retirement, what's your magic number?

[neatokimmo]

the early retirement forum folks use this:

http://firecalc.com/

After running my numbers on other calculators,I agree, the ING number seems low. When I tell it I need 2K a month, I can't tell if that is today's numbers or 30 years from now.

 

[MrsPete]

The number that spits out seems really, really low compared to other advice I've seen and read.

I don't know about that! My number is $1,918,485. Of course, I said I'd need income to age 100 (my grandmother is 97, and several other female relatives have lived to their mid-90s).

 

[mnrose]

My number was $547,402 and we already have at least that much in our retirement accounts. Yeah!

That number seems really,really low to me...there are other retirement calculators out there that are much more accurate than the one on the ing thing. Fidelity has a free one, for example, that requires you to go into much more detail about what you have, where it is, and what you plan to spend in retirement. I am a 52 year old person with modest expenses (home is fully paid for, new car every 10-15 years, etc) and Fidelity tells me to feel secure, I need at least 2.5-3 million if I plan to live to 95...not an unreasonable expectation given that I've lived to 52 already.

I'd not put a whole lot of stock in the ing number.

 

[brerrabbit]

The calculators are really just this. First determine an inflation adjusted number you will need to receive each month in retirement. Second calculate the amount of money at a given rate of return you will need to set aside for the earnings only to generate that amount of cash flow.

Now this is where the devil in the details come in. What amount of money will you need in retirement. The standard calculators say you will need 80 to 85% of your current income inflation adjusted into the future. That is a lot of money. It assumes that you will live in the same area will the same expenses. What you really need to consider is will you move, and what will your expenses really be. If your job today demands that you live in a very expensive area or commute to a very expensive area like New York, LA, San Fracisco, DC or places like that then when you retire your housing costs could actual go down by as much as 50%. Additionally all of these calculators assume you will want to leave money to your kids to which I say, the heck with that, I want to be broke when I die.

A better approach is to take your own stab a what it will cost you in retirement and be realistic. From there determine your number and start saving. A calculator that gives you an unreachable goal so much so that you decide you will never get there anyway can actually discourage people from saving anything.

While everyone has a number like the commercial says the reality is you have to know what the calculator is saying behind the scenes to know if the number it gives you is right. Remember a lot of these planners generating the numbers just want you to invest with them for the commision the get selling the investment. They are more worried about making money and their number than they are yours.

 

[StitchBuddy]

Hmm, I think it gepends on a lot of variables. Is your house paid off? Etc... We could live on a third of what we make if we downsized our house. I think the 80% is way high. We don't spend that now.

 

[wdwfan16]

The calculators are really just this. First determine an inflation adjusted number you will need to receive each month in retirement. Second calculate the amount of money at a given rate of return you will need to set aside for the earnings only to generate that amount of cash flow.

Now this is where the devil in the details come in. What amount of money will you need in retirement. The standard calculators say you will need 80 to 85% of your current income inflation adjusted into the future. That is a lot of money. It assumes that you will live in the same area will the same expenses. What you really need to consider is will you move, and what will your expenses really be. If your job today demands that you live in a very expensive area or commute to a very expensive area like New York, LA, San Fracisco, DC or places like that then when you retire your housing costs could actual go down by as much as 50%. Additionally all of these calculators assume you will want to leave money to your kids to which I say, the heck with that, I want to be broke when I die.

A better approach is to take your own stab a what it will cost you in retirement and be realistic. From there determine your number and start saving. A calculator that gives you an unreachable goal so much so that you decide you will never get there anyway can actually discourage people from saving anything.

While everyone has a number like the commercial says the reality is you have to know what the calculator is saying behind the scenes to know if the number it gives you is right. Remember a lot of these planners generating the numbers just want you to invest with them for the commision the get selling the investment. They are more worried about making money and their number than they are yours.

ITA

I found all the online calculator lacking. The one that does the 1000 runs is the one our financial person runs but we have far more control of the numbers he puts in. It has all the accounts where our money is, how much we put into our 401K each year and how much other money we plan to save. We have our inheritance set at $50K and we leave out our home, (which can be put into the calculator) since we would have it paid off and live in it until it was too much for us, and social security. We also have my life expectancy set to 90. So far nobody in my family has reached that and no male in DH's family has reached 90 either. We both carry LTC (unlimited) insurance, so one spouse cannot get so ill that they destroy the security of the other.

