Investments/Retirement-how much should we have?

[KennesawNemo]

I read a general rule somewhere:

1x annual income when you are 30
1.5x when you are 35
2x when you are 40

I don't remember the rest and I think that rule is very general.

I think that rule is very general. DH and I are in late 30s, but we don't have 1.5x yet because we started working late.

 

[barkley]

if you want an idea of some expense changes after retirement now is a great time to start looking at one area-employment. just start keeping a rough list of EVERYTHING either person spends on work-professional fees, tolls, clothing (that you wouldn't need/likely use outside your profession) dry cleaning or tailoring/repairs on those clothes, lunches out, the contributions to gifts at work, any supplies (ink, paper) you buy for use at home related to work, and don't forget to add in every time you end up defaulting to grabbing prepared foods/to go foods for dinner b/c you were too exhausted to even think about cooking when you got home. it might surprise you as to how much it costs to be employed.

if you want to explore it a bit further and you commute at all- give a call to your auto insurance carrier and ask what percentage they discount their policies when your mileage significantly drops (I think w/ours it was between 5-10%). I know gas prices have dropped but keep track of how many miles a year you do just for work and consider the cost savings gas/auto maintenance wise.

on the increased cost side as was said before-health insurance is the wildcard but you might be able to get a peek at how your costs may increase if you will have employer sponsored benefits at retirement by looking at their website (or the materials they sent you in the last few months) to see what retirees are currently paying (and take note to see how much it increases next year to get a rough idea of the scale of increases over time). if you plan on moving from your current state REALY take note of how much that will cost you insurance wise-many employers charge a MUCH larger premium for out of state retirees (and grossly limit their coverage options). our largest expense is health insurance despite also having Medicare b/c Medicare does not pay for everything, and esp. with prescriptions we have to have other coverage.


if you can get a rough idea of some savings/some increases to include with the rest of your anticipated/planned budget changes (like more traveling and such) it helps with the planning.

 

[*pixie*dust*]

Everyone's "magic number" is different based on so many personal things. Your age, health, housing, location, hobbies and debt are all part of that equation. A person with no debt and a free and clear home can live on very little, if their travel and hobby aspirations are modest and they are relatively healthy.

Personally, my home will be paid for when I retire, I will have no commuter costs, no daycare (or college costs) so the bulk of where my money goes today will not be factors. In today's dollars, I could live on $2000 per month with the above expenses gone. I would only have taxes, insurance, utilities, food and extras to pay for. Because I don't know how long I will live, what my health may be like, and how much I may want to travel, I am aiming for a higher monthly amount. Assuming I will also get something from Social Security, I feel fairly secure, looking forward.

 

[DanInMN]

Assuming a 4% withdrawal rate, we need investment total to be 25X expenses. Expenses can be partly paid with Social Security payments. A paid-for house greatly reduces expenses and is a guaranteed rate of return equal the the interest rate we had been paying.

I want enough funds to do things, not just sit around! Assuming we want $100k/year before tax income (we have no debt!), SS at ~$13 k/year x 2 = $26 k /year and a small pension of ~$17 k/ year, we need $60 k/year more. $60 k x 25 = $1.5 million. That is my target.

 

[Dakota731]

Is there a good retirement calculator to use? I tried the AARP one and the TRowe Price and they come up with VERY different results!

 

[tvguy]

Is there a good retirement calculator to use? I tried the AARP one and the TRowe Price and they come up with VERY different results!

You really need to meet with a Financial Advisor. Too many variables to use a generic calculator.

 

[eliza61]

Is there a good retirement calculator to use? I tried the AARP one and the TRowe Price and they come up with VERY different results!

That is not unusual and it's not a right or wrong thing. I use a few.

1) firecalc.com. I love this calculator. If you have investments in the stock market it is a useful tool. what it does is take the money you have invested now and predicts how long your money will last under EVERY stock market condition in the last 100 years. you plug in how much you may spend per year. you can also play with different scenerios (rate of withdrawal, retirement age, etc etc) So you can have an idea of how you will do let's say if we have another market crash.

2)Vanguards retirement nest egg calculator. It's great and very easy to use. it uses a very simple monte carlo type of analysis.
3)if you are investing in a 401K plan, check with the company that manages your plan. Mine is Merill lynch. they have a wealth of information



TVguy has it right though. most on line calculators are designed to give you a general overview. Great place to start though.

