Retirement Goal Calculation

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Topic Author
goodoboy
Posts: 475
Joined: Sat Nov 05, 2011 8:05 pm

Retirement Goal Calculation

Post by goodoboy »

Hello,

I am 35 years old. How do you calculate how much is needed to retire for husband and wife?

Just curious how everyone here on this forum calculates their retirement goal.

Please describe your method for calculating your magic number for retirement.

Thank you kindly.
John3754
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Re: Retirement Goal Calculation

Post by John3754 »

25x projected annual expenses is a good starting point.
Topic Author
goodoboy
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Re: Retirement Goal Calculation

Post by goodoboy »

John3754 wrote:25x projected annual expenses is a good starting point.
Thank you

What is your method for calculating projected annual expenses? Do you use inflation? How much inflation do you use?

Thanks
LeeMKE
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Re: Retirement Goal Calculation

Post by LeeMKE »

For many years I used the tools in Quicken for retirement planning and they are good enough for someone years away from retirement to confirm they are saving enough and headed in the right direction.

About 10 years before retirement I started using Fidelity tools. They calculate more complex situations, vary from quick estimates to granular disecction of your budgets and notices gaps and odd entries to alert you to issues. And they run Monte Carlo simulations so you can feel some comfort that they aren't just giving you a single number that may or may not turn out to be true in the future. And they are my favorite price, free.

Both these tools take inflation into account.
The mightiest Oak is just a nut who stayed the course.
steve_14
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Re: Retirement Goal Calculation

Post by steve_14 »

1) Estimate how much you'd need to spend in your first retirement year if you retired today (come up with a simple budget)
2) Factor in inflation
3) Factor in retirement income (SS, pension)
4) Multiply by 30
bcjb
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Re: Retirement Goal Calculation

Post by bcjb »

The above all work well. I especially agree with LeeMKE. At age 35 (my age also), I doubt you can rely on any estimate, or use it for planning purposes. There's just too much uncertainty about expected expenses in retirement incl. healthcare costs, the evolution of Social Security, etc. Right now, we are just trying to save as much as possible -- more than our vague estimate of '30x expenses' suggests we'll need. When we're ten years away from retirement, we'll do a proper calculation.
Rodc
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Re: Retirement Goal Calculation

Post by Rodc »

LeeMKE wrote:For many years I used the tools in Quicken for retirement planning and they are good enough for someone years away from retirement to confirm they are saving enough and headed in the right direction.

About 10 years before retirement I started using Fidelity tools. They calculate more complex situations, vary from quick estimates to granular disecction of your budgets and notices gaps and odd entries to alert you to issues. And they run Monte Carlo simulations so you can feel some comfort that they aren't just giving you a single number that may or may not turn out to be true in the future. And they are my favorite price, free.

Both these tools take inflation into account.
That works well. 30 years out, a simple back of the envelope calculation is also fine. Errors in assumptions grow exponentially if all goes well. If all does not go well the errors grow even bigger, or if all goes super well. It is good to have a plan and a rough idea of where you are heading, but at this early stage there is no way to have much accuracy. Life is uncertain.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
Dandy
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Re: Retirement Goal Calculation

Post by Dandy »

When I was 35 I believe long/med term Treasuries paid 7% or so. My stable value fund paid that type of interest. Most companies had pensions and great/inexpensive health insurance. Lots of time and lots of unknowns. Trying to project what you will need, even in rough numbers, is often a waste of time. If you focus on managing debt, living below your means saving/investing mid teen double digits in mostly low cost diversified index funds -- you will probably be ok. When you get to around 50 you will have a much easier and more accurate estimate of what you need.

At 35 I think I figured $1million. At 50, I figured about $2million - which was much closer to what I wanted - a bit more than I needed. After 50, I lost my job twice but due mostly to luck it didn't seriously affect my financial situation. Could have been a disaster.
kaudrey
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Re: Retirement Goal Calculation

Post by kaudrey »

I have a spreadsheet that projects a variety of expense, income, and portfolio growth categories. I adjust general expenses for 3% inflation. And then specific line items get different adjustments - for example, healthcare gets a higher inflation rate; the mortgages are static but I assume payoff at retirement.

