How much I need to retire.

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Re: How much I need to retire.

Postby MathWizard » Tue Jul 09, 2013 12:35 pm

....
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


A sample of the Social Security Statement like the one I recieve annually can be found at:
http://www.ssa.gov/myaccount/SSA-7005-OL.pdf

At the top of page 2, the statement:

*Retirement You have earned enough credits to qualify for benefits. At your current earnings rate, if you
continue working until…
your full retirement age (67 years), your payment would be about.........................................................$ 1,619 a month


appears. This is an example of what I meant by "your projected benefits", I guess SSA uses the word estimated.

The pertinent line on what percentage I would estimnate actually getting comes from the later statement:

*Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2033, the payroll taxes collected will be enough to pay only about 77 percent of scheduled benefits.


The percentage has been hovering around 75% for as long as I have been recieving statements.

(I signed up with the SSA for annual statements a long time ago. For a while, everyone got one, but that chnaged when an online
tool became available. Some people say they don't get them anymore. Maybe I get them because I had actually asked for them.)

If you want one, do a google search with something like
"requesting Social Securit Benefit Statement"
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Re: How much I need to retire.

Postby goodoboy » Tue Jul 09, 2013 11:35 pm

MathWizard wrote:
....
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


A sample of the Social Security Statement like the one I recieve annually can be found at:
http://www.ssa.gov/myaccount/SSA-7005-OL.pdf

At the top of page 2, the statement:

*Retirement You have earned enough credits to qualify for benefits. At your current earnings rate, if you
continue working until…
your full retirement age (67 years), your payment would be about.........................................................$ 1,619 a month


appears. This is an example of what I meant by "your projected benefits", I guess SSA uses the word estimated.

The pertinent line on what percentage I would estimnate actually getting comes from the later statement:

*Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2033, the payroll taxes collected will be enough to pay only about 77 percent of scheduled benefits.


The percentage has been hovering around 75% for as long as I have been recieving statements.

(I signed up with the SSA for annual statements a long time ago. For a while, everyone got one, but that chnaged when an online
tool became available. Some people say they don't get them anymore. Maybe I get them because I had actually asked for them.)

If you want one, do a google search with something like
"requesting Social Securit Benefit Statement"



Thank you for replying.

So that comes to 75% of $ 1,619 or $1214 is what you would be getting at 67 right?

Thanks for the information.
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Re: How much I need to retire.

Postby Garco » Wed Jul 10, 2013 12:51 pm

That's not the way I figure it. I am getting the "$1619" now, since I filed for SS at age 66 (FRA). Actually I'm getting about $2,500 now (and my wife is getting another ca. $1250, so together we receive ca. $45,000 per year). I don't concern myself with the risk that this payment might be reduced in the future. If I were 30 years from retirement instead of one or two, I still wouldn't be concerned about it. I'm far more concerned now about the funding of Medicare and the cost of healthcare in general. Aside from this, I've focused mainly on building my 401k and other tax advantaged investment accounts, on establishing a plan for managing my "taxable" funds, and on purchasing long-term care insurance to protect my wealth over the long term. (My kids are financially independent and thriving.)
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Re: How much I need to retire.

Postby goodoboy » Fri Jul 12, 2013 1:10 pm

Thanks to everyone who help me so far.

Any rate, I figured how much i needed for retirement in 30 years

$4 million (not including SS)

$2 million (including 70% of SS)

all figures are assuming:

3% inflation over the next 30 years
5% return on current savings (50k)
25% tax rate on retirement income (5000 x .25)


Now I need to see if I am saving enough (i hope so) in 401k to reach those goals. I will use 5% return rate in my calculations.

Thanks for all the help. Well appreciated.
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Re: How much I need to retire.

Postby umfundi » Fri Jul 12, 2013 2:24 pm

goodoboy wrote:Thanks to everyone who help me so far.

