How much do you need for a decent retirement? (1 Viewer)

[massraider]

Retiring outside the continental US has been my plan for years. It's the only move. 

 

[tri-man 47]

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.

Yes.  This is the point you raised in response to my post about not counting on steady year-over-year returns.  I was recently looking at my wife's and my portfolio, and it shows a 46% increase over the past three years (average of 9.1%/year over the past 18 years).  Very nice!  BUT I'm well aware it could be flat or negative for the first few years- or more - after I retire. 

 

[AAABatteries]

Might need to go with the cheap hookers and cheap blow. Need to make cuts somewhere in this equation. 

Cheap hookers, sure - never skimp on the blow.

 

[AAABatteries]

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.

Leave?  I did that last night!

 

[NutterButter]

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.

I'd look into getting some ltc insurance if you're that concerned.   

 

[eoMMan]

Unless changes are made to SS soon, benefits will need to be reduced.

 

[acarey50]

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.

This is the most true post ever made in the FFA.

I have 3 boys aged 10-17 plus one more 17 year old that we've essentially adopted (basically lives with us now, treat him just like our 4th son). The food bill alone is incredible.

 

[DocHolliday]

Unless changes are made to SS soon, benefits will need to be reduced.

Another variable.  

 

[stbugs]

This is the most true post ever made in the FFA.

I have 3 boys aged 10-17 plus one more 17 year old that we've essentially adopted (basically lives with us now, treat him just like our 4th son). The food bill alone is incredible.

14-20 and it truly is ridiculous when the oldest is home like now. Local burger place that is a bit cheaper than 5 guys and we only got 2 combos and it’s $55 with tip. Inflation is a ##### but whenever you multiply by 5 it adds up quick, especially with taxes and tip. Outside of fast food, pizza and cheaper options at home, it’s always expensive. Even at home nicer foods like steaks or shrimp/crab legs is still a lot.

 

[[icon]]

At our current rate of inflation your Million bucks should last you a solid 2.7 years  

 

[fruity pebbles]

Cursory look, you’re pretty good in Kentucky with a house that’s almost paid for with $3000 a month in SS and a million dollars. If the house is paid off, you’ll probably be able to live off the SS alone and certainly the SS and pension if you’re not living large.

 

[Desert_Power]

Including or not including SS?

I'd include SS at his age for sure or calculate the expected present value of it.

 

[stbugs]

Unless changes are made to SS soon, benefits will need to be reduced.

I really don’t think you need much change to keep it rolling. When you hear about insolvency in 2033, it means by current rules it will only pay out 76%. I think income limits will keep being raised and not to be morbid but once the baby boomers start dropping more often, the payouts needed will lessen. Baby Boomers will be 87 to 69 in 2033. Average US life expectancy is 79 meaning that most (@75%) baby boomers are likely dipping into SS now but in 2033, based on life expectancy, only 40% will be. Gen X is about 10% smaller than boomers and as we start sucking from the teet, the Millennials, larger by 10%, should be in their max earnings.

Anyway, I think SS will continue (it has to) with some tweaks and then should have a period of hopefully more coming in than going out. I am definitely planning to start at 62 for both my wife and I and use that for expenses while keeping investments rolling, partly because I don’t feel like getting screwed out of a lot of money we’ve paid in. 

 

[Orange&Blue]

If you are lucky enough to have a pension and 403b and Social Security around $3000 a month, how much do you need total for a comfortable retirement?  Meaning how much total for the pension and 403b if you have around $3k SS?

I'd say at least 20x expenses.

 

[Judge Smails]

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.

I wouldn’t assume no weddings. Sorta old school thinking. It’s now more about who can contribute, does. And if you have a lot more coin than the bride’s parents, well……

 

[Judge Smails]

Cheap hookers, sure - never skimp on the blow.

Now I know why you were down to wearing a Medium..

 

[Judge Smails]

Long term care is the big one. It’s private pay, out of pocket and depending on the level of care could be 7.5 -15K a month in todays dollars. For years. It’s happened to several friends (neighbor’s husband got advanced dementia in his 50’s. Was in diapers in 2 years. Lived another 7. Huge $$$). Same with my brother in law’s Mom. If it’s memory care we’re talking big checks. I’m planning on having enough in retirement to cover that to not burden my wife or kids

 

[John123]

More than I'm going to ever have, which means I'll never be able to retire.  Which is sad.

How old are you?  A lot of people say this and therefore don't save what they can because they think it's futile.  Then they get to be about 45-50 and finally realize that with compounding if they had saved more at a younger age they'd be a lot further along than they are at that point.  Basically, they create a self fulfilling prophecy. 

 

[John123]

Unless changes are made to SS soon, benefits will need to be reduced.