 

[LuvOrlando]

My husband buys into what the finance industry is selling and I do not. He seems to think we need $1 million which I think is beyond absurd. He is believing the financial industry who are telling him that we need to maintain today's expenses forever into the future & thats just wrong. Right now we are at the pinnacle of our expenditures. We are in the suburbs I am a stay-at-home mom and we have two young adults teenagers living home with us. Our expenses right now are ridiculous and things are about to get worse once my kids go to college (we are hoping to be able to pay) but after that everything should shrink. I am fortunate to live next-door to my in-laws who are retired and I can see how different their lives are & A side-by-side comparison does not come anywhere close. Do yourself a favor and find an elderly person and ask them what the real expenses are, create a mock budget for yourself and go from there. I think I'm going to create one for my husband just to help him chill.

I think part of the problem is I do the household budgeting and he does not so much the kids add to our expenses. When I try to talk my husband off the cliff I just rattle off all the stuff we won't have to pay for. I also point out the fact that we will not need this big house in the suburbs, my in-laws could live in a place that had one bathroom with a shower a kitchenette because they don't really cook the TV room and two bedrooms. They have two cars but they don't need two cars. They do complain a lot & loudly about the expense of medication and healthcare supplement but in their case I think it's more about resentment than affordability. I'm aware that for some people the expense is troubling but they're not those people, you would not believe the amount of money they spend on tearing up tile, landscaping & decorating their home because they're bored and don't know what to do with all the money they were told they needed when at the same time it will drive all over town for a sale on eggs.

Anyway, people in the finance field wouldn't have jobs if people werent giving them money and that's something to consider before talking to them. That's not to say there isn't good advice out there, of course there is - just realize that you're likely talking to a Mercedes salesman when all you really might want is a Honda civic on lease for $159 a month. Be realistic about what you'll really need and go with that.

I'm planning on selling the house we are in now, divesting/liquidating paying off all debt (kids college expenses if we have them) while in an appartment a few years at the same time I will reenter the workforce & rejoin my husband making $, rebuild our cushion then buy something smaller to live in as we cruise into old age. The plan is we are basically going to do the same exact thing we did when we started out in our 20's- it worked once why wouldnt it work again

 

[eliza61]

My husband buys into what the finance industry is selling and I do not. He seems to think we need $1 million which I think is beyond absurd. He is believing the financial industry who are telling him that we need to maintain today's expenses forever into the future & thats just wrong. Right now we are at the pinnacle of our expenditures. We are in the suburbs I am a stay-at-

I think the take away message is always 'what type of life do you want to have".

A million dollars for what I want to do in my retirement is the bare minimum, so for me your husbands is not "absurd" at all. and believe me, that is for me to maintain how I live now, not living la vida loca.

I'm the opposite, I never believed my expenses would go down in my retirement. First of all I want to have two places to live, so right there is another expense. I love big city living (Philly) a condo in Old city Philly is crazy expensive but it's where I want to be during the spring, summer & fall, and then "fly" to some where warm during the winter months right now it's either florida or St. Thomas USVI.

Next I absolutely want to travel the world.
I plan on seeing every continent except for antartica.

I won't get into the pro/against financial advisors argument except to say, I have one, I think he does an excellent job for me. I'm not doing it myself, have no desire to do it myself and he's consistently made me money so I'm a happy camper. Yes I pay him a fee to do so, I also pay my plumber, electrician and lawnscapping guys. LOL I plan on dying without ever mowing my own grass or doing my own taxes.

Works for me.

That's always my big take home message. find what works for you and go for it.
use the tools available and tailor the information to your particular circumstance.

 

[aprilchem]

Assuming a 4% withdrawal rate, we need investment total to be 25X expenses. Expenses can be partly paid with Social Security payments. A paid-for house greatly reduces expenses and is a guaranteed rate of return equal the the interest rate we had been paying.

I want enough funds to do things, not just sit around! Assuming we want $100k/year before tax income (we have no debt!), SS at ~$13 k/year x 2 = $26 k /year and a small pension of ~$17 k/ year, we need $60 k/year more. $60 k x 25 = $1.5 million. That is my target.

This is the type of calculation I've done as well, except at 39 years old I'm assuming Social Security will not be around when I'm old enough to collect it. So we're shooting for $2 million when we retire.

