Running out of money

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Running out of money

Postby EternalOptimist » Wed Feb 06, 2013 4:51 pm

When do you know that you've accumulated enough assets so that you feel confident that you will never run out of money in your lifetime. Is it a tangible thing like having $1 million, an age, some intangible feelings you have or something else...or maybe you never get to that point :confused
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Re: Running out of money

Postby The Wizard » Wed Feb 06, 2013 4:54 pm

You run the numbers and determine a Confidence Factor...

For instance, I've had a certain Take-home Pay from employment over the past decade, tweaked a bit each year.
I have High Confidence that if this pay-level continued, that I could continue my lifestyle unhindered.
My retirement net income (starting in a few months) should be slightly MORE than my employment take home pay has been, hence...
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Re: Running out of money

Postby TravelforFun » Wed Feb 06, 2013 5:09 pm

EternalOptimist wrote:When do you know that you've accumulated enough assets so that you feel confident that you will never run out of money in your lifetime. Is it a tangible thing like having $1 million, an age, some intangible feelings you have or something else...or maybe you never get to that point :confused

X= annual expenses
Y = retirement income like pension or social security
Z = savings needed

Z = 25( X - Y )
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Re: Running out of money

Postby Peter Foley » Wed Feb 06, 2013 5:17 pm

If you have a balanced AA (in the 40/60 to 60/40 range) and you can live off the bond portion at your projected withdrawal rate.
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Re: Running out of money

Postby Call_Me_Op » Wed Feb 06, 2013 5:23 pm

Travel for fun,

I would accept your equation for a 65 year old retiree, but not for early retirement.
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Re: Running out of money

Postby The Wizard » Wed Feb 06, 2013 5:40 pm

Some people look at a sum of money and figure what it takes to run it down to zero after 40 years.
For some (many?) of us, the opposite will be true, with a properly managed AA:
Start with a sum of money and after however many years, it will be double or triple the starting amount, even with amounts being withdrawn.
Strive to make THAT your reality!
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Re: Running out of money

Postby Abe » Wed Feb 06, 2013 5:48 pm

You will never know that you've accumulated enough. I thought that I would feel somewhat secure at some point along the line, but I don't. I don't think that I ever will. Don't know about other people, but this is how I feel.
Slow and steady wins the race.
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Re: Running out of money

Postby midareff » Wed Feb 06, 2013 5:58 pm

There is no such thing as too much, but enough can be defined by each individual. My savings rate was sufficient that when I retired and stopped saving my income level was significantly in excess of what I had been living on and a very conservative decumulation rate was the frosting. As Spock said; "Live long and prosper".
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Re: Running out of money

Postby Abe » Wed Feb 06, 2013 6:34 pm

Money can get away from you. Clint W. Murchison Jr., who inherited his fortune from his father a Texas oil mogul, died broke. He was worth an estimated 250 million dollars in 1984.
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Re: Running out of money

Postby Socrativestor » Wed Feb 06, 2013 6:38 pm

Larry Swedroe answers the question "How much money do I really need?" in a 5:27 video:
http://www.youtube.com/watch?v=NX0YyxYf85w

While one may disagree about where the threshold is, IMHO I think one almost has to agree that there *is* a threshold for each person and that the appropriate investing strategies for each side of the threshold are different.

(I also think that Larry's most important point in the video is near the end and concerns what in the old days was called "hubris"...).
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Re: Running out of money

Postby jeffyscott » Wed Feb 06, 2013 7:04 pm

I feel secure enough that we are almost there, that I came up with a plan for determining how much we can give to our children. Also the secure enough that my wife is planning to quit her job at the age of 50.
press on, regardless - John C. Bogle
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Re: Running out of money

Postby lawman3966 » Wed Feb 06, 2013 10:23 pm

EternalOptimist wrote:When do you know that you've accumulated enough assets so that you feel confident that you will never run out of money in your lifetime. Is it a tangible thing like having $1 million, an age, some intangible feelings you have or something else...or maybe you never get to that point :confused


For a realistic, rational investor dependent on a nest egg, the feeling you refer to will likely arise only if the nest egg exceeds what is needed by a comfortable safety margin. I say this because determining the sustainability of a nest egg through a long period of withdrawals is an inexact science. Just notice the number of articles on the "safe withdrawal rate" in retirement to appreciate this point. If the Finance Ph.Ds don't agree on the issue (and they don't), it's unlikely the rest of will achieve certaintly on the issue any time soon.

