Personal Finance Advice and Education! (8 Viewers)

[ghostguy123]

Question regarding the less risky investments upon retiring. For the sake of easy numbers lets say you have a million bucks in your account you hit 65, and you retire.

The conventional wisdom is to draw X number of dollars per month/year/whatever, while the money sits in stable (probably cash) investments.

Why not draw from half, and keep half in the volatile market investments?

Seems the calculations will give you a dollar figure for when you retire, but if you remain invested with the 6-7% or whatever returns, that money continues to compound, while drawing from a safer cash investment.

Say the 1/2 million you draw from lasts you 10 years. Woudlnt it make some sense to have had that other half million in higher risk investments up until (and probably past) your retirement date, then transitioned into the safer investments maybe a few years into retirement?

These are totally just round about figured I am throwing out, but just wanted to bring up the concept of having a large chuck of the pie continue to work for you DURING part of retirement.

 

[Vincesanity]

Pretty risky would be leaving your money in cash equivilants.

 

[FUBAR]

I'll just say, I don't feel the slightest bit comfortable in assuming anywhere close to a 10% average return for the next 30 years.

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

Try re-running the numbers with a more realistic return (say 5-7%) and the problem will disappear

We talking inflation adjusted?

I would do 3-5% if you are doing real (inflation adjusted) return

I think I'm going to actually drop my original from 10 to 9 non-inflation adjusted. That's less than what its been over the past 20, but I'll be a little conservative.

1) Save more so that you exceed the 401k max per year and have to use non-401 accounts. If all you are doing is maxing out your 401K, I don't think you will be in a great position to retire until you are over 67. At 50? Maybe if you live in a swamp and hunt gators on a seasonal basis.

2) Go to Firecalc and run lots of assumption scenarios. DO NOT use 9% as a growth assumption

3) Go to Booglehead and Firecalc chat boards.

But I like 9%. Why can't I use that? So what if it comes in lower than that. Just work a few more years. Why think its going to be significantly lower than its historically been? If you want to use recent history, that's what its been over the pass 20 years. At 9%, 85% chance at 50. I probably wouldn't retire at 50 even if I could especially if I have an easy gig like I do know, but its nice to have that option.

Use whatever % you want, use negative if you like. These are your calculations. Personally, I'd rather be on the low side of realistic.

We just crossed over a somewhat significant milestone is savings and investments which I thought we'd reach at the end of the year, loving this market. Expecting a decline and we aren't selling, but it's a nice feeling to cross an arbitrary line.

 

[ghostguy123]

Question regarding the less risky investments upon retiring. For the sake of easy numbers lets say you have a million bucks in your account you hit 65, and you retire.

The conventional wisdom is to draw X number of dollars per month/year/whatever, while the money sits in stable (probably cash) investments.

Why not draw from half, and keep half in the volatile market investments?

Seems the calculations will give you a dollar figure for when you retire, but if you remain invested with the 6-7% or whatever returns, that money continues to compound, while drawing from a safer cash investment.

Say the 1/2 million you draw from lasts you 10 years. Woudlnt it make some sense to have had that other half million in higher risk investments up until (and probably past) your retirement date, then transitioned into the safer investments maybe a few years into retirement?

These are totally just round about figured I am throwing out, but just wanted to bring up the concept of having a large chuck of the pie continue to work for you DURING part of retirement.

I'm assuming it has to do with if you're willing to lose 20-30% of that 500k if the market were to tank during that 10 years. Seems pretty risky

But according to history, it would rebound, so just leave it.........................

 

[NutterButter]

But I like 6%. Why can't I use that? So what if it comes in higher than that. Just get to retire a few more years early. Why think a globalized American market is anything like America when it was in the Industrial Revolution? If you want to use recent history, that's what its been over the past 10 years. I probably wouldn't retire at 70 even if I had to as I wouldn't be able to walk then but I would rather plan for a conservative number and it is ends up higher, it is nice to have that option

 

[PinkydaPimp]

Does anyone here do whole life insurance? What kind of person is this a good vehicle for? I feel like most people would say it is a bad tool, but I am curious for whom it would be good.

Also, in general financial planning, how many months of average expenses should you keep in the bank as liquid assets? I feel I am waaaaay over the reasonable limits. As in I may have nearly 2 years' worth. Plus another 5 months in cash in a brokerage account from a stock transaction.

