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

[NutterButter]

This doesn't get talked about enough. I read articles suggesting you need to cover 80%+ of pre retirement income, but right now I live off less than 2/3 after taxes and retirement savings and have a mortgage payment I won't have in retirement. 

Agreed, those estimates are crazy.   Throw in college savings as well.  I'm right where you are.   

 

[Buck Bradcanon]

I'm 40, my advisor came up with a number of $5m by age 67 to afford to live 30 more years after, assuming inflation at 3%/yr from now to the end.

Fml

 

[-OZ-]

This doesn't get talked about enough. I read articles suggesting you need to cover 80%+ of pre retirement income, but right now I live off less than 2/3 after taxes and retirement savings and have a mortgage payment I won't have in retirement. 

Yep. I assumed they meant take home pay but maybe not. 

Mortgage and investments total close to half our monthly expenditures. Plus the kids would be out of the house, we'd probably save another $500/month on food alone. 

But then we'd travel more, take up new hobbies and expand our current hobbies which is why we want to retire anyway. I actually like my job but it gets in the way of our hobbies. 

 

[-OZ-]

Advisor advice is often off set multipliers.  Anyone who has had large increases in income or good combo income with a spouse can NEVER catch up to the multipliers.  

You are restricted to what you can contribute and what you are matched at.

? 

In tax advantaged accounts sure. But you can put the increase into real estate rentals or other investments. 

My wife has only worked two years out of our 20 together so maybe I'm overestimating the ability of dual income families to save. 

 

[lumpy19]

I'm behind.  Early 40's and I really dicked around in my 30's having borrowed some money from retirement and made a few bad investments.

That said my wife and I crossed 1/3 of a Million today for the first time.  (She also has a govt pension coming, so in reality it's more than that).

There are others my age that do and should have more than that put away, but we have put some work in to get back on track and it feels good to say.

ML parlay kc/Jax this weekend and double that retirement number

Nice job, I think that's a pretty good spot to be.

 

[Da Guru]

      1 hour ago, Walking Boot said:

I'm 40, my advisor came up with a number of $5m by age 67 to afford to live 30 more years after, assuming inflation at 3%/yr from now to the end.

Considering you will only probably live 1-13 years after that I would not worry.  After 80 who really cares.

 

[ZenMaster]

I'm 40, my advisor came up with a number of $5m by age 67 to afford to live 30 more years after, assuming inflation at 3%/yr from now to the end.

It's all about your expected expenses. I've been doing a lot of reading on early retirement forums and that's the main thing that continually gets brought up. If you have $5 million but plan to spend $1 million every year, then $5 million isn't enough. 

If you can get a reasonable estimate of your projected expenses in retirement, you can determine a target savings amount. 

 

[pecorino]

I'm 40, my advisor came up with a number of $5m by age 67 to afford to live 30 more years after, assuming inflation at 3%/yr from now to the end.

5 million dollars for 30 years? Even if you earn zero interest on that money, you’re talking almost $167.000 per year. To me, that’s triple what I’d need—sounds like an alarmist number unless you plan to retire in NYC or some other high rent district. 

Eta: yes, I understand how inflation works.

 

[NutterButter]

5 million dollars for 30 years? Even if you earn zero interest on that money, you’re talking almost $167.000 per year. To me, that’s triple what I’d need—sounds like an alarmist number unless you plan to retire in NYC or some other high rent district. 

Eta: yes, I understand how inflation works.

There's taxes as well.   

 

[Slapdash]

      1 hour ago, Walking Boot said:

I'm 40, my advisor came up with a number of $5m by age 67 to afford to live 30 more years after, assuming inflation at 3%/yr from now to the end.

Considering you will only probably live 1-13 years after that I would not worry.  After 80 who really cares.

Yeah, I'd just retire earlier in that scenario.

 

[The Ref]

If it's going to take 5m of today's dollars to retire then I'll have a lot of company at McDonald's at 72

 

[⚡DEADHEAD⚡]

With dividend interest on savings, combined social security and wife's pension, and expecting to retire at 68 and wife at 61, project to have somewhere between $300k and $350k/year pre-tax, with no debt aside from a couple car payments. That includes a conservative estimate on returns between now and then (5%) and doesn't involve drawing down assets. We'd like to retire earlier. We will be more aggressive as income increases, but kid expenses are increasing and we want to enjoy ourselves a bit too now. We've earned it.