They're gonna have a hard time implementing across the board changes.  If they end up having to do this I predict a tiered system that leaves older people with the benefits they expect but reduces future benefits for younger people since they have more time to compensate for that loss.

 

[wilked]

I'd look into getting some ltc insurance if you're that concerned.   

It’s fun to look into until you see the price tag

 

[wilked]

Long term care is the big one. It’s private pay, out of pocket and depending on the level of care could be 7.5 -15K a month in todays dollars. For years. It’s happened to several friends (neighbor’s husband got advanced dementia in his 50’s. Was in diapers in 2 years. Lived another 7. Huge $$$). Same with my brother in law’s Mom. If it’s memory care we’re talking big checks. I’m planning on having enough in retirement to cover that to not burden my wife or kids

To be sure, are you planning something like $200k for 10 years, or an extra $2MM? What are your assumptions? 

 

[NutterButter]

It’s fun to look into until you see the price tag

Yeah, its nuts.   If you need long term care, you're screwed either way.  I'm personally just gonna pay out of pocket.   I'd just use the proceeds from the sale of my house since I won't need it anymore.  That should cover about 5 years; thinking ~$100k/yr.   I don't need the rolls royce of homes; just something solid where my kids will know I'm being take care of. 

 

[Juxtatarot]

It would be too politically damaging to cut social security. Much easier for the government to just create more money instead.

 

[gruecd]

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.

Or unless you have enough foresight to buy LTC insurance.  Or, you know, a good FA who looks out for you and recommends stuff like that...

 

[gruecd]

It’s fun to look into until you see the price tag

It's definitely not for everyone.  It can certainly be cost-prohibitive for some, and at the other end of the spectrum it can make more sense to self-insure.  But there's definitely a sweet spot where it makes a ton of sense.  And there are hybrid products now where there's also a life insurance component and your beneficiaries can effectively get your money back if you end up not needing care.

 

[gruecd]

It would be too politically damaging to cut social security. Much easier for the government to just create more money instead.

I say this all the time.  SS isn't going anywhere.  That said, it might not get you very far if it costs $15 to buy a loaf of bread...

 

[gruecd]

Yeah, its nuts.   If you need long term care, you're screwed either way.  I'm personally just gonna pay out of pocket.   I'd just use the proceeds from the sale of my house since I won't need it anymore.  That should cover about 5 years; thinking ~$100k/yr.   I don't need the rolls royce of homes; just something solid where my kids will know I'm being take care of. 

How old are you?  Depending on the level of care you require, "something solid" already costs more than $100K/year in most parts of the country, and the cost is rising much faster than your home is appreciating...

 

[elbowrm]

The two most likely changes to SS are an increase in the maximum income subject to SS taxes, which stands at $147k for 2022 and is already subject to change with inflation, and introduction of means testing for benefits payments - both more politically palatable now than at any point since 1986.

 

[kentric]

My biggest concern was open-ended medical costs.  My buddy says that Obamacare has a cap on your annual outlays.  If that's true I could probably retire now if l wasn't married to a woman who spends like crazy.

 

[NutterButter]

How old are you?  Depending on the level of care you require, "something solid" already costs more than $100K/year in most parts of the country, and the cost is rising much faster than your home is appreciating...

44.  Yeah, it probably is.   Haven't really looked in a few years.   At the same time though, housing prices have gone up considerably as well so who knows where that's at.  I also believe last time I checked that average stay in a home is 2 years so planning for 5 might be on the conservative side.  That is a fair point about the rate of increase of each.   Just giving an idea that a large chunk of my ltc costs will be covered by the home sale.   I should still have a bunch of other savings aside from that as I also budget as if I'm living to 100.    I really try to be on the conservative side of these things so I never run out of money and leave my kids in a bind but you can only reasonably plan for so much.    

 

[wilked]

It's definitely not for everyone.  It can certainly be cost-prohibitive for some, and at the other end of the spectrum it can make more sense to self-insure.  But there's definitely a sweet spot where it makes a ton of sense.  And there are hybrid products now where there's also a life insurance component and your beneficiaries can effectively get your money back if you end up not needing care.

At 55 or so it'll cost ~$5000/year.  Maybe more.  Often these will get you 5 years of LTC coverage.  And the premium is not fixed, in fact most premiums have increased significantly in the last 5 years or so (say from $4000 to $5000).  

So you pay for 25 years, now you're 80.  My guess is premiums will continue to go up in that time.  Let's say you put out $150K in premiums.  A year of LTCI might cost $150k at that point.  If you had invested it at just a 6% return you'd have doubled your money ($300K).  Average length of stay in nursing homes is ~ 2 years.  1/3 of nursing home stays are under 100 days and covered by Medicare.  Only 10% of nursing home patients are still there 5 years after arriving.  

to me the only real benefit of that insurance is the long tail (that 10% of patients).  Note, that is not 10% of population, that is a subset of:

-Those that live long enough to be alive at typical nursing home age

-Those that have health issues requiring nursing homes / no secondary support with children/siblings/spouse

For me, I'd choose to self insure.  

