How much I need to retire.

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How much I need to retire.

Postby goodoboy » Sun Jun 30, 2013 9:44 am

Hello,

How much should I plan on saving for retirement? Any rule of thumb. My 401K owner Fidetly calculator says I am on the right track, if we want to live off $5000, per month in retirement. They include SS into their results. My house will paid off in 15 years and I am not buying another.

Should I include Social Security in this calculation?

I am 33 and wife is 32. I plan on retiring at 60 or 62, not sure. Currently, most of savings is thru 401K where I am starting this year of maxing my 401K account to $17.5k and the wife is not able to max her to 17.5k, cause she makes less. So she only contributes 10%, company match 4%. I don't have enough now for Roth IRA, so just general saving in savings account for car purchases later or house fix, vacation, etc.

Any questions or comments would be grateful.

Thanks,
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Re: How much I need to retire.

Postby reggiesimpson » Sun Jun 30, 2013 9:55 am

Rule of Thumb.

Save a whole lot more than you think!
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Re: How much I need to retire.

Postby Grt2bOutdoors » Sun Jun 30, 2013 9:59 am

25 or 30x annual expenses is what level of savings you should aim for.
Assume you will receive 2500 per month in Social Security at retirement (a very conservative estimate), that would mean you would need to accumulate a minimum of 750K for 25x expenses using a 4% annual withdrawal rate or 900K for 30x expenses using a 3.33% withdrawal rate.
The real wildcard will be long term healthcare expenses, no one knows what may or may not happen to Medicare in the future. Keep saving. :beer

BTW, all of the calculators I've used have also said "I'm on track", don't trust them, I believe those calculators portray optimistic outcomes, without the proverbial black swan making an appearance in their methodology. Like I said, keep saving.
Last edited by Grt2bOutdoors on Sun Jun 30, 2013 10:07 am, edited 2 times in total.
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Re: How much I need to retire.

Postby YDNAL » Sun Jun 30, 2013 9:59 am

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

goodoboy wrote:if we want to live off $5000, per month in retirement. They include SS into their results.

This is not clear... read above.
Last edited by YDNAL on Sun Jun 30, 2013 10:02 am, edited 2 times in total.
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Re: How much I need to retire.

Postby livesoft » Sun Jun 30, 2013 10:00 am

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.
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Re: How much I need to retire.

Postby gerrym51 » Sun Jun 30, 2013 10:00 am

your so young. save as much as possible-and hope you don't get divorced.
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Re: How much I need to retire.

Postby Sidney » Sun Jun 30, 2013 10:09 am

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.

I agree with Landy. It isn't clear to me that the $5K is expenses or potential income (cash flow). Expense estimate should include income taxes.
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Re: How much I need to retire.

Postby ofcmetz » Sun Jun 30, 2013 10:24 am

I'm 33. I would recommend a minimum of somewhere between 20% and 25% of your gross income. This gets you used to living on less than what you make and builds a nice amount of savings. If you find you can save more then I think that is even better. You don't mention income, but it sounds like you already do a good job of saving.
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Re: How much I need to retire.

Postby YDNAL » Sun Jun 30, 2013 10:37 am

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.

I agree with livesoft in general, but I also have a problem with % of gross income. A professional athlete has a short work life and makes a lot of money. Since they retire perhaps in their 30s, a 25% of gross income may be (may not be) adequate to provide a similar lifestyle for as long as 50, 60 years at their income levels. It is difficult to come-up with an residual expense number, and even estimates (or reality) in SS income, etc., but is the best course of action AFAIC to establish a savings goal.
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Re: How much I need to retire.

Postby goodoboy » Sun Jun 30, 2013 7:42 pm

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
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Re: How much I need to retire.

Postby goodoboy » Sun Jun 30, 2013 7:44 pm

gerrym51 wrote:your so young. save as much as possible-and hope you don't get divorced.



:D :oops: Very good point! I better be a good boy, right?
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Re: How much I need to retire.

Postby livesoft » Sun Jun 30, 2013 8:01 pm

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

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.

2. I would not include the company match at this point in time. Consider it frosting on the cake. Maybe re-evaluate in 10 years.
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Re: How much I need to retire.