 

[-OZ-]

With dividend interest on savings, combined social security and wife's pension, and expecting to retire at 68 and wife at 61, project to have somewhere between $300k and $350k/year pre-tax, with no debt aside from a couple car payments. That includes a conservative estimate on returns between now and then (5%) and doesn't involve drawing down assets. We'd like to retire earlier. We will be more aggressive as income increases, but kid expenses are increasing and we want to enjoy ourselves a bit too now. We've earned it.

####. No debt and $300,000/year? Sure seems to me that you could retire earlier.

 

[rascal]

With the new tax plan, how are people treating the 401k vs. Roth 401k differently now?  I'm thinking of going all in on Roth.

I built up my traditional 401k to 250k.  Now I'm doing Roth 401k to hedge my bets.  Who the #### knows what tax rates will be in the future.

 

[rascal]

Both the wife and I are at 50. We are approaching 3/4 million in retirement. We've been debt free for 5 years (except leased vehicle). Unlike others, I expect to pull SS and the wife's Federal Fers retirement annuity. Our health care is semi fixed through BCBS federal. We live very frugal and continue to save roughly 35% of our income. We reallocated to 70/30 bond to stocks about 6 months ago. 

The only thing that may change, is if we decide to buy a motor home and travel full time for a few years while we are still young enough to enjoy it.

You need to look at geha for insurance.

 

[pecorino]

I built up my traditional 401k to 250k.  Now I'm doing Roth 401k to hedge my bets.  Who the #### knows what tax rates will be in the future.

Aside from the tax implications, the Roth also has the added benefit of not being subject to RMDs. So you can tap your money in retirement with more flexibility with a Roth. It’s a great tool.

 

[KCitons]

You need to look at geha for insurance.

Looking at the basic rates on their website, they are almost twice as much as we are paying now.

Healthcare is one of those costs that will actually decrease for us in a few years. Currently, we are paying for a family of 5. One of those is my 21 year old daughter who is type one diabetic. Even with good insurance we are still paying a couple thousand a year in expenses for supplies. (every 4-5 years we spend and extra $1k on a new insulin pump and cgm). When we drop to 2 person coverage and eliminate her expenses, I expect to see a $200 a month savings.

 

[Gawain]

People talking about 5 million and I'm over here like, "2018 is the first year I will have to actually calculate student loan deduction and not auto fill 2500"

 

[-OZ-]

I built up my traditional 401k to 250k.  Now I'm doing Roth 401k to hedge my bets.  Who the #### knows what tax rates will be in the future.

That makes sense, to a degree anyway. I'd bet they won't be lower than 12% and most likely other rates will be higher than they are now. Nobody likes to talk about a rate hike but I'd think it would be necessary at some point. 

That said, around 40% of our retirement funds are in the traditional TSP, because the Roth wasn't offered until 2012. So we were maxing both Roths and putting more into the tsp. I stopped putting money into my Roth IRA when TSP offered the Roth, instead maxing the tsp, her Roth, and 4 coverdell accounts. 

 

[Bull Dozier]

I don't get it.  The retirement income calculator on my 401k website is projecting a retirement income that is 20% higher than my current salary (I'm 44, and this is including SS and a small pension that I'm not banking on having, but it is so small it doesn't really push the needle).  But, based on the $3 million and $5 million targets for others here in this thread, and me not being close to that track, it seems I'll be living in poverty in retirement.  

 

[CR69]

With the new tax plan, how are people treating the 401k vs. Roth 401k differently now?  I'm thinking of going all in on Roth.

I'm still sticking with traditional and plan to do the Roth conversion when I first retire and have no earned income.

 

[CR69]

A lot of people in the early retirement community use this site to calculate the amount they need to retire. I used a net worth of $1.25m with annual spending of $48k for 50 years and got a success rate of 86.6%. https://www.firecalc.com/index.php

For those looking into early retirement that are worried health insurance, check out Healthcare sharing ministries which have significantly lower premiums. You just have to be (or pretend to be) a Christian.

 

[eoMMan]

How much of your retirement funds are you allocating to crypto currencies?

50%?

25%?

10%?

0%?

 

[NutterButter]

I don't get it.  The retirement income calculator on my 401k website is projecting a retirement income that is 20% higher than my current salary (I'm 44, and this is including SS and a small pension that I'm not banking on having, but it is so small it doesn't really push the needle).  But, based on the $3 million and $5 million targets for others here in this thread, and me not being close to that track, it seems I'll be living in poverty in retirement.  