Thus, if most of the online calculators indicate that sustaining an inflation-adjusted withdrawal rate of $40K a year for 30 years requires a $ 1 million nest egg, I'd feel uneasy with $ 1 million, queasy with $1.5 million, and probably feel comfortable with $ 2 million.

There are ways to mitigate the uncertainty, such as by using income annuities, having the ability to generate further income, and having flexibility on the spending side.
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Re: Running out of money

Postby 555 » Wed Feb 06, 2013 10:51 pm

See if your assets could buy an inflation indexed immediate annuity that would give you enough income.
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Re: Running out of money

Postby john94549 » Wed Feb 06, 2013 11:07 pm

I suspect most folks try to calculate their "number" at one point or another (some do it often, to reflect changed conditions).

For example, I had always thought (perhaps wrongly) that I could always assume a floor of 2% on the fixed-income portion of our portfolio. Now that 5-year CDs are routinely paying less*, the "number" I'll need in my ladder has migrated upwards. On the other hand, thanks to Bogleheads, my wife and I became aware of the delayed strategy for collecting Social Security (one files at 62, spousal benefits for the other at FRA, with deferral to 70) which has reduced the need for the fixed-income yield in the retirement budget. And our tax burden (federal and state) has turned out to be much lower than anticipated.

I sort of laugh when I pull out retirement projections I did just five years ago. Not to say folks ought not to do them, as they are essential for discipline. Just don't be all that shocked if your "number" turns out to be subject to a few revisions.

*2% 5-year CDs still are not that hard to find, but the trend is not our friend.
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Re: Running out of money

Postby travellight » Wed Feb 06, 2013 11:30 pm

I think roughly 4 million with no mortgage debt; or any debt at all.
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Re: Running out of money

Postby obgyn65 » Thu Feb 07, 2013 7:20 am

Thank you. Great video. I have also posted it on ER.org, I hope this is ok.

Socrativestor wrote:Larry Swedroe answers the question "How much money do I really need?" in a 5:27 video:
http://www.youtube.com/watch?v=NX0YyxYf85w

While one may disagree about where the threshold is, IMHO I think one almost has to agree that there *is* a threshold for each person and that the appropriate investing strategies for each side of the threshold are different.

(I also think that Larry's most important point in the video is near the end and concerns what in the old days was called "hubris"...).
"The two most important days in someone's life are the day that they are born and the day they discover why." -John Maxwell
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Re: Running out of money

Postby Confused » Thu Feb 07, 2013 10:31 am

travellight wrote:I think roughly 4 million with no mortgage debt; or any debt at all.


That seems extraordinarily high to me. $4,000,000 over 25 years is $160,000 per year (for simplicity's sake, I'm assuming it continues to grow at exactly the same rate as inflation). If you didn't have a mortgage, what would you be spending all that money on?
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Re: Running out of money

Postby desertbandit442 » Thu Feb 07, 2013 10:49 am

For me, it is living on income streams--pension, ss, interest, dividends and the like; without have to touch principal of my "nest egg."
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Re: Running out of money

Postby Abe » Thu Feb 07, 2013 11:28 am

desertbandit442 wrote:For me, it is living on income streams--pension, ss, interest, dividends and the like; without have to touch principal of my "nest egg."


