much missing to give an answer to this. Ages, how healthy are you, what kind of plans do you have for retirement (traveling, etc.).
Sure, I could say 1M + SS is enough but you may then say you want to travel the world or buy a boat and jet skis, hookers and blow.
JohnnyU
Footballguy
I don't have any big expenses except normal living stuff. No car payment, except our current mortgage, which we are way ahead on. No credit card dept.
JohnnyU
Footballguy
We will live a simple life and just do a vacation once a year. I do have health issues, so there is that.
Desert_Power
Footballguy
25x what you expect to spend in retirement each year
JohnnyU
Footballguy
Wildcat
Footballguy
25X sounds like a lot, but if you spend $100K/year, you would need $2.5M. If you have $1M in pension/403b and get $3K/month for SS, you are close. Say you live until you are 90, you will have about $900K in SS, so you will be at $1.9M. Right? (I'm not a finance person, just doing quick math). Depends on what you plan to spend per year and your life expectancy. Knowing you will do less traveling when you are in your 80s most likely.
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GreenNGold
Footballguy
There are people that live simple lives on $30k per year, and people that live simple lives on $150k per year, and everything in-between (and even outside that range). Simple life has a very wide range of what you would need for retirement.
For the people saying 25x saved up, I'd take the difference between what you spend and what you will receive from SS and 25x that, but also take things like any expected health costs into account.
It sounds like a visit to a fee-based financial advisor (not someone working on commission who would be trying to sell you something) would be good for you, and should not cost more than $100-$200 to get a good financial picture for you.
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tri-man 47
Footballguy
I agree with what @gruecd said above.
Three notes:
1) SS increases on a pace of 8% per year beyond your stated retirement age. Deferring for a few years beyond 66 is desirable. (Roughly, if you'll live a dozen or more years beyond the start date, which is more likely than not, then you benefit by waiting and getting that higher SS amount forever.)
2) Recall that in retirement, you will not have your 403b contribution, your share of health/dental coverage, or the SS amount coming out of your income stream. So it will take less "gross" to reach the same "net." [You will probably have some cost for Medicare supplements.]
3) An oft-recommended approach is to draw 4% on your retirement funds. Even with conservative investments, the funds should then last a long time.
Build yourself a spreadsheet showing the different income streams and an estimate for the tax deductions ...probably calculated on a monthly basis as a good comparison to where you're at now.
Sand
Footballguy
Let's assume that with SS and pension you and your wife take in 4k/month. That 1M you have left will have to cover the rest of it and will provide safely another, say, 36k of income. That's 84k - just a very rough guess as to where you are. At least on the federal level your tax bill will be low. Medicare will eat 10k/year of that. So 70k for the rest. That's a decent amount to live on there, particularly if you don't have a mortgage or other debt to pay.
I agree with Grue a trip to a fee only CFP is a good idea if this causes you heartache and you aren't seeing clearly where you sit.
Sand
Footballguy
BTW, as a general comment, at 62 in this position you look pretty good unless you like Lambos and strippers.
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wilked
Footballguy
Think of it as monthly income
Pension should be defined by monthly income. Note, pensions are not typically indexed to inflation, so your buying power will drop with age. Then again, your consumption might as well.
SS should be defined by monthly income. It is indexed to inflation, which is nice.
Then you have your 403b. Take that number, multiply by 4%, and that is what you can comfortably take as income annually without depleting it over a 30 year period. For instance, if it's $1MM, you can pull $40K/year, or about $3K/month.
Add up pension, SS, and 403b withdrawal and that is your income stream. Compare against your budget.
Big note - be sure you account well for medical costs. They are the variable item that can blow up retirement
Pension should be defined by monthly income. Note, pensions are not typically indexed to inflation, so your buying power will drop with age. Then again, your consumption might as well.
SS should be defined by monthly income. It is indexed to inflation, which is nice.
