Contributors to this thread:
Retirement how much income required???
So Lou's Retirement thread got me thinking. How do you know when you have enough money/income to retire on? One of the things on our company retirement planning website tells me I may need $150K a year. Is that enough or too much? I have started a spreadsheet detailing the expenses we will have but am a long way from finished with it. Do not what to eliminate hunting/fishing trips to Canada and Alaska and well as other states so will have to figure that in somehow.
$20,000 a year for some. $200,000 a year for some. Every person will be different for what they "need". A good financial planner can help. I'm going through the process right now of what I'll "need" even though I'm a few years off from retirement. I have a feeling I have "enough", but am anxious to see what the experts say based on my account balances and expenses in retirement.
Will depend on the lifestyle you want to maintain (not uncommon to figure 75% of your last base salary) , when you retire, and against the devaluation of currency long term. Healthcare is a major component as well.
That may be where the $150k is coming from.
when you have twice as much as you think you will need you are probably getting to the point you will have enough.
Dang, Rock....livin large!
I'm doing the same. Getting my numbers lined up and vetted. Professionals I've read recomend 75 - 80% of your final salary. Of course, this depends on your lifestyle and circumstances. My wife and I planned well and are debt free so I'm hoping for a soft landing. Not sure if there is a magic number but would love to hear what some of you retired guys think. Thanks.
I'll just shoot from the hip and let the chips land where they may.
Actually....that is not me but pretty much every person I have worked with in the past 20 years that decided to retire. Math doesn't seem to be strong poiifor many.
Rock - "I have started a spreadsheet detailing the expenses we will have but am a long way from finished with it."
Wonderful start. Do this for 2-3 years. I would still talk to a professional after this to find out how to protect yourself from major expenses that could derail all of your previous work (mostly medical). My fishing wife Steve (real wife calls him this) did all this and added in an additional $1000/month average to take care of all vacations for the year.
We kept track of every expense and potential expense for two years. That included dog food and meds, trash pickup, vehicle maintenance, propane for the grill, chimney sweep, nonprofits and memberships, discretionary for each of us per month, everything we could think of and track. There are 36 different items, some monthly, some as needed (medical, dog meds, dental, etc..), some annual. We have a home in town and one in the mountains so those expenses were all factored in. Then I padded it a bit for unforseen costs (rise in Obamacare premiums, etc..) Both places are paid off so our only debt was one truck payment. We live in an area with relatively high cost of living (-) and don't take expensive vacations (+).
Before starting this exercise I'd WAG'd $60K. The real number was $61K. My writing income pays for hunting and fishing trips. Any other vacations we took were funded from dividends on one investment, so both of those were excluded from the $61K
The first year was kind of scary. Now after almost 4 years in, that $61K number is pretty danged accurate, which means I can reinvest a chunk of income back into the nest egg or splurge a little, now that I'm comfortable with the real numbers. If we only had one house or lived where cost of living was lower, we could probably knock $5K off that number.
BTW, kota, my primaryvfinancial guy retired so I moved everything to another one who already handles some of my stuff. He took a guess at our real cost of retirement living and hit it on the nose - $60K.
Great thread, I retired a few years ago still pick up a few small jobs each year and debt free I was thinking 100k a year will work out for us, it has is far.
I'm retired & can live easily on 20,000 a year. We own our own home!
I think many of us, especially if you own your home, could live on much less than the so-called experts purport on TV. I'm embarrassed to tell you what I could make it on, but then I'm a simple guy with simple tastes and no major inclination to travel further than 50 miles from home. The fly in the ointment for me is what will my health condition be in retirement? If it's as it is now with no major issues I know without a doubt I can get by reasonably well. If not, then who the hell really knows?!?
One thing for sure, if I can continue to get awesome returns like I got in 2017 retirement is going to happen sooner than I thought. Go Market!!!
As others have rightly pointed out, a lot of factors go into answering the question "what is enough," and that answer is going to be different for everyone. Things like your pre-retirement expenses, expected changes to your lifestyle (will you take more trips, will your house be paid off, do you want a second house, etc), life expectancy, anticipated market returns, social security offset, other income sources, etc will all impact how much is enough.
I recommend playing around with many of the online tools and calculators out there that are designed to take into account all of these things. A google search for best retirement calculator will pull up a bunch!
So, Lou, what was the final nest egg number to generate that 60K income?
Was thinking the $150K estimate was an extremely high number when I saw it, so just trying to get a reality check form those that are retired. I am working on getting everything paid off and becoming basically as debt free as possible as no one is ever debt free. Medical issues I am trying to take care of things as they come up now and also fix/repair things I have been putting off like fixing a broken nose (deviated Septum) from playing Hockey 40 years ago. Maybe I will go buy a Mega Lotto and Power Ball ticket (I never do), if I won that I know I would then have enough, HaHa.
It all depends on what you want to do during your retirement. In my opinion, you must have your house paid off!!! If you like to go river cruising in Europe with your wife you can expect to pay $10,000 for the two of you plus some money for souvenirs on a 14 day trip. Here in the states you can take a Mississippi River cruise or along the east coat from Maine down to Atlanta. It doesn't cost much to stay at home or around the place where you live. Your wife and you would get tired of staring at each other after awhile. Add up your normal cost of living items plus Christmas presents and vehicle updates plus about minimum of $25k for travel expenses a year unless you are a hermit. Just my opinion. We have been retired for 18 years and I am 72. We have been blessed for sure. I would like to go on 2 or 3 vacations each year but my wife doesn't like to travel more than 14 days a year. More hunting trips???? Hmmmm.
I do this for a living and all I can say is to repeat what kota-man said. Everyone is different.
Don't do what everyone else does, because you are not just like everyone else. No one is.
We're all unique individuals and as such, we all have different goals and objectives, wishes, desires, dreams and emotions. Your planning needs to take all of those into consideration and you need to have deep discussions with both your spouse and with someone with years or even decades of experience in helping people with these sorts of issues.
I dont think some of you are quite ready to retire!
My required monthly expenses are $1400 - including mortgage. Food, gas, misc expenses are on top of that + another ~$1000. So $29,000/yr?
As I already stated, I already know my pension amount and Ive been living off that for the past few months just to see how it feels. Been doing good and still 'paying myself'!
Only 225 more days, but nobody is counting
It helps to have investments that aren't at the whims of the stock market. most of my investment income indexes to the cost of living. Thumbs up!
My FIL had a good [pension] retirement when he retired many yrs ago through the trade union- $3,700 a month which $200 of that went to medical.
FFWD 20 years and now his $3700 is only $2500 for reasons due to the union itself and increased Medical costs. Don't underestimate the cost of living index rising as it kills fixed investments.
My dad has been living on $36K/year and travels all the time! And I have friends who wouldn't survive if they made $80K/year and don't travel all that much.
You need to pay up for someone who has the tools to actually evaluate everything about your savings/lifestyle (current and planned)/etc if you want (you actually need it) any accurate estimate. I think the 75%-85% of final salary is fine if you're still 20 or 15 years from retirement because the future unknowns are just too far out to predict. I suspect that figure gets thrown around for people closer to retirement because they are afraid to take a honest hard look at their expenses.
Rock, one thing to consider that may factor into the $150K number is whether it is a nominal or real amount. Nominal prices would be in terms of today's dollars, whereas real prices are in terms of future dollars. This will make a bigger difference if you are further away from retirement and the $150K number is a real number (not nominal). For example, if you are 20 years from retirement and assume something like 3% for inflation, that $150K/yr would actually be closer to about $85K/yr in 2018 dollars.
Paid cash for my house and land in 70, so, no mortgage. I drive old vehicles, grow a lot of my own food, burn wood for heat, and my SS and teaching pension equal what I made my last year teaching. I still coach and play music. I bank royalties for vacations. We live simply and my only extravagance is my studio and guitars, though I have cut back. We get by and if needed, I could hit the road again. I did a solo New Year gig and enjoyed it. Medicare and a high level supplement cover medical expenses. If that gets too much, I still can get Veterans care I suppose.
Nick, I'll shoot you a PM. Would rather not divulge "nest egg" numbers, but I will say that since I didn't have a pension I set myself up with an annuity that pays $54K a year from now through the rest of my life, plus a "home health care doubler" if that is ever needed.
So when I take Social Security at 66 I'll be way ahead of my spending budget and can roll more back into the nest egg or really do some exotic stuff. That nest egg is invested in a diverse portfolio, some exposed to the market and some in dividend-paying alternative investments like REITs and a Business Development investment company.
As a lifestyle, I don't scrimp on anything (except Sitka, and I might buy a Sitka Incinerator thong just because...) I didnt work my ass off since age 10 to live on bread crust and generic beer during my golden years. I have substantial Dish packages with DVR and HD for both houses, buy whatever I feel like, go wherever I want to go. I earned it and am now enjoying it. As I learned with my late wife, there are NO guarantees in this life.
Another ++ for "everyone is different". The formulas about X% of pre-retirement income are useless. High earners don't need nearly that much and low-earners may need 100% to be happy. There are a lot of "poor" old people who thought they had enough. Fast-forward 20 years and it will be 10X worse because our generation was pretty bad at saving.
My buddy decided to pursue the Super Slam and world sheep slam after retirement, so his "need" is significantly more than mine with maybe 3-4 out-of-state hunts per year.
cnelk is right! Try living off what you will have in retirement a few years BEFORE you retire. Then you will know what you need. I have been doing this and it is enlightening. I know I have enough now but, the finance part of retirement still scares me. But the,what will I do , is the easy part. Greg
Complicated and suggest you contact someone like Kyle "NvaGvUp" who is/was a Bowsite sponsor. A few very general rules of thumb follow. Minimum retirement expenses for my wife and I look to be $6,000/month and that includes an estimated $1,500 for health insurance premiums and a $1,000/month pad. Minimum expenses must include utilities, car insurance, car registration, medical deductibles, prescriptions, etc. and must be sorted out for your area. That's net income, gross dictated by taxes, etc.
From that point we need to add our annual "life style" expenses including; travel, hunts, entertainment, etc. to get to our "total expenses" number.
To figure out your retirement savings you need in total, assuming you don't have a pension, take your annual expenses and divide by 4%. For example if your expenses total $100,000 then $100,000/4% = $2,500,000. You then need to factor in Social Security, Medicare, reduced spending in your golden years, and so on to determine if that $2.5M is more than you need, not enough, etc. Thus the reason to engage a professional's services to get a plan together!!!
I was forced into retirement at age 60 when my workplace closed the doors. I did get a slightly reduced pension (32 years with the Co.) I have 8 years military so VA is where I go & have for many years for medical. I had a 401K but wife became extremely Ill & I burned thru that in no time (meds were $1000 out of pocket after insurance). Asked for help on meds only from social services & they said buy a burial plot (FOR REAL). I had worked all my life & didn't qualify for "anything". A druggie that never worked or illegal DOES. Refinanced my paid for house. 3 years of juggling & pure hell but we made it. All the money in the world won't do us any good if we are sick.. We live modestly but do what we want & yes, 15 grandkids do pretty well also. I've managed to bowhunt 15 states & 2 Canadian provinces, take vacations we wanted (reasonable) & sent our kids on some fun weekends with their families. I get SS & a pension & wife gets SS now & a modest distribution from her 401k. So, I still have a mortgage due to her past medical issues but no other debt to speak of. I manage out of state bowhunts when I want (planning DIY Antelope & Hog with son for 2018). 20th anniversary in March so going to surprise wife with a 5 day Cruise out of Fl.. Well, planning anyway. We do lots with our G-kids in summer. We feel we are blessed with everything but a lot of $$$$ & that's OK with us.. We have what is needed.. Now, 16 years after forced retirement, we do just fine & under $75K. Hell, I never made over $50K working my butt off. Everyones "needs" are different for sure.
I don't know why people think they can live on a lot less just because they are retiring! About the only thing that changes is if you pay off you house soon before you retire and can figure that monthly money can be used. I paid off my house and hunting property up in northern MI before I retired in 2002 and between my pension and SS check I'm netting as much as I was the last 3 years I worked, so I'm doing as much or more than I did while I was a working stiff, including going out west every fall to hunt for 2 months or more.
