PBS Frontline : The Retirement Gamble, sorta Must See (1 Viewer)

[Ministry of Pain]

So I'm just throwing out numbers here...

$1M in RE assets and you have 12 units and each one is positive $250 each or $3k/month

-SS for a married couple somewhere in the $2k-$3k range...$2,500 for arguments sake.

-$1M invested in terms we discussed in earlier posts, I'll cut the income to $2,500 a month.

I'm coming up with $8k in income and I am also assuming I am not carrying mortgages unless it is to buy more properties. 

Dentist isn't talking pipe dreams here. 

 

[FUBAR]

On a side note, there is no way I'm paying $1M for my kids education.  Not a chance.  I do plan to help them out financially for school, and one of the ways is going to be to teach them about ROI.  No way spending $1M on school is a good investment.

That's fine.   But i'll pay whatever it takes.

I graduated with no debt, and I intend to pay it forward.  The greatest gift I ever received was my education and not having a debt for it.

agreed, although we're probably matching what they get in scholarships or pay in cash, not matching whatever debt they take on, and giving them a year paid for by Uncle Sam (9/11 GI Bill).  If they want to go to Vanderbilt (or Ivy) and can get scholarships, awesome.  If not, Alabama has a pretty decent scholarship system for kids with good grades.  (insert your Alabama education jokes now)

 

[NewlyRetired]

   I'm messing around with firecalc now, but can't see where to input current retirement savings.

Very first page.  The interface is ugly but look for it on middle to lower right of first page.  After inputting thise basic number then start moving to each tab and experiment.

 

[NewlyRetired]

That's fine.   But i'll pay whatever it takes.

I graduated with no debt, and I intend to pay it forward.  The greatest gift I ever received was my education and not having a debt for it.

That is my opinion word for word.

 

[Dentist]

Dentist, two data points are:

38 - whatever you have saved for retirement

55 - $2MM (goal)

What I am asking is intermediate estimates, what you expect to have at 40, 45, 50, 55.  ie the 'curve'.  And ideally perhaps a couple data points backward

I'm going to work on that and get back to you

 

[FUBAR]

Very first page.  The interface is ugly but look for it on middle to lower right of first page.  After inputting thise basic number then start moving to each tab and experiment.

  thanks. 

Because you indicated a future retirement date (2036), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 20 years of preretirement plus 35 years of retirement, or 55 years.

FIRECalc looked at the 91 possible 55 year periods in the available data, starting with a portfolio of $xxx,xxx and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 91 cycles. The lowest and highest portfolio balance at the end of your retirement was $320,851 to $16,715,144, with an average at the end of $5,904,078. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 55 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

 

[SFBayDuck]

On a side note, there is no way I'm paying $1M for my kids education.  Not a chance.  I do plan to help them out financially for school, and one of the ways is going to be to teach them about ROI.  No way spending $1M on school is a good investment.

Totally my ex-wife here.  Not a million on education, but chose private schools for both bachelors and masters, when she came from a single-parent, fairly poor background.  All paid for with loans - something like $180K in loans, for degrees that ended up providing a job 10 years out of school that pays $60K-$70K.  Brutal from an ROI perspective.  

I got lucky that she kept deferring them while we were married, but that made it worse for her long term and now she is paying something like $900/month.

Good lesson, as I'll do everything in my power to make sure that my daughter doesn't make that same choice, as I'll be limited in what I can contribute to her education.

 

[NewlyRetired]

  thanks. 

Because you indicated a future retirement date (2036), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 20 years of preretirement plus 35 years of retirement, or 55 years.

FIRECalc looked at the 91 possible 55 year periods in the available data, starting with a portfolio of $xxx,xxx and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 91 cycles. The lowest and highest portfolio balance at the end of your retirement was $320,851 to $16,715,144, with an average at the end of $5,904,078. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 55 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

Great start, now you can begin tweaking.

The sweet spot is said to be in the lower 90's for success rate.   More than high enough to assure anything but a zombie apocolypse will see you safe but still makes sure you don't work too many extra years.

 

[FUBAR]

Great start, now you can begin tweaking.

The sweet spot is said to be in the lower 90's for success rate.   More than high enough to assure anything but a zombie apocolypse will see you safe but still makes sure you don't work too many extra years.

true, it also doesn't account for our desire to build a log cabin and buy a beach house - which we would rent out when not using. That will require more detailed planning than we can really do on firecalc. 

