goodoboy wrote:How much I need to retire.
goodoboy wrote:if we want to live off $5000, per month in retirement. They include SS into their results.
YDNAL wrote:My suggestion is to estimate ANNUAL expenses, deduct known income streams (SS, Pension, etc.) and the rest (known as residual expenses) comes from savings.
livesoft wrote:At ages 33 and 32 there is no way to come up with a precise number. Many studies have shown one needs to save/invest between 15% and 20% of their income annually starting at a young age. SS should make up the rest. Folks who want to retire before drawing SS or who have high incomes will need to save a higher percentage of their annual income. Folks who want to live in retirement on a fraction of their just-before-retirement income will not need to save as much.
So at this stage, I think a good rule-of-thumb would be to save 25% of your current pre-tax gross income.
livesoft wrote:
So at this stage, I think a good rule-of-thumb would be to save 25% of your current pre-tax gross income.
gerrym51 wrote:your so young. save as much as possible-and hope you don't get divorced.
goodoboy wrote:I have a question. If our gross income is $100K (before taxes), and we want to save 25% of our current pre-tax gross income
1. Does this mean we should be saving $25K per year in retirements accounts (401k and/or Roth IRA)?? Currently, I contribute 18% (17.5k) and she contributes 10% (3.2k) of the 401k. So combined are we contributing 28% or should I include company match as well?
2. Does the 25% include the company match by employer as well? for instance
YDNAL wrote:goodoboy wrote:How much I need to retire.
Goodoboy,
This projection is simple, but not easy. The more variables you throw at it, the more difficult.[list][*]My suggestion is to estimate ANNUAL expenses, deduct known income streams (SS, Pension, etc.) and the rest (known as residual expenses) comes from savings.[*]Multiply residual expenses by 25 or 30 or 33 - depending on projected forward returns for YOUR specific circumstances - and that would be MY goal.[*]Multiplying by 25 is the often referred-to 4% guideline. So multiply by 30 would be 3.33% guideline, etc.
reggiesimpson wrote:Rule of Thumb.
Save a whole lot more than you think!
goodoboy wrote:YDNAL wrote:goodoboy wrote:How much I need to retire.
Goodoboy,
This projection is simple, but not easy. The more variables you throw at it, the more difficult.[list][*]My suggestion is to estimate ANNUAL expenses, deduct known income streams (SS, Pension, etc.) and the rest (known as residual expenses) comes from savings.[*]Multiply residual expenses by 25 or 30 or 33 - depending on projected forward returns for YOUR specific circumstances - and that would be MY goal.[*]Multiplying by 25 is the often referred-to 4% guideline. So multiply by 30 would be 3.33% guideline, etc.
Thank you,
I am confused. Can you please give me an example? Here is my info.
estimated annual expenses: $6000.00
estimated SS for both of us: $3200.00
Can you please give me example of what you wrote? I am slow to catch on.
Thanks
gerrym51 wrote:your so young. save as much as possible-and hope you don't get divorced.
goodoboy wrote:YDNAL wrote:goodoboy wrote:How much I need to retire.
Goodoboy,
This projection is simple, but not easy. The more variables you throw at it, the more difficult.
- My suggestion is to estimate ANNUAL expenses, deduct known income streams (SS, Pension, etc.) and the rest (known as residual expenses) comes from savings.
- Multiply residual expenses by 25 or 30 or 33 - depending on projected forward returns for YOUR specific circumstances - and that would be MY goal.
- Multiplying by 25 is the often referred-to 4% guideline. So multiply by 30 would be 3.33% guideline, etc.
Link: http://www.bogleheads.org/wiki/Safe_Withdrawal_Rates
Thank you,
I am confused. Can you please give me an example? Here is my info.
estimated annual expenses: $6000.00
estimated SS for both of us: $3200.00
Can you please give me example of what you wrote? I am slow to catch on.