Yep, healthcare is a big issue, at least until you get medicare. then somewhat of an issue. My wife and I at age 60 are now paying $1800/month for health insurance in Texas and it is nowhere near as good of the coverage we had before Obamacare (at $950/month). If I don't at least keep catastrophic insurance, they could come after everything I own, including my ranch, to pay the bills if I were in a bad accident, got cancer, etc. Health insurance is a BIG DEAL in retirement. And guess what??? No one knows what next year holds in that regard
Never forget the cost of long-term care if you and/or your wife should ever need such services, God forbid.
But we're living longer which means we are more apt to need assistance of one kind or another than would have been the case with our parents, who mostly passed away in their late sixties/early seventies.
If you or your spouse ever needs to go into a long-term care facility, it can easily cost you up to $7,000/month and the average time spent in same runs two YEARS or more.
The last thing you can afford to deal with in retirement are YUGE, unexpected expenses such as those. If you can handle eating those potential expenses out-of-pocket, good on you, because that means you've done well financially and have made good and rational decisions with your money.
Otherwise, if it happens to you or your spouse, you or your spouse might become a ward of the state. Who the 'ell wants that?
I have come to the point after several similar threads that my ideal number is $150k. I am below that figure for 62 so I may offset with some consulting work. Some of you do much better at spending than I do but that’s just the way that it is. I am focusing on creating additional income versus reducing spending to the point of losing my current way of life.
I wish that I liked simple things and was more content and could do with significantly less but I’m not at that point.
For those that are 10 to 15 years away from the magic age of 59-1/2, think of what a retirement could look like and how soon if you can dump your mortgage payment into a non-qualified type plan, interest bearing account with good returns for you instead of them. Paying a mortgage off early is big.
How many of you are retiring in place versus relocating to a lower expense area? I foresee spending far less in retirement as I expect to be in a far less costly area and average hunting trips will routinely be a cup of fuel to get to MT (2 miles away) or stepping out the back door instead of a multiple thousands of dollars for a bush flight several times per year. 292 working days but who is counting?!
Kyle, Great reminder about long term care. I tell everyone I know who is in their 50s and healthy to seriously consider LTC insurance.
My mom is in year 3 in a nursing home. $8660 a month. She has a small pension and minimal SS, which reduce it to around $7600 a month. I sold her house and all her belongings to fund it, have enough left for two more years. Luckily this place accepts Medicaid for established patients when she goes broke because there's a waiting list for Medicaid beds in our area.
Unbelievable how many people I talk to who think Medicare or the Govt will help with long term care. Nope, not until you get down to $2000 in total net worth. Then maybe.. IF you can get into a place that accepts Medicaid and you qualify. And most Medicaid places are crap-holes.
Not sure where you live but nobody around here makes $150k a year. My dad is 86 and lives on $1,800 a month. That being said, everything he owns is paid off and neither he nor mom travels.
I believe I would be asking a professional financial adviser rather than a bunch of bowhunters. The answer is different for everyone. It depends on your lifestyle and your desires for retirement. I am doing just fine on way-way less than $100K a year. But I have no debts, none. I am on medicare and I have wife who is make way more than $100K a year. So my figure would be totally different from yours. Get professional advice.
"Way more than $100k a year" + "way-way less than $100k a year" = a whole hell of a lot more than 98.5% of everyone else, lol.
My wife is my professional adviser. Her MBA in Finance helps a lot. I won't get into numbers because it is personal but I will say that we don't have a house payment and don't pay anything for medical. We do have Medicare and United Healthcare plan F at not a penny of cost to us. All prescriptions are free for me. Not everyone planned for their retirement early. We did. If I have major medical care requirements I can always go to the VA but I don't plan on falling back on that. Everyone's situation is different so you can't really rely on what you read on this thread. Go see your Financial Adviser. If you don't have one, shame on you. Better get one real soon!
Magic number is 59 1/2.....I wish.
Social security wise, Your full retirement age varies with your age. I was born in 1957, so mine is 66 1/2.
If I retire at 62 I lose 25% of the benefits I would receive at 66 1/2.
Then theres medical. My wife switching jobs right now our medical for fam of 4 is $2,500/mo [for the one month until it swaps] I'm pretty sure you can't collect Medicaid until 65 unless you are disabled. Retiring early would cost you for medical insurance.
My advice to young guys; its not how much you make...its the assets you acquire that are important. Assets like rental properties are awesome. When the cost of living goes up, you increase rents to keep abreast. You can sink todays dollars into them now [at 50% off in some cases]...and reap the benefits in retirement.
In my case I had kids late in life, so paying for 2 kids in college at $122,000/year [with after tax income -sucks] has postponed my retiring. You might want to factor a smart kid into your retirement equation. If only i could have talked my son into the OleMiss honors program, that would have only cost me $300/year the rest in scholarship. I made them both a promise to pay for whatever schools they wanted [and could get in to] That promise cost me a little shy of $500k.
Financial advisor wanted to tell me that I needed 3.5M. Hell I could cash out for over twenty years at $150K a year for over twenty twenty years with that amount. Odds are I will need 150 do the first 10 years and a hundred for the second and 75 for five years. I have not been very impressed with most financial advisors. Like I said upfront my concern is building a $1M 401 K to take care of the wife in case I die early. She unlike me is very frugal.
I'm a boglehead kinda guy and like their forums suggestion of 25 X Annual Expenses.Ive handled all my inv.estments myself.No load funds,no management fees or 12b.
Strength in diversity
Dang Bruce,he coulda rented my upstairs as I'm 15 min from Ole Miss!lol
The truth is, that no one really knows how much money they will need, and that no two people's needs are the same. Some people spend lots more than others. Some people will live to be 90, some won't even make it to 62. If you have a steady retirement income, you don't know how future inflation may affect it. If you have a large sum that you're investing, you don't know how the investments will do. I retired at 55. The way I looked at it was that I'd rather take a chance on living to be old and broke, than keeping on working to be more "financially secure" and run the risk of having lots of money and being too old to enjoy it. I'm betting though, that if I do happen to live to be old, that I'll have enough to get by.
Interesting timing on this topic. Meeting with financial adviser next week to go over our retirement savings. I'm 55 and would like to retire in 5 yrs. On the radio today I heard a report that most Americans have not saved for retirement; many planning to rely on good old SS. They also stated the average person has only $60K out away for retirement. Biggest thing that scares me is health care costs. My grandma lived for 10 yrs in a nursing home before she died. My mother in law just went into assisted living at $8k per month. Savings won't last long at these prices b
59-1/2 to advert a stupid 10% penalty is why it's the magic number.
I have no debt and a portfolio better than most people my age. I had a rental and hated it, but then, it was the wrong type of rental so got rid of it. Don't really need to rely on a 401K as the one thing that makes it all happen, there are many other ways and the successful self employed guys out there know what I'm talking about.
What matters most is the avg return you get on your investments and like most have said, what your individual needs are/will be. I am not worried about SS, if it's there later then great, but young(er) guys shouldn't bank on it...
But I agree, the right type of assets are paramount, whether it be a good business or rental properties (or both) are not a bad hit.
Kota-man hit the nail on the head. The nature of retirement will also help one learn the difference between "a want" and "a need".
Retirement does no necessarily mean one becomes a pauper.
The variable that will always increase in a retirement as a person ages is medical cost. The older the person- the higher the medical expenses will be. But that rising cost will be offset to some degree because you won't be spending money on what you use to spend money on - so you will have more money available to cover the continued increase in medical expenses.
The wife and I started saving and investing when we got married in 1982. I was 21, she was 20. Her dad owned a Radio Shack when they had franchises. He worked it for a while, got a bunch of stock and sold the store back to them in 1988. He did well for himself. He was very sharp with money....much more than us when we got married. He told us where to invest out money. We still have the same mutual funds from when we got married. We lived a very frugal life growing up together and saved/invested alot. We got the kids thru college and they're on their own.
Anywho....when I retired from the military a while back we paid off what was left on the house. That was the only outstanding debt we had. The wife kept her big city job and does it remotely when we moved back to our place in northern Michigan.
The wife is real good at tracking our income and expenses. We (she) knows where everything comes and goes to and tracks it on spread sheets and Quicken. Most of our expenses are the usual ones everyone has....utilities, auto/home/life insurance, food, gas, etc. Our medical is Tricare Prime and that is a great deal for us. While reading this thread I asked her what our monthly expenses are. She said it varies with the seasons. She forecasts to maintain our current lifestyle after she retires will be approx $72K. Now....we watch our money but we also live pretty good. I do hunting/fishing trips here and there, we snowbird every year for 3-4 months, she does boondoggles.
I think there are three big variables that can trip anyone entering or already in retirement. The first is health. If you have an unplanned major long term medical issue, that can throw off your plans. The second is the economy. Many retired folks have some of their money in vehicles like 401's, IRA's, stocks, mutual funds, etc. If the economy takes a hit...so does your investments. The third is over dependency on the govt bennies. I'm not sure if social security, medicare/medicade will be around or solvent in the future. If retired folks are counting on those and they collapse or get reformed, that will force a change in retired life.
What I would suggest to a young person or couple.
- Do an honest analysis of your finances and expenses and set up a budget - Start saving and investing now as much as you can into different types of investments - Do not carry over credit card debt.....pay off every month - Keep an outstanding credit rating - Don't live beyond your means - Don't count on the govt (or anyone else) to do something for you that you should be doing for yourself
Got on the Obamacare website a while back to get a quote for health insurance if my wife quit her job, and we needed to switch plan. My quote was 20k per year for a family of 4. Unbelievable! What a scam! I think I saw obamacare costs were going up like 25% a year. I 'm thinking I will be working all my life so I can blow my hard earned income buying freaking insurance.
The crazier part of it is, I have a few friends with rare medical problems, and nothing is ever covered. My attorney always likes to tell me insurance companies are in the business of collecting money, and keeping it.
We fall into the same group as Jaquomo. We have a home at the lake and one here at the farm and a few cows to help with taxes. We can live very comfortable on 60-65k a year and our living is very much the same as before we retired. If it was needed we could tighten our belts and still be fine.
You know, if you have to attach a dollar figure to retirement, you are, well, I don't know... maybe not ready. A lot of retirement is a state of mind and having stuff you wanna do... ie be happy. Granted, you need the bucks to live, and many aren't in the position most of us are, but decide what you really want. Gonna last forever?? Than better save up!! You spouse may or may not be with you to be a part of it, which some of us know. Put them damn hiking boots every body worries about that have the right sole, tread, and laces flat on the damn ground and look up at the sky. What you want?? Do it!!
Have Tricare for insurance, have lots of little bits of retirement income from different sources. About 70 thousand a year coming in. We also have 401K's and Roths that we are still reinvesting dividends in. We pull money from the dividends when we take cruises or go on guided hunts.
When we pass we plan on passing some on to the kids, grandkids. But not too much. I don't want them to be depending on us for their retirement. I have not told them how much money we have. We haven't figured out who gets the rest.
A huge factor that many ignore is how much of your income is not inflation protected.
Many retirements aren't and then you get fooled and live to long. At some stage you outlive your retirement and have to cut back.
^^^ but by then, you're too old and feeble anyway to do anything. 8^)
It is not that hard to figure out with a little research and tracking expenses as suggested above. The other suggestion of living as if you were retired before you retire is a good one as well.
Having zero debt is key. Also, take care of any major home repairs such as new roof or heating system before you retire.
Like Pigsticker posted above, I too have not been impressed with financial advisors. The older I get and the closer I get to retirement, I think the majority of people can do well on their own without a financial advisor.
To me it was always to have everything basically brand new and paid off and then be sure and have the house paid in full so that is what I did in 2017 as I was putting in my retirement paperwork.
I have the titles to everything and almost everything is 2017 or 2018 and the Deed on my home on February 5, 2018.
I am just setting up my Property Tax payments to the county and my Property Insurance with Farmers on my home as by having it paid off, I have to do these items separately now.
I just feel that what a person debt is becomes more about how much they 'need' to retire.