78% of my retirement investments are in my 401k. About 15% is in various American Funds, with a little less than half of that as rolled over IRAs. My wife and I turn 38 this year. I don't know if this is a good way to explain without revealing specific dollars I have, but the total in those investments equates to about 7.5 years of my current expenses today. We have 2 boys ages 7 and 9 and have some put away for college for them, but I am pretty confident it won't be enough yet.

What should I be thinking about at this stage to properly set us up to retire at 60 or earlier?

i think most people keep 6 months to 1 years as an emergency fund. Unless your job situation is very risky, it would likely make sense to move the rest somewhere you can at least beat inflation.

 

[ghostguy123]

But according to history, it would rebound, so just leave it.........................

Sure, but when? Plus you're already retired so you're no longer adding to your retirement.

Adding no, but (ok this is likely me being stupid) when you retire and start drawing money out of say a 401k or 403b, the money will still grow/regress with the market investments that you have the money in, correct?

Again not saying it would be right or wrong or not risky. I don't plan to do that myself, just wondering why if people are so confident in the long term growth (even at 2-3% let alone 8-9%) that there isn't a lot of people who recommend keeping their money in riskier investments like the index funds?

Say you are 35 right now. The same confidence in the market over the next 30 years could be applied to the 20-30 years following that, no??

 

[RUSF18]

But according to history, it would rebound, so just leave it.........................

Sure, but when? Plus you're already retired so you're no longer adding to your retirement.

Adding no, but (ok this is likely me being stupid) when you retire and start drawing money out of say a 401k or 403b, the money will still grow/regress with the market investments that you have the money in, correct?

Again not saying it would be right or wrong or not risky. I don't plan to do that myself, just wondering why if people are so confident in the long term growth (even at 2-3% let alone 8-9%) that there isn't a lot of people who recommend keeping their money in riskier investments like the index funds?

Say you are 35 right now. The same confidence in the market over the next 30 years could be applied to the 20-30 years following that, no??

My wife's grandparents are 94 and 90 and have been retired from teaching for decades. They have money in safer things as more of a base but also have a good amount in individual stocks. It all depends on what your goals are. A lot of people aren't just trying to run out the clock with their money.

 

[FUBAR]

But according to history, it would rebound, so just leave it.........................

Sure, but when? Plus you're already retired so you're no longer adding to your retirement.

Adding no, but (ok this is likely me being stupid) when you retire and start drawing money out of say a 401k or 403b, the money will still grow/regress with the market investments that you have the money in, correct?

Again not saying it would be right or wrong or not risky. I don't plan to do that myself, just wondering why if people are so confident in the long term growth (even at 2-3% let alone 8-9%) that there isn't a lot of people who recommend keeping their money in riskier investments like the index funds?

Say you are 35 right now. The same confidence in the market over the next 30 years could be applied to the 20-30 years following that, no??

There are many people who advise keeping at least some money in ETFs or funds after retirement. My parents are 68-71 and still have close to half their money in Mutual Funds. Albeit, he does have a public school pension which helps mitigate the risk.

 

[RUSF18]

I think part of it is also that no one wants to be a year away from retirement and have their money invested in higher risk instruments, only to see the market tank and then realize they need to work for an additional four years while the market rebounds. I imagine that's an enormous mental #### you to the people who went through it a few years back.

Not that it's a good thing to go through the same thing if you're already two years into retirement...

 

[FUBAR]

I think part of it is also that no one wants to be a year away from retirement and have their money invested in higher risk instruments, only to see the market tank and then realize they need to work for an additional four years while the market rebounds. I imagine that's an enormous mental #### you to the people who went through it a few years back.

Not that it's a good thing to go through the same thing if you're already two years into retirement...

The standard rule of keeping money you need in the next 5-10 years in safe investments holds true. But your retirement is going to be a lot longer than 5-10 years we hope. Perhaps 30-40 years, which leads to a conclusion that you should have more than 25% but less than 75% in safe assets. the optimum spot in that range is debateable.

 

[mquinnjr]

I think part of it is also that no one wants to be a year away from retirement and have their money invested in higher risk instruments, only to see the market tank and then realize they need to work for an additional four years while the market rebounds. I imagine that's an enormous mental #### you to the people who went through it a few years back.

Not that it's a good thing to go through the same thing if you're already two years into retirement...

