Retirement, how much is needed?

Has there been any discussions on the subject of retirement here? I am 60 and plan to retire soon. But, I am not sure if I have enough money to last another 20 years. I plan to by a house in Vegas, all cash. Then all I need are medical care, food, entertainment, etc. How much more cash at least do I need to retire at the age of 62, $500 K, $800 K or $1M? Is there a calculator on WoO? Thanks. I know one answer already, "depends on your life style."

Quote: UCivan

Has there been any discussions on the subject of retirement here? I am 60 and plan to retire soon. But, I am not sure if I have enough money to last another 20 years. I plan to by a house in Vegas, all cash. Then all I need are medical care, food, entertainment, etc. How much more cash at least do I need to retire at the age of 62, $500 K, $800 K or $1M? Is there a calculator on WoO? Thanks. I know one answer already, "depends on your life style."

Why buy? Rates are so low on mortages now, it makes more sense to borrow than to tie up your cash.

Foreclosed one house, bad credit. -:((

How much money do you think you will need to live off of per month? Think not just about normal living expenses like electricity and food, but also other additional "luxury" expenses, like travel, restaurants and gambling.

Also consider the need for an estate. Do you need to have money in the bank in case you predecease your spouse? Do you need money to support any children (college bills, etc.)?

A 62 year old male in 2014 will live, on average 22.489 more years, according to the 1994 Uninsured Pensioners mortality table, with generational projections.

>If you can earn 3.25% on your money (1% real assuming inflation of 2.25%), then $1,000 a month will require $184,000 in savings.

>If your investments can only match inflation at 2.25%, then $1,000 a month will require $205,000 in savings.

>If you will not be investing your money, $1,000 a month will require $270,000 in savings.

One more thing, the above are non-indexed amounts. There is a very important concept in retirement planning called the "time value of money". In simple terms, $1 today is worth more than $1 a year from now. Why? Because inflation eats away at the purchasing power of a $1 year after year. Think about the price of a coke today vs. 20 years ago.

You will probably need more money as you age as a result of inflation. Your electricity bill will go up, the cost of food will go up, even table minimums at the casino will go up over time! As a result, you may want to know what it might cost to "index" the $1,000/month I illustrated in the post above. This preserves the purchasing power of your monthly payment. So a stream of payments might look like this: $1,000/month for the first year, $1,022.50/month for the second year, etc.

Indexing the above amounts @ 2.25% inflation under the above scenarios would cost:

>If you can earn 3.25% on your savings: $241,000
>If you can earn 2.25% on your savings: $270,000 (the more mathematically astute here will notice this is just $12,000 times 22.5 years life expectancy)
>If you do not invest your savings: $374,000

--I've given you maybe too much to think about. If you have questions, just post.

cardshark has done a good job scratching the surface of a simple question with a complex answer, but I would probably get professional help. Call whoever has your 401ks or IRAs and ask if they have any retirement income planning specialists.

One rule of thumb going around is that if you have a well balanced portfolio you can count on withdrawing 4% per year for decades. You don't count equity in your house or SS, etc. If super conservative or going risky with your investments, figure less. The portion coming from your portfolio, this 4%, will be able to be increased for inflation.

You might object that surely 4% is too low, but, to repeat, like your SS portion it allows an adjustment for inflation.

One thing notable is that a $1 million will yield $40k/yr by this formula. Thus it is clear that young people with a million should not retire and also that just about everybody should want to put away more than a million... or work until 70+ yrs old at least.

While you may seek professional guidance keep in mind they just want to sell you products, so please don't sign any papers on the spot.

To figure how much you need saved first you need to know what you will spend every month. To calculate this make a budget, then throw it out. People find out that they tend to spend the same or more in retirement. You may spend less on the house but a lot more on gambling, food, entertainment, etc..

Simple rule of thumb is to plan on spending the same amount you currently do. As for how long you should plan for in imho at least 5yrs past expected life span. This will give some leeway for the future.