I have only my Utiities of $450 a month and my eats/food @ $300 a month......$75 a week on groceries ya know...
Good luck, Robb
I agree, best not to retire with any debt, zero.
Converting Trad IRA To Roth is also a good tool when applicable once you enter retirement and lower salary.Ill covert mine up to the next tax bracket each year when I enter retirement so the kids will draw out RMD based on their life expectancy and not mine
The real value in these discussions is not in finding your specific answer but in seeing things one needs to be aware of and that there are so many ways to approach and succeed at this, whether early, normal, or late.
There are a few accounts of people who's parents have used their entire savings for extended long term facilities. I've seen that myself with a family member and why I caution against those who might secretly wishfully think they'll get inheritance for that final push over the line when their date comes.
Some, like my dad have already stated charities get his egg when he passes. I say good for him because it's his money just as ours is to my wife and me (charities will get ours too). Am thankful we never fell into the 'entitled' expectation for a parents/family members wealth.
And it's ok if some don't entertain an early retirement or want to step up adventure (and the expense it takes) in retirement. Properly plan it and you've got as good a shot at getting it right as the rest of us.
Sure there are ways to access funds pre-95 1/2 without a penalty. Learn about the Rule of 72T for IRAs and Rule of 55 for 401Ks. May not be a right approach for many but due diligence to a well constructed strategy these are potential successful tools.
Being 1 year into retirement and only 53 years old, I have my moments of questioning too. But worrying needlessly is what I do...it's what I've always done....that's why we have the savings and a lifestyle that made this all possible. But I know the numbers show worrying, in our case, is for naught. And have for a long time having been saving and planning this for 26 years (was an engineer that geeked out on this from the start).
As my dad, and others who've retired way early before me, had advised: "When you retire you don't all of a sudden go on some spending, vacation binge, you go on as before being responsible with your money. Your biggest challenge may be to actually stop regular savings and spend the money after decades of such aggressive savings.". I'll go out on a limb and suspect others here who've retired way early resemble that last.
It may not be possible for some and they'd be right, but if these recent discussions on here should show you anything it's that there are so many ways to successfully skin a cat but is prudent that you take the time necessary to learn a thing or twelve about it before you're jolted awake with a dead cat in hand that all of a sudden needs skinned.
I feel it depends where you live. I retired in N.Y. , then moved to Kentucky. I gained an extra $20,000. a year income by not paying N.Y. state real estate vs. Kentucky taxes.
My woodlot with logs is my fallback income should I need it. I can average 20 grand a year in veneer should I want to. Our logs up here go to Canada and overseas. Sold 3 for $9200, two birch veneer and one curly maple. A friend of mine bought 300 acres years ago near Sunday River ski area in Maine. Every year he sells a cabin lot. We own a 200 year old farmhouse and plan on giving it to our kids this year for a camp when they visit. I am 71 and tired of working on it. I started milling out lumber from our land for a cabin. Dug my well and put in a septic system myself. Downsizing. My brother and his wife sold their house to his kids and is living in their RV while he puts a mobile home on land he had. They travel a lot, so they just need a place to crash for a while that he doesn't have to work on. I plan on living 6 months in Newfy and 6 months here.
A lot of great points have been laid out here. Remember that its after tax income (you pay taxes on traditional 401k, ira, pension etc), medical expenses are going up and inflation. Research which states have lower property taxes or exemptions. Have a plan and stick to it, even when the market goes up or down.
Here is a cool website - AreaVibes.com
Enter a state, select a city, select 'Cost of Living', scroll down and enter what your income is now and it will factor in what it costs to live there compared to where you live now
I'll further add: You still have to know yourself through all this. No one, even a high quality financial professional can tell you everything, they can only make experienced/educated assumptions based on your input and historical financial data.
What I mean is: ours, as good as he was, still had us down for $10K year for vacations, and replacing vehicles every few years, until our passing around 95years old.
I explained $10K/year was no where realistic as $2K only every couple years is what we spend on vacations. Sure there's room to bump up vacations a little but to think we have ($10K/year) money burning a hole in our pockets is irrational for us.
And we don't replace vehicles like the majority of people do. We take care of our stuff and keep them until the first couple occurrences of stranding/failure. Our 2002 Duramax is at 176K miles, wife's 2003 Grand Cherokee is at 193K miles, and my 2001 Cherokee is at 179K miles. All kept well maintained, rust free, operating perfectly fine, and no signs of replacement needed. Had the truck since around 2007 and the 2 Jeeps are replacements since the 2013 fire. Wife lost the 1998 Cherokee with 255K miles that we bought new back in 1998 and I lost a aggressively run 1995 Wrangler with 176K miles that I bought in 1999. Both ran great, rust free, and no signs of replacements needed. So no, we don't replace vehicles as most others do.
You truly have to know us to understand how we don't fit the mold of typical people but a financial professional has an expectation of typical. Just know even they can only get close.
LOL - the only jewelry my wife has is her wedding band and one pair of earrings. That was pre-fire AND continues post-fire...just gotta know us ;-)
I took a buy out in 2006 I was 51,thought I would take a couple of years off.Well here it is 2018 and I am still (off) LOL.I had rental property I sold it every one thought I was nuts, but after 25 years of being a land lord I had it.Used a 72T so know penalty I have taken 7% for all those years.But I put 3% back into the market when I retired I was making around 70 a year and living on about 35.Every thing is paid for, I also have hunting land and a cabin,and fish and hunt almost every day,I was a fishing guide for two years but the insurance got to high for a part time guide so I do not do that anymore.I am taking SS and investing the 1900$ into safer investmants.All this said every one is differant.I do go out west two times a year one bird hunt and and a some kind of biggame.
Just remember, financial advisors may have an incentive to recommend you retire later and build up huge balances in your (their) investment accounts. Spend the time to choose carefully.
With no-load mutual funds and a little research and a lot of patience you can do very well. I've tracked my investments against the S&P 500 index since when me and the wife started putting money away and I've beaten the index lifetime-to-date by 1.8%. That doesn't sound like much, but it is huge over 20, 30, 40 years, and it outperforms well over 95% of all the other mutual funds and most money managers. I averaged a consolidated 25% return this year when the S&P returned around 21% total return. It can be done. Low-cost index mutual funds are God's gift from heaven for the individual investor, and makes it even simpler. Wish they would had been around (they actually were around just not very many or well-known) when I started. I understand the above is probably better suited to some of the young guys on here just getting started and not us old geezers smelling retirement in the wind. What it really comes down to is that retirement (and the planning for it) is really just a bunch of choices you make. Do you want to drive a new car every couple years or save money and run your current one until it goes to car-heaven? Do you want to live extravagantly or more frugally? etc, etc... What do you REALLY want out of retirement, and what are you willing to do (sacrifice during working years, lifestyle in retirement) to get there?
I'd recommend everyone re-read Whocares post above. He gets it and said it well. Most people can retire on much less than the oft-repeated 80% of your current income. If they want to and are willing to adjust to get there.
“You know, if you have to attach a dollar figure to retirement, you are, well, I don't know...”
One of the most ridiculous comments ever! I am not planning on living on $35K or for that matter &75K. I have not worked for forty years to downsize living. I am debt free, sans 2 years on my mortgage. Just bought new F250 wife is ready to pull trigger on an Accura MDX. Those will carries several years without car payments of any type. My real goal is to have what is commonly referred to as “golden years”.
Pigsticker, You have done well and I would venture to guess that you, if compared to the entire population, are much closer to the top end of the spectrum of how well prepared we are for retirement, than that lower end. The vast majority of folks in this country are not as prepared, which would translate to many of the people reading this thread. I think that is who Whocares, and who I have directed my comments at. The ones who are hearing that they need to be able to produce 80% of their pre-retirement income in retirement, and will not be able to come close to it. Or the ones that are contemplating retiring much earlier than the typical retirement.
In a way different class than the rest of you. 59 years old and recently divorced. Kids both college grads with great jobs. In 9 years gonna take what I have and move to camp. Remote northeastern Maine on the lake. Live off the land, hunt, fish, trap and forage. Three others in that area doing the same for up to 13 years and all three living for around 10K a year. Grow veggies and store in the root cellar. That's where they will find me tits up and a smile still on my face!
MNRazorhead- RE Low Cost Index funds. +1. I started an IRA when I was 19 years old. (Long before there was a Roth) It wasn't much, but I was more focused on implementing a plan. I studied no load mutual funds and picked funds. I now have a financial guy and moved some money under his umbrella and I regret it. (He is a friend and I went against my better judgment) The investments under his umbrella have performed ok, but I have done as good or better with my own investments on low expense/no load funds. And at much lower expense ratios than the "managed" funds.
Razorhead is spot on why would any planer want any one to retire.
My wife did really well investing our money herself, too. But when it came time to pull the trigger we decided we couldn't afford a 20-30% market downturn while drawing $60K a year from investments, so we enlisted two different advisors to recommand some safer vehicles that still provide a 6-7.5% return, while keeping a portion in the market to take advantage of the current run. We've missed out on some returns but we had "enough" money to retire comfortably.
Another thing to remember is if your house is paid off you can do a reverse mortgage LOC. That money sits there earning interest until you need it, then it's available with a phone call or an email. Gets paid back when the house is sold. For me it's a nice little $200K (you only get part of the equity) piggy bank I can draw from for a hunt or trip or home repairs without touching other investments earning more in this bull market.
I retired in July 2017at 62. My single biggest expense by far is health insurance at $22,000 for my wife and I for 2018.We have been paying for our own health insurance since 2005 so I know what Obamacare has done to the market. So anyone planning to retire before they can get on Medicare better be prepared for a shock.
It all comes down to lifestyle. Doesn't really matter how little or how much you make, it's what you do with it. My dad retired a 56 with a small pension, but fully paid healthcare. He's now 71 and their income is around 40k with SS, and I don't think they spend half that. They travel when they want, but are mostly home bodies. I agree that a good number to try and hit is 75% of working income, but not everyone will need that much. Some would need more.
I'll throw a plug in here for Dave Ramsey. If you don't know of him, he has a national brand(books, radio show, seminars) that promotes debt free living. I don't agree with everything he says, but his plan to pay off debt flat works. I'm early forties, my wife is 39, and we've been debt free, including our home, for over 6 years now. We moved 3 years ago and wrote a check for our current residence, pretty good feeling. We don't make a ton of money, but we both work and are comfortable and able to do pretty much what we want. As others have stated, being debt free going into retirement seems crucial to me.
We both plan to retire at 55. My wife will(hopefully) have a very nice pension that should meet expenses. I'll have to buy health insurance for myself, which I know will be costly. My 401k and her 403b will supplement other things we want to do. This is our long term plan that of course is subject to change if one of us dies or has a serious health issue. We don't currently use a financial planner because we haven't met one yet that we both are comfortable with. No offense, but I avoid places like Edward Jones etc like the plague. Those people are sales agents paid on commission. At some point, we will hire an independent certified financial planner who has fiduciary responsibility.
My only complaint/regret is not having my own hunting ground. Prices are high for timberland where I'm at and I won't go into to debt or borrow from my 401k to purchase any. I been very fortunate to have access to private property to hunt all of my life but that is changing. I still have a lot of public ground available and that may be what I'm left with to hunt someday.
Congrats to all you retired, or soon to be retired, folks!
Let try this again
I do my own investments
Is this a good rate of return?
Another big consideration is WHERE you live. Cost of living rates vary widely geographically.
I did a calculation, factoring for inflation, and I figure I'll need about $15/day for gas, beer, and bait. If I can do that every day healthcare will be a moot point.
That's about average in this market for a conservative portfolio, IMO. Some individual investments will beat that by a lot and some won't. Go back and look at the performance of those same investments from 2007- 2011 for comparison.
NvaGvUp might weigh in here. The bigger hurdle is whether you can afford a 30% (or more) drop like many experienced in 2000 and in 2008 and still draw from it while it builds back up. That's the killer for retirees with a lot of market exposure. They are suddenly paying what amounts to 30% more for everything, pulling more from the funds while they rebound. Some retirees never recover from a beat down like that. I have some friends who were ready to retire in 2000 with a tech-heavy portfolio. They never did fully recover and a couple are still working now, 17 years later, after losing 70% of their 401K value back then.