I agree. You can work for money or money can work for you. A lot of people spend their whole lives working for money. Instead of living on 90% of their income, they live on 110%.
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Re: Running out of money

Postby 555 » Thu Feb 07, 2013 11:58 am

desertbandit442 wrote:"For me, it is living on income streams--pension, ss, interest, dividends and the like; without have to touch principal of my "nest egg." "

If you don't need to touch your principal, then you have more than you need.
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Re: Running out of money

Postby obgraham » Thu Feb 07, 2013 12:31 pm

Seems to me you have to decide on just WHY you are accumulating assets. To live in retirement? To leave to your descendants? Not necessarily requiring the same goal.
Years ago, a fellow stated "if I die with more than $100 in my account I will consider that I have mismanaged my financial affairs". Well I don't quite go that far, but I don't think leaving a pile of cash to my kids would be a good thing for them. So I'm using my assets in retirement, as that's why I built them.
For me the only issue is to try to retain enough to support me and my spouse as we age. Of course there is unpredictability there, but I'm pretty sure my cash needs will not rise should I last a long time.
I've never understood the reluctance to touch principal. It's there to be spent, IMHO.
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Re: Running out of money

Postby Abe » Thu Feb 07, 2013 12:38 pm

555 wrote:
desertbandit442 wrote:"For me, it is living on income streams--pension, ss, interest, dividends and the like; without have to touch principal of my "nest egg." "

If you don't need to touch your principal, then you have more than you need.


I understand what you're saying, but how do you know you have more than you need. Before I was exposed to the Boglehead philosophy, I thought that I needed to have enough money so that I would never have to spend the principal, only what the principal produced. Actually, I still feel that way. I do understand the concept of drawing out a percentage (say 4%) each year and increasing it by the rate of inflation, etc. That's okay too, but for me, I had rather have too much than not enough.
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Re: Running out of money

Postby Jay69 » Thu Feb 07, 2013 1:25 pm

I almost hate to admit this.

Wife and I are 43, down loaded our lastest SS statment last month and when we look at that we could darn near live on that amount today + healhcare cost. If we did not still have kids at home it even looks better.

We save as much as we can, about 20%-25%. I worry about running out of cash, more worry that my wife will run out of money. I have no clue where we will end up, 20-25 years seems like a long time out before we start thinking about retirement thus we save as much as we can while trying to ballance living for today.
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Re: Running out of money

Postby EternalOptimist » Thu Feb 07, 2013 1:58 pm

Confused wrote:
travellight wrote:I think roughly 4 million with no mortgage debt; or any debt at all.


That seems extraordinarily high to me. $4,000,000 over 25 years is $160,000 per year (for simplicity's sake, I'm assuming it continues to grow at exactly the same rate as inflation). If you didn't have a mortgage, what would you be spending all that money on?



I agree that this is very high. especially considering the average American has about $125,000 saved for retirement and most people do not end up working their whole life or living out of boxes.
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Re: Running out of money

Postby NYBoglehead » Thu Feb 07, 2013 2:03 pm

obgraham wrote:Seems to me you have to decide on just WHY you are accumulating assets. To live in retirement? To leave to your descendants? Not necessarily requiring the same goal.
Years ago, a fellow stated "if I die with more than $100 in my account I will consider that I have mismanaged my financial affairs". Well I don't quite go that far, but I don't think leaving a pile of cash to my kids would be a good thing for them. So I'm using my assets in retirement, as that's why I built them.
For me the only issue is to try to retain enough to support me and my spouse as we age. Of course there is unpredictability there, but I'm pretty sure my cash needs will not rise should I last a long time.
I've never understood the reluctance to touch principal. It's there to be spent, IMHO.