Think of 2008 happening when you're a year away from retirement, and you're 80% in equities. You are no longer 1 year away from retirement if you paced to your nest egg goal to align with your retirement date. Over a long term horizon, the market has been shown to return ~8% per year, but that's accounting for huge swings up like 2013/2014, and huge swings down like 2008. That's why it's key to invest early and take on your risk at the onset. You have a limited window to take on the risk of equities and not have to fret about having too short of a window to recover from a 2008-esque downturn before you retire. So, you invest early and often in a high % of equities, when they're "paper tigers" and you're not realizing gains or losses, or have time to recover from them. I'm 31, and am 80/20 equities/fixed income. I have probably a 20 year window now to play that hand before I need to start to taper off my equities allocation into my fixed income allocation to hedge against a year like 2008 as I approach my own retirement. Some might say even sooner than that, but playing it out if I am 51 and 2008 happens again, I have ~5 years to get that back before I taper to fixed income in earnest. Approaching or at retirement, I'd never have more than 50% in equities, possibly less.

 

[ghostguy123]

Think of 2008 happening when you're a year away from retirement, and you're 80% in equities. You are no longer 1 year away from retirement if you paced to your nest egg goal to align with your retirement date.

If those people kept their money in equities/indexes, and still retired, they ended up just fine. Even better than if they went super conservative and the crash didn't effect them.

The money grew again, and grew to more than what they have now by far, even after drawing money from it.

 

[mquinnjr]

Think of 2008 happening when you're a year away from retirement, and you're 80% in equities. You are no longer 1 year away from retirement if you paced to your nest egg goal to align with your retirement date.

If those people kept their money in equities/indexes, and still retired, they ended up just fine. Even better than if they went super conservative and the crash didn't effect them.

The money grew again, and grew to more than what they have now by far, even after drawing money from it.

Better you than me in that heavy equities at retirement boat, guy.

My point is, you can take the risk/reward for decades and taper off of a high equities allocation leading up to retirement if you get your money in early and often during your investing horizon. I like to sleep comfortably at night, and that would not be gambling on equities when they're no longer paper tigers in my 30's and I have to actually live with/realize the ups and downs of the market in my retirement years.

 

[RUSF18]

Think of 2008 happening when you're a year away from retirement, and you're 80% in equities. You are no longer 1 year away from retirement if you paced to your nest egg goal to align with your retirement date.

If those people kept their money in equities/indexes, and still retired, they ended up just fine. Even better than if they went super conservative and the crash didn't effect them.

The money grew again, and grew to more than what they have now by far, even after drawing money from it.

Better you than me in that heavy equities at retirement boat, guy.

My point is, you can take the risk/reward for decades and taper off of a high equities allocation leading up to retirement if you get your money in early and often during your investing horizon. I like to sleep comfortably at night, and that would not be gambling on equities when they're no longer paper tigers in my 30's and I have to actually live with/realize the ups and downs of the market in my retirement years.

Exactly. And that's what I was saying earlier...if you saw 30% of your nest egg wiped away, are you still putting in your papers in a year? No way in hell. You don't know how long it will take to rebound and no one ends up retiring just because they reached an age goal that is no longer valid under the hope of "it'll end up fine".

A guy I worked with finally retired late last year after originally planning on retiring around 2010. Yes, he ended up fine and whole but everything was pushed back almost 5 years.

 

[wilked]

Once you lose 50%, you now need to gain 100% to get back to even

 

[wilked]

Inevitably everyone will say to go 100% stocks when the market is doing well, as it has been. When something like this happens

http://motorcityconnect.groupsite.com/uploads/files/x/000/01c/816/DJIA_1929-1932.jpg

The world will be inundated with analysts recommending to sell before you lose everything and balance into safer investments. If that is your retirement you are watxhing and you just saw it get carved in half it would be extremely difficult to just leave your money alone

 

[FUBAR]

Think of 2008 happening when you're a year away from retirement, and you're 80% in equities. You are no longer 1 year away from retirement if you paced to your nest egg goal to align with your retirement date.

If those people kept their money in equities/indexes, and still retired, they ended up just fine. Even better than if they went super conservative and the crash didn't effect them.

The money grew again, and grew to more than what they have now by far, even after drawing money from it.

Better you than me in that heavy equities at retirement boat, guy.

My point is, you can take the risk/reward for decades and taper off of a high equities allocation leading up to retirement if you get your money in early and often during your investing horizon. I like to sleep comfortably at night, and that would not be gambling on equities when they're no longer paper tigers in my 30's and I have to actually live with/realize the ups and downs of the market in my retirement years.

Exactly. And that's what I was saying earlier...if you saw 30% of your nest egg wiped away, are you still putting in your papers in a year? No way in hell. You don't know how long it will take to rebound and no one ends up retiring just because they reached an age goal that is no longer valid under the hope of "it'll end up fine".