My company's stock was $78 in 1999. Had the 4th best performing stock of the decade of the 90's. Secretaries were driving Ferraris. Many employees were rolling their whole 401K into company stock. When WorldCom collapsed, our stock dropped to $3 before anybody knew what happened. Think about that - a $780,000 retirement fund drops to $30,000. That stock never did recover.
14% is a good annualized return, but like Jaq said it's probably about consistent with what the broader benchmark markets (DOW, S&P, etc) returned during that time (just checked, the DOW returned 40% during that time and the S&P returned 33%, so you did a bit better). Historically, a conservative assumption on market returns would be around 7% per annum. You might have a slightly more aggressive portfolio that is aimed at returning more, but it'll carry more risk.
A common piece of advice is to stay away from investing a significant portion of your retirement in company stock for those that have the option to buy it. Most people already have a tremendous amount of exposure to their company given that is where the bulk of their income likely comes from. Stacking investment risk on income risk is just asking for a disaster to happen. WorldCom, Enron, you name it. Diversification is a great thing.
Cnelk, It depends on what that return is generated from. Is it from a broad equity base (large, mid and small-cap companies) or more specific such as mostly small-cap or tech? Also, is it a true total return including all reinvested dividends and earnings and less all fees and expenses rather than just the per-share increase? Assuming it is a broader mix of equities and it is net of all things instead of just simple per-share appreciation, it is a very good return. Remember, most all mutual funds and money managers don't even match the overall index. If you hit that, and it appears you have actually exceeded it, you've done well, very, very well.
2015 was a crap of a year, 2016 was average to a bit better and 2017 was a very good year overall, on average (from a broad market perspective). I have always been a believer in diversification and tend not to get overly involved in any narrow segment of the market no matter how hot it currently is. That is what got the employees at Jaq's company in trouble, chasing one brightly burning star. Slow and steady (aka diversified) is boring, but it tends to be better for long-term results.
I asked this question in another thread awhile ago. Good topic. Deciding to chase the superslam has hurt my ability to retire. I chose to do that earlier in life as opposed to beginning hunts later in life. Probably a big mistake. I feel bad about that decision now. If only I would have chosen wisely to invest that hunt money cost rather than go hunting. Would be in way better shape financially. Ugh
For me, As of now, I’m hoping for 59 years old. No mortgage and college education fully paid for whatever kid(s) I may have. Then I’m thinking I need $150K/year to live off starting in 2044 for say 30 years till I’m 90 so that would be $4.5M (not counting Soc Sec, my wife’s retirement $, or interest on the $4.5M starting in 2044). Hopefully when the time gets closer for me, I will realize my wife and I can live off less but who knows what the future holds. I have 26 years to figure it out.
Every situation is different. I retired two years ago at 59 and spend over $200K/year but I have no debt and the cash flow to do it. Best friend retired at 62 and lives on a $50K pension. We both love retirement and hunt and fish together all the time. It's all about your goals and wherewithal.
The post deer season topic transition is officially here.
I hope to never retire full time.
After watching for years I have come to the conclusion that beyond a certain level of wealth that wealth increase and personal satisfaction seem to be inversely related. Charitable giving and service being positively correlated with personal satisfaction.
Self imposed austerity can have many benefits beyond financial.
With the average return on investments listed here, then why are so many adamant about getting debt free? If you have good job security and much lower interest rates on loans, then whats the hurry to get them paid off?
I still coach and intend to keep at as long as I can remember my way to school. I hope to keep playing music until they bury me. I have to be busy. That is why I like groundhunting. One reason so many of us seniors never totally retire is socialization. Go to any McDonalds in the morning and see all the seniors hanging out. I love working with my runners and throwers, and I enjoy the cameraderie with fellow coaches. I get as much out of it as the athletes. There are a lot of old Track and Cross Country coaches in our state and scheduling and seeding meetings are fun for us old farts.
BUCKeye - peace of mind that the bank can't take it away, if for some reason, you fall in hard times.
No such thing as secure dynamic cash flow as in working for wages.
BUCKeye, I'm with you there. Financing my newish used truck at 1.99% feels like stealing with the returns I've gotten by putting that extra money to work elsewhere.
I also like to run my number through a very simple calculator. www. firecalc.com.Great probability calculator based on historical markets.Very simple and runs your number instantly against every past possibility
Plug in annual spending and add number of years and it will run a scenario for every market in history.Its truly amazing at what bad sequences on the front end can bring down your egg.However,spending frugally in bad markets and increasing spending in good markets (common sense) really helps to buffer the situation greatly.
That calculator pretty much agreed with my investment guy. Pretty cool running different scenarios.
Yep, if a 30% market drop happens in the first year or two of retirement that loss will never be made up as the market recovers. So retirement "investment" vehicles need to factor in the potential market risk.
Buckeye, the returns have been pretty good of late, especially last year, but there's no guarantee that another 2008 won't happen again at anytime. I understand taking advantage of low interest rates, but there is no peace of mind like being completely debt free. Anyone who says otherwise probably hasn't been there. Just my opinion.
Also, just my opinion again, but driving new vehicles all of the time keeps people working longer than they otherwise would have to. Biggest depreciation and loss of money most people will ever see. I wish I had the money back I wasted on new cars when I was younger.
Buckeye, New cars are only a worthwhile if you drive them for an extended period of time. You are right they are a black hole to throw money into.
Rellikreed has the ultimate plan.
I guess I wasted 33 years in the financial services business. So much retirement advice from bow hunters:) great resource!!
The older I get the more I realize the most important thing to do is stay as healthy as possible. Do you have a fantastic primary care physician? I know some guys that don’t have a complete annual physical every year. Don’t be afraid! Too many friends and family passing too young.
Good luck all!
My Goodness! There is an interesting mix of responses and information here. Some of it good, some of it downright bad. The fact of the matter is, there is never one universally correct answer to this retirement planning question, nor any other question on the subject. What's right or wrong is uniquely dependent on your own individual financial situation. End of story.
If you are even asking this question, you need to talk to a retirement planning professional.
Any good planner/advisor can assess how much you need in a matter of minutes, right down to the dollar. No guesswork. I do it for my clients every single day. And I'll tell you what... nothing makes me happier professionally than presenting a plan to somebody that allows for an earlier retirement, or being able to deliver a greater retirement lifestyle than expected. To suggest there's an ulterior motive at work among financial professionals is just plain silly. The better I do for a client and the earlier I can show them retirement, the happier they are, and happy clients = greater referrals for me. That's a much more significant net positive than another year or two of marginally higher fees.
Also, I always chuckle when I hear index returns quoted as a reference for how an investor is doing. Most people get that wrong, way wrong. Then they chase index returns into a raging bull market (like now) only to get crushed when the cycle turns. I see so much of this now and see it on this thread. Anyone remember irrational exuberance? It's back with a vengeance! The ONLY question that should matter when analyzing investment returns is "am I on track to accomplish my personal goals?" Benchmarking to some arbitrary index makes little sense for those in the retirement planning phase of life.
As others have said, the internet and a bowhunting website is certainly the LAST place you should turn for financial advice. Find a pro. Ask your good friends and other professional advisors (CPA's and Attorney's) for a trusted referral. You don't go through life without a doctor. You should treat your finances the same.
Ultimately, I like Charlie's answer the best. Stay healthy! If you can't do that, the money doesn't matter!
SDHNTR, you over simplify a major life decision! I can figure out what I need but that’s not what I May want or what I want to leave my offspring should I pass on earlier than expected. I have a couple of pensions, some stock, 401K and of course Social Security but the plan is not to draw until 66 and perhaps even 70. All this and I am still wanting to max out the 401K for the next ten years.
This may be easy to do but I may need significant more money with all the time on my hands.
Pigsticker. sorry, I certainly did not mean to oversimplify. I think you actually misunderstood me. My point was the exact opposite of your take. It's NOT a simple or unimportant decision. Next to family, and health and fitness decisions, financial decisions are probably next in line in order of importance. It's critically important, and that's the exact reason why asking the "how much do I need" question on a bowhunting website makes little sense.
To your points... Most people certainly do need more than they think. Or at least they should plan for more, in case of health care needs. And all of the factors (pension, 401k, Social Security, leaving a legacy, etc) you mention can easily be addressed by qualified planner or advisor to help you come up with the optimal strategy, for you and you alone.
My intended point was... this stuff IS important! If you have to ask yourself this question, you obviously could use some help, so find a qualified professional.
I dunno the exact figure....but its a huge % of the country lives paycheck to paycheck.
Good thread even if it only gets the young guys thinking about it.
Jaq- good point on Stock Market volatility. I think its going to be a pretty good run with Trump in there...so far so good but you never know. I considered the Stock Markets potential and diversified a big % away from it years ago.
I know some dads in our area almost my age that think day trading Bitcoin is investing....the one guy tells me he thinks he can quit his job as its so lucrative- Facepalm
sdhntr you are right my planner got me through 2008 .He has helped me with other things then money.But like all things you do have to be carefull I know two guys that are flat broke from bad advice.
As has been said, it all depends on what you want your post working years to look like.
Postpone (larger spending) now for a better retirement tomorrow hoping for good health to enjoy it or living a fairly "normal" life now and have a fairly "normal" retirement later?
Investing in the market for retirement is certainly a risk and requires understanding how to do it and what financial vehicles are available. I would respect the advice of a more sage investor/planner with real life experience over a young hotshot that wants to fast track success and just recently passed a series 65, 66, or 7 exam.
They are both financial "professionals"...
Best retirement planning advice I ever received was from Charlie in an elevator. "Do it as soon as you can".
Then a couple friends who worked hard to enjoy a good retirement tipped over. That was my catalyst to move from an "investment guy" to a "retirement professional" and we worked out a plan so I could get out early and still have a good lifestyle.
^^^ I agree to asap. In my opinion (underline opinion), I would be a fool to wait until 65 because that is the norm or what I was told to do...
Drummer boy and HDE, you bring up some good points. Anyone shopping a financial advisor relationship needs to first go to the website called FINRA Broker Check. There you will see what license an individual has and for how long, their tenure, employment history, education, bankruptcies, criminal activity and any complaints or disciplinary action that has been filed against them. All this stuff has to be declared so if you do a little research it’s pretty hard to wind up with a bum.
Like any profession, there are bad apples in every bunch. Stick with advisors from the larger firms as they will have extensive compliance departments and strict oversight that will weed out the vast majority of nefarious activity and bad advice.
Jaq, I had the same experience. Almost everyone I have talked to over the years that had retired has said that EXACT thing. My comments above regarding equity investing, as I also said above, are really meant for the young guys on here that have decades before they punch out for the last time (per quote in prior post "I understand the above is probably better suited to some of the young guys on here just getting started and not us old geezers smelling retirement in the wind"). They have by far the most valuable item to help them retire when they want - time. Time to plan and ability to capitalize on the time-value of money by compounding their contributions over many years. Time is also a great mitigator of risk and allows young people with many years before retirement to aggressively invest for higher average returns but not be at risk in the short term. I saw a chart once, 30 years ago when I just became a CPA that compared two people and highlighted the advantage of starting early to plan for retirement and the incredible power of compounding over time. The first person invested $2,000 per year for only 5 years from age 22 to 26 and then stopped. The second person waited until they were 35 and started putting in $2,000 per year until age 65, a total of 30 years. Assuming they obtained the same average 10% return guess which one ended up with much more? The first person's money grew 45.7 fold to $456,714. The second person had a 5.5 fold increase and totaled $328, 988. I still have that chart and kept it as a motivator. I hope I can pass that motivation on to some of the young guys (or even the not so young) on here to start early. You don't have to have a huge income to accumulate sufficient retirement funds, just start early, or now, with small amounts and keep it going on a steady basis, and pay attention to your choice of investments to maximize their ability to generate retirement funds with reasonable risk for your stage in life.