 

[havaneselover]

It's good to be conservative but I wouldn't bet on the government ending an entitlement program. Taxes will end up going up to pay social security benefits. Perhaps there will be means testing.

 

[LuvOrlando]

I think the take away message is always 'what type of life do you want to have".

A million dollars for what I want to do in my retirement is the bare minimum, so for me your husbands is not "absurd" at all. and believe me, that is for me to maintain how I live now, not living la vida loca.

I'm the opposite, I never believed my expenses would go down in my retirement. First of all I want to have two places to live, so right there is another expense. I love big city living (Philly) a condo in Old city Philly is crazy expensive but it's where I want to be during the spring, summer & fall, and then "fly" to some where warm during the winter months right now it's either florida or St. Thomas USVI.

Next I absolutely want to travel the world.
I plan on seeing every continent except for antartica.

I won't get into the pro/against financial advisors argument except to say, I have one, I think he does an excellent job for me. I'm not doing it myself, have no desire to do it myself and he's consistently made me money so I'm a happy camper. Yes I pay him a fee to do so, I also pay my plumber, electrician and lawnscapping guys. LOL I plan on dying without ever mowing my own grass or doing my own taxes.

Works for me.

That's always my big take home message. find what works for you and go for it.
use the tools available and tailor the information to your particular circumstance.

Nothing at all wrong with wanting a Mercedes lifestyle and planning for it. The problem I have is that not everybody wants/needs that but they're being sold on that template, on the idea that it's a necessity so that disconnect isnt really ok especially if it's leading people towards stress & being unnecessarily fearful because fear drives people to do unreasonable things.

I'm not saying that everybody in the field is this way there are many conservative people out there but I have yet to sit through an investment planning seminar, read a glossy brochure or listen to a single speaker who's not driving up the price point by either directly or indirectly downplaying the validity of a modest lifestyle. Even if they're proposing a modest lifestyle they will absolutely throw in potential catastrophe to unsettle the investor.

If you walk into a Mercedes dealership they're simply not gonna turn around and tell you a bicycle can get you around just as easily because the Mercedes salesman does not get commission on the bicycle sale.

The power of sales: When I was a kid we drank water from the hose or tap. Since then an entire industry has been built on convincing people that somehow water from the faucet or a hose is not as good as water out of a bottle AND that has continued despite all of the environmental efforts to tell us about we're doing wrong- somehow the catastrophic damage plastics production & dispossl creates has missed the bull's-eye. That is the power of sales & influence of marketing & its not to be underestimated.

 

[georgina]

My in-laws always had a modest lifestyle. The problem with everyone living longer these days is the possibility of a major problem coming up. MIL had lung cancer and needed 4 months of nursing home care after her surgery. FIL had Parkinson's and needed lots of extra care for 5 years until he died at age 94. If you are retired for 30 years and your income doesn't rise much over that time, the rising costs will make it seem less. My mom is 94 and still living on her own in a condo, but her memory is getting worse and assisted living looms in the near future. My DH is close to retirement and my biggest fear is healthcare costs, although we are comfortable with our current savings.

 

[KKB]

MIL & FIL have gifted a bit of money each year to avoid inheritance taxes.
MIL informed us that we may not be getting the gift this year--and would we be OK? (of all their children we make the least but a fair margin--we are 2 teachers while others are attorneys, business owner, IT, VP at Pepsi...)
I said we are fine, we don't use that $ to pay the bills.
Then she says she thinks that we should still get it--FIL just refigured things & is worried they won't have enough to live on IF they live to 120 MIL said NO way she wanted to live to be 120!!

 

[eliza61]

Nothing at all wrong with wanting a Mercedes lifestyle and planning for it. The problem I have is that not everybody wants/needs that but they're being sold on that template, on the idea that it's a necessity so that disconnect isnt really ok especially if it's leading people towards stress & being unnecessarily fearful because fear drives people to do unreasonable things.

I'm not saying that everybody in the field is this way there are many conservative people out there but I have yet to sit through an investment planning seminar, read a glossy brochure or listen to a single speaker who's not driving up the price point by either directly or indirectly downplaying the validity of a modest lifestyle. Even if they're proposing a modest lifestyle they will absolutely throw in potential catastrophe to unsettle the investor. If you walk into a Mercedes dealership they're simply not gonna turn around and tell you a bicycle can get you around just as easily because the Mercedes salesman does not get commission on the bicycle sale.