Postby The Wizard » Sun Jun 30, 2013 8:07 pm

$1.5M should be adequate for $60K per annum.
Not a hard number to achieve.
Aim for $2M and relax with the extra income...
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Re: How much I need to retire.

Postby goodoboy » Sun Jun 30, 2013 8:26 pm

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
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Re: How much I need to retire.

Postby umfundi » Sun Jun 30, 2013 10:07 pm

goodoboy,

Trust me, this works.

If you are looking at about 30 years of savings, each 1% of your annual income you save will provide 2% of your annual income in retirement.

In other words, if you save 33% of your income now, you will now be living on 67% of your income. When you retire, those savings will be able to replace that 67%.

If you are accumulating Social Security, that is about 15% of your salary and may provide 30% of your retirement income.

If you have a pension, that is extra.

Bottom line, if you save about 25% of your income you will be fine (assuming SS). Save more, you're being too frugal, save less than about 20%, you may be looking at a lower standard of living in retirement.

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Re: How much I need to retire.

Postby joe8d » Sun Jun 30, 2013 10:31 pm

reggiesimpson wrote:Rule of Thumb.

Save a whole lot more than you think!


:thumbsup to that "Rule of Thumb" :happy
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Re: How much I need to retire.

Postby HomerJ » Sun Jun 30, 2013 10:45 pm

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


You need $6000 a month, SS will give you $3200... So your investments need to generate $2800 a month... That's $33,600 a year... 4% rule means you need $840,000 saved to throw off $33,600 a year...

Of course, we forgot inflation. SS is inflation-adjusted, so that's okay.... But that $2800 a month will probably be (assuming 2% inflation) $5000 a month in 30 years... So you'll actually need $60,000 a year or $1.5 million saved.

All these is super rough guesswork... 30 years is a long time away... However, if you're saving $20k a year, and you continue to save more each year as you get promotions and raises, I bet you'll be just fine.

Just redo the numbers at 40 and 50 and see where you stand.
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Re: How much I need to retire.

Postby Watty » Sun Jun 30, 2013 11:17 pm

For a couple you really should also look at "the number" three ways, as a couple, and as if one or the other of you survives the other.

Being in your 30's it is pretty try to do this for more than a very general number so your really don't need to worry about trying to be very accurate now. Once you are ten years or so from retirement you can try to come up with a better number.

It is better to save more than you think you might need when you are young since not only can your money fall short of your goals but things like career setbacks, health issues, etc may make it hard to save a lot when you are near retirement.
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Re: How much I need to retire.

Postby IlliniDave » Mon Jul 01, 2013 7:03 am

gerrym51 wrote:your so young. save as much as possible-and hope you don't get divorced.


I second this, both points. I made mistakes in each area. :oops:

Save to the point it begins to hurt, back off a tad, and maintain that relative rate. When you start to approach age 50 or so, start looking at your potential retirement situations in detail. It might be you can check out early, or maybe not.

One advantage to saving at levels the hover on the cusp of extreme is you gain a wealth of practical experience regarding what your minimum lifestyle needs are. You may want to retire at a higher lifestyle level, financially-speaking, but one of the most valuable pieces of information you can have is first-hand knowledge of what your contentment threshold is. It can clarify early/semi-retirement decisions as well as provide understanding of how far back you can dial lifestyle expenses to weather a rough patch without winding up miserable and discontent.
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Re: How much I need to retire.

Postby YDNAL » Mon Jul 01, 2013 7:07 am

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.

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
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Re: How much I need to retire.

Postby JW Nearly Retired » Mon Jul 01, 2013 7:47 am

The elephant in the how-much-to-save room is you need to feed your investment advisor and pay other investment expenses out of this 3% or 4% withdrawal. If you have an industry standard AUM fee type advisor and the pricey investment funds they typically recommend, that's 2% right there. Not much left for the investor.

Unless you are a do-it-yourself boglehead, you will really need to save twice as much as you are probably thinking. :oops:
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Re: How much I need to retire.