I also had one of my best friends and hunting partner die from a pulmonary embolism on Christmas day a few years back, just as he was about to put in his retirement papers. That was, as it probably was to you, a big slap across the face from reality. I can't wait to retire and am doing it as soon as I can.
I opened up a Roth IRA for my 22 year old daughter, who is graduating from college this spring and gave it to her with the initial contribution as a Christmas gift. Then I sat down with her and showed her my spreadsheet tracking me and my wife's own investments spanning back 30 years. I wanted to impress on her how that tiny amount we started with has grown over the many years and that she could easily do the same. I did get a comment about me being the worlds biggest geek or something similar, but her eyes told me it hit home. I did it because I remember for us the hardest part to getting started was actually just taking that first step to start when money was tight.
I think hiring a professional, with integrity and good references, is the way to go. Most people would probably consider my income/career to be "upper-middle-class", but a few things will set me (us) apart for retirement. One, I will have a healthy, iron-clad pension (which is a stroke of luck since retirement was the furthest thing from my mind when I started my career). Secondly, as suggested above, I hired an accountant/financial advisor (who is now one of my closest friends) the second year I started my career (many years ago). And thirdly, my wife is more of a "financial asset" rather than a "financial liability" which really helps, if you're married.
Barring a massive bear market, I (we) should actually be better off in retirement than we are right now - thanks to the reasons above, and some significant self-discipline.
Best wishes and good health for everyone contemplating retirement. Under ten years for me!!
Luckily I fell into the "Start Early" group although not quite as early as age 22. For the young kids bothering to pay attention to this discussion, educate yourself and learn about "dollar cost averaging".
I also was an early starter (not as early as 22 tho) which also helped us nip lifestyle inflation in the butt. I turned every pay raise into retirement savings until I was maxed out. Then I used only 1/2 of every pay raise after that to additional after tax savings/investing.
An elevated lifestyle inflation early (as most people pursue right out of college) makes saving later painful because one now has to reduce their lifestyle to accomplish it.
I have been undisciplined in many ways other going to the when the wolf howled. Luckily I have done better than I many. I am pretty much locked into retiring on $110K a year @ 62 because I am damn sure not going to dip into the 401K until 70.5 and then I will reinvest it.
My biggest concern is what is my additional cost to support the additional free time. I am not a handyman, I am not industrious, and I am not content at doing nothing!
My plan is to hunt, fish, hike, bike, workout, and take naps more in the afternoon with the wife. These are the unknowns for me.
Damn, I could use an editor!!!
Not ready yet to retire yet, but bought / started a couple outiftting business in Eastern Canada....My goal will be to retire someday, sell you retired guys Moose, deer and Bear hunts :) and trade some hunts or fishing trips so we can enjoy other hunting opportunities throughout the USA.
The real answer resides in the holding costs of the assets, current debt, and expected lifestyle. Every person is unique in all of these aspects.
Lou: Happy to share my experiences. I’m in a tree right now in NW Illinois hunting with a freakin Longbow! Everyday is Saturday!!!!
Charlie, spending that much time in treestands will lead to hemmorhoids. Get down and hunt like a biped!
Pigsticker, I could retire on that amount too ($110K+). What I learned after the first 18 months is that my lifestyle is much like you envision - hunt, fish, hike, bike, workout, and take naps more in the afternoon. Plus I do quite a bit of volunteer stuff (archery club, managing two substantial fisheries, wounded vet and kids fishing, serving on three Boards). We also took a couple vacation trips every year and I hunt 70+ days a year. We had a hard time spending more than $70K even in the fattest years of spending when my wife had some health problems. So my $61K "budget" is really a "spending amount" because that's how much it costs to do whatever we want to do. The rest rolls back into the nest egg and is reinvested.
In order for me to spend $110K I'd have to develop a serious taste for Macallan 25, Cakebread and Opus One wine, Peruvian flake coke, expensive hookers (now that my wife is gone) and guided hunts. Macallan 25 is the only vice with a possibility, but it's not worth the cost to me since Scotch is now only on occasions. I don't enjoy guided hunts so that's not going to cost much. Or I could buy a lot of Sitka stuff every year. That would put a dent in it too! ;-)
Interested in hearing someone's take on what one does with 401k rollover to IRA? We currently are all in with the IRA having had to rollover our 401k. I am looking to diversify with some "safe" or "safer" place to invest? Financial guy seems to come up with a few different forms of annuity. Are there other options that I may not be hearing from him?
Love the 2 fund portfolio of VTSAX and VBTLX......allocate at one's desire.
Genesis you are giving an example of a fund to purchase staying within the IRA correct? I'm wondering what other products are available other than annuity's ( if any? ) But don't get me wrong I like the heads up on the funds!
I have some IRA investments in REITs and also some in a Business Development fund. They both pay a steady 7% annual dividend which I can reinvest in more shares or take monthly. They are generally immune to stock market whims. I know someone who bought a ski condo as a rental property with IRA money. I also have a big annuity as an IRA. You can do a lot with an IRA - within guidelines of course.
The two Vanguard no-load index mutual funds are excellent funds for their respective categories. An IRA is just a designation/label that an investment account is now an individual retirement account and has special rules regarding contributions and distributions, etc.. You can put a bank savings account or many other kinds of accounts into an IRA. Mutual funds are by far the most common type of investment account that people designate as an IRA. You can also transfer funds from one IRA into another IRA account, which is what I assume you will have to do since your 401-K is now rolled over into an existing IRA, If I understand what you are saying?
cbfromd, absolutely! There are a multitude of investment choices available to you in an IRA. Don't invest in anything you don't fully understand and make sure ALL expenses are fully disclosed to you and are 100% transparent. Annuities can be great or terrible investment vehicles and there are lots of different types. Some are really expensive. Has that been explained to you? Are the costs worth it to you? Similar case with mutual funds. What might be right for Genesis might be totally wrong for you. Those two particular Vanguard index funds are good funds but they also both have their own associated systematic risks that are very real right now. One being a stock market at all time highs and one being a bond market faced with rising interest rates. Ask lots of questions. If it doesn't feel right to you, it isn't!
Again, don't go asking for specific advice like this on the internet. It sounds like you don't trust the advisor you have already sought out. Find another one. Ask a friend or family member you trust, or your CPA/Attorney, for a referral.
I practice tax and trusts & estate law. I'll make a quick plug for incapacity planning. Make sure you've designated who will manage your medical and financial affairs should you become incapacitated. Believe me, you don't want the legal system to make those decisions for you. Protecting your nest egg is the LAST of the system's concerns, and an incapacitated person is a very EXPENSIVE person. Powers of Attorney, living wills, etc., don't cost much and are worth their weight in gold.
Again, this site should be the first place you look when considering a financial advisor:
IntruderBN, AMEN! One of the biggest mistakes I see clients make is not having an estate plan. No better way to tear apart an otherwise loving family.
Curious to get some opinions. I have my IRA's with EJ. It cost me 3250.00 dollars this past year for them to "take care" of my money. My account increased 43,000 dollars this year. Sounds like a lot but is this the best way to go about it? My 401k at work returned 18% this year with me doing all the picking of investment choices. Kinda got me to wondering if I am giving away money when I could do it myself but I have to think(hope) that they would be on top of it if SHTF and may be able to make corrections faster than I would. I have about 13 years til 67. Thanks for the opinions.
kyrob, $3250 could be a lot, or a little, it all depends on how much you have. Fees are usually assessed on the total value of your assets, so whether or not that is reasonable depends on the size of your acct. I would first start with asking your guy to justify those fees. Make sure his response makes sense to you. Then go get a second opinion. When comparing portfolios, you must compare risk profiles too as performance cannot be measured in a vacuum. Only you can answer the question whether the fees are worth it, but I do think you may be on the right track in that it's easy to say you don't need the advice in an up market like this. A rising tide floats all boats. Ask your guy to show you how your investment strategy did in 2008. That should be a good indicator of the flip side of the coin we've experienced lately. And look at a longer track record than just one year. That's not a long enough time period to make a fully informed decision. Even Warren Buffett has had off years. Look at 5 and preferably 10 year continuous periods before you make firm decisions.
The wife and I had a meeting with our financial advisor today. Too say I was disappointed in his bow hunting advice is an understatement. But, he did say I'm all set to retire in 5 yrs @ 60.
Jaq, thanks for the perspective. If you come across the pure Peruvian flake I will come out of retirement!
kyrob, I would get another opinion on the account with EJ before talking with them further. Educate yourself before meeting with them, and have your questions written down. I suspect you will find a better option then EJ
UP retirement needs beer, bait and gas money
kyrob,that's $3,250 for sure that won't be invested.Too many companies out there providing service for much much less.
I sure hope it's not much.
Genesis, how can you say for sure that’s too much? Sure, That’s an expensive fee if he has $100,000, but it’s also very inexpensive if he has $1,000,000. Big difference. Any decent financial advisor should be able to quantitatively justify his fee. Kyrob, give the guy a chance to do so and if not satisfied, move on. And don’t think your 401k that you are comparing against is without fees. It certainly has expenses, they are just internal fees baked into the mutual funds so you never see them. You could even be paying more in the 401k funds and not know it. Get ALL the info before making any decisions.
Read this is you want an eye opener:
kyrob, It looks like the fees you are paying are fairly typical and you probably can not find a much better deal for the same services. I think that you hit on the key question: Do you need the services? I looked at my 401K and an account that I bought and sold stock in. Over 10 years which included 2008 my 401K averaged 7.4% and my account averaged 11.4%. Being over 59 1/2 I took an in-service withdrawal from my 401K and transferred most of it to a self directed IRA with no fees. I did over 18% since I did that. If you feel comfortable buying individual stocks your self and developing a diversified portfolio you can save the fees. If you will lose sleep at night worrying about it you may want to let some else do it. I do not think the pros can do a much better job of picking stock but they can follow a disciplined approach w/o emotion. You can get the same result if you do the same thing.
Genesis, how can you say for sure that’s too much? Sure, That’s an expensive fee if he has $100,000, but it’s also very inexpensive if he has $1,000,000. Big difference. Any decent financial advisor should be able to quantitatively justify his fee. Kyrob, give the guy a chance to do so and if not satisfied, move on. And don’t think your 401k that you are comparing against is without fees. It certainly has expenses, they are just internal fees baked into the mutual funds so you never see them. You could even be paying more in the 401k funds and not know it. Get ALL the info before making any decisions.
Read this is you want an eye opener:
I used to have some investments with EJ for quite a few years. Some did ok, some were dogs. My wife consistently beat the returns we were getting from EJ, and her fees were a LOT less. Then I met a former EJ broker who told me EJ often recommends investments that produce a bigger commission for them, not necessarily the best returns.
When I got closer to retirement I told my EJ broker I was moving to an independent who specialized in retirement planning. He asked me why and I told him I felt like he was working for EJ and his own commissions, and not me. He shrugged and didn't try to deny it or talk me out of it.
jaq, you just extolled the virtues of a fee based pricing model versus commissions.
WSJ on-line article right now about brokers steering clients to deals that are best for the broker. Seriously? Say it ain't so!
MNRRazorhead and SDHNTR... Yes A few years back we rolled a workplace retirement fund into an IRA with a financial planner. Good guy all seems well, up front with fee's, etc.... lately I have been asking him about reducing risk with a portion of the money and annuity's are so far all we have talked about moving money into. I don't like what I see with a variable annuity fee's... so Just wondering what type of products other than an annuity I could use? I understand where some people are coming from when they say this is no place to be asking such questions, but I will tell you that sometimes a lot of good down to earth common sense information can be obtained from such conversations.. I have already came away with a couple of things/ideas just from this thread.
Sometimes its actually better to get monetary/life advice from Bowsite rather than bowhunting advice! lol!
No-load mutual funds. There are many out there to pick from based on what you want out of them. Or, get a new planner that will listen to what you want and give you more options because there are definitely more out there. Can't really give you anything more specific without knowing a lot more about you and your situation.
Since Trump has been in office an indexed S&P would have been wise.