The power of sales: When I was a kid we drank water from the hose or tap. Since then an entire industry has been built on convincing people that somehow water from the faucet or a hose is not as good as water out of a bottle AND that has continued despite all of the environmental efforts to tell us about we're doing wrong- somehow the catastrophic damage plastics production & dispossl creates has missed the bull's-eye. That is the power of sales & influence of marketing & its not to be underestimated.

lol, I call that the "doomsday" scenario. I've learned to tune out most of the media and reports on retirement.

You are absolutely right that the message is definitely if you don't have a gabillion dollars, we're all doomed to spend old age under a bridge.

Wait until you get to Long term care insurance!! I've been called all ways a fool because I'm choosing to do other things instead of buy expensive LTC policies.

I think one thing you have to remember is our entire standard of living has elevated since the old "water from the faucet" days.

Just look at these boards luv, you seriously have folks who believe that the only "memories" a person can give their kids is a trip to Disney. like some how we are "deprived" if we don't get it.

smart phones are "de riguer" and if you don't have one, well the message is your less than.

fear sells. I've asked this question on the cc board many times. Is anyone retired and simply happy??

why don't we hear those stories. How is it that everyone "knows" some one who is two steps from catastrophe in retirement. My siblings are all retired, I'm the youngest. my sister brought her million dollar dream house after she retired from the ny police force. is it some thing I would have done at 60? nope. but she's happy as a pig in dirt and able to afford it.

but you are right, maybe the first step in this journey is being true to oneself, knowing what it will take to be happy and THEN plan for it.

happy journeying.

 

[disney1990]

Exactly. And with homeownership, it means avoiding the temptation of pulling equity out of your house. I feel sorry for a guy down the street, he's 78 years old, been in his house for 35 years, and still owes more on it than he paid for it.

To the OP's question,in a perfect world, the investments your IRA/401k etc. will earn as much per year when you retire as you earned working, less social security so you have no drop off in income. Generally speaking, folks need less money in retirement than when working, but not always.

That's very sad. I think of all these people buying houses. They need to know that, in most cases, they won't be able to retire until their house is paid off. DH retired about 10 years ago and I work PT. We have absolutely no bills. We don't quite have a million in our accounts, but close. I feel like we will have no problems.

 

[mjkacmom]

That's very sad. I think of all these people buying houses. They need to know that, in most cases, they won't be able to retire until their house is paid off. DH retired about 10 years ago and I work PT. We have absolutely no bills. We don't quite have a million in our accounts, but close. I feel like we will have no problems.

Our house will be paid off, but our property taxes are around $1000 a month, and increase every year. It's like an endless mortgage payment.

 

[Disneybuckeye]

Where you live, how you live and how you have lived your life can be huge factors.
My mom had no problems in 28 years of retirement of paying all her expenses with money left over from her $1,200 social security check. But her house had been paid off for 25 years when she retired. Her car paid off 9 years earlier.....and lasted another 18 years before needing to be replaced.

Her $400 a month pension and $400 a month IRA money was her mad money for trips and home repairs, but mostly it just went into the bank. I took over her finances for the last year of her life and I was amazed at how little money she needed to live.

You mother is good. My mother has no house or car payment, but she does pay quite a bit each year in taxes. She runs through about $100k a year. She travels a lot and some of it is international. She enjoys eating out, especially at ime at her country club. She shops and likes to attend social events. She still makes more in interest than she spends each year, so more power to her. I am glad to see her enjoying life with her money. She is also generous to her children and grandchildren.

Our goal is to retire with 2.5 mil in savings. Our house will be paid off, but our annual taxes and insurance are over a thousand dollars a month. Our lake house will not be paid off, but that payment is less than 1k a month. I also have a seven figure trust fund that we do not even figure into our calculations. We hope to save that to pay for our grandkids (if there ever are any) to attend college.

I want to retire like my mom and enjoy life. My MIL spent most of her retirement just sitting in her house doing nothing and going nowhere because she had no money and did not want to take anything from her kids.

 

[tvguy]

but our annual taxes and insurance are over a thousand dollars a month. .

My mom's annual taxes were $650 a year, and her insurance was about $150 a month.

 

[disney1990]

Our house will be paid off, but our property taxes are around $1000 a month, and increase every year. It's like an endless mortgage payment.

OH MY!! Our property insurance is about $266 a month.