Haha, I've heard that one before too about the $100. The problem with that of course is we don't always get 24 hours notice before we leave this world to spend whatever is left!
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Re: Running out of money

Postby EternalOptimist » Thu Feb 07, 2013 2:09 pm

NYBoglehead wrote:
obgraham wrote:Seems to me you have to decide on just WHY you are accumulating assets. To live in retirement? To leave to your descendants? Not necessarily requiring the same goal.
Years ago, a fellow stated "if I die with more than $100 in my account I will consider that I have mismanaged my financial affairs". Well I don't quite go that far, but I don't think leaving a pile of cash to my kids would be a good thing for them. So I'm using my assets in retirement, as that's why I built them.
For me the only issue is to try to retain enough to support me and my spouse as we age. Of course there is unpredictability there, but I'm pretty sure my cash needs will not rise should I last a long time.
I've never understood the reluctance to touch principal. It's there to be spent, IMHO.



Haha, I've heard that one before too about the $100. The problem with that of course is we don't always get 24 hours notice before we leave this world to spend whatever is left!


Wonder how many people get to use their last nickel? :twisted:
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Re: Running out of money

Postby Confused » Thu Feb 07, 2013 6:31 pm

EternalOptimist wrote:
NYBoglehead wrote:
obgraham wrote:Seems to me you have to decide on just WHY you are accumulating assets. To live in retirement? To leave to your descendants? Not necessarily requiring the same goal.
Years ago, a fellow stated "if I die with more than $100 in my account I will consider that I have mismanaged my financial affairs". Well I don't quite go that far, but I don't think leaving a pile of cash to my kids would be a good thing for them. So I'm using my assets in retirement, as that's why I built them.
For me the only issue is to try to retain enough to support me and my spouse as we age. Of course there is unpredictability there, but I'm pretty sure my cash needs will not rise should I last a long time.
I've never understood the reluctance to touch principal. It's there to be spent, IMHO.



Haha, I've heard that one before too about the $100. The problem with that of course is we don't always get 24 hours notice before we leave this world to spend whatever is left!


Wonder how many people get to use their last nickel? :twisted:


After college, and before landing a job, I got down to $38 to my name. That's pretty close to bottoming out.
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Re: Running out of money

Postby HomerJ » Thu Feb 07, 2013 9:59 pm

travellight wrote:I think roughly 4 million with no mortgage debt; or any debt at all.


Do you really spend $160,000 a year, not counting your mortgage?
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Re: Running out of money

Postby reggiesimpson » Thu Feb 07, 2013 10:35 pm

EternalOptimist wrote:When do you know that you've accumulated enough assets so that you feel confident that you will never run out of money in your lifetime. Is it a tangible thing like having $1 million, an age, some intangible feelings you have or something else...or maybe you never get to that point :confused

I have enough according to my accountant, adviser and my wife BUT i will always have that nagging question "what if". The concern has been significantly mitigated with the accumulation of more assets over the years and as a result i am glad i went in to overkill during my working years. I have no regrets whatsoever.
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Re: Running out of money

Postby madbrain » Thu Feb 07, 2013 11:25 pm

EternalOptimist wrote:
Confused wrote:
travellight wrote:I think roughly 4 million with no mortgage debt; or any debt at all.


That seems extraordinarily high to me. $4,000,000 over 25 years is $160,000 per year (for simplicity's sake, I'm assuming it continues to grow at exactly the same rate as inflation). If you didn't have a mortgage, what would you be spending all that money on?



I agree that this is very high. especially considering the average American has about $125,000 saved for retirement and most people do not end up working their whole life or living out of boxes.


I am with travellight, it would take several millions. At least $3 million for me. Early retirement may well last more than 25 years for some.
Even with a paid off house, there are still a lot of other expenses than a mortgage payment.

Income taxes are already higher than the mortgage payment, and that's the federal part alone, if we count state tax too, the taxes are by far the #1 expense. Who knows what they will be in retirement, they might go down or they might go up. Hopefully it will be down, but that will depend on the sources of income. We have half of our savings in tax-deferred accounts.

My property taxes + home insurance, which are only going up, are already getting close to my principal + interest on my mortgage given the low current interest rates. Of course we could move to a low-cost area, but that's not the way we want to retire.