My wife has a chunck of money trapped in a variable annuity in a 403b with her employer. Just recently been looking at the fees and found out that they are really high (2.4%). We met with the advisor for the account a few months ago to discuss the fees and he repeatedly lied thru his teeth. We have filed multiple complaints against the guy. I won't give the name of the company, but I would look VERY closely at any annuity product in regards to fees. You need to know exactly what it's costing and what you are getting for the expense.
Greg, same thing happened to us way back when we just got out of college. My wife is a teacher and her 403-B was one of the first things we started putting money into and we chose an annuity from Great-West - didn't know any better at the time. I soon realized the high fees, and more importantly, the back-end load (deferred sales charges). It sounds like you have them too from your comment that the money is trapped? I would recommend 1.) stopping any further contributions into it and put future contributions into another, better, fund option available in her 403-B (hope there is a better option?), 2.)waiting until the deferred charges go away (it will probably be a number of years - we had to wait at least 7 if I remember, but the cost is so high it is worth it to wait until they go away) and, 3.) then transfer those funds to your account you set up and are currently putting money in. The prospectus for that annuity will tell you how much the charges are, how long the deferred sales charges apply and when they expire. Good luck!
Best plan by far is Ground Hunter's Yooper plan! Ya, dats a good one, you betcha! Love it! Going to be a big part of mine!
The way I looked at my big annuity was this: How much would our annual guaranteed payback be over our lifetimes once we started withdrawing, vs. putting that same money into the overall market for the same period of time and risking a major downturn or worse, an extended bear market after we retired? Fees weren't really a concern because I planned to leave the money in there until I needed it (12 year window). I already had enough nest egg exposed to the market and in alternative investments. An annuity was our way of guaranteeing a lifetime revenue stream for both my wife and I of $52K a year, which combined with max Social Security gives us a pretty healthy income regardless of what happens with our other investments. Then our investment nest egg can grow or be used for trips, unexpected medical expenses, major renovations, whatever. It's gravy.
Annuities aren't for everyone. Especially not necessarily for those with a good guaranteed pension ahead. They also aren't for those who view them like a traditional market-based vehicle. It's simply an insurance policy for a chunk of your money, and insurance costs money (fees). We wanted the peace of mind that no matter what happens with the market, we wouldn't run out of money and could still live a good lifestyle. I haven't yet found a mutual fund or an investment advisor who will guarantee that my money will reach X value in X years.
At one company I worked for I was eligible for a modest pension. When they offered a lump sum buyout years later I took a close look and ran some numbers with our investment guy, and by rolling that lump sum into our big annuity I would actually get a better monthly payback from the same amount at the same age than leaving it in the pension.
My wife and I have been looking a retirement for a long time. We are looking at 2 for her 4 for me. Planning, We met with three different retirement councilors-investors. We will both retire with a solid pension fund. We will be basically debt free. I will need a single health care plan for 4 years and the wife a supplemental medicare plan. We have some small IRA's savings, etc. They told us we needed 300,000 to 450,000 more. I was for like for what. To retire and live, travel around the world. No way we need that but they would make good profits on us for sure. Be careful. Research yourself and don't just trust everyone's advise.
Don't forget health expenses late in life. This has been touched on before. My retired neighbor developed prostate cancer that spread. His treatments cost around $8000 a month, and Medicare doesn't pay for it. They're now into the second year of this treatment and it's crushing their modest savings.
Thanks for the info guys. EJ evidently charges a 1.35% fee for the first 250,000 and that slowly goes down with each 250,000. The next drop will be to 1.30%. What gets me is they took the first 1.35% from what I put in and they did nothing to earn it save for a few thousand the first year. The next year they got their cut again and got more from the original amount I put in. Kinda feel like I'm getting robbed but they are making me some money at least for now. The guy is very friendly and answers any questions very promptly and in depth. A lot of people I know use him but I still think it's a bunch to pay out but I have been called a bit frugal in the past. They do have a fund that I could control totally for 40 bucks a year and I might go that route eventually.
kyrob, Don't be afraid to call Vanguard or Schwab to see what services they offer and what they charge for those services. I think most folks focus on one fund they have that has done extremely well, or the opposite, and think the rest of their money returns the same rate,, NOT! A lot of individuals that I know are not capable of managing their money themselves in a way to maximize their returns along with minimizing risk along with tax efficiency. Full service brokers hate places like Vanguard and Schwab because they are making a Hell of a lot of money off of folks that don't know any better. Maybe that gives you something to think about as well as the above comments.
Curious if any of you that invest in stocks yourselves use services like e-trade or scottrade etc. and have good/bad results?
Mark, thanks for the advice. In ignorance and mostly because of convenience, my wife has been in this plan for about 9 years. The company is AXA and the reason the money is trapped is because the only other option she has to roll to is another insurance company which is no better. The only way she could move the money is to sever employment, which she won't do. We are patiently working with the school to get a low cost provider as an option. We stopped contributions 2 months ago. Surprisingly the surrender charges aren't that horrible so if we get another option we will probably just roll it all at once.
Tried the e trade thing in the 90’s. I can’t see the advantages of buying single stocks, for an average investor.
Much better off with a Schwab index fund. Your exposure in single stocks is too great.
SDHNTR,are you gonna twist everything I post to your narrative?Firstly,I said I love VTSAX and VBTLX.Due diligence is a givien for anyone .
Regarding kyrob's $3,250 management fee I didn't say it was high.I said it was money that wasn't going to market and that there are mucho companies working for under 1.35 % management fee.
Both are those are the truth.
I'm a proponent for no load funds and skinny management fees ....it's the only thing I can control.Investors need to do their on due diligence but after being a white coat investor for 25 years I will continue to stay the course and investors need to realize that YOU DO NOT HAVE TO PAY SOMEONE to get competitive returns and sound advice.No load indexing can be very effective.
It just seems to me that the market is going to drop a whole bunch one day soon and I'm not sure what one should try and do when it does. I know you will lose share value and just hope it comes back and when it goes down is the best time to buy and then hope it goes up but I don't watch it daily like I assume these companies do, (which they probably don't anyway, but it sounds good). I worked with a guy set to retire at the end of 08 and he ended up losing so much that year that he had to continue working for several more years. I don't want to be that guy.
Genesis, no twisting. I didn’t mean to offend. That wasn’t intended to be a jab at you. I was just trying to illustrate the point that there could be more to the story than just face value. That’s all.
There will always be a place for DIY investors and also those that need or want advice. There’s room for both in the marketplace.
We still have retail auto parts stores and still have auto repair shops. Heck, we still have outfitters and DIY hunters too. This is not much different.
There are many ways to get cash returns tied to high credit. ...but the returns being chased by west coast money is amazing and really creating a lot of downward pressure on returns. I would suggest that IRA money be treated differently than at risk money. Create two pools (or more) - one conservative for your IRA and one gambling money if you are set on getting a high return.
Most investment planners are simply salesmen netting the herd into a managed fund and regurgitating information sent by their affiliation. As stated above - choose wisely. Perhaps only your wife is a more important choice for a long term partner.
Good financial planners are worth more than most are willing to pay.
A key problem is that most investors are willing to follow advice without understanding and then want to blame their advisor rather than themselves for not taking ownership of the decision.
And if you think you are smarter than "the street" then you haven't been around long enough. But the amount of good information out there is incredible. There are a lot of ways to beat big funds.
It will be interesting to see what happens with 5G and AI in the coming years. A lot of wealth will be created...but the black swan is always out there. Always. Just know what you will do when it shows up.
Ok Nate,I feel better :),I realize I'm a hack but hacks can survive with some principles and discipline
1. Develop a workable plan 2. Invest early and often 3. Never bear too much or too little risk 4. Diversify 5. Never try to time the market 6. Use index funds when possible 7. Keep costs low 8. Minimize taxes 9. Invest with simplicity 10. Stay the course
I don't call myself giving advice because I can't and shouldn't but I do like to promote self empowerment in whatever you do.
Some good stuff right there Genesis! Unfortunately most people aren’t emotionally equipped to do a lot of that, especially #1, #5 and #10. That’s where guys like me earn our keep.
Question for the 'gurus'
I currently have a 457 Deferred Comp Plan thru my employer funded by payroll deductions contributions. Once I retire [age 55], its done.
So what can/should I do with it if I want to continue to build it?
Rollover to a new 401k? Let it be and save it for later?
Whitty, I select stocks for investment . I presently trade through both Schwab and Fidelity. Both have $4.95 on-line trades and pretty nice research systems. Except for a 401K where I had no option to do so, I have purchased individual stocks and not funds for around 20 years.
I think the main thing is to start, lots of ways to invest all are better then doing nothing.I do it both ways I have EJ and vanguard the reason I still have EJ is because I just like the guy.
EJ recruits likable salesmen. My guy was very likable, and they tried hard to recruit me once.. ;)
My late wife traded through Muriel Siebert and researched through them and Motley Fool resources. She consistently beat the market and also our EJ returns, which the EJ guy always marveled at since she was an "amateur". Her "fees" were elk streaks and walleye fillets.. We only moved everything to a fee-only pro when our portfolio got large and we were looking down the barrel of retirement, and she got a little spooked.
Point is, you can do it yourself and do it well if you're willing to work at research and have the nuts to accept risk and losses with occasional dog investments. Its hard to tell your spouse that the "Peters Pipeline " stock you were so high on just dropped $10,000 in value before you noticed and cut your losses.
Thread has developed into a huge contradiction. At first thread was retirement was to big of a deal to do it yourself and to get a retirement counselor. Now it has moved to manage your portfolio yourself. The later is something that I somewhat believe in.
My wife happens to manage a very large portfolio for her boss. When I say large I’m talking somewhere between $40M and $50M. They pick and choose and they also have a broker. The broker’s role has diminished more over the last 10 to 15 years. This started when my wife contacted some trade organization in New York when noticed a lot of movement with little return on investment. Later she was subpoenaed to come testify but later was released of that responsibility due to the fact that there was enough people to testify from that area so the court would not have to incur the cost of bringing her all the way from Georgia. So this supports my skepticism that fee based transactions work really well for the one on the receiving end and not so well for the investor.
Personally, I think that most of the pain of retirement could be transparent if all of us started young enough and were not a $200K plus a year income earner.
Case in point is I have friends and family that were teachers and military that have pensions and with Social Security retire comfortably with the huge task of financial planning to the degree that we have discussed. The below average guy who is wise enough to start early with small investing in company plans may do as well or better in retirement than they did working if they managed their debt well. I have had many people find out that they could not afford to not retire when they started to do the math.
Amazingly, I just of the huge number of people that cannot afford to retire. This is because of unmanaged debt, zero savings, and investing. If anything this thread has done is hopefully created the need to plan for retirement for the young Bowsiters and maybe woke up the the 35 to 45 crowd that they better get off the stick. I know many people will say that if they made the big bucks that this would not be a problem but I have banker friends who tell that they have more people in the $200K range that suffer from poor money management than many of those that make much less. I know and appreciate that many of you have not beat me up hard with the information that I have shared on this discussion. Had I been a high earner most of my life this would literally be a no brainer for me. Again, I am not worried about making ends meet but my challenge is strictly inmaintaining my current lifestyle. I absolutely abhor the concept of downsizing.
Truly great topic and even better input on the topic. Actually, I found this thread provided more common sense information than many threads on retirement forums and financial sites.
I started telling my two kids at a very early age to live on 90% of their income and they will retire when they're 50. I remember my youngest asking, "But dad, what if I don't want to retire at 50?" I laughed and told her, "Imagine how great it would be to go to work every day knowing you don't have to!" lol
midwest yes there is such a differance between having to go to work and wanting to.I was just lucky,started at a company at 23 that had profit sharing so even though I retired early I still saved for over 30 years.
“Her fees were elk steaks and walleye fillets.”
Lou....For what it costs me to procure those said items.......well, let’s just say that my broker’s fees don’t seem too bad, NOW!
Here is an article about the questions you should ask your financial adviser. Some good food for thought.
The second article is one adviser's response. http://www.basonasset.com/19-questions/
I just have one more important point for folks to ponder, that hasn't been brought up regarding risk.