Any rate, I figured how much i needed for retirement in 30 years

$4 million (not including SS)

$2 million (including 70% of SS)

all figures are assuming:

3% inflation over the next 30 years
5% return on current savings (50k)
25% tax rate on retirement income (5000 x .25)


Now I need to see if I am saving enough (i hope so) in 401k to reach those goals. I will use 5% return rate in my calculations.

Thanks for all the help. Well appreciated.

I think it's much simpler than that.

1% of your salary (income) saved over 30 years will replace 2% of your salary when you retire. Save 1/3 of your salary, live on 2/3. When you retire, you will have 2/3 of your salary replaced by withdrawals from savings.

When are you done? When your savings nest egg is 17x your income.

I believe these rules of thumb are every bit as good as guesses about future investment returns and inflation.

Keith
Déjà Vu is not a prediction
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Re: How much I need to retire.

Postby goodoboy » Fri Jul 12, 2013 4:54 pm

umfundi wrote:
goodoboy wrote:Thanks to everyone who help me so far.

Any rate, I figured how much i needed for retirement in 30 years

$4 million (not including SS)

$2 million (including 70% of SS)

all figures are assuming:

3% inflation over the next 30 years
5% return on current savings (50k)
25% tax rate on retirement income (5000 x .25)


Now I need to see if I am saving enough (i hope so) in 401k to reach those goals. I will use 5% return rate in my calculations.

Thanks for all the help. Well appreciated.

I think it's much simpler than that.

1% of your salary (income) saved over 30 years will replace 2% of your salary when you retire. Save 1/3 of your salary, live on 2/3. When you retire, you will have 2/3 of your salary replaced by withdrawals from savings.

When are you done? When your savings nest egg is 17x your income.

I believe these rules of thumb are every bit as good as guesses about future investment returns and inflation.

Keith


Thanks

I rather use something everyone else is using. And the method I did above is what lots of people used here and lots of articles online use.

There is no magic formula, so I am not trying to invent the wheel. I am just trying to make sure I am on the right track and not spend so much time on this.

I would like to know whatever one uses as inflation in their calculations?
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Re: How much I need to retire.

Postby umfundi » Fri Jul 12, 2013 5:24 pm

goodoboy wrote:I would like to know whatever one uses as inflation in their calculations?


The projections for inflation I have read are less than 2% dropping to 1.5% over ten years.

Rick Ferri (see Portfolio Solutions) has a 30-year outlook on his site.

One way to do this is to do the calculations after inflation, in constant dollars. In other words, set inflation to zero. Then you simply need an estimate of income (salary) growth after inflation. I might suggest 2% to age 45, then zero. And, you need an estimate of investment return after inflation. 5% seems like a reasonable number.

Whatever you do, you should calculate best and worst cases. Salary growth might be 0%, it might be 4%. Inflation might be 1%, it might be 4%. Investment return might be inflation plus 3%, it might be inflation plus 7%.

The point is not to drive yourself crazy with worst case scenarios, it is to see how sensitive the result is to your assumptions.

Good luck,

Keith
Déjà Vu is not a prediction
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Re: How much I need to retire.

Postby leonard » Fri Jul 12, 2013 6:19 pm

goodoboy wrote: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,


Not enough for Roth but enough for taxable investing?

Keep in mind that Roth contributions can double as emergency fund (but should never be touched unless it's the absolute last resort.) Contributions can always be withdrawn without penalty. So, time to start putting at least some money in the Roth (but don't touch it).
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Re: How much I need to retire.

Postby hoops777 » Fri Jul 12, 2013 6:53 pm

You are 30 years from retirement.You have no idea where you will be working in 15 years.You think you do but the world changes and we often wind up doing something we never imagined we woukd be doing.Who knows what is going to happen to the stock market,the healthcare system or your company.The best advice is to save as much as you can while still enjoying your life.Life is short and if you worry so much about retiring and do not take that trip to Europe when you are 36 or 38,you may never get there.You never know what health issues you may develop when you are older or countless other things.Be responsible and plan but enjoy life.You are barely 30 and you stated you will not be buying another house.The best laid plans..........Good luck :happy
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Re: How much I need to retire.

