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

Parents Forum Parent Cafe
1721

<p>Since she isn’t making a lot of money (and the tax deduction from a traditional IRA wouldn’t be worth much), please consider a Roth IRA.</p>

1722

<p>My CPA said just a few months ago when I asked that a small business owner (as I am) can get an HSA if they have a very high deductible. Really high. She has one herself but then said that those types of insurance plans have gone away (maybe a law–? cannot remember) a few years ago. She aquired hers long ago and stayed with it. </p>

1723

<p>You can get it but not as profitable because it’s passed through. The key thing is to get HSA and let it grow tax deferred.

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1724

<p>We talked earlier about spouses taking social security.</p>

<p><a href=“http://m1.marketwatch.com/articles/BL-235B-2247?mobile=y&mobile=y”>http://m1.marketwatch.com/articles/BL-235B-2247?mobile=y&mobile=y&lt;/a&gt;&lt;/p&gt;

<p>“If you are entitled to both a spousal benefit and a benefit based on your own earnings, be careful about claiming a spousal benefit before your full retirement age. Why? If you claim early, the Social Security Administration will “deem” that you have filed for your own benefit. Here’s how it works: If at age 62, you qualify under your own work history for a reduced benefit of $600 a month, but your reduced spousal benefit would be $750, you might assume you should file for your spousal benefit now and then switch to your own benefit later, when it has grown to more than $750. But under the “deeming filing” rule, the Social Security Administration will assume you are filing for your own reduced benefit of $600 and add on a $150 spousal benefit, says Marty Allenbaugh, a senior marketer at T. Rowe Price. As a result, you’d “lose the ability to apply for your own benefit at a later time,” when it will be bigger, says Allenbaugh.
Once you reach your full retirement age, the “deeming filing rule” no longer applies. At this point, you can file a “restricted application” for a spousal benefit, leaving your own benefit on hold to grow larger.”</p>

1725

<p>dstark, this is why it’s best to at least wait for FRA like 66 or 67 if you count on spousal benefit.</p>

1726

<p>Yes. It is best to wait until full retirement age if possible.</p>

1727

<p>A few posters in earlier threads mentioned the need of a couple of millions dollars for retirement years, the level of spending during retirement years, should do a budget etc… If both husband and wife receive government pensions upon retirement, if we are frugal, do we actually need a couple million dollars in retirement funds? I will never get there having that kind of money! We also have a thrift and 457. Without a mortgage, we will be comfortable I think.</p>

<p>Btw, if I have to start a Roth IRA for my daughter who is 18, working part time in a supermarket since January and more hours this summer, thinking of Vanguard mutual fund, do any of you have experience with the Vanguard 500 Index Fund, they also have other index funds such as large cap, mid cap, small cap and so on. I am lost in all those “choices”. Thinking of starting her account with $3k, minimum amount required for most funds.</p>

<p>Thank you.</p>

1728

<p>Either Vanguard’s S&P 500 (which seeks to track the return of the S&P 500 Index, made up of 500 mostly large companies) or the Total Stock Market Index Fund (“seeks to track the performance of a benchmark index that measures the investment return of the overall stock market”) should work.</p>

<p>The S&P 500 Index covers about 80% of the market capitalization of the entire US stock market.</p>

1729

<p>Hopeful820, it depends on the pensions and what a person spends, but reading your post, NO. You dont need a couple of million dollars in retirement accounts if you have pensions. </p>

1730

<p>One can calculate the present value of lifetime pension. I am sure it will come out to be a few million dollars. So in a way you already have a few million.</p>

<p>I agree with dadinator about S&P 500 index fund and Total Stock Market Index fund. I prefer Total Stoc Market. It includes small cap and offers a slightly greater growth opportunity. I read somewhere that Vanguard 500 fund has a huge capital gains. The fund was created a long time ago.</p>

1731

<p>A quick estimate of the worth of your pension is to divide by .04(recommended withdrawal rate for non-pension people for money to last forever), so for example you have $100K/year pension, divide that by .04, I think the worth of your pension is about $2.5Miliion. This is a very rough estimate to get an idea. The .04 withdrawal rate is also debatable.</p>