The standard practice is that a younger person can safely absorb high risk, and the expected higher returns (hopefully...), and that the level of risk should be moderated as you age and get closer to retirement. However, that doesn't mean retirement is the end of the line and you should have everything in CD's when you retire. Most people can expect to live 20-30 or so years after they retire. Now, think about that large amount of time in terms of inflation/cost of living. $100 10 or 25 years from today will buy less than $100 today, much less.
When you start ramping back the aggressive investing keep in mind your retirement date, but also keep in mind the decades you still are expected to live. I look upon retirement as not an end of the line in terms of investing, but as a waypoint on your total expected lifespan. You may still want a limited expose to equities or other higher long-term return assets through some of your retirement to maintain your lifestyle and purchasing power. Obviously, you aren't going to invest like you did back in your 30's, but you also may not want to be completely in "safe" investments. This has a big assumption in that you can do this and sleep at night. If your risk-tolerance is going to go nuclear, it isn't the right approach for you. In the end, what is most important is your comfort and ability to enjoy life, post employment. Just something to be aware of and maybe use as a tool in your toolkit.
Correct me if I am wrong please. It is my understanding that any pre-tax
contributions to a retirement / educational fund, be it 401k - 403b - IRA - 529 college plan, results in corresponding income being excluded from Social Security benefits calculations. Can any of the tax / financial planners comment on this please?
Six, if this is happening on your paycheck you need to get down to payroll and show them the attached link. Pre-tax employer sponsored retirement plan withholdings should not reduce your Social Security wages. Other pre-tax deductions like health insurance and related will, but not retirement plan withholdings. 529 contributions are not federally tax deductible at all so they have no effect on your Social Security wages. IRAs are individual and not employer-sponsored, so they also would have no effect on your SS wages.
Interesting. I will have a chat with payroll. Thank you.
SDHNTR is one of the most successful money managers I know so I’d take his points. IdyllwildArcher is a very successful Medical Doctor so I’d take his points too. Pat is one of the top cyber security guys in the country so I’d take his points. That said find someone you can sit with face to face, matter to, trust and then step aside. I used to manage my money and could do it well with constant effort but now I give it up to a real pro and could not be happier. I can’t tell you what a relief it is to not worry about money or which investments I need and when. I have a very limited amount and can’t afford to go backwards. Good luck all at finding “your” path to financial security.
Hey thanks Charlie! I've had several great conversations with bowhunters since this thread popped up. I love my job and I love seeing the relief people experience when they know they are on the right path to a secure retirement.
Charlie, I'm a really successful fly fisherman - does that count?!
Another vote for letting a pro manage it. My wife did very well with ours, but she basically did it as a full time job since she didn't work. I earned, she invested and managed. That was the last thing we wanted to do in retirement. Plus, there are investment vehicles for limiting risk in post-retirement that amateurs may not know about. Like Charlie, we had enough, but couldn't afford to go backwards.
Many thanks to SDHUNTER for his advice. I took that to my prospective new investment guy today and he had the answers, some of which were a little alarming (total fees after everything is considered). But the risk-adjusted after-fee returns on the investments he suggests are very good, which they should be considering the market performance. So I'm still shopping.
Nice! Glad our chat helped Lou and you are now better equipped to find the right professional. I wish you the best.
ALL fees need to be transparently disclosed! The days of snake brokers hiding juicy commissions and expensive fees are fortunately on their way out!
Many of the old guard in my industry are begrudging the new fiduciary mandate. I think it’s wonderful! It’s the way biz always should have been conducted, IMO.
This is a great thread and interesting for me since my wife and I have decided to retire this year. I haven't done any detailed spending analysis and figure that we'll make it work with modest pensions, SS, decent 401Ks, reasonable health insurance premiums and long term care policies that we started in our 40s. You can't trade money for time and we'll never be healthier or more physically and mentally capable so we're gonna try it. We are also going to take SS as soon as possible. We'll prefer the cash flow early in retirement as we have a pretty decent bucket list and you never know when the Grim Reaper will call or SS will be modified.
Alpinehunter, Have you run an analysis on your social security payments? Odds are, you will benefit greatly (usually to the tune of about 8% annually) by postponing your payments. I’m not saying not to live the way you want, but if you have other non qualified (non retirement plan) assets you can live off of for a few years, it will likely behoove you to wait before drawing on SS. Especially if you are healthy and have any family history of longevity.
Like anything else with regard to retirement planning, don’t guess at this. Any decent retirement planner/advisor can run a SS analysis telling you when is the optimal time to take payments. There are a host of such tools available on the Internet too. Don’t shoot from the hip.
Great thread, I've been sitting back and reading this and there are a lot of great points and things to consider. Not sure where I saw this, it could have been in an email regarding my 401K or IRS fund, but it said as a rule of thumb, that by 50, you should have at least 6X your annual salary saved in retirement. I thought that at least this took salary into consideration instead of saying that you need X number of dollars for retirement. I understand that a lot can happen in the 15 or so years to retirement and it likely estimates a certain percentage of growth and continued investment and doesn't account for a prolonged recession or losing your job, etc. Anyone else heard this? Any truth to it or is this just a ploy by the financial institutions?
To have enough to retire? Without a pension, 6x is probably WAY low.
"that by 50, you should have at least 6X your annual salary saved in retirement" I think AVERAGE annual salary is a little more appropriate and is what I've read.
To have enough to retire? Without a pension, 6x is probably WAY low.
SDHNTR not to retire at 50, but as a goal for where your retirement savings should be when you are 50. If you have 6X your annual salary (or average salary as Genesis mentions) you are on a pretty good track for when you retire in 15 years or so with continued growth and savings.
Yeah I suppose that could make more sense, I just don’t like “rules of thumb” guesses in retirement planning. I’d much prefer to know exactly whether that’s enough, and if not, then exactly what I needed to do to get enough.
I found an online calculator that you put in what you have and the annual fees a place charges and how many years til retirement and when I hit enter I got enlightened, to say the least. The amount they keep is enough to retire on. I pick my own investments in my 401k at work and got 18% return and the other place got a bit under that and made good money doing it. If I am thinking about it right, from what they made me and then took their cut, they actually only returned about 10% for me. I am going to switch out of the fund letting them manage my money and try it myself.
Anyone subscribe to the dartboard approach?
Nate, I am 48 and at that 6x rule of thumb now but feel terribly behind. Anyway I would have to believe that many, when computing, have to realize that they will never be where they need to be. What do you suggest to people that are in this state of mind so to speak? What does a person have to do to get there? This thread is great but makes me feel like a POS. lol
Quote: "I found an online calculator that you put in what you have and the annual fees a place charges and how many years til retirement and when I hit enter I got enlightened, to say the least. The amount they keep is enough to retire on. I pick my own investments in my 401k at work and got 18% return and the other place got a bit under that and made good money doing it. If I am thinking about it right, from what they made me and then took their cut, they actually only returned about 10% for me. I am going to switch out of the fund letting them manage my money and try it myself. "
If you can pick your investments then consider low-fee options like BND for a bucket of bonds, VTI or SPY of VB for stocks, IXUS for foreign, etc? These are relatively very low cost so can decide you goal (x% stocks, y% bonds, etc) and probably need around 5 EFTs to achieve your goals of diversification at low annual cost. Some funds are around 0.20% or less for the annual cost so you are hit with around $2 per $1000 a year. If you are paying 8.00% of return then that is around $80 per $1000 a year. You pay in 1 year what takes me 40 years to hand over to the fund manager. Ouch. Not everyone has the same investment, risk, liquidity goals so do your research and seek advice from more than just someone operating a keyboard on the internet.
P.S. I was able to rollover money from an employer where I was still employed. Not sure if is still possible or if is limited to certain types. I went from 4% fees pre-transfer on a SPY-type Fortune 500 fund down to around 0.10% for a similar fund post-rollover. Is damn near criminal what goes on in 401K type plans.
Ned, no offense meant to tobywon, but throw that 6x rule out the window. No telling whether that is applicable to you or not. You may need more or you may need less. And different kinds of money in different places aren’t the same. You could have $3 mil in a 401k and think you’re sitting pretty, but guess what, that $3 mil ain’t $3mil because you’ve never paid taxes on that money! Whereas $3mil in a non qualified brokerage acct is a hell of a lot more real money. So where is that $6x? There are just way too many variables to deal in rules of thumb! That one or any other.
So what do I suggest to those that feel behind? Same as with anything else important in life, put your head down, make a commitment, and fix it! But start with a plan!
Look, if there is anything anyone should take away from this entire thread, it’s that you should know exactly what it’s going to take to reach your retirement goals. You should not just be guessing at how much you need to save each year, you should know that amount down to the dollar! And if you can’t save that much, you must face perhaps some hard realities. Either you are living beyond your means and need to reduce spending, or you are going to have to work longer than you’d probably like. But bottom line, you should know EXACTLY what needs to be done. Everyone should know just how much they need to save each year, exactly how much investment risk they should take, exactly when they can retire, and how much they can afford to retire on. That’s a retirement plan! Anyone reading this deserves the same. The answers are out there and they involve a hell of a lot more than just investment returns and expenses. Or one can just continue to guess and hope for the best. Not me, I prefer peace of mind.
And Ned, you’re a bowhunter! You have to find an optimistic outlook to your retirement savings, just like preparing for any hunt. A “fatalistic” approach to anything always yields bad results. In my experience, regardless of the answers, it is nearly always refreshing for a client to have their retirement questions answered. Even if it’s not quite what they wanted to hear, like they need to save more, work longer, retire on less, etc., at least they now know what they are dealing with! Just ruling out the unknown is usually very relieving to most people planning retirement.
So my advice to you is to seek out some professional help. Lay out a retirement plan so you know exactly how much to save and what you are up against. Commit to the plan, monitor it over time to make sure you are on track, and before you know it, you’ll be looking at a comfortable retirement, on your terms. Good luck.
Nate, guys should pay for the advice you're offering for free on here. Too many people I know think they can rely on the "seat of the pants" method of planning, with a strong dash of "hope" thrown in. The statistics on the number of seniors living on the edge of (or in) abject poverty is scary, and based upon the small savings of younger Boomers nearing retirement age, it's only going to get worse.
Where I live in a college town everyone is abuzz over the need for affordable student housing. That's going to turn around into the need for affordable senior housing within the next 15 years.
I also think there is a misunderstanding here that retirement planning simply means maximizing investment returns. Sure that’s critically important, but there’s a lot more to it.
Savings for one! You can’t expect your investments to make up for lack of savings. In fact, I’d bet on the conservative investor and diligent saver meeting retirement sooner and more comfortably than one who is just a risk taking investor. Think beyond just returns here.
18% return at a lot of risk could be less favorable than 10% at lower risk. Net (after fee) returns have to be measured against risk to assess value. Again, let’s not look at returns in a vacuum. Standard deviation comes into play. I can break down risk adjusted returns, quantitatively showing a client my value and demonstrating how they are getting their money’s worth from their fee. Any financial advisor should be able to do the same. And value should mean more than just beating some index. Is your advisor meeting with you regularly? Can you reach him/her on a direct phone line and is he/she responsive? Is he/she providing you with regular guidance to keep your savings/spending on track to meet goals? Did he or she present you with a written financial plan? Help you optimize social security options? Recommend the best educational savings vehicle for your kids? Calculate and help you to remember to take your IRA mandatory distribution? Work with your CPA on advantageous tax strategies? Make sure your acct titling and beneficiary designations are in line with your estate plan? Etc. all these things have to be worth something, and they are all things a good financial advisor should be doing to earn his fee. And none of these things can be quantified in terms of fees and returns alone. So please, to be fair, let’s examine the whole ball of wax here.
Not offended here, the 6× rule of thumb is not mine or something I'm pushing on anyone, it was something I read and only asked about it because I felt the same way as loesshill. I appreciate the feedback.
Well, after reading the link from Genesis, I can honestly say that I don't personally know any above average people.