Postby goodoboy » Mon Jul 01, 2013 6:10 pm

Thank you all for responding.

I have not had time to review the posts, cause I started new job and busy all day. But I will respond later in the night.

Thank you all.
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Re: How much I need to retire.

Postby Garco » Tue Jul 02, 2013 12:58 pm

A few other things to factor into your calculations, or at least your thinking when you calculate "how much do I need to retire."

1. Debt: especially home loans. Best to plan how to be debt-free when you 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.

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.

4. Stick to your plan: stuff happens, but it's a cardinal error to ever borrow from or spend out your tax-advantaged account. If you change employers, transfer the 401k's or convert to IRA's, but don't give up your accumulated savings to cover current expenses. In this connection, always have a contingency plan or fund for short-term expenses, and "save ahead" for major purchases when possible (e.g., for a new car). Avoid credit-card debt like the plague.
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Re: How much I need to retire.

Postby goodoboy » Thu Jul 04, 2013 11:24 pm

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.


Thank you,

This is good point. Just need to figure out where to get an additional $4.3K to meet the 25% saving rate.
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Re: How much I need to retire.

Postby goodoboy » Thu Jul 04, 2013 11:32 pm

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.


Thanks,

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 hard!
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Re: How much I need to retire.

Postby goodoboy » Fri Jul 05, 2013 12:05 am

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 (eg., $2800)
Whats the difference between using 4% and 3%?

I'm a bit loss.
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Re: How much I need to retire.

Postby YDNAL » Fri Jul 05, 2013 6:39 am

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
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Re: How much I need to retire.

Postby Valuethinker » Fri Jul 05, 2013 9:21 am

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.
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Re: How much I need to retire.

Postby goodoboy » Sat Jul 06, 2013 1:14 am

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


Thank you for responding.

Yes, I read it twice, just taking some time to sink in my head. But I know using 4% is cutting it close and I see why people say save alot.'

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
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Re: How much I need to retire.

Postby goodoboy » Sat Jul 06, 2013 1:19 am

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]!! :annoyed :annoyed
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Re: How much I need to retire.

Postby bornloser » Sat Jul 06, 2013 6:00 am

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


Lots of good advice and would have to echo the concept of saving until it hurts and then back off some. The benefits of LBYM and investing early with a stay the course attitude are way greater than you can imagine at your relatively young age. The above quote sort of caught me off guard though. Kids are an amazing gift and the responsibility of bringing a child into the world should not be taken lightly. We have kids completely by choice now. Not to keep the species going (6 billion plus currently and doing a good job of destroying the planet) and not to plow the fields. I would recommend thinking long and hard about the reasons you want to bring a child into the world and not give any educational support after age 18.
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Re: How much I need to retire.

Postby blueridge » Sat Jul 06, 2013 6:55 am

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]!! :annoyed :annoyed

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.
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Re: How much I need to retire.

Postby pastafarian » Sat Jul 06, 2013 7:00 am

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]." :shock:
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Re: How much I need to retire.

Postby Buckeye » Sat Jul 06, 2013 7:15 am

Relax. You are doing a fine job saving.

Save for those vacations now instead of when you are an old geezer!
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Re: How much I need to retire.

Postby Call_Me_Op » Sat Jul 06, 2013 7:25 am

goodoboy wrote:My 401K owner Fidetly...


I assume that you own the 401K, and Fidelity is the custodian.
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Re: How much I need to retire.

Postby Garco » Sat Jul 06, 2013 8:26 am

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.

Yes, as I'm on the brink retirement, I'm letting my term life insurance expire, and am applying the cash that I was paying for that instead to contribute to long-term care insurance.
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Re: How much I need to retire.

Postby YDNAL » Sat Jul 06, 2013 8:38 am

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

Tax = Expense.

$2800 should include ALL Residual (after income) Expenses.

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]!! :annoyed :annoyed

Speculation about the future of SS is just that... speculation.
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Re: How much I need to retire.

Postby goodoboy » Sat Jul 06, 2013 11:07 am

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]." :shock:



HAHAHAHAH LOL, that's very funny. I have seen on some threads where Lade Geeks, cuts off the BS before its getting started. [I'm running late... --admin LadyGeek]

Sorry, ignore the guy at work!
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Re: How much I need to retire.