My goal number is based on never going over a 4% withdrawal rate. That is after adjusting for our various income sources in retirement. So, I hope to retire at 57 (and DH will be 52). At 57, I get a pension, so that reduces how much we have to withdraw. That pension is flat for 5 years but becomes COLA'd at 62. At 67, I assume I'll take SS, and my DH will take 1/2 of my SS. I'll probably actually wait until 70, but I'll play with those numbers more when I get closer.

So I basically want 25x expenses not covered by other income sources.
Miguelito
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Re: Retirement Goal Calculation

Post by Miguelito »

35 yo here also.

For planning purposes, I assume our house will be paid for but will continue living in it indefinitely (despite being bigger than we would need).
I also figure our projected SS benefits and use only 75% of that (since that is all we are projected to have if SS doesn't get fixed)
I use all my current expenses for utility, food, fuel, car, clothing, etc.
I jack up my by a bunch (2X or 3X) the budget for vacations, gifts, hobbies, eating out, entertainment, etc - basically anything I might do more of given more time.
I budget an appropriate amount for car depreciation, and house and car maintenance and insurances.
My (100% by then) home equity is my insurance in case calculations are wrong/inheritance for children.

Based on what we have, and maxing out 401k's+IRA's, it looks like we'll be in better than great shape, but at 25+ years away, who knows if we will continue to be able to fund retirement at this rate? I rather be ahead in case something happens and retire sooner if all goes well.

Sounds like I'm not cutting back a lot, and I'm not. But that's because our 4 biggest expenses will be gone or massively reduced:

-Taxes
-Savings
-Mortgage
-Childcare
Topic Author
goodoboy
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Re: Retirement Goal Calculation

Post by goodoboy »

Let me make sure I understand. Everyone tell me if what I am doing somewhat correct. I know I can't be exact but want to make sure I understand.

Retire at 62, 35 now. Last til 90

My Method
Monthly expenses in retirement (today money): $5000
Income for SS: $2600

Total monthly expense after income: $2400
Annual Expense: $28,880
Annual Expense (including 15%) tax rate: $33,200

Expense for 28 years after retirement to 90: 33200 x 28 = $930k

Add 2.5% inflation: $930K after 27 (62-35) years from now is about $1.81M

So I need to save about $2M for me retirement goal. Of course this is just estimate, but I want to make sure we are saving enough to meet to goal or more.

What do you think? Did I calculate right?

Thanks
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Watty
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Re: Retirement Goal Calculation

Post by Watty »

goodoboy wrote:Annual Expense (including 15%) tax rate: $33,200
(all in current dollars)
From here you would multiply the $33,200 times 25 to get $830,000 which would be your magic "number". The reason that 25 is used is there have been studies that show that a 4% (1/25 = 4%) initial withdraw rate and then taking inflation adjustments is a relatively "safe withdrawal rate" for a 30 year retirement.

http://www.bogleheads.org/wiki/Safe_withdrawal_rates

There are of course various opinions about exactly what percentage should be used.
Topic Author
goodoboy
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Re: Retirement Goal Calculation

Post by goodoboy »

Watty wrote:
goodoboy wrote:Annual Expense (including 15%) tax rate: $33,200
(all in current dollars)
From here you would multiply the $33,200 times 25 to get $830,000 which would be your magic "number". The reason that 25 is used is there have been studies that show that a 4% (1/25 = 4%) initial withdraw rate and then taking inflation adjustments is a relatively "safe withdrawal rate" for a 30 year retirement.
Thanks

I am completely confused!!

Are you stating using the 4% withdraw means I need approximately (of course this is ball park figure) $830K when I reach the age of 62? If so, how is this possible? What about inflation? How can $830K today be the same 27 years from now?

I am not understanding when you wrote "taking inflation adjustments is a relatively "safe withdrawal rate" for a 30 year retirement."