Then you have your 403b. Take that number, multiply by 4%, and that is what you can comfortably take as income annually without depleting it over a 30 year period. For instance, if it's $1MM, you can pull $40K/year, or about $3K/month.
Add up pension, SS, and 403b withdrawal and that is your income stream. Compare against your budget.
Big note - be sure you account well for medical costs. They are the variable item that can blow up retirement
Dennis Castro
Footballguy
Great thread. I’ve spent too much time bumbling through life assuming that ####’ll just work out, but I really need to start thinking about this stuff as I get older.
gruecd
Footballguy
Even then, the sequence of investment returns plays a HUGE role in your outcome. You can't just assume a linear ROR.
gruecd
Footballguy
gruecd
Footballguy
I'm obviously far from impartial, but this type of question is one of the main reasons why it's worth paying a financial advisor. We add very little value anymore (if any) by executing stock transactions; people can do that themselves online. But the financial planning process is super important and should really be the basis of people's asset allocation and spending decisions. Just like most people who are married with kids probably shouldn't do their own estate planning, they should probably engage a CFP professional for their financial planning work, too. (End PSA)
JerseyToughGuys
Tough Guy
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Capella
Footballguy
So what I’ve done is laid out what I think I’ll need when I retire. I’m only 43 but I keep an excel book that tracks all my investments and property value, and then I designed a theoretical budget for when we are retired and won’t have a mortgage etc. Obviously I’m sure it won’t be close to the real expenses but even just having it laid out allows me to know what to expect.
Then I take the money we have invested and what we put in annually, put that into a compound interest calculator with a fairly conservative yearly rate of return (~7% so I can have a baseline — anything higher, great) and then map out what the calculator expects we will have when we retire. Then, taking my expected social security and pension I can use the calculations to determine where we will stand monthly. It can get a little mathy but it can be done.
Then I take the money we have invested and what we put in annually, put that into a compound interest calculator with a fairly conservative yearly rate of return (~7% so I can have a baseline — anything higher, great) and then map out what the calculator expects we will have when we retire. Then, taking my expected social security and pension I can use the calculations to determine where we will stand monthly. It can get a little mathy but it can be done.
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gruecd
Footballguy
1. 7% average annual ROR is hardly conservative. That's right in line with long-term averages.
2. You can get to a 7% average annual ROR an infinite number of ways, and the way that you get there matters (a lot). For example, you could average 7%/year between now and the end of your plan, but if the first three years of retirement are double-digit losses, you could be SOL.
When I do retirement goal analysis for a client, we do a monte carlo analysis with 10,000 different computer simulations to account for a statistically significant range of outcomes. Only then can we tell the client the likelihood of "success" of his/her plan.
Capella
Footballguy
Yea I do Monte Carlo too, I was just trying to simplify here. I figured that would be a little too much to get into. I keep up with my standard deviation.
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Grace Under Pressure
Footballguy
Binky The Doormat
Footballguy
love this ...I spent many, many hours playing with this for retirement planning.
I know it isn't perfect - but it's damn fine enough ...
HellToupee
Footballguy
Expenses won’t stay static, you will need less at 80 than you do at 65. That is of course you have solid healthcare ins
Ted Lange as your Bartender
Footballguy
More than I needed last week :(
Sand
Footballguy
Not including pension/SS. Take savings and divide by 25. Add that to your annual pension and annual SS payments. That total will be about what kind of expenditures you can sustain.
If you get 3k/month SS, your wife 2k/month SS, and you have 1 million saved a very rough estimate of yearly expenditures that you can sustain is 100k. Shift that down if you intend on a retirement of longer than 30 years (and likely your wife will outlive you). Again, rough estimate. I personally use 3.75% safe withdrawal rate, which in the above example would be 97.5k.