Postby HopeToGolf » Sat Jul 06, 2013 11:32 am

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


Re #1 your math is off....if your % and $ contributions are correct, it implies you make $132K and in total you are not at 25%.
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Re: How much I need to retire.

Postby Paul78 » Sat Jul 06, 2013 11:49 am

Given my young age I save as much as possible.

Currently I have saved (in retirement accounts) 41.5% of the gross income I have earned in my life.

Sure since there is SS and I have a pension (nothing crazy but it is wayyy better then most people get) saving 33% of my gross (maybe even 25%) should be enough.

But I have no idea how my future will turn out. If I marry some who makes more then me then this 41.5% savings might be dumb. Or if I end up single for life 41.5% might be dumb. But what if I marry some who makes half as much? What is my spouse is simple a stay at home mom? What if I have a bunch of kids? I really do not know what the future holds so I save as much as possible now (without taking too much away from my day to day life) just in case the future is not favorable. Ideally I marry someone who makes the same or more as me and we have 3-4 kids. But I have no clue what will actually happen.
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Re: How much I need to retire.

Postby Paul78 » Sat Jul 06, 2013 11:51 am

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]!! :annoyed :annoyed

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.


At first I was in the "do not include SS in you retirement" but I use the 70% estimate. If SS completely fails apart that could easily be an indicator American is [in deep trouble --admin LadyGeek] (ie losing out on SS will not be my biggest concern).
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Re: How much I need to retire.

Postby goodoboy » Sun Jul 07, 2013 6:37 pm

Thank you all, I am back after doing some reading and calculating. I have summarized below.

Our current income is:

Me: 98k
she : 30k

Total per year: 128k

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? 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.

Thanks for all the help. And comments or questions if needed.
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Re: How much I need to retire.

Postby livesoft » Sun Jul 07, 2013 7:00 pm

There are calculators on the web that can do these calculations for you. Here is a search on google that results in some links, take a look:
http://lmgtfy.com/?q=how+much+in+401k+in+30+years%3F

Here's one of the calculators: http://www.calcxml.com/do/pay07
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Re: How much I need to retire.

Postby python99 » Sun Jul 07, 2013 10:19 pm

check out FireCalc.com...maybe just what you need
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Re: How much I need to retire.

Postby YDNAL » Mon Jul 08, 2013 6:24 am

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,
    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.
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.
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Re: How much I need to retire.

Postby MathWizard » Mon Jul 08, 2013 12:18 pm

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]!! :annoyed :annoyed


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.
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Re: How much I need to retire.

Postby technovelist » Mon Jul 08, 2013 5:32 pm

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]!! :annoyed :annoyed


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.


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Re: How much I need to retire.

Postby LadyGeek » Mon Jul 08, 2013 9:08 pm

As a reminder, political comments, such as the future of Social Security, are off-topic. See: Forum Policy

In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited.

Also, please keep the language "family-friendly" - stuff you can say in front of the little ones. I replaced a few phrases from that aspect.
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Re: How much I need to retire.

Postby goodoboy » Mon Jul 08, 2013 11:21 pm

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]!! :annoyed :annoyed


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.


Thank you Mathwizard,

I am bit slow, can you tell me what the above statement means?

When you say "projected benefits" are you talking about SS?

Thanks
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Re: How much I need to retire.

Postby goodoboy » Mon Jul 08, 2013 11:30 pm

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,
    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.
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.


Thanks YDNAL, I will respond tommorow. I have to sleep now for work. But I have to agree with you. I am tired of worrying about retirement. Its too much work. And too many variables to be thrown in the equations.

I am doing the following and if that's not enough, then its just not enough.

1. pay house off in 15 years
2. no more debt (no more buying house)
3. max 401k to 17.5k
4. Start maxing Roth IRA to 5.5k next year via Vanguard
5. Do good quality work at my job

That's it. That's all I can say. I don't want to do nomore calculation on how much I need to retire. Its too much work and I want to enjoy life now. :sharebeer
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