<p>Well, all I know is I’d have a hard time living on my current salary or even 5x my current salary. It’s only possible because we have other income. </p>
<p>I think it’s pretty hard to accurately come up with an estimate of expenses unless you know exactly how you are going to live.</p>
<p>We swing between “travel the world” to “6 months in the south, 6 months in the north” to “let’s live in a bunch of places for 3 months at a time” to “let’s see where the kids wind up” to “let’s downsize” to “let’s stay in this house forever” to “let’s buy a house on the Cape”.</p>
<p>So I am more inclined to use an income approach - how much will we have and when, from what assets we have, and go from there. I think we are in a position where we can easily cover regular living expenses though, especially once you subtract out FICA (7.65% for me, 15.3% for DW), retirement savings (usually around 20% for DW, 10-15% for me), college tuition, mortgage payments (we are accelerating to pay them off sooner), etc. I think we will have enough that it won’t be hard to adjust out lifestyle to fit the income available, whatever that is.</p>
<p>Busdriver–lol! yeah, I stopped reading about 1000 posts ago when I realized I had no idea what was going on. Despite my apparent illiteracy, I am of the notrichenough camp–we’ll have an income, and we’ll live on that. It should be enough as our costs will be minimal and we have no illusions of world travel.</p>
<p>After reading the fidelity link… </p>
<p>Played around…</p>
<p>I like this calculator…</p>
<p>Better than the one I have been using…
There are a few more inputs…</p>
<p>One of the major problems with projections is what IxnayBob talked about…</p>
<p>Inflation is not a steady increase…
Costs may jump around…
What happens if you end up needing care…I guess you can end up on medicaid…
What happens if your assets drop in value? How are bonds and bond funds handled if rates rise…</p>
<p>Anyway, I like this calculator…</p>
<p>Easy to input pensions , ss, inheritance if there is any…</p>
<p>You can also input what you want the estate to have at your death or close to your death.</p>
<p><a href=“Best Retirement Calculator: Simple, Free, Powerful”>http://financialmentor.com/calculator/best-retirement-calculator</a></p>
<p>I mean, right now on a modest income we are supporting two houses. By retirement, the paid-off one will be sold and the other will be paid off, and our utility use will drop a lot. So, just property taxes-which are relatively modest in our area, food, and utilities. How much can they cost? We own a lot of books, and the beach is free.</p>
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<p>Yes, a rule on saving X<em>annual income for everybody makes no sense. One I’ve seen is save 25</em>annual spending which is “theoretically” supposed to last indefinitely (4% withdrawl rate, idea being something like 2.5% inflation and 6.5% return), but anything could happen and it’s not especially safe.I would actually make required savings a function of annual spending and expected years from retirement until death, because the longer the period before you die the more uncertainty there is. </p>
<p>Additionally, there’s a concern of how the money is tied up. You might have 1M networth at 36, if spending is low that could be enough to retire, but if 300K of that it tied up in 401K and IRA that you can’t get to until age 59 and 200K in home equity, you might not be ready to retire yet. Even if you can average 7.5% on that 500K remaining with 2.5% inflation, drawing 40K a year, you’re out of money a few years before you hit 59. And if there’s a big downturn (and in the span of 23 years chances are there will be) you’re screwed. </p>
<p>What I might consider safe for myself by age 40 would be 25<em>annual spending liquid, 10</em>annual spending in retirement accounts, and a home owned outright. </p>
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<p>That’s a little… under ambitious. Maybe at 35 people are still getting themselves well established. In the next 10 years they’re saving an average of what, 10% of their income approximately? The following 10 years saving damn near nothing? Maybe if the plan is to work until you’re 70. This sounds like a very bad plan to rely on. </p>
<p>Any plan where it takes the same amount of time to get from 1x income in savings to 3x, as it does from 3x to 5x, should probably be disregarded by any reasonable person. I’m hoping the American public is smart enough to see that. 1.05^10>1.6. If that’s actually from Fidelity, well, I don’t know what kind of crap they’re trying to pull but I know never to ever trust one of their heuristics. </p>
<p><a href=“Annual%20costs%20-%20ss%20-%20pensions”>quote</a> x years you are going to live x 1.2= also close enough
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<p>Where on earth does 1.2 come from? Retirement is damn hard if you’re expecting negative real returns on capital. Though one thing can be said, this will probably be very safe, at least if you don’t include SS/Pensions if you’re not going to collect them for a while. </p>
<p>Garland, then you dont need much. :)</p>
<p>Fidelity’s numbers dont work for me. The numbers can work for others. </p>
<p>I look at my folks and my wife 's parents. My father in law just entered an assisted living facility. Costs just increased $30,000 to $40,000 a year. </p>
<p>^dstark–to be clear, my second post cross-posted yours and was not in reply. :)</p>
<p>Vlad…I am expecting no real returns after taxes.