 

[Binky The Doormat]

I was nervous they were going to require me to have near 5 mil.

I'm on a reasonable pace for 3 if the market cooperates,  should get a mil or so from inheritance.... but it sounds like retiring at 55 may not be feasible unless i get my butt in gear and do more dentistry.   I may have to shift to 58 and then commit to dying sooner  #morecigars




 

Firecalc is for guys like you Dentist.  You need to run scenarios for yourself - it all varies based on your input.  I don't know what NR put in for return and/or inflation but you will want to do it for yourself.  I spent a lot of time with it over a several year period of time before retiring.  

It is the coolest, easiest planning tool I have ever used.  

Thanks NR for all the responses here.  Firecalc needs to be the Official FBG retirement planning tool.

 

[NewlyRetired]

true, it also doesn't account for our desire to build a log cabin and buy a beach house - which we would rent out when not using. That will require more detailed planning than we can really do on firecalc. 

Firecalc does build in the ability to alter both income and expenses for a banded amount of time, so that your expense and revenue data is not always the same year to year.

But figuring out those exact variance numbers to plug in based on the situation you describe will take some side work as you said.

 

[Sand]

I'll ask it a different way...

Let's assume my family needs $5k a month income to meet our needs. I want to know how much money I need to have in order to produce $60k in yearly income...$1M/2M?

I'll try the link as well, much appreciation for all the help, from all of you. 

Assuming a 40 year retirement and a 5% return on investment you'd need ~1.6mil to make it work.  I've always thought firecalc is a tad optimistic (it ignores taxes, from what I've seen).  I built my own and that's about what I get.

BTW, once you're in that range very small annual inputs, like 10k income or SS kicking in or SS going away if one person in a couple dies makes a big difference in outcomes.  At 1.4-1.6mil or so you're right at the inflection point.  Adding in 10k of income per year changes the balance at death by about 500k.

 

[Sand]

When I learned that my wife worked with people driving nicer cars and making less than her but not putting one dime in their 401ks, my first indicator that human beings are even dumber as a whole than previously thought. How do you turn down free money that will then be working as compound interest FOR YOU and not against you?

I will say that with the current boom in auto credit (the easiest credit you can get now, by far) I see more nice, new cars on the road than I ever have.  I had to go get a tag for my car today and the lot had more than a few brand new Range Rovers, Mercedes, and an Audi.  Crazy.  That 80k car is worth about 8-9 years of retirement.

 

[NutterButter]

I will say that with the current boom in auto credit (the easiest credit you can get now, by far) I see more nice, new cars on the road than I ever have.  I had to go get a tag for my car today and the lot had more than a few brand new Range Rovers, Mercedes, and an Audi.  Crazy.  That 80k car is worth about 8-9 years of retirement.

I noticed recently that out of the 100 cars in my parking lot, like 20-30 are way nicer than mine and I know these cats are making that much more than me if at all.

 

[tonydead]

Assuming a 40 year retirement and a 5% return on investment you'd need ~1.6mil to make it work.  I've always thought firecalc is a tad optimistic (it ignores taxes, from what I've seen).  I built my own and that's about what I get.

BTW, once you're in that range very small annual inputs, like 10k income or SS kicking in or SS going away if one person in a couple dies makes a big difference in outcomes.  At 1.4-1.6mil or so you're right at the inflection point.  Adding in 10k of income per year changes the balance at death by about 500k.

I just did a few quick sanity check calculations and came out at about the same numbers.  

 

[tonydead]

Sha-la-la-la-la live for today........

 

[Dentist]

I noticed recently that out of the 100 cars in my parking lot, like 20-30 are way nicer than mine and I know these cats are making that much more than me if at all.

All 7 employees I have drive newer nicer cars than I do, including the 21 yo with just a year of employment under her belt.

The chiropractor next door just got a bmw 650I.

I make more than all these people, in many cases much much more

 

[wilked]

You guys seem to compare #### size way more than I do

 

[Slapdash]

Crabs legs or Filet's for dinner,   no scotch aged under 15 years,    Winters on an island,   High Limit Poker tourneys.    It's gonna be great.

At least I'll need that from 55-70,   after that probably half that..   so maybe SS will fill in a lot of those gaps.

Fair enough.  I still can't see racking up that much on all these though (maybe poker).  The first two are drastically cheaper if you enjoying them outside of a restaurant.

 

[Bob Sacamano]

You guys seem to compare #### size way more than I do

It's warmer where they live.