Currently, my employer pays for most of my healthcare expenses. But if I stop working and taking early retirement I would have to pick up that cost myself. Even if the house is paid off, those medical costs would be already be half of the mortgage payment today, except that most of them (insurance premiums) would not be tax-deductible unlike mortgage interest. And healthcare expenses will only go up over time. Most likely, in old age, medical costs will be at least as much as principal + interest mortgage payment. For people in low-cost of living areas, I suspect the healthcare cost would actually end up being much higher than mortgage payments.

The main expenses that would for sure disappear in retirement would be contributions towards retirement accounts. If you have any travel plans during retirement, that could make up for those costs too.
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Re: Running out of money

Postby HomerJ » Thu Feb 07, 2013 11:50 pm

When my wife was working, we had a ton of money, saved a lot, and spent semi-freely (for us) without keeping track.

Now that she's retired (at 51), money is a little tighter, and we decided to buy Quicken and keep a budget for a year to see how much we really spend...

Right now (still early in year though), it looks like we spend about $5500 a month without a mortgage. And that includes $1000 a month for a vacation budget. (And we've got a kid at home, who eats a LOT).

So that's $66,000 a year, and that's living pretty well. I plan to work for 12 more years, which will put me at 55, and my wife at 63. The goal is about $2 million, which will give us $80,000 a year, and she will get $20,000 a year from Social Security... Even with inflation, that should cover us pretty well.
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Re: Running out of money

Postby celia » Thu Feb 07, 2013 11:54 pm

The simple answer is to figure out what your living expenses will be (your live style will be different when retired, eg, no commuting, bigger medical expenses) and then live on that amount for 2 years or so to verify that you can actually live on it.

In the meantime, calculate where that money will come from. After subtracting your pension(s), SS, annuities, do you still need more money to cover your expenses? This is where you'll have to touch your assets and make them last for 30-40 years (depending on when you started touching the assets).

For simplicity's sake, do everything in today's costs. Then see if your future pension(s), SS, annuities have cost-of-living adjustments built in. If they don't, you need to plan for pulling more from your assets each year as time goes on.
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Re: Running out of money

Postby travellight » Fri Feb 08, 2013 12:55 am

regarding the 4 million: Ultimately, my number is sort of a gut feeling. But there is some logic behind the gut feeling...

-right now, I am busy working. When I am done working, I want to be busy playing. Playing costs money. When I am older, heck even now, I want to fly first class. I want to stay in nice places and I don't want to pinch pennies like I am now. That is going to be my trade off and reward for being an old(er) lady. Right now, I have relative youth and frugality and moderation. When I give up the youth, I want living well to be the balm.
-I have hopes of living another 50 years.
-I have a kid and likely someday grandkids who I can help with any excess money.
-I like to prepare for the worst. Higher taxes, etc. I want to be set no matter what.
-back when my goal was 2 million, I asked one of my close friends what her "number" goal was and she said 8 million. Granted, I am a single person and they are a couple but there is efficiency in couplehood. Perhaps their shockingly high number made me feel 4 mill might be reasonable. At 4 million, I would not feel set/made though until there is no debt as well.

Yes, I could retire with a lot less. I could retire right now. But my retirement goal is something else..... to satisfy my sense of security and lifestyle wishes. I feel like it is an attainable goal. There is no point in having a goal if it is pie in the sky.
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Re: Running out of money

Postby mephistophles » Fri Feb 08, 2013 12:56 am

There is no magic number to guarantee that one will not run out of money before they die.
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Re: Running out of money

Postby gd » Fri Feb 08, 2013 9:11 am

I review my current spending, lifestyle, likely future lifestyle, assume I'll live longer than I've seen be desirable (95), run calculators like Firecalc, test conservative withdrawal rate estimates (3%), then when I've got a pretty consistent figure, add 50%. I used the same 50% factor when estimating project times as a software engineer, a business notorious for missed deadlines, and pretty much never missed.