Inflation will be a factor that no one can tell you what it will be. While some will plan for a 2% year over year rate others will expect it to be higher. This effects how much you need in savings. Keep in mind whatever you plan for be flexible, life changes.

Everything is a tradeoff

More is always better -- but anyone can drop out of the workforce anytime they want

Once that conclusion hit me I decided it would be best for me to retire early

Total assets weren't very high -- but I do what is necessary to avoid going bust

Budget is tight -- make an effort to avoid buying stuff -- but everything is so much more comfortable without those 40 hours dominating the week

How much is needed for retirement? What does it
matter, whatever number you arrive at, it won't
be enough. It never is.

Quote: whatme

While you may seek professional guidance keep in mind they just want to sell you products, so please don't sign any papers on the spot.

Definitely, which is why I suggested starting with places he's already a customer. The products to watch out for are stuff that can lock your money up with penalties to get out (annuities, other insurance products) and mutual funds with front end loads (sales charges that can be up to 5%....no reason to pay that at all).

It's really great you can summon up so many calculators with your google machine these days.

Boy is this one essential for just about everybody Guess what happens when you screw your retirement distribution up in your dotage? You give the IRS a 50% penalty on the amount you failed to draw out. Must be party time over there all the time now.

Just work til you drop; it's the American way.

In fact, with the evisceration and evaporation of many retirement plans, it's really the only way.

Heck, even that old Internet Fool, Frank Stanton, is still working, and he's 78.

The guy who runs the wine dept in my local
grocery store is 81 and still works 40 hours
a week.

None of the elderly working at Walmart are there "to keep active"... they are there to eat or drink or smoke at home.

The first thing is to consider in what way will you be adjusting your lifestyle and do it now. Library instead of bookstore? Clothing? Cars?

If you move to Las Vegas from somewhere else your automobile and electricity expenses will climb astronomically. Even if you yourself are luck enough to travel elsewhere for August, the house has to be kept relatively cool.

How much will you budget for legal insecurities regarding prior foreclosures on homes in Vegas? How much will you budget for occasional checking of your properties title records to avoid scam artists selling a fictional mortgage on your home while you are out at the casino?

What comfort level do you want? Its not much fun to be cutting the thermostat to "save" money. Health problems may strike? Crime victims can be in the headlines or in your home or both.

Diversification is good. Some fools lock things up in an annuity when they need the money "now" or forget that the term "income" in an annuity payment has a specific meaning and does not mean the full payment.

If you have assets in a trust and also a will... be careful. Children is a term that in a will tends to include adopted children but in a trust document it tends to exclude them, so make sure you tell your estate lawyer just what your situation is. If you die in an autoaccident the cause of action might be part of the Trust corpus rather than the Will's hotchpot... be sure such unusual situations are considered.

Keep control of assets... too many people who give their kids their inheritances early wind up in a low cost nursing home with no frills. Rather than buying an assisted living policy you might be better off buying a home that appreciates but the ownership of it entitles you to some assisted living care.

Go to a REAL financial planner, not a commission-oriented salesman pushing some product so he will get HIS money no matter what happens to your money or how unsuitable the investment is for you. A front end load is absurd. Even a fee for management of money in a stock fund is absurd since the fund itself charges a management fee.

Consider Asset Protection but only if you really think you will face greedy judgment holders and know what you are doing. If you put your funds in a Cayman corporation you are in real trouble, you have to put them in a Cayman company. The words have major differences in the Cayman Islands and some careless lawyer in the USA might not know that.

Expatriates often try to come back when laws and local customs start to annoy them but some can't afford to. English retirees in France don't qualify for health coverage and English retirees in Spain often don't bother to call the local police when Gypsies come calling. The local police don't come to the aid of foreigners.

Remember... there are always pitfalls. Its true that often Brazil does not extradite Americans but Brazil does often expel them to America. If you want the protection of Brazils non-extradition laws its best to be the father of a Brazilian national. And even then you may have to pay and pay and pay. So don't assume anything that you've "heard over the years". Check it out.