I guess it wants you to be a big baller in retirement.     Can you really blame them?   The more you save, the larger the fee they collect.     

 

[wilked]

I don't get it.  The retirement income calculator on my 401k website is projecting a retirement income that is 20% higher than my current salary (I'm 44, and this is including SS and a small pension that I'm not banking on having, but it is so small it doesn't really push the needle).  But, based on the $3 million and $5 million targets for others here in this thread, and me not being close to that track, it seems I'll be living in poverty in retirement.  

Is it future dollars or 2018 dollars?

 

[Bull Dozier]

I guess it wants you to be a big baller in retirement.     Can you really blame them?   The more you save, the larger the fee they collect.     

I should clarify, my website is making that projection based on my current savings balance, current contribution level, and performance projections.  Based on my own math, I don't think I'll be close to a multi million dollar nest egg at retirement age, so I don't know how it is projecting an annual retirement income that high.

 

[Bull Dozier]

Is it future dollars or 2018 dollars?

Good question.  That's probably the kicker.  If I assume today's dollars, then the projection doesn't look so rosy and more in line with my own projections.

 

[Sand]

I'm 40, my advisor came up with a number of $5m by age 67 to afford to live 30 more years after, assuming inflation at 3%/yr from now to the end.

Where will you be living, Monaco?  That is an outrageous number.

ugh. my wife and i (46 yo) have a goal of $3 million. i knew it wasn't going to be old age life on easy street, but that is sobering. 

I'm your age.  If I had $3M and I'd think hard about retiring today.

 

[Grace Under Pressure]

Where will you be living, Monaco?  That is an outrageous number.

I'm your age.  If I had $3M and I'd think hard about retiring today.

Agreed. Hit Firecalc for the success rates. Hard to find failure cycles at that age and amount unless spending north of $100K+ annually.

 

[KCitons]

Where will you be living, Monaco?  That is an outrageous number.

I'm your age.  If I had $3M and I'd think hard about retiring today.

If I had $1M, you guys would probably never hear from me again. 

Should I start a go fund me?

 

[wilked]

$5MM is the new "millionaire"

 

[guru_007]

Where will you be living, Monaco?  That is an outrageous number.

I'm your age.  If I had $3M and I'd think hard about retiring today.

I, too, am your age and I do think if I had this much in non-retirement accounts, I could retire today.  These numbers/calculators being thrown around are ridiculous.  Oftentimes, they try to look at your current income and base it off living of say 80% of that, or conservatively 70% off what you are currently making.  

If someone wants to strive for that, I'm not going to begrudge them saving aggressively and being financially ultra conservative.  But, frankly imho it's nonsense.

I can give you a real world example of my folks for instance, but who's to say I'm not making stuff up.  I do know if I have $3MM, I could conservatively parlay that into an income stream of over $200K/year and I could live on that without touching the principal, ever.  

 

[NutterButter]

Not really. I have no kids, so I have to protect to fund my own medical care. I'm also protecting for the case that Social Security is not fully funded by the time I retire. Also, I currently live in Southern California, though I may retire elsewhere. My family history suggests a long retirement, as my grandparents all lived to their 90s, with one hitting 100, and as a kid I knew a couple of my great-grandparents who also lived into their late 90s. 

I'm assuming expenses around $60,000 per year (this was computed in 2010 dollars). At 3% annual inflation, when I retire in 2045, that $60k is $168,832 per year. If I live to 100, that is $434,756/yr in 2077 dollars. 

The sum total of expenses from 2045 to 2077 is $9,298,888. So the hope is that by hitting $5mil by 2045 that it will continue to grow to cover the rest. If it grows at 4%, I go broke at 101.

you're protecting for the case that SS doesn't exist from what you said.  if you want to be safe, just assume 75% which is really the realistic worst case scenario.  i believe max ss today if starting at 70 is $3.5k so 75% of that is ~$31k annually which would be half of your expenses.    you're also using 3% for inflation which is higher than what i believe firecalc uses.   I've been using 2% personally and that 1% difference makes a huge difference.    