As of now we hit our number in 90% of the runs. Some of the runs are hysterical. I have seen one where we die with $100 million and another where we die and owe $100 million. They result from all best case or worst case parameters.

This works for us. We also would sell the home when the upkeep became too much or cleaning became too much. By the time we retire the house could be worth $1M.

Our financial person told us the house and not counting SS is quite the fall back plan. Most of our money is at Vanguard and he is not associated with Vanguard, thus he is not giving us advice to sell us stuff but showing us how we are doing with our plan and if we are too heavy in one area. That happens when one sector does well and another not so well. We then rebalance and as we get older get more out of stocks and into bonds.

 

[dvcgirl]

Hmm, I think it gepends on a lot of variables. Is your house paid off? Etc... We could live on a third of what we make if we downsized our house. I think the 80% is way high. We don't spend that now.

Yes, same here. We live on 40% of our net income now, and so there's no way we're going to need 80% of our current income. The ING calculator is very simplistic and makes a ton of assumptions. It also doesn't account at all for what you already have saved.

 

[Kika]

Good and interesting discussion here.

OP, I am around your age and have an approximate 65%/35% split in my 401k. I plan to gradually decrease that over the next 20 years until I hit retirement age. (I would feel nervous with 90% in stocks at my age; however, I know we all have different comfort levels and risk tolerances.)

 

[bettymae1121]

I tell you one thing, my Dad "technically" lives off of SS income. He owns his (very nice) home outright, as well as owning his (very very nice!) car. SS takes care of his monthly expenses, he only needs to spend his income off his retirement investments for fun stuff like vacations or upgrades to his house (he just remodeled his perfectly good kitchen, for example).

If your retirement plans aren't fancy (you won't be be jetting off to Europe every other week, etc.) I'm thinking you may not need nearly as much as the calculators tell you.

DH and I plan on retireing to rual PA (if DH lives that long) or if I"m a widow, I'll likely retire to AZ (I love the area my father retired to). Either way, unless things drasticly change in 30 years, our cost of living will be low as our home will be paid off and we'll own our cars. We don't plan on traveling much (we'll probably do one or two really big trips, but for the most part vacation the way we do now, someplace nice but affordable once a year or so), so we could live on less than half our current income, not the 70-80% they recommend.

The only real question mark is health care. If things are about what they are now, we'd be fine (medicare and then pay for the supplimental insuranc OOP). If Medicare changes and covers less (unlikely given how popular the program is, but one never knows) then it's a whole new ball game. Also, I'm not sure if DH can get LTC insurance since he has a pre-existing condition at the ripe old age of 38 (he's type II diabetic and is also insulin dependent).

Anyway, what we've decided to do is to save as much as we comfortably can until we can't work anymore, and cut our retirement to fit the size of our nest egg. Really that's all we can do. While retirement savings is very important, we aren't going to live on rice and beans in order to save up that much more. But at the same time we'll make sure to fund our 401k's in a serious way (and never touch the money for anything). We should retire with $2M and that will just have to be enough.

We could kill ourselves to save up $2.5 or even $3M....but then we run the risk of what happened to DH's parents. They put off almost all the "extras" in life figuring they'd enjoy things in retirement, then DH's father died in his mid 40's. MIL says she will always regret that they didn't do more (travel, etc.) when they had the chance. They always thought they'd have more time. So I'd rather enjoy our lives now and risk saving a bit less (and seriously, if $2M isn't enough to retire on in 30 years, I doubt having a few hundred thousand more will make that big a difference!).

 

[Colleen27]

We could kill ourselves to save up $2.5 or even $3M....but then we run the risk of what happened to DH's parents. They put off almost all the "extras" in life figuring they'd enjoy things in retirement, then DH's father died in his mid 40's. MIL says she will always regret that they didn't do more (travel, etc.) when they had the chance. They always thought they'd have more time. So I'd rather enjoy our lives now and risk saving a bit less.

That's always in the back of my mind when we're planning too. My husband is 9 years older than me, and his parents have both developed serious health issues in their late 50s/early 60s. So there's a real chance that we won't have many good retirement years to enjoy together. That tends to put a damper on any thoughts I might entertain of cutting out or cutting back on travel, which is our only expensive vice, to save more for retirement.