Added: and late in the game when my facilities start to decline, I may move most to an annuity and that will determine my remaining lifestyle, for better or worse.
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Re: Running out of money

Postby john94549 » Fri Feb 08, 2013 9:52 am

As I noted above, retirement projections have a tendency to change over time.

For grins, I suggest everyone have a separate file for "assets and projections". In this file, place your annual list of assets and retirement projections. Keep this file in a very safe place. For max humor value, start keeping the file as early in your career as possible. For ease of review in the years ahead, try to settle on a format and stick with it. Hint: for projections, "actual dollars" is much easier than "today's dollars".

At age 65 (or whenever you actually retire), start from the beginning, chronologically, and note the changes.

Don't stop up-dating the file after you actually retire. Make sure your spouse and kids know where it is.
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Re: Running out of money

Postby NoVa Lurker » Fri Feb 08, 2013 10:11 am

travellight wrote:regarding the 4 million: Ultimately, my number is sort of a gut feeling. But there is some logic behind the gut feeling...

-right now, I am busy working. When I am done working, I want to be busy playing. Playing costs money. When I am older, heck even now, I want to fly first class. I want to stay in nice places and I don't want to pinch pennies like I am now. That is going to be my trade off and reward for being an old(er) lady. Right now, I have relative youth and frugality and moderation. When I give up the youth, I want living well to be the balm.
-I have hopes of living another 50 years.
-I have a kid and likely someday grandkids who I can help with any excess money.
-I like to prepare for the worst. Higher taxes, etc. I want to be set no matter what.
-back when my goal was 2 million, I asked one of my close friends what her "number" goal was and she said 8 million. Granted, I am a single person and they are a couple but there is efficiency in couplehood. Perhaps their shockingly high number made me feel 4 mill might be reasonable. At 4 million, I would not feel set/made though until there is no debt as well.

Yes, I could retire with a lot less. I could retire right now. But my retirement goal is something else..... to satisfy my sense of security and lifestyle wishes. I feel like it is an attainable goal. There is no point in having a goal if it is pie in the sky.


When you said $4 million, did you mean for purposes of retiring right now? Age is a big factor! I think $4 million is low if you are, say, 35 years old, want to live well, and (in this hypothetical) would be retiring immediately. $4 million seems very high if the assumption is retiring at 70 and the only goal is not to run out of money personally.

As with Jay69, if my wife and I counted our SS and pensions at 100% of their expected value, then we could plan to retire at 62 and live comfortably with no other savings. In other words, we don't need to save anything for retirement, except as a buffer in case SS/pensions get reduced. Despite this, we save more than we spend. I do think about this when we make financial sacrifices today, and I wonder whether it's worth it. I do agree with travellight that one factor is that you "need" a bit more luxury as you age. Paying for yardwork, housework, and nicer hotels started making sense as soon as we had our first kid, and we've already started doing non-stop flights if they're not _too_ much more expensive.
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Re: Running out of money

Postby NoVa Lurker » Fri Feb 08, 2013 10:19 am

john94549 wrote:As I noted above, retirement projections have a tendency to change over time.

For grins, I suggest everyone have a separate file for "assets and projections". In this file, place your annual list of assets and retirement projections. Keep this file in a very safe place. For max humor value, start keeping the file as early in your career as possible. For ease of review in the years ahead, try to settle on a format and stick with it. Hint: for projections, "actual dollars" is much easier than "today's dollars".

At age 65 (or whenever you actually retire), start from the beginning, chronologically, and note the changes.

Don't stop up-dating the file after you actually retire. Make sure your spouse and kids know where it is.


As you suggest, I save a new "projections" sheet in our Excel retirement document every year. I consider this to be "marking my expectations to market," but I'm not sure how useful it is. Stock market fluctuations make a mockery of the year-to-year planning (i.e., if you apply a "2% real growth" projection to your retirement savings, then your projections will look a whole lot better or worse depending on exactly where the stock market is at when you take the snapshot).
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Re: Running out of money

Postby HomerJ » Fri Feb 08, 2013 11:47 am

travellight wrote:regarding the 4 million: Ultimately, my number is sort of a gut feeling. But there is some logic behind the gut feeling...