Postby goodoboy » Sat Jul 13, 2013 11:07 am

leonard wrote:
goodoboy wrote:Not enough for Roth but enough for taxable investing?

Keep in mind that Roth contributions can double as emergency fund (but should never be touched unless it's the absolute last resort.) Contributions can always be withdrawn without penalty. So, time to start putting at least some money in the Roth (but don't touch it).


Thanks,

I don't have any taxable investing (stocks or mutal funds), just 401K and savings (credit union)

That's a good idea, to put some of my emergency fund in Roth IRA. Never thought of it like that. But I will get to Roth IRA soon.
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Re: How much I need to retire.

Postby goodoboy » Sat Jul 13, 2013 11:13 am

hoops777 wrote:You are 30 years from retirement.You have no idea where you will be working in 15 years.You think you do but the world changes and we often wind up doing something we never imagined we would be doing.Who knows what is going to happen to the stock market,the healthcare system or your company.The best advice is to save as much as you can while still enjoying your life.Life is short and if you worry so much about retiring and do not take that trip to Europe when you are 36 or 38,you may never get there.You never know what health issues you may develop when you are older or countless other things.Be responsible and plan but enjoy life.You are barely 30 and you stated you will not be buying another house.The best laid plans..........Good luck


Thanks,

No offense, but I have the rest of my life to enjoy it. I am taking the time to learn about my personal finance NOW. Nobody is going to do it for me, and "ain't nobody got time for that". I made enough finical mistakes during my working years so far, and i don't want to make anymore. I want to be atleast 70% sure I am saving enough so I can retire in peace and skip all the BS marketing out there and "keeping up with the Jones" and all this buy this and that stock. I am having fun doing this, making sure this money will be right and growing. Thats fun for me right now. I grew up poor and not trying to revisit that lifestyle.

I want be spending anymore time on "how much I need to retire", I figure that out already. And at my saving rate I have set now, I should be fine. I will enjoy life, that's why I am getting this responsible matter out of the way now. I want revisit the subject, until about 10 years from now. It will be on autopilot from now on.

As far as buying another house, yes correct, I am NEVER buying another house. NEVER, unless I have cash money to do it. I hate DEBT with a passion. I rather buy a nice car then a house. Unless someone decides to pay the mortgage for me :) .
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Re: How much I need to retire.

Postby nedsaid » Sat Jul 13, 2013 7:55 pm

I take it that poo-poo jokes are off limit in this forum. :happy
A fool and his money are good for business.
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Re: How much I need to retire.

Postby ot1138 » Sat Jul 13, 2013 8:05 pm

You'll need at least $2M. More is better.
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Re: How much I need to retire.

Postby hoops777 » Sat Jul 13, 2013 11:20 pm

As I said save as much as you can without living like a monk,invest the boglehead way and be prepared for lifes unexpected.When I was your age I was a high school basketball coach with less than 5k to my name.Somehow I ended up owning a business that I would never in my wildest imagination would have expected.I will bet you 5 bucks that the house you are in now will not be the house you are in when you are 60.You can post back in about 30 years and if by some miracle I am still kickin,we can settle the bet :D
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Re: How much I need to retire.

Postby sperry8 » Sun Jul 14, 2013 12:24 am

I'd say save $1.5 million. I retired 6 years ago - and based on your monthly spend that is what I've learned. I think many of the other posters are being too conservative.
Certainty is a requirement of ignorance.
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Re: How much I need to retire.

Postby goodoboy » Tue Jul 16, 2013 1:09 am

hoops777 wrote:As I said save as much as you can without living like a monk,invest the boglehead way and be prepared for lifes unexpected.When I was your age I was a high school basketball coach with less than 5k to my name.Somehow I ended up owning a business that I would never in my wildest imagination would have expected.I will bet you 5 bucks that the house you are in now will not be the house you are in when you are 60.You can post back in about 30 years and if by some miracle I am still kickin,we can settle the bet :D



The bet is on!!!
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