Thanks
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Watty
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Re: Retirement Goal Calculation

Post by Watty »

goodoboy wrote:I am completely confused!!

Are you stating using the 4% withdraw means I need approximately (of course this is ball park figure) $830K when I reach the age of 62? If so, how is this possible? What about inflation? How can $830K today be the same 27 years from now?

I am not understanding when you wrote "taking inflation adjustments is a relatively "safe withdrawal rate" for a 30 year retirement."
That is in non-inflation adjusted current dollars so if you were going to retire tomorrow then you would want to have $830K if you needed $33,200 a year. That withdrawal would be adjusted for inflation each year so if inflation is 3% over the next year then 1.03 * 33,200 is $34,196 which should have the same purchasing power as your original withdrawal.

30 years from now when you retire then you an amount with the same purchasing power as $830K adjusted for inflation.

Trying to put projected inflation numbers in your calculations is pretty much impossible since you cannot know what inflation will be and it make the math a lot harder and less reliable since you would have to forecast inflation and what your investments returns will be.

The way to work around this is to do all your math using the value of a dollar today, but to use a "real" expected earnings rate that subtracts out inflation. For example if you thought that your portfolio would beat inflation by 4% (like a 7% return when there is 3% inflation 7-3=4) then you would use 4% for your calculation. Your future contributions are treated this way too so if you planned on saving $10,000 but inflation is 3% this year then next year you would need to save $10,300 because that would have the same purchasing power as $10,000 today.
4nursebee
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Re: Retirement Goal Calculation

Post by 4nursebee »

It is good to be relatively young and thinking about how much is required. I suspect many never do this.

When I started working a profession, I did not know this answer. What I did at the time was come up with some dollar amount that at a 3% CD rate would replace what was then current income, and keep pace with inflation. I do not know what inflation calculation was but do recall I wanted $3M to yield 90K. Kind of a pipe dream at the time.
Pale Blue Dot
Mongoose
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Re: Retirement Goal Calculation

Post by Mongoose »

27 as of this week. I'm using 25x expenses assuming I spend the same amount every year and I have zero debt (no mortgage). 50k/year x 25=$1.25million invested and I will quit that same day. Realistically I will spend about 40k and thanks to the new healthcare law I will be heavily subsidized which will further reduce expenses. The only wildcard is the future child but I don't plan on subsidizing his college costs unless some of the better firecalc scenarios pan out :-).
Topic Author
goodoboy
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Re: Retirement Goal Calculation

Post by goodoboy »

Watty wrote:
goodoboy wrote:I am completely confused!!

Are you stating using the 4% withdraw means I need approximately (of course this is ball park figure) $830K when I reach the age of 62? If so, how is this possible? What about inflation? How can $830K today be the same 27 years from now?

I am not understanding when you wrote "taking inflation adjustments is a relatively "safe withdrawal rate" for a 30 year retirement."
That is in non-inflation adjusted current dollars so if you were going to retire tomorrow then you would want to have $830K if you needed $33,200 a year. That withdrawal would be adjusted for inflation each year so if inflation is 3% over the next year then 1.03 * 33,200 is $34,196 which should have the same purchasing power as your original withdrawal.

30 years from now when you retire then you an amount with the same purchasing power as $830K adjusted for inflation.

Trying to put projected inflation numbers in your calculations is pretty much impossible since you cannot know what inflation will be and it make the math a lot harder and less reliable since you would have to forecast inflation and what your investments returns will be.

The way to work around this is to do all your math using the value of a dollar today, but to use a "real" expected earnings rate that subtracts out inflation. For example if you thought that your portfolio would beat inflation by 4% (like a 7% return when there is 3% inflation 7-3=4) then you would use 4% for your calculation. Your future contributions are treated this way too so if you planned on saving $10,000 but inflation is 3% this year then next year you would need to save $10,300 because that would have the same purchasing power as $10,000 today.
Thank you

So you using 4% rule we come up with $830K if I want to retire tommorow correct?