A guy I worked with finally retired late last year after originally planning on retiring around 2010. Yes, he ended up fine and whole but everything was pushed back almost 5 years.

depends on the person really. But this is why you look ahead and put 5-10 years away in safe assets.

Let's say Mr. X has saved $2 Million (a low estimate, but roll with it), he's 55 and wants to retire. He intentionally ignores SS for now, considering anything he gets to be a bonus.

25% is in Bonds / CDs yielding 1% (so $500k x 1% / year)

75% is in stocks (he's entirely in the S&P 500) but let's say he loses 40% of his stock holdings, so he now has $900k

Let's say he pulls out 3% / year and retires right after the market crashes. year one he can withdraw $42k from his short term assets. he'll readjust his portfolio to 25/75, meaning he'll buy roughly $118k in stocks giving him $1,018K in stocks and $340k in bonds/CD.

He'll continue to readjust, but for simplicity say he has $1M in stock, $340k in bonds and doesn't readjust (a smarter person than I could do the math showing if he did readjust annually). He could live off the bonds for 6 years while (if history repeats), the stock market rebounds over 200%, which would make his stocks worth over $2Million and if he pulled out $42k every year he'd still have $88k in bonds (again, he would readjust but this is supposed to be simpler).

Clearly losing 40% before retiring would suck, but if Mr. X is conservative with his spending and saves well throughout his earning years, he'll be fine.

the only real question here is how much you save vs. spend in retirement.

 

[Vincesanity]

That really is the bigger question, the market dropping only has an effect on your emotions. If you're withdrawling 5-6% or a set amount and increasing each year for inflation then you'll recover just fine.

 

[Sand]

Question regarding the less risky investments upon retiring. For the sake of easy numbers lets say you have a million bucks in your account you hit 65, and you retire.

The conventional wisdom is to draw X number of dollars per month/year/whatever, while the money sits in stable (probably cash) investments.

Why not draw from half, and keep half in the volatile market investments?

Seems the calculations will give you a dollar figure for when you retire, but if you remain invested with the 6-7% or whatever returns, that money continues to compound, while drawing from a safer cash investment.

Say the 1/2 million you draw from lasts you 10 years. Woudlnt it make some sense to have had that other half million in higher risk investments up until (and probably past) your retirement date, then transitioned into the safer investments maybe a few years into retirement?

These are totally just round about figured I am throwing out, but just wanted to bring up the concept of having a large chuck of the pie continue to work for you DURING part of retirement.

Hey Ghost. This kind of analysis has been done - check out this article. That guy is super sharp, so well worth the read. Most times when a retirement path fails it is due to returns right at the start of retirement. His analysis showed being very conservative at the start of retirement and then opening up (though the chances of failure don't move by a huge amount).

Have a look - well worth a discussion in here, too.

 

[ZenMaster]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

 

[Random]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.

And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

 

[mquinnjr]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.

And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

I think the employer match is the key to get people over the hump, because you are correct if you're basing projections on solely employee contributions. It will be different for everyone, but a match on any percentage of contribution or other employer driven assistance is a big help. Most employers don't offer a defined benefit pension plan anymore, and have shifted the risk to the employees to reduce company costs associated with pension accounting and required contribution/investment risk to the company. There (hypothetically) should be a correlating boost in matching/bonus employer contributions to employee 401k balances, providing employees that upside to get them to their target nest egg amount over time.

Total YMMV situation, but a big factor to consider when projecting a future nest egg amount and what's required to get there.

 

[FUBAR]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.

And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

This is where a pension is very helpful.

 

[Dentist]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.

And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

I've been maxing my retirement accounts since I was 24 y.o. and have maxed out a roth ira most years in that time frame, and then have done the same for my wife since we were married.

if you max 2 401k/403b's, and 2 roth iras and max out a HSA, and put a sizeable contribution into a 529 plan if you have children you're packing away well over 50K/yr into tax advantaged vehicles. 17k (+5k match)+17k+5.5k+5.5k+6K (hsa)+5K(529) = over 60k i'm putting away for mostly future expenses.

I'm pretty sure that's going to get me there without a single dollar outside of a tax advantaged account (although I do have those as well.. and those are for the gap between my desired retirement age and the age you can begin to withdraw from retirement accounts).

I suspect this will yield FAR above the 1.5M your calculation yields.

 

[ghostguy123]

Example. You and your wife both have a 403b. Both investent in all index funds.

You each plan to retire at 63.

For your 403b you remain 100% invested in indexes at age 63, do not draw anything out.