 

[NewlyRetired]

  I've always thought firecalc is a tad optimistic (it ignores taxes, from what I've seen).

Firecalc is neither optimistic nor pessimistic, it is simply a tool that uses historical data to present you a model.  It is not trying to predict the future because it can't.  It is simply showing what happened in the past.

In terms of ignoring taxes, the writer of firecalc made a decision to not include them when he created the program.  It is left up to the user of firecalc to build taxes into their expected expenses (there are a bunch of tools online that can help you with this.

Here is some info about taxes in the FAQ

FIRECalc ignores taxable versus nontaxable portfolios right now. Since it only uses historical data to determine how a portfolio would behave, with no guesses by anyone about what will happen to inflation, market performance, and so forth, and we don't have historical tax rates for the period for which I have market data, I can't add tax planning without changing the philosophy of the program. Just planning on x% tax rates would make all the historical examples meaningless, when changing tax rates would have at least some effect on the market returns.

If I can figure out how to do this in a way that would not corrupt the results, I'll do it. For now, I prefer to leave the tax planning portion to programs like www.i-orp.com -- an outstanding tool!

 

[Sand]

You guys seem to compare #### size way more than I do

It's more of a reflection of where society is today.  I'm perfectly happy with my Fit - I tend to think about big purchases in the sense of where I want to be in the future.  So I drive a box (but I bought a new house last year as it was where we wanted to be).  Both were good choices.

 

[Sand]

Firecalc is neither optimistic nor pessimistic, it is simply a tool that uses historical data to present you a model.  It is not trying to predict the future because it can't.  It is simply showing what happened in the past.

In terms of ignoring taxes, the writer of firecalc made a decision to not include them when he created the program.  It is left up to the user of firecalc to build taxes into their expected expenses (there are a bunch of tools online that can help you with this.

Here is some info about taxes in the FAQ

FIRECalc ignores taxable versus nontaxable portfolios right now. Since it only uses historical data to determine how a portfolio would behave, with no guesses by anyone about what will happen to inflation, market performance, and so forth, and we don't have historical tax rates for the period for which I have market data, I can't add tax planning without changing the philosophy of the program. Just planning on x% tax rates would make all the historical examples meaningless, when changing tax rates would have at least some effect on the market returns.

If I can figure out how to do this in a way that would not corrupt the results, I'll do it. For now, I prefer to leave the tax planning portion to programs like www.i-orp.com -- an outstanding tool!

Interesting - I have never read that.  Taxes tend to be progressive, though, so accounting for them externally is a bit tough (IMO).  

Note I'm not really knocking firecalc - it is a fantastic tool and what I tell people to use.

 

[NewlyRetired]

Interesting - I have never read that.  Taxes tend to be progressive, though, so accounting for them externally is a bit tough (IMO).  

Note I'm not really knocking firecalc - it is a fantastic tool and what I tell people to use.

taxes are a ##### to model, I agree.

There are so many variables involved in trying to predict things 30 years out, that it is best to not get too hung up on any one thing.  Just give it your best shot.

Anyone in this thread who is even taking a few minutes/hours to do some modelling is already far ahead of probably 85% of people their age in our country.

 

[Sand]

taxes are a ##### to model, I agree.

There are so many variables involved in trying to predict things 30 years out, that it is best to not get too hung up on any one thing.  Just give it your best shot.

Anyone in this thread who is even taking a few minutes/hours to do some modelling is already far ahead of probably 85% of people their age in our country.

If there is anything I've learned in building my own tool the two biggest variables are the ones you can't control - inflation and investment return (I use 2.25% and 5.75%, but those are obviously guesses).  You can only ameliorate those a bit by the two biggest variables you can control - spending and time of retirement.  But if inflation goes nuts or market returns go in the crapper for 15 years they completely overwhelm the two things you control.

 

[Binky The Doormat]

Interesting - I have never read that.  Taxes tend to be progressive, though, so accounting for them externally is a bit tough (IMO).  

Note I'm not really knocking firecalc - it is a fantastic tool and what I tell people to use.




 

taxes are a ##### to model, I agree.

There are so many variables involved in trying to predict things 30 years out, that it is best to not get too hung up on any one thing.  Just give it your best shot.

Anyone in this thread who is even taking a few minutes/hours to do some modelling is already far ahead of probably 85% of people their age in our country.




 

The taxes part aren't that hard, maybe a little calculating off to the side.  Like if you have muni-bonds with no taxes or rental income, pensions, etc.