If I use 4% inflation (conservative) for the next 30 years when I retire, then I need $2.7M?

From using these figures, my investments (and contributions) need to generate roughly $2.7M?

Are we one the same page now?

Thanks
red5
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Re: Retirement Goal Calculation

Post by red5 »

goodoboy wrote:
Thank you

So you using 4% rule we come up with $830K if I want to retire tommorow correct?

If I use 4% inflation (conservative) for the next 30 years when I retire, then I need $2.7M?

From using these figures, my investments (and contributions) need to generate roughly $2.7M?

Are we one the same page now?

Thanks

When you retire someday in the far future you will need $830K in today's (2014) dollars. That could be $2.7M in future dollars or it could be something else, depending on what inflation does.

If you were to retire tomorrow for a very long retirement (60 years?) you'd perhaps want more than $830K. I am not so sure the 4% rule is supposed to last such a long time.

I do all my calculations using real rates and ignore inflation. I would ignore the $2.7M number and use the $830K number.

My apologies if I have misunderstood anything you have written.
dbr
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Re: Retirement Goal Calculation

Post by dbr »

goodoboy wrote:Hello,

I am 35 years old. How do you calculate how much is needed to retire for husband and wife?

Just curious how everyone here on this forum calculates their retirement goal.

Please describe your method for calculating your magic number for retirement.

Thank you kindly.
You can certainly calculate as indicated in this thread. It isn't necessary to attempt anything more exact because much happens between now and twenty or thirty years from now including:

1. You don't know how your careers will go, what you will earn, where you will live, what interests you might pursue, etc. Knowing what lifestyle you want to pursue that far ahead is an uncertain proposition.

2. Statistically you are just as likely not to be married to that wife as to be married, and whether or not you are married you don't know for sure about the effect of children yet. You can, by the way, acquire children along with a new wife, just in case you think that issue is settled.

3. You or your wife could be chronically ill or disabled; there is even a statistical chance of being dead.

So the answer is that retirement is approached by successive approximations. You can start now in the general direction and continue to work at where you want to go and how to get there as things evolve. To know your life plan at age 35 might be a curse more than a blessing.
ralph124cf
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Re: Retirement Goal Calculation

Post by ralph124cf »

The 4% safe withdrawal rate, with yearly inflation adjustments, is meant to be safe for a 30 year retirement, if invested in a conservative portfolio that has a chance of beating inflation, not forever. Most on this forum would suggest something along the lines of 50-50 stock index funds and bonds. Many would quibble about the exact percentages, but very few would say all stocks or all bonds.

Ralph
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Sheepdog
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Re: Retirement Goal Calculation

Post by Sheepdog »

I didn't attempt that estimate at your age. The 4% theory had not been discovered at that time. However, my later-in-life planning for the amount needed was simply knowing how much I was spending annually (I averaged 5 years of spending). I took that annual amount and subtracted my expected annual Social Security payment (and a defined pension, if I was to have one) , then divided that figure by 0.04 (4%). I increased that figure by 10% as a safety factor. Today, If I was 35, I would do that now and then update that calculation occasionally as I aged, thereby updating my spending history and inflation and future planned needs.
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
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greg24
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Re: Retirement Goal Calculation

Post by greg24 »

If you think you are 27 years away from retirement, I think calculating numbers is a fools errand. Save as much as you can, enjoy life. Start running the numbers as you get closer to the finish line.
The Wizard
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Re: Retirement Goal Calculation

Post by The Wizard »

35 is still on the young side of one's working and accumulation career.
While it's good that you're thinking about this, I would not spend too much time on this until age 50 or older.
Instead, I'd ponder more on how to get your long-term savings/investment rate up to 20%, 25%, 30%. This will give you more options for early retirement, should you so choose, once you get somewhere north of age 50.

Also, once you get within 10 years of retirement, your expenses are known a lot better and inflation is less of an issue for years to go...
Attempted new signature...
jmg229
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Re: Retirement Goal Calculation

Post by jmg229 »

goodoboy wrote:
Watty wrote:
goodoboy wrote:I am completely confused!!