For her 403b you started switching to much more conservative investments over the past 10 years, and are now all bonds/cash, and begin drawing from that.

Something like this. It does seem that drawing from a fluctuating acount would be risky if the market trends down at the beginning of your retirement. But of you draw from the stable account while letting the other ride, seems far less risky.

Am i even making sense or am I sounding dumber by the post

 

[Slapdash]

There are more options about how to access money in IRA/401k than are being assumed here.

 

[ghostguy123]

A guy I worked with finally retired late last year after originally planning on retiring around 2010. Yes, he ended up fine and whole but everything was pushed back almost 5 years.

But did it need to be? He likely has a LOT more money for his retirement now than he originally planned on having, and had he retired in 2010 he would have been fine.

 

[ghostguy123]

There are more options about how to access money in IRA/401k than are being assumed here.

I would ask what, but for now I am better off not knowing

 

[Random]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.

And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

I've been maxing my retirement accounts since I was 24 y.o. and have maxed out a roth ira most years in that time frame, and then have done the same for my wife since we were married.

if you max 2 401k/403b's, and 2 roth iras and max out a HSA, and put a sizeable contribution into a 529 plan if you have children you're packing away well over 50K/yr into tax advantaged vehicles. 17k (+5k match)+17k+5.5k+5.5k+6K (hsa)+5K(529) = over 60k i'm putting away for mostly future expenses.

I'm pretty sure that's going to get me there without a single dollar outside of a tax advantaged account (although I do have those as well.. and those are for the gap between my desired retirement age and the age you can begin to withdraw from retirement accounts).

I suspect this will yield FAR above the 1.5M your calculation yields.

I assume you already know you do not fall in the "most people" category. But you are a great example of the extremes you would need to go to retire in your 50's with only retirement accounts. And the 1.5M was for one person maxing 401K and an IRA. About 20K per person per year.

 

[Slapdash]

There are more options about how to access money in IRA/401k than are being assumed here.

I would ask what, but for now I am better off not knowing

72t and Roth Conversion Ladders are the big ones.

 

[NutterButter]

There are more options about how to access money in IRA/401k than are being assumed here.

I would ask what, but for now I am better off not knowing

72t and Roth Conversion Ladders are the big ones.

Tasker mentions the 72t as well. That's a good one.

 

[NutterButter]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.

And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

do you need more than 45k/yr during retirement? if you had 1.5M in retirement at 50 and plans to live for another 40 years at 45k/yr, firecalc gives that plan a 100% chance of succeeding. That doesn't include SS either.

 

[fred_1_15301]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

I've been maxing my retirement accounts since I was 24 y.o. and have maxed out a roth ira most years in that time frame, and then have done the same for my wife since we were married.

if you max 2 401k/403b's, and 2 roth iras and max out a HSA, and put a sizeable contribution into a 529 plan if you have children you're packing away well over 50K/yr into tax advantaged vehicles. 17k (+5k match)+17k+5.5k+5.5k+6K (hsa)+5K(529) = over 60k i'm putting away for mostly future expenses.

I'm pretty sure that's going to get me there without a single dollar outside of a tax advantaged account (although I do have those as well.. and those are for the gap between my desired retirement age and the age you can begin to withdraw from retirement accounts).

I suspect this will yield FAR above the 1.5M your calculation yields.

True but how much have you pissed away from poker bad beats?

 

[Dentist]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

I've been maxing my retirement accounts since I was 24 y.o. and have maxed out a roth ira most years in that time frame, and then have done the same for my wife since we were married.

if you max 2 401k/403b's, and 2 roth iras and max out a HSA, and put a sizeable contribution into a 529 plan if you have children you're packing away well over 50K/yr into tax advantaged vehicles. 17k (+5k match)+17k+5.5k+5.5k+6K (hsa)+5K(529) = over 60k i'm putting away for mostly future expenses.

I'm pretty sure that's going to get me there without a single dollar outside of a tax advantaged account (although I do have those as well.. and those are for the gap between my desired retirement age and the age you can begin to withdraw from retirement accounts).

I suspect this will yield FAR above the 1.5M your calculation yields.

True but how much have you pissed away from poker bad beats?

I'm definitely +EV lifetime on poker, moreso online than live.

Eventually though I found that the bad beats were affecting me negatively on an emotional level more so than the monetary gains were affecting me in a positive way.

I got so mad at people online that i became a troll on the worst level when someone would 3 or 2 out me, especially if their decision for making the call was suspect.