 

[NutterButter]

I, too, am your age and I do think if I had this much in non-retirement accounts, I could retire today.  These numbers/calculators being thrown around are ridiculous.  Oftentimes, they try to look at your current income and base it off living of say 80% of that, or conservatively 70% off what you are currently making.  

If someone wants to strive for that, I'm not going to begrudge them saving aggressively and being financially ultra conservative.  But, frankly imho it's nonsense.

I can give you a real world example of my folks for instance, but who's to say I'm not making stuff up.  I do know if I have $3MM, I could conservatively parlay that into an income stream of over $200K/year and I could live on that without touching the principal, ever.  

I'd love to know how you could conservatively make almost 7% a year.  I haven't given too much thought about to what I'm going to do with my retirement savings throughout retirement other than the typical 120-age percentage in a stock index and the rest in a bond index.

 

[⚡DEADHEAD⚡]

With dividend interest on savings, combined social security and wife's pension, and expecting to retire at 68 and wife at 61, project to have somewhere between $300k and $350k/year pre-tax, with no debt aside from a couple car payments. That includes a conservative estimate on returns between now and then (5%) and doesn't involve drawing down assets. We'd like to retire earlier. We will be more aggressive as income increases, but kid expenses are increasing and we want to enjoy ourselves a bit too now. We've earned it.

####. No debt and $300,000/year? Sure seems to me that you could retire earlier.

The value of compound interest, plus the acceleration of my wife's pension in those last few years, and the value of collecting SS later all suggest that even retiring a few years earlier could mean several tens of thousands of dollars less/year. Classic golden handcuffs issue on several fronts.

Also, it is conceivable that those of us in our mid-40s will reach an age where monthly care will cost $20,000 or more per person. $300k seems like a lot, and it should make us comfortable in early retirement, but I'm not convinced it's as nice as it sounds.

 

[NutterButter]

Of course. But I'm trying to guess at something that's 25 to 60 years away. Social Security could be just fine, or could pay out at 50%, or inflation may be 1% or 2%. 

But inflation could also be 5%. Social Security could go broke. It's 25 to 60 years away. I don't know.

I can always re-adjust down later. In the year 2035, 2040, I could look and see what I've got, and where things are going, and change direction easier. It's a lot easier to revise down 10 years away from retirement rather than ramp up and have to catch-up and save more. I'd rather not get caught short.

Look, I know it seems like a crazy number. But if the economy tanks, or the government screws up, or SS goes broke, all of which are not impossible between today and the year 2077, I want to be OK. Worst case, those things don't happen, I'm fine, and I can retire earlier. Yay me. Much better than the opposite scenario.

it just seems like you're cherry picking that social security won't exist when there's no reason to believe that.     regardless, that's your prerogative.  

 

[NutterButter]

The value of compound interest, plus the acceleration of my wife's pension in those last few years, and the value of collecting SS later all suggest that even retiring a few years earlier could mean several tens of thousands of dollars less/year. Classic golden handcuffs issue on several fronts.

Also, it is conceivable that those of us in our mid-40s will reach an age where monthly care will cost $20,000 or more per person. $300k seems like a lot, and it should make us comfortable in early retirement, but I'm not convinced it's as nice as it sounds.

what's monthly care?  medical care?   $20k/month?

 

[guru_007]

I'd love to know how you could conservatively make almost 7% a year.  I haven't given too much thought about to what I'm going to do with my retirement savings throughout retirement other than the typical 120-age percentage in a stock index and the rest in a bond index.

I don't give financial advice.  But even with a quick search I was able to find a number of tax free bonds/funds yielding near 5%, which is even better than the 6% yield I quoted above!

 

[NutterButter]

I don't give financial advice.  But even with a quick search I was able to find a number of tax free bonds/funds yielding near 5%, which is even better than the 6% yield I quoted above!

Man, that sounds nice.   I wasn't expecting that.   Almost guaranteed 5% year.  I need to look that up.

 

[-OZ-]

My point was just to note that for someone under 40, "$5 million" is not an unreasonable number. For someone in their 20s, it might even be wholly realistic.

Depends on the interest rate. If we get 8% and keep going like we have been and are currently, we'll reach $4.8M at 67. 11% would yield $9.6M. 

 

[⚡DEADHEAD⚡]

what's monthly care?  medical care?   $20k/month?

Yes. Assisted living.

 

[NutterButter]

Yes. Assisted living.