-right now, I am busy working. When I am done working, I want to be busy playing. Playing costs money. When I am older, heck even now, I want to fly first class. I want to stay in nice places and I don't want to pinch pennies like I am now.


That's understandable... But here's the trade-off... When you hit $2 million, you're going to probably be able to retire with the exact same lifestyle you have now... And say you're 55 at that point... And you've had your first health problem... a minor one, but it reminds you that your body isn't going to last forever...

And then you'll have to make a choice... Do I retire now and enjoy all that free time doing whatever I want (but yes, flying coach), or do I go to work every morning and penny-pinch for another 10 years to get to $4 million so I can fly first-class and drink champagne in my 70s (assuming you're still alive, and don't have a medical problem that keeps you from flying).
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Re: Running out of money

Postby Woodshark » Fri Feb 08, 2013 7:38 pm

My goal is to accumulate enough to pay our expenses and live the way we do now at a 4% draw with no other income. That said, in a very few years we can retire with a state pension that covers our normal annual expenses without touching our investments. Having enough retirement funds that could, if needed, more than replace and take care of us if the pension would somehow go away. It is a nice safety and my personal "enough to retire" level.
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Re: Running out of money

Postby travellight » Fri Feb 08, 2013 8:39 pm

I was thinking 4 million to be able retire by age 58'ish. That is the age when my son should be done with college at least and I should be free and clear.

I am fortunate in that I really enjoy my work for the most part. I would love to be financially free so I wouldn't have to work but can't really quite envision myself not working. So, it isn't a trade off or sacrifice really to keep on going.... when I retire, my lifestyle will likely be grander than it is right now. I am frugal in a race to get there; just to get there, as soon as I can. I don't mind being frugal, it is not a hardship for me. Really, I think we all have varying degrees of need/threshold to attain the "feeling of security" financially. My needs are high to feel secure. I can just say that at the number I am at right now, I don't have that feeling; and that would seem crazy to some people.
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Re: Running out of money

Postby gkaplan » Fri Feb 08, 2013 8:53 pm

Four million? I'm aiming for a quarter of that.
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Re: Running out of money

Postby jeffyscott » Sat Feb 09, 2013 9:57 am

gkaplan wrote:Four million? I'm aiming for a quarter of that.


Yeah, me too and that's for a couple, we just do not have any desire to live a more lavish lifestyle than we do now. I had an economics teacher, about a hundred years ago, in HS who said the key is reducing your economic wants.

We also have no love for our jobs, it's different for the workaholics, who really don't want to retire or if they do will hate it unless they are constantly active.

Having a pension (even one without any guaranteed increases) certainly helps, but even without that we'd still be at maybe $2 million.

My formula is based on our current gross income less payroll taxes, savings, college tuition, deductions for pensions, insurance, and taxes. This leaves us with other spending of about $29,000 per year for the last 2 years. Add back to that $5000 property tax, $5000 income taxes, $5000 health insurance (w/ PPACA/ObamaCare subsidy), and $2000 car replacement allowance brings it to $46,000. Then I add about a 10% safety factor to get $50,000 as minimum target and set a desired target at 20% above that, $60,000.

I then assume SS at 75% of current law and inflation adjustments at 75%, no increase in pensions, and very low returns. Returns at 1% real or even less still carries us to age 100, while spending $60K per year.
press on, regardless - John C. Bogle
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Re: Running out of money

Postby desertbandit442 » Sat Feb 09, 2013 10:44 am

555 wrote:
desertbandit442 wrote:"For me, it is living on income streams--pension, ss, interest, dividends and the like; without have to touch principal of my "nest egg." "

If you don't need to touch your principal, then you have more than you need.