Code: Select all
Expenses $6000
Income $3200
-------
Residual $2800
Multiple 25 = $840,000 ($2800 x 12 x 25) - 4.00% withdrawal guideline
Multiple 30 = $1,008,000 ($2800 x 12 x 30) - 3.33% withdrawal guideline
Multiple 33 = $1,108,800 ($2800 x 12 x 33) - 3.00% withdrawal guideline
livesoft wrote:1. This means contribute $25K per year, but $17.5K + $3.2K = $20.7K which is not 28%, it is 20.7%. Since you have reached your max, she has to contribute another $4.3K. Or if she is not allowed to do that, either one or both of you could contribute $4.3K to your Roth IRAs.
Garco wrote:3. Children: potentially the largest "drag" on your income and ability to save for retirement will be the cost of education, especially college education. Children are expensive in many ways, but I value having a family and children, so look at caring for them as a "necessary" expense; but financial planning is warranted. There are effective ways to invest in tax-advantaged accounts for education, but it's really important to think through how much you will invest into this sector of your family's economy. Also, think about how important leaving a financial legacy might be.
YDNAL wrote:goodoboy wrote:YDNAL wrote:Sure.Code: Select all
Expenses $6000
Income $3200
-------
Residual $2800
Multiple 25 = $840,000 ($2800 x 12 x 25) - 4.00% withdrawal guideline
Multiple 30 = $1,008,000 ($2800 x 12 x 30) - 3.33% withdrawal guideline
Multiple 33 = $1,108,800 ($2800 x 12 x 33) - 3.00% withdrawal guideline
goodoboy wrote:YDNAL wrote:Sure.Code: Select all
Expenses $6000
Income $3200
-------
Residual $2800
Multiple 25 = $840,000 ($2800 x 12 x 25) - 4.00% withdrawal guideline
Multiple 30 = $1,008,000 ($2800 x 12 x 30) - 3.33% withdrawal guideline
Multiple 33 = $1,108,800 ($2800 x 12 x 33) - 3.00% withdrawal guideline
Thank you.
This helps. I am still not understanding where 4% comes from? Does the 25 means how many years I want to depend on the residual income expenses (eg., $2800)
Whats the difference between using 4% and 3%?
I'm a bit loss.
Garco wrote:A few other things to factor into your calculations, or at least your thinking when you calculate "how much do I need to retire."
2. Insurance: think of life insurance as a way to assure your survivors against a loss of your (or your spouse's) earning power. Think of long-term care insurance as a form of wealth insurance, reducing the chance that care for you or your spouse might eat into your estate's accumulated value.
.
YDNAL wrote:goodoboy wrote:YDNAL wrote:Sure.Code: Select all
Expenses $6000
Income $3200
-------
Residual $2800
Multiple 25 = $840,000 ($2800 x 12 x 25) - 4.00% withdrawal guideline
Multiple 30 = $1,008,000 ($2800 x 12 x 30) - 3.33% withdrawal guideline
Multiple 33 = $1,108,800 ($2800 x 12 x 33) - 3.00% withdrawal guideline
Thank you.
This helps. I am still not understanding where 4% comes from? Does the 25 means how many years I want to depend on the residual income expenses (eg., $2800)
Whats the difference between using 4% and 3%?
I'm a bit loss.
Based on $2,800 residual expenses that you must pay from your portfolio, the minimum savings goal should be:
25 x [$2800 x 12] = $840,000. Then your withdrawal is 4%. This is simply [$2800 x 12] ÷ $840,000 = 4%.
The difference between 4% and ANY other withdrawal (3.33%, 3%, 2.5%) is the final savings number you achieve.
[2800 x 12] ÷ 1,008,000 = 3.33%
[2800 x 12] ÷ 1,108,800 = 3.00%
[2800 x 12] ÷ 1,344,000 = 2.50%
Etc.
Did you read the link I provided a few days ago ?