1732

<p>I use an annuity calculator. I assume experts have made the best educated guess on life expectancy and the rate rate return in determining the annuity value. One could also use a mortgage calculator. If you think you will live roughly about 30 years, you can match monthly payment to the 30-year mortgage amount. </p>

1733

<p>“A quick estimate of the worth of your pension is to divide by .04(recommended withdrawal rate for non-pension people for money to last forever), so for example you have $100K/year pension, divide that by .04, I think the worth of your pension is about $2.5Miliion. This is a very rough estimate to get an idea. The .04 withdrawal rate is also debatable.”</p>

<p>So at that estimate, we shouldn’t save anything else. Our pensions are each 130/yr, if we can hang on till 60, meaning theoretically they are worth 6.5 million. Unfortunately, one can’t completely trust that a private pension plan will remain intact, stiffer rules and all, there is always a way things can unravel. And since our life expectancy is supposedly only two years past retirement, I guess normal calculations don’t apply either. So I don’t know if that clues me in to retire early, or to hang on to working as long as possible. Maybe it just means to enjoy yourself while you’re around.</p>

1734

<p>Your life expectancy is 2 years after retirement - age 62?</p>

1735

<p>Your life expectancy at 65 is about 20 years. Using 4% as the rate of return gives a present value of about $1.4 million for a $100K pension. At 3% the present value is about $1.5 million.</p>

<p>I think multiplying by 25 is way too conservative.</p>

1736

<p>Thank you everyone. So I will pick either Vanguard fund. Now that I am retired for almost 3 weeks, at 58, it was not an easy decision, could have worked a couple more years, but the stress from work is wearing me down, my health has suffered in the past few years, especially mental health, so I decided to take the big step. Hope I don’t have buyers remorse.</p>

<p>DrGoogle, who has a $100k/year pension??? LOL. Unless the federal and state government default and not pay our pension, then we will be in big trouble. Only I will get social security.</p>

<p>My deferred compensation is not doing as great, as I hoped or compared to other bench marks, I guess because I really was not smart to pick the money making mutual funds, and the fact I did not make any changes over the years, sort of just let my paycheck deductions go into the 457, did not help, but I am still ahead, I do understand that it depends on the market fluctuation, at least the market value came all the way back from the crash in 2008/2009 and more.</p>

<p>I now spend my newly found free time reading books on retirement, investments etc., never too late I hope. I also post on other thread that I messed up my back trying to do sit ups and rushed to do too much "exercise’, ugh.</p>

<p>Watching the stock market gives me whiplash.</p>

1737

<p>@hopeful820 - Airline pilots have $100,000 a year (plus) pensions . :slight_smile: </p>

1738

<p>“Your life expectancy is 2 years after retirement - age 62?”</p>

<p>My job, my company, two years after retirement is what it averages out to be. People retire at different ages, the maximum age you can work until is age 65. The overall life expectancy for us is age 64 (so apparently our average age of retirement is 62), unfortunately far less than notrichenough’s life expectancy of age 85. That’s why I’m always overly concerned about when we’ll retire. You wonder why we don’t all quit, but it’s because nobody thinks they will die that young. It’s always the other guy.</p>

1739

<p>Can somebody post a link for an online calculator that can calculate the present value of rising future cash flows or variable future cash flows?</p>

<p>$2.5 million today is worth a lot more than income of $100,000 over 25 years or 30 years. As notrichenough’s post states.</p>

<p>Which would you choose?</p>

<p>a) $100,000 a year with a pension for 30 years unless you die. If you die the pension is over. </p>

<p>Or? </p>

<p>b) You receive $2.5 million in bonds. You then buy bonds with a face value of $2.5 million that pay you $100,000 a year and after 30 years… You receive the $2.5 million back? If you die the heirs still receive the interest and eventually the principal.</p>

<p>A pension of $100,000 today is not worth $2.5 million unless…the pension increases over time…</p>

1740

<p>I’ll take the bonds, thank you very much. You get the pension, you die a month later, you collected $8,333.33.</p>