Oh yeah, that costs a fortune.    It will certainly be 20k/month 40 years from now.  Typically though, you only need full assisted for a few years.   There are those cases though of people needing it a lot longer.   I don't know how you can prepare for long term full assisted living except by saving a crap load of money that chances are you'll never need.    If you're one of the really lucky few, you're pretty much stuck with whatever medicaid will cover once you blow through all your retirement money.

 

[Sand]

Man, that sounds nice.   I wasn't expecting that.   Almost guaranteed 5% year.  I need to look that up.

This is one area that closed end funds really do well.  They use moderate leverage (~30%) to juice returns on munis.  I own a couple - BBF, NVG.  Both are somewhere in the range of 5% tax free.  The leverage does also leverage duration, so it will see somewhat bigger value swings when the Fed dickers with interest rates.

 

[Sand]

I have no kids,

Full stop.  Without the financial suck of kids, you're already one of the evil rich.  

 

[Sand]

With dividend interest on savings, combined social security and wife's pension, and expecting to retire at 68 and wife at 61, project to have somewhere between $300k and $350k/year pre-tax, with no debt aside from a couple car payments. That includes a conservative estimate on returns between now and then (5%) and doesn't involve drawing down assets. We'd like to retire earlier. We will be more aggressive as income increases, but kid expenses are increasing and we want to enjoy ourselves a bit too now. We've earned it.

I know a slightly pudgy 46 year old who needs a nice adoptive home...

I'd stay on this and as the years pass try to figure out when you have "enough".  Play with firecalc a bit.  You should be able to pull the plug earlier than you think, even with those late juicers.  300k/yr is a staggering sum, particularly as spending tends to drop off the older you get.  

 

[⚡DEADHEAD⚡]

I know a slightly pudgy 46 year old who needs a nice adoptive home...

I'd stay on this and as the years pass try to figure out when you have "enough".  Play with firecalc a bit.  You should be able to pull the plug earlier than you think, even with those late juicers.  300k/yr is a staggering sum, particularly as spending tends to drop off the older you get.  

No doubt. I have a spreadsheet model where I can modify variables. If I can average 8% on my 401k while maximizing annual contribution, I can retire earlier, possibly 7 or 8 years earlier. If I can get 12%, maybe 10 years earlier. But I'm sure you know, if I can get 12% and I stay working, I may have $10 million in my 401k at age 68 as opposed to nearly $3 million or so.

Compound interest. It's a beautiful thing.

 

[ZenMaster]

Oh yeah, that costs a fortune.    It will certainly be 20k/month 40 years from now.  Typically though, you only need full assisted for a few years.   There are those cases though of people needing it a lot longer.   I don't know how you can prepare for long term full assisted living except by saving a crap load of money that chances are you'll never need.    If you're one of the really lucky few, you're pretty much stuck with whatever medicaid will cover once you blow through all your retirement money.

Long term care insurance. Generally 2-3 year policies and can be either simple or inflation-adjusted (those cost more). Without looking it up, the average stay in a long term care facility is ~2 years I think. Just like life insurance, rates are cheaper if you buy when you're younger. My wife and I bought our policies several years ago (we're now in our 40s) and we pay $26/month for $3K/month coverage. I don't think our rates are guaranteed but they haven't gone up yet since we're still young. My wife is the insurance expert in our household, I just stayed at a Holiday Inn once so do your own research.

 

[NutterButter]

Long term care insurance. Generally 2-3 year policies and can be either simple or inflation-adjusted (those cost more). Without looking it up, the average stay in a long term care facility is ~2 years I think. Just like life insurance, rates are cheaper if you buy when you're younger. My wife and I bought our policies several years ago (we're now in our 40s) and we pay $26/month for $3K/month coverage. I don't think our rates are guaranteed but they haven't gone up yet since we're still young. My wife is the insurance expert in our household, I just stayed at a Holiday Inn once so do your own research.

Yeah, I've heard about that but it seems fishy to me.    

 

[ShaqAttaq]

Where will you be living, Monaco?  That is an outrageous number.

I'm your age.  If I had $3M and I'd think hard about retiring today.

It’s the goal, not my status.  we’re a little over 40% of the way

 

[ShaqAttaq]

Yeah, I've heard about that but it seems fishy to me.    

My parents (71 yo) have that. The premiums just skyrocketed. My dad & I sat down and reworked the policy this past year. I assume it won’t be the last time we do that.