Hmm, I wonder why a college degree is number 1. I have five siblings with college degrees and I make twice as much as anyone of them. This falls into the same of someone’s recommendation based on success in other areas to make sound financial recommendations. This falls into the same thought of I see on bowsite where some opinions are highly valued while some are devalued. Imagine if you picked stock like they predict success based off of The Heisman selection process. Hell, I could have told you that RG3 was not a pro caliber quarterback. Enough with that, like many have stated here I do not want to be my personal investor in retirement. If young adults follow three or four sound principles then retirement should be a no brainer. Where people fall victim is they do not start in their twenties or even their early thirties. Most people are playing catch-up after they failed the number one priority of starting early. Sometimes I think colleges and the government wants you to fail so that you become a slave to the system. Work until you are 65, rely on Social Security, and die shortly thereafter. This is like when you here of Social Security going broke. Well if you think that there is going to be hell to pay when people lose Obamacare or food stamps just think about all the retirees whose retirement plan is primarily based on Social Security. The government cannot let that happen and if it does then we will be the Social States of America. I have many who have retired very comfortably and their retirement is spent on figuring out their next cruise. Sorry for the rant but like SDHNTR stated that you need to save. Every economics guy on the TV focuses on consumer spending all the while they should be focused on consumer savings. People are amazed when I tell them that I paid cash for a truck. I get the same deer in the headlights look when I tell them that I am not going to draw Social Security if I retire at 62 and may not draw until I am 70. We can afford to buy a new bow every other year but we can save $1500 in an IRA when we are 25! I mentor several young guys and I tell them that they cannot afford not to invest. I spoke with one last night that I have known for thirty years and we were discussing him buying a $500K house and how that value could go up five times faster than a $100K house based on the overall value of the house. He never dreamed that he would be buying a house in that price range.
SDHNTR is another rule of thumb, assuming no company pension, that you can only take about 5% of your total after tax retirement money as income each year and it should last you 25 years? So if you have a million bucks you could take just $50,000 per year, assuming some amount, say 20%, in the stock market for hopefully better return over the long haul? So start taking $50,000 per year out at 65 and hope you die broke on your 90th birthday? Want $100,000 per year, then you better have 2 million in the bank at 65? Stupid rule of thumb?
I have read 4% and you should never run out of money,if it is invested right.So 80,000 would take two million not including ss.
One of the best things that you can do in preparation for retirement is to make sure you are completely debt-free. House paid off. No truck loans. No credit card debt. etc.
As stated above, there is no "percentage" guideline. Also, you need to factor Social Security into the equation. $80K can be done with a lot less than $2M. Depends upon your investment vehicles, dividends, expected growth of those vehicles, etc...
Mike and Drummer boy, yes I hear the 4-5% withdrawal rate rule of thumb tossed around regularly too. There is some very loose validity to it, I suppose, but also lots of variables. There is a HUGE difference in a 20 year retirement and a 30 year retirement. 5% might work for 20 years and it might not for 30 years. You need to think about inflation too. 4% might last you that 30 years but that same dollar amount will probably lose 2/3 if it’s purchasing power over that period. So what good is that rule of thumb now? How is the principal invested? That makes another huge difference on how long the money will last. What about sequence of returns? If you get whacked with a bear market in your first few years of retirement, kiss that 4-5% goodbye. Also, if that nest egg you are drawing from is an IRA or 401k, you still have to pay taxes on those withdrawals, so that’s gonna take another big hit. So is that 4-5% pre or post tax? Adjusted for inflation? For 20, 25, 30, 40? years? On what type of portfolio? Too many question marks.
Why is everyone continually hunting for rules of thumb? Guess what folks? There isn’t one! Like any other worthy pursuit in life, there’s no short cut. Stop guessing! This is far too important to just wing it. Get the EXACT answers you need.
If you want to figure this out, you have 2 choices. Either commit to learning and doing the research yourself and finding the answers on your own (there are tools all over the Internet, like Genesis stated), or hire a pro! I don’t see any other good options.
Also, with regard to debt, paying off all debt may or may not make sense. It’s not an absolute either. Certainly credit card or other high rate consumer debt is not advisable, but some people remain high income earners into retirement, and maybe they have a sub 4% home mortgage. They could probably use that mortgage interest tax write off. The real cost of those funds is now down around 2.5-3%. That’s pretty easy to beat with even a conservative investment portfolio. So the age old principal of leverage can work for SOME, not all, people. You have to be an astute investor and emotionally able to handle the risk of using leverage. Enter at your own risk.
But if debt keeps you up at night, it’s not worth the harm to your mental health. Pay it off. That’s my take.
Very informative thread. After reading SDHNTR's post about the value a financial planner should be able to show their clients for the % fee they collect, does anyone have experience with them doing post retirement planning. The financial planner at the company my 403b and several other investments are with wants to charge an extra $800 to meet with us and develop a post retirement spending and investment plan. The cynical side of me goes straight to thinking I have paid these pricks to much money for to little work and now they want to gouge me some more. Am I way off base with that thinking or is that the norm. If it maters, the company is one of the big ins. companies that are seen advertised on network TV.
ttt for the young guys out there. The hunting connection to this thread is that the earlier you start and stick to your plan, the more dream hunts you will be able to do later. Good luck!
I would be interested to hear about any particular strategies folks use to market proof funds as you go into retirement. Do most of you take a cash position for a few year's worth of funds to ride out any market fluctuations or do you use another strategy? I'm specifically meaning when you are preparing to pull the plug, and it wouldn't be reasonable (for a variety of factors) to go back to work once the plug has been pulled, making sure you don't get caught in a big downturn that takes a couple years of recovery.
Lots of great advice on this thread. As SDHNTR rightfully said, there's no such thing as a one-size fits all plan or rule-of-thumb. However...I found this flowchart to be a nice guide for all things financial planning related. It moves away from the original purpose and direction of the thread somewhat into more generic financial planning, but I thought it was worth a share. Again, there are no one size fits all answers and I agree that it's always a good idea to talk to a professional to understand in what ways your plan needs to be unique or deviate from some of the guidelines above.
Regarding Withdrawal rates.......
Steve H. Point 1, Yes, I do advise a cash buffer. How much exactly depends on ones needs and tolerance for risk. Set aside enough to make you comfortable, but not so much that you disrupt your long term plan's viability. You don't fall off a cliff when you reach retirement. Odds are, you'll need that money to last you another 30+ years, so you probably still need to take some calculated risk to keep abreast of inflation. There is such a thing as too much cash. Find the right amount. Again, this is where a retirement plan comes into play. A plan will tell you exactly how much cash you should set aside, while still investing the rest to make sure you continue to meet your goals for the rest of your life.
Point 2 is diversification. You shouldn't be taking on 100% stock market risk as you enter retirement, not even close. So bear in mind that while the market may go through it's gyrations, you aren't going to be totally exposed. Build and diversify the portfolio right in the first place, so the bad times won't be so bad. Then you won't have to rely on huge low or no interest bearing cash stores and attempting to time the market (which never works over the long term) to minimize damage. In retirement, you win by not losing, so position yourself with a diversified portfolio (stocks big and small, domestic and international, bonds, cash, alternatives, real estate, etc) to mitigate losses to begin with. And keep things mostly liquid. Make sure the majority of your investments can be easily sold to meet unforeseen needs in retirement.
Which brings us right back to the learning opportunity for the young guys now. Save early and save often NOW. Make it hurt. Doing so while you are young will mean that you won't need to take on as much risk later in life. It will make for a more stress free retirement. Trying to make up for one's early lack of savings by taking on too much risk later in life is a dangerous game!
So how do you pick a pro that wants to help you vs. the one that just wants to sell you stuff?
How Much? I retired in 2002 at the age of 62, my wife just this June 2017 at 65 years. We figured we needed, prior to my retirement, $500,000- $750,000 in income generating investments, and then add in SS payments, Medi Care coverage, value of our home, (we hit that goal) to live comfortable but within a conservative lifestyle for the next 20 to 30 years.
All great info here....I plan to work till I die, I guess. 44 years old. Have pensions and 401k's, plus personal savings. Never gonna be enough in the world we live in....can't imagine what the costs will be 20 more years. Heck, my taxes on my house, cars etc. is $20k plus a year alone. Looking forward to working for the man for a long time :)
12 yards, great question! I touched upon this a few times above but let me make a more complete checklist:
1. Ask your successful family members, friends, CPA and attorney who they use and would recommend.
2. Bounce those names off of Finra Broker Check to see if there is a history of complaints or disclosures. https://brokercheck.finra.org/
3. Work with a fee-based advisor. This rules out the commission based pricing model where they may only want to "sell you stuff". With a fee based pricing model the advisor's interests are aligned with yours. They make more when you make more and vice versa. Ask the professionals that are referred to you if they work on an advisory fee or commission-per-transaction based pricing model.
4. Make sure you have a fiduciary agreement. Ask if the advisor is bound by fiduciary standard and ask if they will put that in writing. That means that legally, they must always put your interests ahead of their own.
5. Experience matters. Find someone with 10yrs+ experience. Preferably with the same firm. Beware of someone who jumps from firm to firm a lot. Advisors are often wooed from one firm to another (signing bonuses), attempting to drag their clients with them each time. Doing so probably does not provide a good experience for the client. Also beware the old goat who is half checked out too. Find a middle aged guy who still has to work hard. He'll probably be there for you for a long time.
6. Once they have passed all the above tests, narrow it down to a few names and interview each. There was a great list posted above by TXCO of questions to ask your potential financial advisor. Use that or something like that as a basis for your interview.
7. Ask to see a sample financial plan and have the advisor walk you through it. Then ask to see a corresponding investment proposal. Make sure you like the advisor's approach and explanations.
8. When in doubt, err on the side of someone working for a larger firm. The bigger firms will have more complete compliance oversight and systems in place to ward off most nefarious behavior.
9. Take your spouse with you and make sure he/she likes the advisor. You want continuity and comfort after you are gone.
10. Hire the one who checks the most boxes and gives you the most confidence. Good luck.
Bigeasy, I really like your graph, but do have one question. I see the creepy skull in the middle on the right side is directly in line after the question, "Got kids?" and then "Yes". Does this mean that kids will kill you and that you better buy some life insurance quick? Actually, it kind of makes sense now that I think about it...
I think Genesis is giving some great advice. The avg guy will do fine with a little bit of research.
Where guys like Nvagvup- Kyle can help as a investment pro is to a high net worth guy trying to navigate the tricky tax/inheritance waters. >>>---------> There are a couple facts the supposed investment pros don't tell you; A small % outperform the market A tiny % do it consistently. So why do you need them exactly?
Fees kill you. Outfits like Vanguard with their low fees are fantastic. If you are even thinking about an Annuity....run the number comparing Vanguard with their low fees and they SLAUGHTER the foe fee brokers. Some of those annuities carry a high double digit commission- crazy. I still prefer right real estate as an inflation proof investment ...but a % of no load funds is good.
If you really want to be an active investor follow a successful outfit like Dorsey Wright that maps what fund categories will outperform the indexes. You don't always want to pick your investments from past performance.
Bloodtrail, I'll bet you could retire comfortably if you move someplace with a lower cost of living. I own two houses in northern CO where housing prices are appreciating through the roof. My total property tax bill is $3900 combined.
Bigeasygator- Great graph!
The truth is there are NO EXACT ANSWERS, there are only estimates based on the past, just like Genesis's link, 1970 to 2015, not 2015 to 2050. Best book I ever read on the subject.
Thanks Nate, nice to compare to what I (we) are already doing and the path we are on and its consistent with what you laid out above. Recently took a three year cash position on the balance of our estimated needs above pensions etc. for "market proofing" a set of waves.
We are going to relocate to a income taxless state with a lower cost of living when I do pull the plug. 13 month and 13 days but who is counting?!
Mike, I second your book. It is a good read.
Holy crap Jaq.....I wish my property tax bill was like yours! >>>------------> I should probably clarify my last statement on looking forward when selecting investments. Certain diversified funds are constantly being adjusted by the manager- so if that manager has a really good track record...then that good past performance tells you a lot.
If you want to fine tune your investments further...THEN you need to look forward instead of past performance in say Real estate, Market sector funds...those types of thing.
So for example, if you would have bought Oil sector funds when they are in the tanker....they go in cycles so you can make a lot of $$ buying low. Same with RE in many areas.