 

[Luvchefmic]

I saw it happen in my family time & time again to go with what you are saying , My Dad passed away after his first yr of retirement after 34 years at the post office. At least I can say he enjoyed his life went to places did things he wanted to do. Other relatives literally killed themselves working and saving for "some" day...the day never came.

All things in reason..you have to live not just survive until you can.

 

[neatokimmo]

My Dad died at 64. He didn't do half of what he wanted to do.

That is why my Mom is getting her SS at 62 and is traveling with me next year. We are going on cruises, going to NYC & DC and going to the beach. I keep telling her that I'm not interest in inheriting anything, go ahead and spend it all!

 

[neatokimmo]

Has anyone run across a calculator that lets you put in different numbers for savings year to year? I have a house for sale and that equity will go towards a land purchase and the leftover will be lived off of while I max out my 401K one year. But the maxed out 401K thing isn't my norm.

 

[nunzia]

I saw it happen in my family time & time again to go with what you are saying , My Dad passed away after his first yr of retirement after 34 years at the post office. At least I can say he enjoyed his life went to places did things he wanted to do. Other relatives literally killed themselves working and saving for "some" day...the day never came.

All things in reason..you have to live not just survive until you can.

AMEN...balance..that is my struggle...trying to juggle saving AND doing..I've also seen it too much. Putting off 'fun', waiting 'until' and then it never happens. I have no regrets for anything fun we've done..I'd regret it more if we didn't. That said...I also don't want retirement to be a total depressing broke time or have my kids feel like they have to help out or anything approaching that. Soo...balance. We could live and travel on just our incomes and yet I feel driven to work the second job (very small, but still, another $1,200 a year or so) and do Ebay here and there and do Rewards programs for more extra bits.
We have gotten much more into accumulating experiences than stuff and our trips add to those.

 

[minnie_michelle]

Retirement? Yeah right. We are 29 and 32 we barely have anything leftover at the end of the month to go towards retirement and we haven't even had kids yet. I managed to start saving 3% of my income at work 2 years ago to get the 3% match, but I can't increase it until my income increases enough beyond inflation and with costs continuing to go up......I don't know when that will ever be.

DH does have a state pension and plans to stay the next 3 years at his low paying job just to get vested, but again......who knows if the terms won't change by the time he retires.

So I'm not sure what our plan is. We live in a small condo, but will need to sell and move to at least a 2-3 bedroom modest house or townhome to have a family. We also love to travel and have budgeted that in so that we can have a balance of enjoying life now and doing what we want rather than putting it all off for a retirement that may never come. Our cars are almost paid off and we plan to try and actually drop down to one car in the future if we can. I'm not sure what else we can do. The money just isn't there to save anymore. I've been desperately trying to increase my income, but I'm not having the best of luck and the recruiters keep telling me I need to go back to school if I want a much higher income in the future :-(

Also, I'm glad to hear that so many of you are reaching your savings goals, but many people complained about hurting due to paying for their kids college? Why pay then? There will be NO way that my husband and I will be able to afford to pay for our kids to go to school. He and I did just fine funding our college degrees ourselves with scholarships and loans and paying them back quickly by being responsible with the money we earned in our first jobs (not having fancy apartments, cars, going out or shopping all the time). Don't get me wrong, we would love to help our future children if we can, but if not, it really is their own responsiblity to take care of themselves after the age of 18. Just a thought.

 

[Colleen27]

Also, I'm glad to hear that so many of you are reaching your savings goals, but many people complained about hurting due to paying for their kids college? Why pay then? There will be NO way that my husband and I will be able to afford to pay for our kids to go to school. He and I did just fine funding our college degrees ourselves with scholarships and loans and paying them back quickly by being responsible with the money we earned in our first jobs (not having fancy apartments, cars, going out or shopping all the time). Don't get me wrong, we would love to help our future children if we can, but if not, it really is their own responsiblity to take care of themselves after the age of 18. Just a thought.

For us, it is another of those balancing act questions. We probably won't be able to fully fund our kids' college unless they go to state schools - and that's thanks in large part to prepaid tuition contracts relatives purchased for them - but we don't want them feeling pressured not to go to college or making decisions in their marriage/childbearing years based on massive student loan payments, so we do feel that paying what we can is important.

So many of my friends wish they could start a family or stay home with the kids they plan to have, but since their student loan payments work out to more than a modest mortgage, living on one income or taking on the expense of a child just isn't possible. And I suspect for many it will end up cycling around to their children; student loan debt and retirement planning leave no room for college savings, so the kids will have to take out (even larger) student loans to cover their own education. I don't want my kids in that position if we can help it.