Are you stating using the 4% withdraw means I need approximately (of course this is ball park figure) $830K when I reach the age of 62? If so, how is this possible? What about inflation? How can $830K today be the same 27 years from now?

I am not understanding when you wrote "taking inflation adjustments is a relatively "safe withdrawal rate" for a 30 year retirement."
That is in non-inflation adjusted current dollars so if you were going to retire tomorrow then you would want to have $830K if you needed $33,200 a year. That withdrawal would be adjusted for inflation each year so if inflation is 3% over the next year then 1.03 * 33,200 is $34,196 which should have the same purchasing power as your original withdrawal.

30 years from now when you retire then you an amount with the same purchasing power as $830K adjusted for inflation.

Trying to put projected inflation numbers in your calculations is pretty much impossible since you cannot know what inflation will be and it make the math a lot harder and less reliable since you would have to forecast inflation and what your investments returns will be.

The way to work around this is to do all your math using the value of a dollar today, but to use a "real" expected earnings rate that subtracts out inflation. For example if you thought that your portfolio would beat inflation by 4% (like a 7% return when there is 3% inflation 7-3=4) then you would use 4% for your calculation. Your future contributions are treated this way too so if you planned on saving $10,000 but inflation is 3% this year then next year you would need to save $10,300 because that would have the same purchasing power as $10,000 today.
Thank you

So you using 4% rule we come up with $830K if I want to retire tommorow correct?

If I use 4% inflation (conservative) for the next 30 years when I retire, then I need $2.7M?

From using these figures, my investments (and contributions) need to generate roughly $2.7M?

Are we one the same page now?

Thanks
It looks like you are still confused on the inflation piece. Ignore it. You need $830k in today's dollars (I'm taking the earlier number, not saying its a good one or bad one). Imagine you had $830k today and could stick it in an account where it exactly kept up with inflation, regardless of what it is. Then, at age 62, you are ready to retire. If inflation is 1%, it earns 1%. If inflation is 10%, it earns 10%. So it doesn't matter what inflation is.

Now, you don't have $830k today (presumably), so you don't want an account that earns exactly inflation with no additional contributions. You will continue to invest in stocks and bonds, etc. over the next 27 years. But, how much these earn you will likely be highly correlated with inflation. If inflation is high, your investments will return more (think about those 5 and 6% bank interest rates. What was inflation like then?). If inflation is low, on average, over the long run, they will return less. So what Watty is trying to explain is to ignore inflation and just think in todays dollar terms. Assume that your bonds will beat inflation by (making up a number) 1-2%. So rather than guessing that inflation will be 3% and your bonds will return 4-5%, just use todays dollars as the target and the 1-2% as the growth factor.

In other words, if you use "real" growth rates, you will never know what your "number" is in nominal terms until you get there, but you will know your number in today's dollar terms and can plan for how to reach that. (Although, as others pointed out, pretending that you know that number is probably lying to yourself, but hey, we all have to have something to tinker with in our spreadsheets, right?)
Topic Author
goodoboy
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Re: Retirement Goal Calculation

Post by goodoboy »

jmg229 wrote:
goodoboy wrote:
Watty wrote:
goodoboy wrote:I am completely confused!!

Are you stating using the 4% withdraw means I need approximately (of course this is ball park figure) $830K when I reach the age of 62? If so, how is this possible? What about inflation? How can $830K today be the same 27 years from now?

I am not understanding when you wrote "taking inflation adjustments is a relatively "safe withdrawal rate" for a 30 year retirement."
That is in non-inflation adjusted current dollars so if you were going to retire tomorrow then you would want to have $830K if you needed $33,200 a year. That withdrawal would be adjusted for inflation each year so if inflation is 3% over the next year then 1.03 * 33,200 is $34,196 which should have the same purchasing power as your original withdrawal.