Link: http://www.bogleheads.org/wiki/Safe_Withdrawal_Rates
My kid (or future kids) will get student loan, full-year scholarships to school. I am not paying their college tuition. My parents could not afford to pay my college. I got student loan and paid it back. My kids will know this beginning 6th grade. They better work
goodoboy wrote:A guy at work was saying don't include SS in my calculations for how much I need to retire with. He thinks SS will not be there.
Any opinions? If I removed SS out of the equation, I am [in deep trouble --admin LadyGeek]!!
goodoboy wrote:A guy at work was saying don't include SS in my calculations for how much I need to retire with. He thinks SS will not be there.
Any opinions?
goodoboy wrote:My 401K owner Fidetly...
Valuethinker wrote:Garco wrote:A few other things to factor into your calculations, or at least your thinking when you calculate "how much do I need to retire."
2. Insurance: think of life insurance as a way to assure your survivors against a loss of your (or your spouse's) earning power. Think of long-term care insurance as a form of wealth insurance, reducing the chance that care for you or your spouse might eat into your estate's accumulated value.
Your life insurance will normally expire before 65? I think of life insurance as a way to get my spouse to the same place as she would have been had I lived until age 65.
Long Term Disability Insurance is the big one. You can't buy enough, and it's expensive. But it's the *big* unhedged risk for most working people.
We plan to work to 65, for all kinds of reasons (changes in the job market, illness, disability etc.) we might just not make it.
goodoboy wrote:What about taxes on the $2800 per month or $33,6000 per year. The 4% does not account for taxes right? So this means I need to save more just to cover taxes?
Thanks
goodoboy wrote:A guy at work was saying don't include SS in my calculations for how much I need to retire with. He thinks SS will not be there.
Any opinions? If I removed SS out of the equation, I am [in deep trouble --admin LadyGeek]!!
pastafarian wrote:goodoboy wrote:A guy at work was saying don't include SS in my calculations for how much I need to retire with. He thinks SS will not be there.
Any opinions?
One tempts the fate of running afoul of Lady Geek's thread locking powers when you discuss the future of SS. I suspect she has already sensed this question. "The Force is strong with [her]."
goodoboy wrote:livesoft wrote:
So at this stage, I think a good rule-of-thumb would be to save 25% of your current pre-tax gross income.
Thanks,
Thanks,
I have a question. If our gross income is $100K (before taxes), and we want to save 25% of our current pre-tax gross income
1. Does this mean we should be saving $25K per year in retirements accounts (401k and/or Roth IRA)?? Currently, I contribute 18% (17.5k) and she contributes 10% (3.2k) of the 401k. So combined are we contributing 28% or should I include company match as well?
2. Does the 25% include the company match by employer as well? for instance
blueridge wrote:goodoboy wrote:A guy at work was saying don't include SS in my calculations for how much I need to retire with. He thinks SS will not be there.
Any opinions? If I removed SS out of the equation, I am [in deep trouble --admin LadyGeek]!!
If I ignored "guys at work" when I was younger, I'd be much better off today.
Listen, people will try to bring you down all the time. "What if this?" "What if that?" Barring some cataclysm (which would probably make the loss of SS seem insignificant), SS will be there. Yeah, the amount you get may change a little bit, or the year you get it might increase a little bit, but don't sweat the details too much.
Some people are just worriers, and will work way longer than they need to "just in case" (not counting people who are lucky and just love their jobs). But there is also an unspoken risk of working too long which is ignored too often.
goodoboy wrote:Total contributions (not including company match) Saving in 401k : 17.5k (Me) + 3k (her) = 20.5k (16% of gross combined salary)
25% of gross combined salary is: 32k
Short of saving, if trying to reach 25%: $11.5k
So, looks like I am saving 16% currently and all the suggestions here are between 20-25%. Of course, I need to figure out how to save more.
Questions:
We are 70/30 allocation in 401K. Currently have about $57K in retirement account combined.