 

[eliza61]

Retire

Also, I'm glad to hear that so many of you are reaching your savings goals, but many people complained about hurting due to paying for their kids college? Why pay then? There will be NO way that my husband and I will be able to afford to pay for our kids to go to school. He and I did just fine funding our college degrees ourselves with scholarships and loans and paying them back quickly by being responsible with the money we earned in our first jobs (not having fancy apartments, cars, going out or shopping all the time). Don't get me wrong, we would love to help our future children if we can, but if not, it really is their own responsiblity to take care of themselves after the age of 18. Just a thought.

Aaah, if only life worked that way!! The ole "when they turn 18 kick them out of the nest and let them soar" philosophy. Not making fun of you minnie but gotta tell you, I've yet to meet the 18 year old (including my 3) who has been able to graduate from H.S. get a job paying livable wages, pay for college tuition, get a car etc etc.

What if he gets no scholarships? oh that's right, you probably feel if he didn't do well enough to get scholarships he shouldn't go to college any way.

So let me ask you my kid is a junior in H.S. and will turn 18 when he's a senior. What exactly are we supposed to say "Well Josh, glad you got that job at the movie theater and yes, we know it only pays 8.75/hour but hey you're 18 it's really time for you to start living on your own?"

Glad you and your dh were able to do what you felt you needed to do to get your education but please spare me the "18 year olds who don't go out and hike the yukcon are irresponsible" song. I'm so sick of it.

Parents help their kids for one reason, they want the best for them. Just because you paid for yours makes you no better than any other kid who has help from their parents.

 

[abmitch01]

I'm on vaca this week and plan to take a block of time out to work on one of the more detailed calculators. And also take a look at our overall budget and set some savings goals.

ITA that I can probably live on less than 80% of what I earn when I retire but it's that wildcard of healthcare that makes me use that figure in the calculators.

 

[minnie_michelle]

Aaah, if only life worked that way!! The ole "when they turn 18 kick them out of the nest and let them soar" philosophy. Not making fun of you minnie but gotta tell you, I've yet to meet the 18 year old (including my 3) who has been able to graduate from H.S. get a job paying livable wages, pay for college tuition, get a car etc etc.

What if he gets no scholarships? oh that's right, you probably feel if he didn't do well enough to get scholarships he shouldn't go to college any way.

So let me ask you my kid is a junior in H.S. and will turn 18 when he's a senior. What exactly are we supposed to say "Well Josh, glad you got that job at the movie theater and yes, we know it only pays 8.75/hour but hey you're 18 it's really time for you to start living on your own?"

Glad you and your dh were able to do what you felt you needed to do to get your education but please spare me the "18 year olds who don't go out and hike the yukcon are irresponsible" song. I'm so sick of it.

Parents help their kids for one reason, they want the best for them. Just because you paid for yours makes you no better than any other kid who has help from their parents.

Oh I'm not putting anyone down or making anyone feel bad. Hence why I said if DH and I can afford it, we absolutely will help our children with their education and beyond. I meant that a person shouldn't complain about being strapped for cash BECAUSE they are helping their children. It is their choice and is not required.

 

[nunzia]

We are from the didn't pay for our kids to go to college camp. DS did get an art scholarship and chose to drop out and bum around for awhile and then realized he really needed that degree and went back and fought it out and now is working in his field. We helped along the way as we could, and we did a bit of bailing out, but I really do think kids should have a part in paying for thier own college. Certainly parents can and should help if possible, but there is no scholarships or loans for retirement..again, balance. I know of several people who saved and saved and sent the kids to expensive school and the kids just partied and flunked out..they clearly weren't ready. I also know kids who did great. My daughter put herself through college with a deadbeat husband, now ex, and 2 kids. We are fortunate in NM to have Lottery scholarship if kids go right from HS and stick it out. That really helped, but her hard work also got her scholarships and grants, and she's now an L&D nurse looking into midwifery.Other DS just wandered around with career choices and us sending him to college would not have worked out. He went to dealer school and did real well in that, but then decided he'd rather have a career..a little later than most, but he's at the police academy now. We helped out all of them at times and during emergencys, but there's that balance thing..I'm a firm believer that those who work hard for something appreciate it more.