30 years from now when you retire then you an amount with the same purchasing power as $830K adjusted for inflation.

Trying to put projected inflation numbers in your calculations is pretty much impossible since you cannot know what inflation will be and it make the math a lot harder and less reliable since you would have to forecast inflation and what your investments returns will be.

The way to work around this is to do all your math using the value of a dollar today, but to use a "real" expected earnings rate that subtracts out inflation. For example if you thought that your portfolio would beat inflation by 4% (like a 7% return when there is 3% inflation 7-3=4) then you would use 4% for your calculation. Your future contributions are treated this way too so if you planned on saving $10,000 but inflation is 3% this year then next year you would need to save $10,300 because that would have the same purchasing power as $10,000 today.
Thank you

So you using 4% rule we come up with $830K if I want to retire tommorow correct?

If I use 4% inflation (conservative) for the next 30 years when I retire, then I need $2.7M?

From using these figures, my investments (and contributions) need to generate roughly $2.7M?

Are we one the same page now?

Thanks
It looks like you are still confused on the inflation piece. Ignore it. You need $830k in today's dollars (I'm taking the earlier number, not saying its a good one or bad one). Imagine you had $830k today and could stick it in an account where it exactly kept up with inflation, regardless of what it is. Then, at age 62, you are ready to retire. If inflation is 1%, it earns 1%. If inflation is 10%, it earns 10%. So it doesn't matter what inflation is.

Now, you don't have $830k today (presumably), so you don't want an account that earns exactly inflation with no additional contributions. You will continue to invest in stocks and bonds, etc. over the next 27 years. But, how much these earn you will likely be highly correlated with inflation. If inflation is high, your investments will return more (think about those 5 and 6% bank interest rates. What was inflation like then?). If inflation is low, on average, over the long run, they will return less. So what Watty is trying to explain is to ignore inflation and just think in todays dollar terms. Assume that your bonds will beat inflation by (making up a number) 1-2%. So rather than guessing that inflation will be 3% and your bonds will return 4-5%, just use todays dollars as the target and the 1-2% as the growth factor.

In other words, if you use "real" growth rates, you will never know what your "number" is in nominal terms until you get there, but you will know your number in today's dollar terms and can plan for how to reach that. (Although, as others pointed out, pretending that you know that number is probably lying to yourself, but hey, we all have to have something to tinker with in our spreadsheets, right?)

Thank you

Still confusing to me, you're making far too complicated. I will stick to inflation of 4% and keep my saving rate between 22 to 25% to have 2.7M by retirement.
MathWizard
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Re: Retirement Goal Calculation

Post by MathWizard »

1) Work in today's dollars.
2) Estimate current expenses.
3) Add new expenses (esp. Med Ins. I figure $16K pre 65, $8K after for husband./wife. , travel is an optional expense)
4) Subtract expenses that will go away: commute, maybe life ins.
5) Subtract expected COLA's pensions , SS, (may have to guess inflation for non-COLA'd pension, I use 3% if needed)
6) Assume a real return rate from now until retirement (I use 4% real)
7) Assume a real return rate while in retirement (again I use 4% real)
8) Multiply by 1/WR (I use 4% WR, so I multiply by 25).

This gives you the portfolio value you need in today's dollars.
Adjust each year for what the inflation was that year.

Note that one one of you passes, the total SS income goes down for the spouse.
Also taxes go up on the same taxable income. (Single vs. MFJ).
I assume one makes it to 85, the other makes it to 100, based on max family history.
Topic Author
goodoboy
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Re: Retirement Goal Calculation

Post by goodoboy »

Thank you

Question: If I go to retirement estimator (http://www.ssa.gov/retire2/estimator.htm) and it says I will receive $2500 at 67, will this adjust for inflation over the years (provided inflation goes up)?

Or is this the amount I will receive at 67 if I am 35 now?