If you plan on travel... look at the current headlines: Cruise ships losing power and drifting helplessly in pirate infested waters. Yachts in the Indian Ocean sailing in secret convoys for protection, pirates using AK-47s to totally sever the bodies of American yachting couples who were found to have Bibles aboard. Detention in some foreign country for importing a statue of Qua Yin is not fun since that is a statue of a godess and in a muslim society can bring the death penalty even if the yachtsman had it on board for years of peaceful sailing. Times change! In the sixties a great many yachts disappeared during easy voyages. The boats were not wanted for drug runs, it was simply that taking on-board cash and jewelry and some engines and spare parts was a profitable haul and a safe crime since yachties were in Davy Jones Locker along with all the evidence. Sink a valuable yacht and kill a retired couple for a few hundred dollars? Why not. Life is cheap and every day it gets cheaper.

Living in an urban area as a prisoner of street crime can be just as depressing as living in Las Vegas as a prisoner of air-conditioning. So have an escape plan if something serious happens to that nest egg. Don't think you can sell that house... often it won't sell and often a realtor won't even list it when there is just too much on the market already.

And remember,,, watch your spouse's health: one husband asked his wife for money so this Gypsy Woman would continue to pray for him since that was all that was keeping him alive. The wife immediately checked their 400,000 stash of cash. All gone. Their bank accounts: all gone. Title to their home: the Gypsy Woman owned it. Brain tumors, senility or just mild dotage... can be dangerous for you and your spouse. One man sold 20K worth of stock to buy "collectible glasses". Total worth: zilch. Potential for eventual appreciation: zilch. What could his wife do? Have him declared unable to manage his affairs retroactively? She didn't even have money for a lawyer.

Geez Flea......I thought I worried too much ;-)

Quote: Paradigm

Geez Flea......I thought I worried too much ;-)

Sorry. I'll shut up now.

No I didn't mean it that way....you have some good points in there, I was just like "crap....what else can go wrong". I am trying to stay more positive these days and based on my leap to the negative most times, it is a challenge :-)!

Quote: cardshark

How much money do you think you will need to live off of per month? Think not just about normal living expenses like electricity and food, but also other additional "luxury" expenses, like travel, restaurants and gambling.

Also consider the need for an estate. Do you need to have money in the bank in case you predecease your spouse? Do you need money to support any children (college bills, etc.)?

A 62 year old male in 2014 will live, on average 22.489 more years, according to the 1994 Uninsured Pensioners mortality table, with generational projections.

>If you can earn 3.25% on your money (1% real assuming inflation of 2.25%), then $1,000 a month will require $184,000 in savings.

>If your investments can only match inflation at 2.25%, then $1,000 a month will require $205,000 in savings.

>If you will not be investing your money, $1,000 a month will require $270,000 in savings.

what? age 62 and living another 22.5yrs only requires $410k TOTAL if u need $2000/month and assume your investment return only matches inflation?

how did u arrive at this?

and does that also including taking early social security?

plan on needing income=75% or more of what you are currently earning. Not sure when medicare kicks in, it isntt always whe you become SS eliligle.
A safe rule of thumb is not to plan on drawing down savings/portfolio more than 5% in any given year, less if you dont own equities

For me, I think the key amount of what I need to earn each month in today's Canadian dollars for my wife and I is about $4.0K/month, minimum, before taxes. I anticipate by then that we would be living in a condo somewhere (paid for) and we would be responsible for taxes, maintenance fees, and utilities, so about 1K / month for that. Add in another $700/month for car payments, insurance, and gas and another $500 for groceries and we would have $1.8K/month left over for everything else. At that level of income with income splitting in effect, 15% ($600) for taxes.

To get there, CPP/OAS will provide $1,500 / month at age 67. For my wife, she will receive a combination of US Social Security and Canada OAS worth about $1,600 per month as well at age 67. Since I am five years younger than my wife, I will likely retire at age 62 and collect a reduced pension of $700/month (OAS doesn't kick in until age 67). These amounts grow with the CPI.

That leaves five years where there will be a sizable shortfall of about $1,800/month from ages 62 - 67 and $900 / month from 67 onward that we have to make up with private money. This is in today's dollars.