I am assuming the pension does not have an inflation kicker.
I am assuming inflation is closer to 3 percent.
Anything better than the above is gravy and people wont need as much…</p>
<p>I am also assuming people are going to become less aggressive with their portfolios as they age and will not really want to die the day their assets are zero. </p>
<p>I am being super conservative. </p>
<p>Somewhere between my numbers and fidelity will work for people…</p>
<p>Most people will be ok without multiplying by 1.2 times that calculation…</p>
<p>When you are first retired and the stock market increases llke the last 5 years and you are 50 percent or more in stocks… You will need a lot less…</p>
<p>If you retire during a year like 2000 where the market drops for 3 years, you are going to need more…</p>
<p>Retirement is damn hard although, I dont know anybody in real life with assets that wants to see their assets worth zero at death. </p>
<p>I think this idea that those used to having assets are going to be ok when they wake at up at age 90 broke is ludicrous. My opinion.</p>
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<p>I would, means I was efficient with my money, but I can see how that’s an uncommon opinion. </p>
<p>No you won’t. You arent going to think the same when you are older.</p>
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<p>Meh, maybe. For now I’m going to operate under the assumption that I will though. </p>
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<p>Well, earnings do compound, and sometimes basic life assets that were necessary to purchase by 35 need not be purchased again before 45, ditto 55. Otoh, one would hope that income would go up during those years also. </p>
<p>But, I take your point – I think it’s a simplistic heuristic whose main benefit is that it’s easy to remember. I would not trust most companies’ marketing, because that is what it is, and not much else. I know I’m a Vanguard fanboy, but that’s because I am a proportional shareholder, and there is no clear conflict of interest between me and the shareholders. </p>
<p>I might err on the other side of being simplistic, but I think that a reasonable idea of how your retirement is shaping up requires a lot of data, explicit assumptions, and at least Monte Carlo analysis. My favorite is ESPlanner, Firecalc isn’t bad, etc.</p>
<p>We’re more in dstark’s camp… I just ran the calculator he linked at #2183. It came out very close to what Quicken says for us also, and lots more than 9 x current income.</p>
<p>A friend suggested a better approach may be to use what you plan to spend annually in your retirement vs. using your current ending salary. So you could take your annual projected spending amount x8 - that may be a more accurate number? </p>
<p>For example, you may have expenses that you won’t incur when you retire (mortgage, college, taxes may be lower (fed/state), stopping retirement savings, etc.) and maybe you’ll incur higher expenses when you retire (travel, medical, etc.). It is definitely complicated!</p>
<p>Yes, it really IS complicated, especially when there are expenses that are harder to gauge, like how long we will be paying support for any of our kids who are finding their way, whether we may need to help loved ones financially, etc. It’s also tough if we incur higher medical costs or are suddenly diagnosed with a chronic condition that will have a lot of out-of-pocket medical expenses.</p>
<p>To me, it does make sense to have a pre-retirement rough budget and a post retirement budget as a couple and then as a widow/widower. It was helpful for H & me to do that to realize that H could afford to retire, especially as we pre-paid an extra $500 every month of on our mortgage so it would be paid off, as well as paid our kids expenses and tuition as they were incurred.</p>
<p>Some post-working expenses are under our control and we can adjust them as needed–how much travel to expensive vs less expensive destinations, staying in more plush vs more minimal lodging, relocating to a less expensive area, etc. We even have some control over medical and insurance costs by what we choose and what we do to stay as healthy as possible.</p>
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What date are you going to die on?</p>
<p>My father’s philosophy was “spend my last dollar as I’m drawing my last breath,” Fortunately for my mother, it didn’t work out that way, since he died at 65, and mom is still going strong.</p>
<p>I suppose you could plan to live to 122.5, which is how old the oldest (verified) person was. That should be safe. Or maybe 110, of which there are currently about 70 people (only 5 are male though), which puts your odds in Powerball territory.</p>
<p>You have about a 1 in 20,000 chance of living to 100, maybe that is good enough.</p>
<p>Newjersey17, how can you come up with 8 times expenses for a value if you dont know how long you are going to live? There is inflation? Rate of return? Pension? SS? </p>
<p>Play with a calculator. You will get a rough idea what you need. Does your friend use a retirement calculator? </p>
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<p>Probably when I’m 70-something. I’d plan for until age 85, maybe even as high as 90 just to be extra safe. Longevity isn’t in my genes, I think that’s far enough. And I don’t believe medicine is going to make us all immortal either, </p>