If currently saving 16% of gross salary (combined wife and husband) or 20.5K per year in 401K for the next 30 years, how do I know how much I will have in 401K in 30 years?
goodoboy wrote:My goal is $2 Million for retirement. SS will take care $1.15M of that, which means I need to save about $848K over the next 30 years in 401k to meet goal.
goodoboy wrote:A guy at work was saying don't include SS in my calculations for how much I need to retire with. He thinks SS will not be there.
Any opinions? If I removed SS out of the equation, I am [in deep trouble --admin LadyGeek]!!
After 2020, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest earnings until depletion of total trust fund reserves in 2033, the same year projected in last year’s Trustees Report. Thereafter, tax income would be sufficient to pay about three-quarters of scheduled benefits through 2087.
MathWizard wrote:goodoboy wrote:A guy at work was saying don't include SS in my calculations for how much I need to retire with. He thinks SS will not be there.
Any opinions? If I removed SS out of the equation, I am [in deep trouble --admin LadyGeek]!!
Don't listen to "guys at work".
I use 75% (three-quarters) of my projected benefit in my calculations.
I base that on the SSA Trustees report.
The 2013 report summary is at
http://www.ssa.gov/oact/trsum/
From that link:After 2020, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest earnings until depletion of total trust fund reserves in 2033, the same year projected in last year’s Trustees Report. Thereafter, tax income would be sufficient to pay about three-quarters of scheduled benefits through 2087.
Similar words should appear on your annual statement of benefits.
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited.
MathWizard wrote:goodoboy wrote:A guy at work was saying don't include SS in my calculations for how much I need to retire with. He thinks SS will not be there.
Any opinions? If I removed SS out of the equation, I am [in deep trouble --admin LadyGeek]!!
Don't listen to "guys at work".
I use 75% (three-quarters) of my projected benefit in my calculations.
I base that on the SSA Trustees report.
The 2013 report summary is at
http://www.ssa.gov/oact/trsum/
From that link:After 2020, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest earnings until depletion of total trust fund reserves in 2033, the same year projected in last year’s Trustees Report. Thereafter, tax income would be sufficient to pay about three-quarters of scheduled benefits through 2087.
Similar words should appear on your annual statement of benefits.
YDNAL wrote:goodoboy wrote:Total contributions (not including company match) Saving in 401k : 17.5k (Me) + 3k (her) = 20.5k (16% of gross combined salary)
25% of gross combined salary is: 32k
Short of saving, if trying to reach 25%: $11.5k
So, looks like I am saving 16% currently and all the suggestions here are between 20-25%. Of course, I need to figure out how to save more.
Questions:
We are 70/30 allocation in 401K. Currently have about $57K in retirement account combined.
If currently saving 16% of gross salary (combined wife and husband) or 20.5K per year in 401K for the next 30 years, how do I know how much I will have in 401K in 30 years?
Goodoboy,
I don't particularly like using a percent of Gross Income because this income is unknown over the next 10 years, never mind the next 20, 30 years.
What we control are (1) our expenses, (2) annual savings, and (3) the Asset Allocation that we hope will provide sufficient returns over time to reach our goals. With regards to (3), all we can do is reasonable projections of what we expect in return.For instance,
This early in accumulation, MUCH is unknown over this long-term period. My suggestion is to focus on (1)-(3) above and less on establishing "how much I need to retire?" as per the subject of your thread.
a) Assuming you continue to save $20.5K x 30 = $615K.
b) See, the above is just a guess in of itself because you can't realistic say this is "done deal"... can you ?
c) A 70/30 allocation today and [say] 2% REAL (after inflation) total return, would mean that every dollar contributed shall double roughly in 36 years. So, none of your dollars will double in 30 years. But, you will likely hit $850K that you are targeting.goodoboy wrote:My goal is $2 Million for retirement. SS will take care $1.15M of that, which means I need to save about $848K over the next 30 years in 401k to meet goal.