 

[Sand]

Sadly, I had my numbers run back in 2007, aiming for $60K (in 2007 dollars) a year starting around 2045, and my magic number was $5 mil by then.

Oh, BS.  5mil is a baller lifelstyle for a long, long time.

 

[NewlyRetired]

The taxes part aren't that hard, maybe a little calculating off to the side.  Like if you have muni-bonds with no taxes or rental income, pensions, etc.

I meant hard in that no one can predict what tax rates are going to be 15-30-40 years from now.  Using current tax rates is just basic math obviously as you said.

 

[NewlyRetired]

Oh, BS.  5mil is a baller lifelstyle for a long, long time.

$5m is in 2045 is not that huge number IMO, if that is really the start date of his retirement, which means he is looking out towards 2075 or so which is so far away it hurts to think about and try to plan for  

$5m today would see you have a fantastic non Dentist like retirement though

 

[NewlyRetired]

Of course, that's assuming the base 5mil never gains anything more (all cash). If I keep it in something that returns the same 3% as inflation, it'll last to 2073, an extra 8 years. Winning?

I consider myself a very conservative modeler and even I always modeled, at worst, 1-3% points above inflation as my rate of return.  You really have to work hard to not beat inflation imo even with conservative blend of bonds and balanced funds.  

 

[NewlyRetired]

Heck, I could retire today as long as I die by the end of the month

One of my good buddies entire retirement strategy is based on the fact that no males in his family tree live past 70

 

[FUBAR]

I believe we were using 3% annual inflation starting at $60K in 2007.

I just did some simple calcs in excel; at 3%, that is 184,487 in 2045 dollars, 190,021in 2046 dollars, 195,722 in 2047 dollars, etc.

Starting with $5mil in 2045, and subtracting the 184,487, then the 190,021, 195,722, etc., the money runs out in 2065. 20 years.

Of course, that's assuming the base 5mil never gains anything more (all cash). If I keep it in something that returns the same 3% as inflation, it'll last to 2073, an extra 8 years. Winning?

That also assumes no further income from any outside source, like Social Security or anything. Just "cash it all out the day you retire and live off the pile".

You wouldn't do that over 20 years. (Right? )  it's been said here before, but the smart thing to do is to keep at least some in stocks early in your retirement. 

 

[Dentist]

One of my good buddies entire retirement strategy is based on the fact that no males in his family tree live past 70

That would make it much easier, but my grandfather is 90.

But I need a way to calculate spending big early and then tapering off considerably.

 

[NewlyRetired]

But I need a way to calculate spending big early and then tapering off considerably.

you can do this in firecalc.

I have three different expense groups in firecalc in my models

* expenses for the bracket of years before daughter goes to college

* expenses for the bracket of years bracket of years after daughter in settled in college where we add in travel to the yearly expenses

* expenses for the bracket of years for when we get to old to travel

 

[Binky The Doormat]

I meant hard in that no one can predict what tax rates are going to be 15-30-40 years from now.  Using current tax rates is just basic math obviously as you said.




 

Sorry NR - yes, no doubt.  

 

[NewlyRetired]

and there goes another decent thread :(

 

[eoMMan]

and there goes another decent thread :(

All is well, andy. 

 

[Binky The Doormat]

Sorry NR - yes, no doubt.  

We only have the hope of a Republican majority to limit/stop the Democratic White House's alcoholic-like want to raise taxes on the middle-class.  




 

But only if they aren't mega-religious, gay hating, gun loving dickholes.....right?




 

Completely my fault.  Let's drop the politics here - OK eoMMan?

 

[Sand]

One of my good buddies entire retirement strategy is based on the fact that no males in his family tree live past 70

Actually one the problems I'm wrestling with.  Given my family's history I give myself a 50/50 shot of making 65 (probably generous).  So it's a struggle to decide when I'll pull the plug - gotta leave enough for the wife and kids when I kick off, but don't want to work until I'm living on borrowed time.

 

[Binky The Doormat]

Actually one the problems I'm wrestling with.  Given my family's history I give myself a 50/50 shot of making 65 (probably generous).  So it's a struggle to decide when I'll pull the plug - gotta leave enough for the wife and kids when I kick off, but don't want to work until I'm living on borrowed time.




 

You feel that way until you get closer to that number ...

 

[eoMMan]

An ex's dad kicked due to a massive coronary his first day of retirement. It was like a movie cliche. Awful.