Also, those hybrid products I am very skeptical on.  One is a life insurance product I am fairly certain... why add life insurance if you don't need it?  At 55 you don't need life insurance, your children are grown and the house is well on its way to being paid off.  And the other product is an annuity product I believe, which tend to have lots of hidden fees.  Be very wary.  

LTCI used to be a good deal, but prices have increased 30-50% in the last 10 years, maybe more.  A better way to account for long term care insurance if you ask me is to delay SS filing til 70.  For those thinking of taking it at 62, you nearly double your income by waiting til 70, it is inflation adjusted, and pays until you die.  That's your 'long life' / 'long term care' insurance - steady income in your final 10-30 years of your life that increases each year.  That income stream alone will pay for half of a nursing home stay, with your other income / savings picking up the second half, all in the unlikely event you have a multiyear stay in a nursing home

 

[gruecd]

The two most likely changes to SS are an increase in the maximum income subject to SS taxes, which stands at $147k for 2022 and is already subject to change with inflation, and introduction of means testing for benefits payments - both more politically palatable now than at any point since 1986.

Both of these (but especially the means testing) are a crock of ####.

So I pay the max possible SS tax almost every year, and now I get a reduced benefit because I did a good job of saving, and others didn't?  What a bunch of socialist crap.

 

[gruecd]

At 55 or so it'll cost ~$5000/year.  Maybe more.  Often these will get you 5 years of LTC coverage.  And the premium is not fixed, in fact most premiums have increased significantly in the last 5 years or so (say from $4000 to $5000).  

So you pay for 25 years, now you're 80.  My guess is premiums will continue to go up in that time.  Let's say you put out $150K in premiums.  A year of LTCI might cost $150k at that point.  If you had invested it at just a 6% return you'd have doubled your money ($300K).  Average length of stay in nursing homes is ~ 2 years.  1/3 of nursing home stays are under 100 days and covered by Medicare.  Only 10% of nursing home patients are still there 5 years after arriving.  

to me the only real benefit of that insurance is the long tail (that 10% of patients).  Note, that is not 10% of population, that is a subset of:

-Those that live long enough to be alive at typical nursing home age

-Those that have health issues requiring nursing homes / no secondary support with children/siblings/spouse

For me, I'd choose to self insure.  

Also, those hybrid products I am very skeptical on.  One is a life insurance product I am fairly certain... why add life insurance if you don't need it?  At 55 you don't need life insurance, your children are grown and the house is well on its way to being paid off.  And the other product is an annuity product I believe, which tend to have lots of hidden fees.  Be very wary.  

LTCI used to be a good deal, but prices have increased 30-50% in the last 10 years, maybe more.  A better way to account for long term care insurance if you ask me is to delay SS filing til 70.  For those thinking of taking it at 62, you nearly double your income by waiting til 70, it is inflation adjusted, and pays until you die.  That's your 'long life' / 'long term care' insurance - steady income in your final 10-30 years of your life that increases each year.  That income stream alone will pay for half of a nursing home stay, with your other income / savings picking up the second half, all in the unlikely event you have a multiyear stay in a nursing home

No reason to be skeptical on the hybrid products.  You just need to understand how they work.

 

[NutterButter]

to me the only real benefit of that insurance is the long tail (that 10% of patients).  

Wouldn't most of those people have reached the limit on their plans by then?  At that point, if you didn't have any additional savings, you would get booted to a medicaid covered facility.   

 

[gruecd]

Wouldn't most of those people have reached the limit on their plans by then?  At that point, if you didn't have any additional savings, you would get booted to a medicaid covered facility.   

Correct.  And you'd get sent wherever there is a bed.  Not exactly the most desirable of circumstances.

 

[Sand]

The two most likely changes to SS are an increase in the maximum income subject to SS taxes, which stands at $147k for 2022 and is already subject to change with inflation, and introduction of means testing for benefits payments - both more politically palatable now than at any point since 1986.

That would be incredibly unpopular and it flies in the face of what SS was promised to be.  The first is almost certain, the second impossible to get passed.

 

[NutterButter]

That would be incredibly unpopular and it flies in the face of what SS was promised to be.  The first is almost certain, the second impossible to get passed.

I would think that for the people that would apply to, the 2nd option would be preferred; I'd personally rather have the government take less now and give me less later.   

 

[Sand]

I would think that for the people that would apply to, the 2nd option would be preferred; I'd personally rather have the government take less now and give me less later.   

Maybe so.  BTW, the first solves the funding issue.  I have long advocated for ripping that band aid off.

