How much do YOU think YOU need to retire? ...and at what age will you (and spouse) retire? (Part 1)

[DrGoogle]

<p>

Many CEOs tend to load up tons of stock options from the company over the years. As long as he stays long enough, these options become vested and a regular stream of income follows month after month, even when the share value does not appreciate a lot (just because the size of the stock option is very large.)

There was a book written about it in the late 90s, I bought it so I know what to do with my options. Exercising the options early is a way to deal with stock options.</p>

[jym626]

<p>Mcat,
Steve Jobs salary is zero, since he died in 2011 @-) </p>

[busdriver11]

<p>notrichenough, that is one sweet pension plan. Very few non government jobs will ever see that sort of pension, unless they are CEO types. Can’t compare a cushy pension plan with ss.</p>

[notrichenough]

<p>

Notrichenough, when comparing pensions to SS, Are you counting spousal benefits? Survivor benefits?

Retirement benefits are about 75% of SS benefit dollars according to this:</p>

<p><a href=“Monthly Statistical Snapshot, May 2014”>http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/2014-05.html&lt;/a&gt;&lt;/p&gt;

<p>A private pension that pays out at 50% of my highest three years, if I assume I made the FICA limit is every year, is almost double what SS pays.

Inflation protection? If inflation increases 3 percent a year, how long does it take for SS to be better than pensions.

If the pension is double what SS pays, by the rule of 72 it would take 24 years. I would most likely be dead by then, and even if not I would have collected a boatload more money, something like 40% more.</p>

[IxnayBob]

<p>

@dstark

Notrichenough, when comparing pensions to SS, Are you counting spousal benefits? Survivor benefits?

</p>

<p>… and then there are kids’ benefits. My kids have received benefits due to their being relatively young for having such an old father (62). One can question whether that is the spirit of the law, but it’s legal. I’m not allowed to save that money for college, but money is fungible, so I can use their SS to support them now, and put other money away for their college. I will receive $0 in college aid for my son, and expect the same for daughter. </p>

<p>… and disability benefits. </p>

[notrichenough]

<p>

notrichenough, that is one sweet pension plan.

Current gov’t workers in my state have to kick in between 9-11% of their pay, and the state kicks in some. FICA takes 12.4%.</p>

<p>To get triple the payout for roughly the same contribution? At an earlier age? It is pretty sweet. Or maybe SS is a raw deal.</p>

<p>This is why privatizing SS got as much traction as it did. If you do think of SS as a pension, many workers starting out now will not even get back what they put in, let alone any “return” on their “investment”.</p>

[dstark]

<p>Ok…</p>

<p>If others want to play…</p>

<p><a href=“http://www.mass.gov/treasury/retirement/retirementestimator/estimate.html”>http://www.mass.gov/treasury/retirement/retirementestimator/estimate.html&lt;/a&gt;&lt;/p&gt;

<p>I am planning on being alive in 24 years…</p>

<p>I know you said there were genetics working against your longevity.</p>

<p>I am thinking 37 years…</p>

<p>Obviously, pensions can be better than SS. </p>

<p>One thing I like about SS is it protects me if inflation goes crazy…</p>

<p>Anything above 5 percent inflation would probably start tilting the table towards SS. </p>

<p>If there are pensions with with inflation kickers, they may or may not be better than SS. Some inflation kickers are limited.</p>

<p>If I dont make it another 37 years, I dont think I will care that much. My thinking will stop. :)</p>

<p>SS is not the be all and end all…looking at your table… It would be pretty difficult to rely on SS alone. The average monthly payments look paltry if that is the main means of support. </p>

<p>I dont think most people have pensions anymore. When looking at whether pensions are high dont we have to look at overall pay, and job security, etc? </p>

[DrGoogle]

<p>I truly understand the word peanut when I looked at my COLA pension. Perhaps that is why it was COLA in the first place. My non-COLA pension is much more generous. I don’t know if I prefer one or the other, but I rather have a mixture of both just in case.</p>

[notrichenough]

<p>

I am thinking 37 years…

Three of my four grandparents made it to their late 80’s/early 90’s. 24 years from full SS retirement age would make me 91. 37 years would make me 104… the chances are vanishingly small.

One thing I like about SS is it protects me if inflation goes crazy…

I believe they just monkeyed with how they calculate inflation in order to reduce the increases in SS benefits, as a way to add a few more years before the “surplus” is gone. So I don’t know if you can count on this if we ever have serious inflation again.

SS is not the be all and end all…looking at your table… It would be pretty difficult to rely on SS alone.