You can check my OPR if you don't believe my +EV claim

 

[fred_1_15301]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

I've been maxing my retirement accounts since I was 24 y.o. and have maxed out a roth ira most years in that time frame, and then have done the same for my wife since we were married.

if you max 2 401k/403b's, and 2 roth iras and max out a HSA, and put a sizeable contribution into a 529 plan if you have children you're packing away well over 50K/yr into tax advantaged vehicles. 17k (+5k match)+17k+5.5k+5.5k+6K (hsa)+5K(529) = over 60k i'm putting away for mostly future expenses.

I'm pretty sure that's going to get me there without a single dollar outside of a tax advantaged account (although I do have those as well.. and those are for the gap between my desired retirement age and the age you can begin to withdraw from retirement accounts).

I suspect this will yield FAR above the 1.5M your calculation yields.

True but how much have you pissed away from poker bad beats?

I'm definitely +EV lifetime on poker, moreso online than live.

Eventually though I found that the bad beats were affecting me negatively on an emotional level more so than the monetary gains were affecting me in a positive way.

I got so mad at people online that i became a troll on the worst level when someone would 3 or 2 out me, especially if their decision for making the call was suspect.

You can check my OPR if you don't believe my +EV claim

Relax. I was just messing with you. I know you're a good player.

 

[Sand]

For guys looking to retire prior to 59, how are you planning on cover expenses since you won't be able to tap into your IRA/401k yet? Based on my projections, I could theoretically retire at 50, but if I continue maxing out my 401k, most of my retirement money will be in that. I'll have money in a brokerage account, but not enough to cover 9 years of expenses. I don't know of any other option other than to stop funding the 401k at some point and fund the brokerage account instead.

My wife and I have both of our 401(k)'s maxed out. We also have a lot of savings in various investments (mostly stocks with a bit of precious metals and one rental property).

We plan to retire before 50 and estimate that we'll have at least as much saved in our investments accounts as we will in our retirement accounts. As you mentioned, to retire early you have to have money that you can access.

This is exactly the problem with maxing out retirement accounts in hopes of retiring early. I just don't see it happening without outside investments. If you max out 401K and IRA for 30 years you're looking at less than $1.5M. Or at a 3% withdrawal rate less than $45K/year in retirement. I find it very hard to believe anyone retires much earlier than 55 on nothing more than retirement accounts.And lets not ignore the fact that putting $20K+/year into retirement accounts is very very difficult for almost anyone to do.

I've been maxing my retirement accounts since I was 24 y.o. and have maxed out a roth ira most years in that time frame, and then have done the same for my wife since we were married.

if you max 2 401k/403b's, and 2 roth iras and max out a HSA, and put a sizeable contribution into a 529 plan if you have children you're packing away well over 50K/yr into tax advantaged vehicles. 17k (+5k match)+17k+5.5k+5.5k+6K (hsa)+5K(529) = over 60k i'm putting away for mostly future expenses.

I'm pretty sure that's going to get me there without a single dollar outside of a tax advantaged account (although I do have those as well.. and those are for the gap between my desired retirement age and the age you can begin to withdraw from retirement accounts).

I suspect this will yield FAR above the 1.5M your calculation yields.

True but how much have you pissed away from poker bad beats?

I'm definitely +EV lifetime on poker, moreso online than live.

Eventually though I found that the bad beats were affecting me negatively on an emotional level more so than the monetary gains were affecting me in a positive way.

I got so mad at people online that i became a troll on the worst level when someone would 3 or 2 out me, especially if their decision for making the call was suspect.

You can check my OPR if you don't believe my +EV claim

In the early days of online poker money was pretty easy. Dentist being well +EV surprises me not at all. I played until funding got shut off and then invested it. +EV to the point that it just paid for a 20% down payment on a new house today.

On another note, I figured my retirement calculator is in decent enough shape to share. The deterministic result works well, as does the historic. The graphing on the historic page isn't quite done yet and I haven't made up the Monte Carlo page yet. To come. I put in fake numbers just to show what it does. Anything in yellow is user enterable, though many of those spots the default is fine. One thing not taken into account in any other calculator was something to handle an inherited IRA, something I need to take into account. So I made this - link. Any comments welcome.

 

[ghostguy123]

Can we invest in some of the online poker studs here

What can do with 100 grand now in terms of a 30 year investment for me

 

[fred_1_15301]

Can we invest in some of the online poker studs here

What can do with 100 grand now in terms of a 30 year investment for me

I could get that up to a 103 grand

 

[No. 16]

How much liability do you guys have for car insurance? Mine is currently 250k per person and 500k max each accident for bodily injury and and 100k for property damage.