Yes, that is a true statement. The OP question was about being "confident" about not running out of money and for me, living without touching my investment principal gives me the confidence that I won't run out of money. I know it doesn't guarantee that I won't run out of money due to extreme medical issues, but I can't live my life worrying about every worst possible scenario. I just live retirement on a plan that gives me the confidence that I, or my spouse, won't run out of money for a majority of situations.
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Re: Running out of money

Postby ResNullius » Sat Feb 09, 2013 10:56 am

desertbandit442 wrote:
555 wrote:
desertbandit442 wrote:"For me, it is living on income streams--pension, ss, interest, dividends and the like; without have to touch principal of my "nest egg." "

If you don't need to touch your principal, then you have more than you need.


Yes, that is a true statement. The OP question was about being "confident" about not running out of money and for me, living without touching my investment principal gives me the confidence that I won't run out of money. I know it doesn't guarantee that I won't run out of money due to extreme medical issues, but I can't live my life worrying about every worst possible scenario. I just live retirement on a plan that gives me the confidence that I, or my spouse, won't run out of money for a majority of situations.


Well said.
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Re: Running out of money

Postby dbr » Sat Feb 09, 2013 11:25 am

desertbandit442 wrote:Yes, that is a true statement. The OP question was about being "confident" about not running out of money and for me, living without touching my investment principal gives me the confidence that I won't run out of money. I know it doesn't guarantee that I won't run out of money due to extreme medical issues, but I can't live my life worrying about every worst possible scenario. I just live retirement on a plan that gives me the confidence that I, or my spouse, won't run out of money for a majority of situations.


By definition you won't run out of money, but you may run out of income. That is especially true if you don't account for the dwindling purchasing power of your income streams. Also, when talking of not taking principal, one should be sure that the value of the principal is growing with inflation or one is in fact running down their money. A portfolio that certainly increases in nominal value to pace inflation and that still delivers a certain inflation increased income stream needs to be very large relative to the income delivered.
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Re: Running out of money

Postby Dandy » Sat Feb 09, 2013 1:39 pm

I think Wm Bernstein had a good approach. I believe for age 65 it was having 20 to 25 years of residual expenses in safe investments (e.g. short term bond funds, CDs etc). Residual expenses was defined the extra money needed to meet living expenses after any pension, social securtiy or annuities. You might have to add a year for every year under 65.

The problem for those not in or close to retirement it is difficult to get a good read on what your residual expenses might be at retirement.
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Re: Running out of money

Postby travellight » Sun Feb 10, 2013 1:49 am

interestingly, I read two articles today that made me feel like not such an outlier.

One article had some metrics for what amount you should amass for retirement based on your salary (essentially, what you should be able to do), and I was right at the median for that.

Another was a survey and it found that over 30% said they felt they needed 1-2 million to retire and an equal number felt they needed more than 2 million.
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Re: Running out of money

Postby celia » Sun Feb 10, 2013 4:35 am

jeffyscott wrote:
gkaplan wrote:Four million? I'm aiming for a quarter of that.


Yeah, me too and that's for a couple, we just do not have any desire to live a more lavish lifestyle than we do now. I had an economics teacher, about a hundred years ago, in HS who said the key is reducing your economic wants.

Jeffy, I don't see why you need that much at your age. Since you are over 100, you have made it! Whatever you have been doing, has worked. :beer
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Re: Running out of money

Postby The Wizard » Sun Feb 10, 2013 7:20 am

travellight wrote:interestingly, I read two articles today that made me feel like not such an outlier.

One article had some metrics for what amount you should amass for retirement based on your salary (essentially, what you should be able to do), and I was right at the median for that.

Another was a survey and it found that over 30% said they felt they needed 1-2 million to retire and an equal number felt they needed more than 2 million.

Articles like that need to be normalized for the AGE of the respondents. I'm 63 so how much do I "need" to retire later this year?
But what if I was 43 and retiring either this year (early!) or in 20 years? The numbers vary a bit.
Also, it's nice to have 50% more than you "need" just for a fun cushion...
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