Absolutely true, but the average IRA/401K balances of people 55+ is not very large, and only something like 40% of households have IRAs. They can’t all work until they drop… the bailout for these people is going to make the housing crisis and student loan crisis look like chump change…</p>

[dstark]

<p>“I believe they just monkeyed with how they calculate inflation in order to reduce the increases in SS benefits, as a way to add a few more years before the “surplus” is gone. So I don’t know if you can count on this if we ever have serious inflation again.”</p>

<p>The latest idea to cut inflation benefits hasnt passed but there is very little that can be counted on… Maybe the love for our kids comes closest…</p>

<p>Well I posted this yesterday in another thread… I agree…super duper problem. </p>

<p><a href=“The Typical Household, Now Worth a Third Less - The New York Times”>The Typical Household, Now Worth a Third Less - The New York Times;

[dstark]

<p>“I truly understand the word peanut when I looked at my COLA pension. Perhaps that is why it was COLA in the first place. My non-COLA pension is much more generous. I don’t know if I prefer one or the other, but I rather have a mixture of both just in case.”</p>

<p>I agree with this.</p>

<p>I agree with IxnayBob’s post too.</p>

[dstark]

<p>IxnayBob, what did you do at the bank? </p>

<p>Or is that answer require too much personal detail?</p>

[IxnayBob]

<p>No problem. I was a software developer back when we were not a dime a dozen. I enjoyed my first ten years so much that I refused to buy a lottery ticket, because I didn’t want, should I happen to win, to have to explain why I continued to come to work. I jumped out of bed each morning excited to be going to a job with so much intellectual challenge, with such honorable people, and that actually paid me well. </p>

<p>That lasted 10 years or so. Then, management started reading trade magazines, decided that writing software was like digging ditches (I.e, no matter how good a ditch digger you are, you can at most dig twice as fast as another ditch digger), that they could hire a busload of programmers in India for what I was paid etc. I made a fair amount of money bailing those managers out when the concept was outweighed by reality. </p>

<p>Following a history of going where the need was, I moved into quasi-management doing cost accounting because I saw the incredible bills we were charging internally for IT services, with no more rationale than figuring out who could afford it and who would object the least. That was fun for a while, and I stood the organization on its head, but I’d had enough of banking. I became a SAHD. </p>

[DrGoogle]

<p>dstark, that is not the thread I remember reading in the investment thread. Anyway, I never like reading the opinion section of the NYTimes, that’s why I don’t subscribe to NYTimes. There are some sections I used to enjoy but after reading so many opinion articles from Krugman, I gave up. NYTimes, it’s your lost. At least one less person that Krugman gets to influence. </p>

<p>But I’ve found this article that the average retirement goes up. Of course, I’m aware that it’s Fidelity, they want you to save till you go nuts but still. Note this is only IRA at Fidelity, not 401K, not Vanguard, so this is not the whole picture either. I know it’s average and it’s not adjusted for inflation but it’s not a doom and gloom scenario. </p>

<p><a href=“http://www.fidelity.com/inside-fidelity/employer-services/fidelity-average-ira”>http://www.fidelity.com/inside-fidelity/employer-services/fidelity-average-ira&lt;/a&gt;&lt;/p&gt;

<p>

In addition, the findings show that average balances were $89,100, a nearly 10 percent year-over-year increase and balances across all age groups are on the rise. Hevert said, “Annual contributions – along with age appropriate asset allocation strategies – play key roles in building a strong foundation for retirement.”</p>

<p>Age
Range Average IRA Balance At
End of 2013 Tax Year Average IRA Balance At
End of 2012 Tax Year Percentage
Increase
20-29 $9,600 $9,300 3.2 Percent
30-39 $22,300 $20,700 7.7 Percent
40-49 $45,600 $42,500 7.3 Percent
50-59 $83,100 $75,700 9.8 Percent
60-69 $138,200 $127,800 8.1 Percent
70+ $177,700 $164,300 8.2 Percent
All Ages $89,100 $81,100 9.9 Percent </p>

<p>

</p>

[mcat2]

<p>^ Did you happen to program on IBM mainframe computers back then? While I was at a grad school, one of my professors decided he had lost interests in acamedics (since this is CC where well too many CCers are obsessed with the prestigious colleges, it is worth mentioning that he was graduated with a PhD degree in the CS database area from Cal but refused to dedicate himself to purely academic work exclusively after a few years of being a professor - it was when the relational data base first became popular in the academic circle but not so much in the industry yet), and he went for some programming task on some IBM mainframe transaction software called CICS. Every weekends, for two days, he traveled with his students to another city in order to use that powerful mainframe computer there. I think he did it neither for money nor for fame. (He was trying to bring up a version of CICS in another language and he used IBM assembler exclusively to achieve that for its efficiency. His dedication to the optimation of his code would put today’s Java programmers to shame.) He did it purely for fun - but sacrifying two whole days every weekend for likely 2 years?! Not for me in my whole life. This was before the Internet became popular. In my past experience, I met so many PhDs and it appears to me that the most noticeable characteristics of these people are their work ethics.</p>