My total assets aren't much. Renting an apartment and my car, savings, and retirement is well short of 250k right now. Worth it to go down to 100k/300k to save a few bucks?

 

[Polish Hammer]

Does anyone here do whole life insurance? What kind of person is this a good vehicle for? I feel like most people would say it is a bad tool, but I am curious for whom it would be good.

Also, in general financial planning, how many months of average expenses should you keep in the bank as liquid assets? I feel I am waaaaay over the reasonable limits. As in I may have nearly 2 years' worth. Plus another 5 months in cash in a brokerage account from a stock transaction.

78% of my retirement investments are in my 401k. About 15% is in various American Funds, with a little less than half of that as rolled over IRAs. My wife and I turn 38 this year. I don't know if this is a good way to explain without revealing specific dollars I have, but the total in those investments equates to about 7.5 years of my current expenses today. We have 2 boys ages 7 and 9 and have some put away for college for them, but I am pretty confident it won't be enough yet.

What should I be thinking about at this stage to properly set us up to retire at 60 or earlier?

i think most people keep 6 months to 1 years as an emergency fund. Unless your job situation is very risky, it would likely make sense to move the rest somewhere you can at least beat inflation.

Thanks for that. Any basic investments for that where I won't get killed with fees?Anybody have suggestions or info on any of my other questions?

 

[ghostguy123]

Question regarding the less risky investments upon retiring. For the sake of easy numbers lets say you have a million bucks in your account you hit 65, and you retire.

The conventional wisdom is to draw X number of dollars per month/year/whatever, while the money sits in stable (probably cash) investments.

Why not draw from half, and keep half in the volatile market investments?

Seems the calculations will give you a dollar figure for when you retire, but if you remain invested with the 6-7% or whatever returns, that money continues to compound, while drawing from a safer cash investment.

Say the 1/2 million you draw from lasts you 10 years. Woudlnt it make some sense to have had that other half million in higher risk investments up until (and probably past) your retirement date, then transitioned into the safer investments maybe a few years into retirement?

These are totally just round about figured I am throwing out, but just wanted to bring up the concept of having a large chuck of the pie continue to work for you DURING part of retirement.

Hey Ghost. This kind of analysis has been done - check out this article. That guy is super sharp, so well worth the read. Most times when a retirement path fails it is due to returns right at the start of retirement. His analysis showed being very conservative at the start of retirement and then opening up (though the chances of failure don't move by a huge amount).

Have a look - well worth a discussion in here, too.

Printing out now. Gonna read tonight. Thanks

 

[ghostguy123]

Hey Ghost. This kind of analysis has been done - check out this article. That guy is super sharp, so well worth the read. Most times when a retirement path fails it is due to returns right at the start of retirement. His analysis showed being very conservative at the start of retirement and then opening up (though the chances of failure don't move by a huge amount).

Have a look - well worth a discussion in here, too.

Read this last night. Some of it didn't make sense to me, but the main idea of continuing to invest in equities makes a ton of sense.

This just mostly depends on the type of person you are. If you are a worrier NOW, no way you can do this when you are older.

I definitely like the idea of the 3 year cash reserve while everything else just rides and rides.

 

[FUBAR]

Question regarding the less risky investments upon retiring. For the sake of easy numbers lets say you have a million bucks in your account you hit 65, and you retire.

The conventional wisdom is to draw X number of dollars per month/year/whatever, while the money sits in stable (probably cash) investments.

Why not draw from half, and keep half in the volatile market investments?

Seems the calculations will give you a dollar figure for when you retire, but if you remain invested with the 6-7% or whatever returns, that money continues to compound, while drawing from a safer cash investment.

Say the 1/2 million you draw from lasts you 10 years. Woudlnt it make some sense to have had that other half million in higher risk investments up until (and probably past) your retirement date, then transitioned into the safer investments maybe a few years into retirement?

These are totally just round about figured I am throwing out, but just wanted to bring up the concept of having a large chuck of the pie continue to work for you DURING part of retirement.

Hey Ghost. This kind of analysis has been done - check out this article. That guy is super sharp, so well worth the read. Most times when a retirement path fails it is due to returns right at the start of retirement. His analysis showed being very conservative at the start of retirement and then opening up (though the chances of failure don't move by a huge amount).

Have a look - well worth a discussion in here, too.