There's a lot stories out there about how people need something to live for.

 You hear a lot about people dying shortly after retirement....or after the death of a spouse. 

 

[Dentist]

An ex's dad kicked due to a massive coronary his first day of retirement. It was like a movie cliche. Awful.

That's like a line from alanis morissettes ironic song.

 

[NutterButter]

You feel that way until you get closer to that number ...

Yup, people always talk like that when they're 20+ years away.   

 

[NutterButter]

So important to take care of yourself when you're younger so that you have so good years left when you're in your 60's and 70's.

 

[dino259]

Less than 10% of the population has that much in assets at retirement so that could include a home that while paid for doesn't provide immediate income. 

OK so you understand where I am coming from. It's the exception not the rule that people invest and save. I'm sure the numbers are different here vs other types of forums but honestly I bet if there were secret documents of everyone's finances in here that many would be shocked by how little everyone actually puts away compared to the monopoly of educated middle class folks who post in here.

And some people have no intentions of saving and scrimping until they are 65 or 70 in the hopes of spending it little by little until they might reach 95 or 100, I can understand why some folks make a plan til they are 75-80 and figure anything after is just a bonus no matter what life is at that point. What I'm saying is we can't make a face when people think investing to have a pile of a million bucks is simply a way to show scoreboard and something they don't feel they need to participate in.  

The wife and I are soon to turn 42.  She had a big start on me in terms of retirement savings.  She probably spends less than I do.  Go awesome lucky there.  We work at the same place that offers up to 3% match on our 6% contribution and then a yearly 4% profit sharing type of item.  We are now and have been the last couple of years able to max the IRA and the 401K.  We are only putting in a small amount to the kids (9 & 7) college.  My thought is to provide college support after they graduate.  Make them think they have to pay.  I had loans, i think the wife got grants and/or scholarships.  We should have our humble $200k house paid off in the next 10 years.  We tend to keep vehicles a while.  last year bought a 2014 Honda pilot to replace a 2008 trailblazer, but we should/need to replace our 2006 impala with over 100,000 miles on it.

We are way above average at a current portfolio of about $1.1M including the house.  

I haven't really thought about what expenses will change with retirement.  I don't expect our lifestyle to change a whole lot.  I figure another 10 years or our current path will allow that 1.1M to at least double.  

I am currently leaning toward paying off the mortgage before really getting into additional investments after maxing out the IRA & 401K.

 

[FUBAR]

I am currently leaning toward paying off the mortgage before really getting into additional investments after maxing out the IRA & 401K.

That's the debate my wife and I are having.  I'd rather invest more in our retirement and college funds than pay the house off early.  3.25% rate gives less incentive to pay extra imo.

 

[Sand]

There's a lot stories out there about how people need something to live for.

 You hear a lot about people dying shortly after retirement....or after the death of a spouse. 

The other thing I'm sure of is that the constant stress of my current job isn't prolonging my life.  Neither are the 50-70 hour weeks.

I'll take dying on my couch or my bike over at my desk.

That's the debate my wife and I are having.  I'd rather invest more in our retirement and college funds than pay the house off early.  3.25% rate gives less incentive to pay extra imo.

Right now the math is pretty clear that everyone should be getting 30 year mortgages and investing the rest of the payment.  (that said I got a 15 year because the thought of having a mortgage at 75 was pretty unappealing psychologically).  If you have the discipline to save and invest I wouldn't pay the mortgage down - the ROI right now with these rates really favors investment.  Sock it away with a reasonably conservative asset allocation and it'll pay off.

 

[dino259]

So with the debate of payoff mortgage vs invest left as a different topic as it is more than just math.  The psychological factor is different for everybody.

What types of investments are there for when you have maxed out your IRA and 401K?  How do I know if I am eligible for a HSA?  I don't lean towards being a landlord however the right silent investor opportunity would not be bad.  Our IRA is just basic Vanguard funds currently.

 

[xulf]

My wife just started her NP job after graduating a couple months ago and passing her boards.  Not only have I gone from paying my grad school and hers to no more school payments and her making cash...but our health insurance through her company is ~$800 less per month 

 

[NewlyRetired]

What types of investments are there for when you have maxed out your IRA and 401K? 

While those will typically end your pre tax protected investments, you can invest post tax dollars in anything you want.  The number of investments is enormous.

You probably just want to start with opening a simple brokerage account some where and start buying low cost mutual funds.