By my prediction, with inflation at 2% and my rate of return at 5% after retirement, I'll need about 425,000 of my own savings at age 62 to make it through age 100 with money left over. Canada like the US provides several ways to save money tax-deferred or tax free until withdrawal.

Most investment advistors advise that you will need 70-75% of your preretirement income to enjoy the same standard of living as you do today. You could use a bottoms up approach as well and just do a post-retirement budget to calculate your income needs.

A chart showing results of choosing your retirement age with Social Security:

Interesting graph I havent seen before. I'm surprised the point of intersection is so close to being the same regardless.

Also interesting that the common choice, 62 or 66 [the chart is dated using 65] yields two lines that come together soon and stay fairly close together pretty long. It's as if you could conclude the right move is either one [no wonder the experts differ on this one]

hm.. normal retirement age=67 for those born after 1959.
taking retirement at 62 = 70% benefit.

5yr for 30%? aka 6%/yr penalty

delayed retirement gets you a 8%/yr bonus, up to age 70.
so 24% bonus if you collect benefits at age 70.

if i dont need the $, guarenteed 8%/yr increase sounds good and a no brainer to delay benefits till age 70??
(i'll take guarenteed 8%/yr vs avg 10%/yr in the stock market)

Quote: 100xOdds

hm.. normal retirement age=67 for those born after 1959.
taking retirement at 62 = 70% benefit.

5yr for 30%? aka 6%/yr penalty

delayed retirement gets you a 8%/yr bonus, up to age 70.
so 24% bonus if you collect benefits at age 70.

if i dont need the $, guarenteed 8%/yr increase sounds good and a no brainer to delay benefits till age 70??
(i'll take guarenteed 8%/yr vs avg 10%/yr in the stock market)

I agree with delaying and will not take any of my pensions until I quit working, likely at 70 but the math isn't so simple. You need to factor in how long you are going to live which of course is not exact science. To die after collecting 1 months pension does not work so well.

For anyone here who has their own business, or is in a small group of like-minded individuals, look into a "New Comparability Plan". Best retirement vehicle yet. By FAR.
You can google it.

I note the frequent use of the word "plan" in these various posts and that is all just fine and dandy. Plans? I wonder what plans all those with foreclosed mortgages had? I wonder what plans college students had when they show up at their parents home utterly jobless? Plans? Yes, they are great things.

Flea don't be so negative. We all have to have plans just because our last ones didn't work out doesn't mean we should quit trying. Never ever give in to the dark side just keep on pushing back.

Quote: FleaStiff

I note the frequent use of the word "plan" in these various posts and that is all just fine and dandy. Plans? I wonder what plans all those with foreclosed mortgages had? I wonder what plans college students had when they show up at their parents home utterly jobless? Plans? Yes, they are great things.

There's an old saying that says "If you want to make God laugh, tell him your plans."

Quote:

A Wells Fargo survey...found that near-retirees have the least amount of money saved for retirement of any group surveyed. Americans ages 60 or older reported having a median retirement savings of just $50,000 while those age 55 to 59 had saved three times as much. The annual survey, conducted by Harris Poll on behalf of Wells Fargo, included more than 1,200 people age 40 and older.

Saving earlier helped put the younger cohort ahead of their elders. Respondents ages 55 to 59 said they began saving when they were 31, on average, while those age 60 and older waited until they were 37.

"It's a small difference in when they started, but it's created a big gap in savings for two age groups right on the doorstep of retirement," said Joe Ready, head of Wells Fargo Institutional Retirement and Trust.

On track to do even better, those ages 40 to 49 (the youngest group surveyed) started saving at an average age of 27. They reported having a median $80,000 put away for retirement.

Quote:

Another common strategy is to work longer. Unfortunately, that's not always up to you. Nearly half of retirees in the study said they were forced to retire early for reasons beyond their control — 37 percent cited health issues and 21 percent said it was an employer decision.

http://www.cnbc.com/2015/10/22/