I skimmed most of it, read portions in more depth. This seems to simply say lesser exposure to equities when they decline is better? IOW, it's a risk mitigation strategy based on timing the market.

One noteworthy line though - (It's worth noting that historically, a 60/40 portfolio has never actually failed)

 

[mquinnjr]

How much liability do you guys have for car insurance? Mine is currently 250k per person and 500k max each accident for bodily injury and and 100k for property damage.

My total assets aren't much. Renting an apartment and my car, savings, and retirement is well short of 250k right now. Worth it to go down to 100k/300k to save a few bucks?

I wouldn't. God forbid you get sued, won't they just garnish your wages for the rest of your life if your insurance can't cover it?

Good article on this: http://guides.wsj.com/personal-finance/insurance/how-much-car-insurance-do-you-need/

Has me thinking I need to consider upping from 100/300 soon.

• Bodily Injury Liability (BIL) – This policy pays for the medical expenses of people injured in a crash in which you’re at fault. You’ll often see BIL policies described as a “20/50” policy or a “100/300” policy. These numbers describe the maximum dollar amount the policy will pay for a single person’s injuries and the maximum for all the injuries sustained by all the occupants of the other car. For example, a 20/50 policy will pay a maximum of $20,000 for a single person’s injuries, and up to $50,000 total for the injuries of everyone in the car you hit.

You’re on the hook when costs exceed your coverage limits. That’s why many people opt for policies that cover more than required minimums, particularly if they have assets that can be seized to pay for repairs and medical care.

A good rule of thumb: Make sure you’re covered for an amount equal to the total value of your assets (Add up the dollar values of your house, your car, savings and investments).

 

[Random]

I believe umbrella policies cover auto accidents. Just another reason to have one. And it may cost less than upping your auto limits.

 

[mquinnjr]

I believe umbrella policies cover auto accidents. Just another reason to have one. And it may cost less than upping your auto limits.

Thanks, will look into this! From the Geico website, non-sale related (applicable anywhere):

How much umbrella insurance coverage do you need?

You can take out an umbrella policy with coverage limits of $1 million to $10 million. Can't imagine that you would need that much coverage? You might be surprised. Follow these three quick steps to get an idea of how big an umbrella you may need:

Step 1: Add up your assets (including the worth of your home*, money in the bank, stocks, bonds, 401(k) funds and other retirement savings, and other assets—maybe you have a collection of rare lunchboxes?).

Step 2: See how much liability coverage you have on your homeowners, auto, and boat policies.

Step 3: Determine if your current liability policies cover your assets.

If you don't have protection that exceeds your assets, you owe it to yourself to consider a personal umbrella policy. For an affordable premium, you can protect yourself against a financial tsunami.

Good article on how umbrella policies work, and what a "typical" amount of coverage could cost: http://www.financialsamurai.com/how-does-an-umbrella-policy-work-and-how-much-does-it-cost/

 

[No. 16]

How much liability do you guys have for car insurance? Mine is currently 250k per person and 500k max each accident for bodily injury and and 100k for property damage.

My total assets aren't much. Renting an apartment and my car, savings, and retirement is well short of 250k right now. Worth it to go down to 100k/300k to save a few bucks?

I wouldn't. God forbid you get sued, won't they just garnish your wages for the rest of your life if your insurance can't cover it?

I guess they could, but that would have to be some major damage if it's over 300k. I'll inquire with my agent to see exactly how much going from 250k/500k to 100k/300k affects my premiums.

 

[Chadstroma]

The lesson I learned from my car accident. I always expected that since I have health insurance that I really did not need coverage for medical expenses in auto, so I always had it at a smaller amount- mostly to cover my health insurance deductable.

Not so much.

Apparently your health insurance (or at least mine?) does not cover it because you have auto insurance. ????

Long story short, it was a costly lesson for me.

 

[ajm27501]

In the early days of online poker money was pretty easy. Dentist being well +EV surprises me not at all. I played until funding got shut off and then invested it. +EV to the point that it just paid for a 20% down payment on a new house today.

On another note, I figured my retirement calculator is in decent enough shape to share. The deterministic result works well, as does the historic. The graphing on the historic page isn't quite done yet and I haven't made up the Monte Carlo page yet. To come. I put in fake numbers just to show what it does. Anything in yellow is user enterable, though many of those spots the default is fine. One thing not taken into account in any other calculator was something to handle an inherited IRA, something I need to take into account. So I made this - link. Any comments welcome.

This is pretty slick. Thanks for sharing. One suggested addition would be to include a spot for expected pension income.