FairWarning
Footballguy
My best retirement plan right now is marrying a government worker who is about to retire :(
I meant including for income/expenses to be extra conservative or not. Even with the weed whacking lately, if I include SS for my wife and I as income and then add on 4% of savings, it’s a nice number. Add in 5-10 more years of adding savings and maybe even some gains, I think we’ll be good. My wife wants to semi retire soon which means keep working but move to the water. That may bump up the mortgage a bit from today because of a more expensive house even though we’ll be around 80% equity in a few years. Having the 3 boys out of the house/working after college (we wouldn’t stop working before the youngest is done) will cut down expenses big time. Food, entertainment and random #### is like a mortgage itself. Have to pay off the last braces this week since FSA just renewed for 2022. 3 of 12 years of college done.
It never ends with kids. At least no weddings, lol.Don't Toews Me
Footballguy
Might need to go with the cheap hookers and cheap blow. Need to make cuts somewhere in this equation.
I may do this when I get some time. It’d probably feel better to have exact details. I’m really good with math in my head so I can ball park but it would be nice to run some numbers. I may PM for a copy of that Excel workbook (cleansed of course), because I’m lazy!
ghostguy123
Footballguy
Without reading anymore, this entirely depends where you live.
Sand
Footballguy
:X
I estimate once I can kick out the last kid my expenses will go down 30%.Having the 3 boys out of the house/working after college (we wouldn’t stop working before the youngest is done) will cut down expenses big time. Food, entertainment and random #### is like a mortgage itself. Have to pay off the last braces this week since FSA just renewed for 2022. 3 of 12 years of college done.
JohnnyU
Footballguy
well, all I have to offer is that i hope to have about 1.2M and about 3K SS and medicare + my home equity. If that isn't enough then I can't die soon enough. My wife can get my life insurance which is substantial. At the end of day all I care about is her.
edited to add that she has her own SS and 401k, so she will do fine. She worked over 30 years, most at a high level manager, early on. Not to mention she is older that me and is already getting SS.
edited to add that she has her own SS and 401k, so she will do fine. She worked over 30 years, most at a high level manager, early on. Not to mention she is older that me and is already getting SS.
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NutterButter
Footballguy
I think you'd be good on about $60k per year for you and your wife. That's post-tax in today's dollars so adjust for inflation accordingly. If you have prop taxes or a mortgage, add that. That doesn't take into account long term care though so you might just be stuck with whatever medicaid gives you if you need to go into a nursing home.
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JohnnyU
Footballguy
The big deal is when you are sick and the system takes everything. Families that take in older folks to prevent this is key. My mother-in-law had a stroke and lived many years afterwards in assisted living and eventually a nursing home, but it took all of her 500K. So, if any of you think you have enough money, don't forget one thing. Old age will zap of you of that money unless you are ridiculous rich.
That seems reasonable. Braces, sports, vacations, 3 extra mouths to feed, clothing, electronics, random PayPal charges for video games, etc. It adds up really quick. I used to think you spent a lot on babies, doesn’t come close to teenagers.
DallasDMac
Footballguy
How do you find a reliable, pay per visit CPA /CFP? I assume there are some good websites that will list key factors, like certifications, etc.?
JohnnyU
Footballguy
More importantly is that your health will eventually drain whatever you had. Nursing homes / medical expenses will do us all in, even with medicare and whatever else insurance you have. Let's face it, you will leave this world exactly like you entered it, broke, naked, and drooling on yourself.
NutterButter
Footballguy
This thread got dark in a hurry
JohnnyU
Footballguy
old age is a #####, but when you're 30 something or 40 something you don't foresee the health issues that you will face when you're old and don't take that into account with your retirement funds. None of us do, but it gets all of us eventually unless you are filthy rich, or you fall over dead and don't cost much.
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tri-man 47
Footballguy
Contact @gruecd! Seriously. He's become a "real life" friend of mine after 15-20 years via the 10K thread. He's legit; he's experienced; he's a FBG. (I'm an accounting professor and CPA, so it's not like I'm just blowin' smoke here. I trust him.)
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