<p>Not long ago, I heard of one younger generation technical manager saying to everybody in the meeting room that the assembly language level programming is too difficult and should not be used anywhere, the only thing that pops in my mind then was that maybe I am too old/obsolete and should be out of this field soon. Several new college graduates told me that there is no course dedicated to this “art” at school anymore.</p>

[dadx]

<p>The Forbes article about the Paypal CEO’s roth seems wrong. It says 1.7M shares at $.30 per share, which would have meant the Roth had assets of about 575K at that time. Roth’s only existed after 1997, and it doesn’t seem to me that he could have accumulated that much by the time referred to in the article.</p>

<p>But in general, Roth’s are a good thing. A number of people I know who weren’t eligible for regular Roth contributions converted their regular IRA to Roth in advance of the 2013 tax increases and paid the taxes due at that time. (This also confused some of the less intelligent state and federal budget analysts, who didn’t realize that the additional tax revenue was a one-time phenomenon and not an indication of a rising economy.)</p>

[notrichenough]

<p>This article paints a little brighter picture:</p>

<p>

To provide a more complete picture of retirement savings, Fidelity also studied the combined balance for investors who hold both a 401(k) and Individual Retirement Account (IRA) with the firm3. For these investors, the combined 401(k)/IRA average balance is $261,400, up 16 percent from the end of the fourth quarter 2012 when it was $225,600

</p>

<p><a href=“http://www.fidelity.com/inside-fidelity/employer-services/fidelity-average-401k-balance-nearly-doubles”>http://www.fidelity.com/inside-fidelity/employer-services/fidelity-average-401k-balance-nearly-doubles&lt;/a&gt;&lt;/p&gt;

<p>Of course we don’t know the average incomes that produced these balances… maybe this is just the top X%. </p>

<p>Here’s the chart from the year before, I can’t find this year’s: </p>

<p><a href=“http://retireby40.org/what-if-always-maxed-401k/”>http://retireby40.org/what-if-always-maxed-401k/&lt;/a&gt;&lt;/p&gt;

<p>What’s interesting is that the average balances keep going up at each age bracket even after retirement age. Not sure what to make of that… are people not taking out money?</p>

[IxnayBob]

<p>@mcat2, I started on IBM using punch cards of all things. I was familiar with CICS, but it never lit my fire. Then, I stumbled onto a job on DEC VAX machines, and I fell in love with the elegance and solidity of its architecture. I programmed on VMS (the OS for VAX and Alpha) until they had to pry me away – it was a thing of beauty and their version of assembler was both efficient and yet elegant, a rare combination.</p>

<p>Nowadays, kids complain if a compile takes (literally) 30 seconds; fricking machine is fricking slow. We, by contrast, got to do 1 compile per day (2 or 3 if we brought coffee to the operators ). I think it’s one reason that I was good at coding; when you only had a few shots a day at the machine, it made you think about what you were doing and why. It also made for more efficient programs because you had an idea what the machine was doing.</p>

[notrichenough]

<p>^ I started my career and DEC… at one point, in addition to programming, I was managing a 12-node VAXcluster… by the late 80’s I’d moved on to Unix, then to Windows.</p>

<p>Coding gets harder every year… I think my brain is calcifying. :)</p>

[dstark]

<p>IxnayBob, nice bio including SAHD. I like the way you adapted too. Very very nice. It is obvious you are a very bright guy. I like reading your posts.</p>

<p>DrGoogle…we are measuring two different things. A lot of people dont have iras and averages distort. One person has $800,000 in their ira…4 people have $50,000 each…the average is $200,000. Those 4 people dont look too good, do they? </p>

<p>I am going to decide if it is doom and gloom. Lol.</p>

<p>Earlier, You said something like $6 million isnt wealthy. You can correct me. Now… $6 million isnt wealthy but an average of $138,000 for somebody in their 60’s in an ira is ok by you? Some people in this thread are hoping for “annual income” around that amount or higher than that. </p>

<p>I think you might drop dead if you had an ira at 60 valued at $138,000. </p>

<p>Although, I like talking about money, finance, and economics, I try not to let money run my life. </p>

<p>However, if my IRA is valued at $138,000 when I am in my 60’s, which is going to be soon, I might drop dead myself. $138,000 is not going to stretch too far if somebody is going to need that money to last 20 years. </p>

<p>I like your Fidelity link.
The Fidelity report does not contradict the link I posted. </p>