In other words when to subtract the SS income from calucations?:

Yearly Retirement Expense: $60K
Yearly SS Income: $30K

Required Savings (in today dollar): $30k

Required Savings considering 3% inflation 30 years from now: $73k

Is this correct or should I subtract SS income from the $73K? My co-worker said I should subtract SS from the $73K


Thanks
heyyou
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Re: Retirement Goal Calculation

Post by heyyou »

Your spending is easy to see, just subtract your annual savings from your income. You spent the rest, it doesn't matter if it was taxes or pocket money. What you need is 30+ multiples of your spending if you are retiring early. As mentioned, 25 multiples was for a 30 year retirement. The good news is by saving more, you are spending less. By reducing your expenses now, you are shortening how long you have to work to reach your goal.

Consider saving your pay raises by only spending the initial pay increase on a celebration. Cultivate the attitude that what you have now is enough, enough car, enough house.

SS calculations assume that you will continue to work and will have the same income as last year, and the calculation uses your 35 highest earning years. Early retirees don't fit those assumptions.
LifeLearner
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Re: Retirement Goal Calculation

Post by LifeLearner »

Quick question along the same thought as the OP...

It seems the general wisdom is 25x-30x living expenses. What if you were to retire early -- say around 45? Does that change the calculation or guidance at all?

Does anybody know of a good equation or data fit that plots years left to live vs #x annual living expenses that is risk-matched with the 25-30x living expenses for what I assume is based on a retirement age of around 60 (?), with another approximately 20 years to go?
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Cut-Throat
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Re: Retirement Goal Calculation

Post by Cut-Throat »

LifeLearner wrote:Quick question along the same thought as the OP...

It seems the general wisdom is 25x-30x living expenses. What if you were to retire early -- say around 45? Does that change the calculation or guidance at all?

Does anybody know of a good equation or data fit that plots years left to live vs #x annual living expenses that is risk-matched with the 25-30x living expenses for what I assume is based on a retirement age of around 60 (?), with another approximately 20 years to go?

Sure. Use the VPW (Variable Percentage Withdrawal) tool. You can enter in various portfolio amounts and Number of years of your Plan. It will show how much you can spend every year, backtested with historical returns and inflation. When you find a Portfolio Amount that works for your plan and past History, then that is YOUR NUMBER !!

You can download the tool here and find instructions..... https://docs.google.com/file/d/0B6y4KDl ... MyRGs/edit
Topic Author
goodoboy
Posts: 475
Joined: Sat Nov 05, 2011 8:05 pm

Re: Retirement Goal Calculation

Post by goodoboy »

goodoboy wrote:Thank you

Question: If I go to retirement estimator (http://www.ssa.gov/retire2/estimator.htm) and it says I will receive $2500 at 67, will this adjust for inflation over the years (provided inflation goes up)?

Or is this the amount I will receive at 67 if I am 35 now?

In other words when to subtract the SS income from calucations?:

Yearly Retirement Expense: $60K
Yearly SS Income: $30K

Required Savings (in today dollar): $30k

Required Savings considering 3% inflation 30 years from now: $73k

Is this correct or should I subtract SS income from the $73K? My co-worker said I should subtract SS from the $73K


Thanks
Any help on this part?
derosa
Posts: 464
Joined: Wed Jul 24, 2013 5:18 pm

Re: Retirement Goal Calculation

Post by derosa »

Go to bogleheads wiki. Look for financial calculators. There are 40 or so free and for sale ones.

Pick 2 or 3 or 4 and use them each year over the next 10 years or so to see where you are going.

Personally i use the ones from vanguard including their financial plan which is a historical based tool, firecalc which is also historical based, flexible retirement planner which is a monte carlo based, and the tools on dinkytown.net which are straightline based calculators.

So you have a straightline calculator, a monte carlo calculator and a historical calculator. I want all 3 to be around each other -- in the ballpark.

Financial engines is on vg site and is also monte carlo based.

If you have used calculators on different websites your may have been using tools from dinkytown.net. There business is developing financial calculators. They have 100s on their site for use - they are all java based tools.

Keep in mind there is no magic answer my friend. SAve more and be cautious on spending.
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