 

[wilked]

Wouldn't most of those people have reached the limit on their plans by then?  At that point, if you didn't have any additional savings, you would get booted to a medicaid covered facility.   

That's true.  At least you'd get 5 good years before it's cold porridge and bed-stains

I take it back, there is no strong benefit to the LTCI at the prices being offered.

 

[JohnnyU]

I would think that for the people that would apply to, the 2nd option would be preferred; I'd personally rather have the government take less now and give me less later.   

Yes, but people are spending more, investing less than they used to.  Add that to the fact that pensions are fading.  Companies don't provide a pension as much as they used to.  I'm fortunate that my company still does.  As much as people are spending now, they will need every dollar SS can provide.

 

[NutterButter]

Yes, but people are spending more, investing less than they used to.  Add that to the fact that pensions are fading.  Companies don't provide a pension as much as they used to.  I'm fortunate that my company still does.  As much as people are spending now, they will need every dollar SS can provide.

I'm not saying its necessarily in their best interest to do; just that its what they'd prefer.  And for those of us that manage our money better, we'd be better off as we'd get a greater return investing that ourselves.   You might be able to even avoid the reduced benefits if you have enough non-taxable sources of income; same way you can take advantage of obamacare and avoid high premium in your pre-medicare retirement years.   

 

[NutterButter]

That's true.  At least you'd get 5 good years before it's cold porridge and bed-stains

I take it back, there is no strong benefit to the LTCI at the prices being offered.

I think LTCI is really for the same people that like annuities and target date funds.   Financially its not in your best interest but its easier than having to manage that savings yourself.   

 

[Da Guru]

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.

A couple of friends of mine are advisors who advocate taking SS earlier than later. Watching the SS tables say you retired at 64 and the SS rate is roughly 2900 a month.  Would waiting 2 more years to get another 200 or so a month make it worth it?  You would already have 72K of SS income to make up. Plus no assurance of how long anyone will live.

I have no idea if this is the right or wrong way.

 

[elbowrm]

Both of these (but especially the means testing) are a crock of ####.

So I pay the max possible SS tax almost every year, and now I get a reduced benefit because I did a good job of saving, and others didn't?  What a bunch of socialist crap.

Agree 100%.  Unfortunately political winds are blowing in this direction on both sides of the aisle these days.

 

[NutterButter]

I don't think SS is an issue.   There's some really good options to fix that.   Besides the 2 mentioned, you can also increase the retirement age.  I personally don't care which one they choose.   Something will get done.  It just won't happen until the very last minute.   

 

[Capella]

It would be too politically damaging to cut social security. Much easier for the government to just create more money instead.

Yea I don’t think that’s anything anybody should be concerned about. It would be political suicide. 

 

[dgreen]

A couple of friends of mine are advisors who advocate taking SS earlier than later. Watching the SS tables say you retired at 64 and the SS rate is roughly 2900 a month.  Would waiting 2 more years to get another 200 or so a month make it worth it?  You would already have 72K of SS income to make up. Plus no assurance of how long anyone will live.

I have no idea if this is the right or wrong way.

I read once that an analysis of actual SS earnings revealed that most people wait too long to start. But I know people here tend to talk about waiting to maximize that monthly check.

 

[Capella]

A couple of friends of mine are advisors who advocate taking SS earlier than later. Watching the SS tables say you retired at 64 and the SS rate is roughly 2900 a month.  Would waiting 2 more years to get another 200 or so a month make it worth it?  You would already have 72K of SS income to make up. Plus no assurance of how long anyone will live.

I have no idea if this is the right or wrong way.

Yea I’m taking it when I can and putting it in the market. 

 

[FBG26]

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.

A couple of friends of mine are advisors who advocate taking SS earlier than later. Watching the SS tables say you retired at 64 and the SS rate is roughly 2900 a month.  Would waiting 2 more years to get another 200 or so a month make it worth it?  You would already have 72K of SS income to make up. Plus no assurance of how long anyone will live.

I have no idea if this is the right or wrong way.

I haven't thought much, if at all, about SS for my case (mid 30s here). But if I understand correctly, when one spouse dies, the surviving spouse can get the higher of the benefits. Anybody know if that's correct? If it is, and you have one spouse that would receive significantly more SS than the other spouse, maybe it makes sense to have the lower receiving spouse take early and the higher receiving spouse wait to maximize the payment if one dies? It's probably a complex problem and you'd have to factor in life expectancy. But based on my wife's grandparents, they tend to live into their 90s. My side not so much. So I'd want to maximize the amount she can get after I die. 

 

[Capella]

The two most likely changes to SS are an increase in the maximum income subject to SS taxes, which stands at $147k for 2022 and is already subject to change with inflation, and introduction of means testing for benefits payments - both more politically palatable now than at any point since 1986.

Zero chance that second one ever happens.