Do we have enough to retire?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Do we have enough to retire?

Post by Mintee »

We are getting ready to retire, and I'm worried about whether we have enough saved to do so. I've read many of your helpful postings, I've used the retirement calculators, read books, talked with financial planners, etc.-- but the answers are frequently different. No one can predict the future, but if we are not financially ready to retire, we should continue to work. I'd love your counsel.

If we need about $70K after SS (and have no other income)and expect a 35-year retirement, what balance, today, would support that, given a 50/50 balance of stocks and bonds? I know about the 4% safe withdrawal theory and the issues with the safe withdrawal theories, but so many of you are living successfully in retirement, so you are the experts. We can try to live on less and will try, of course, but what do you think we should have before we take the leap?

Thank you so much for any guidance you can provide.
livesoft
Posts: 75224
Joined: Thu Mar 01, 2007 8:00 pm

Re: Do we have enough to retire?

Post by livesoft »

No one knows for sure. All answers are debatable. How much of the $70K is for essential, non-discretionary expenses? How much is for fun discretionary stuff?

By asking this question, you are just going to add more confusing data points to the one's you already have. That said, have you read Jim C. Otar's "Unveiling the Retirement Myth" yet?

And a specific answer: I suggest you have $2 million.
Wiki This signature message sponsored by sscritic: Learn to fish.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you, Livesoft. A good portion is for medical expenses.

I tend to estimate expenses will be high and returns will be low (and varied), so I don't expect we will necessarily need everything I've budgeted, but I'd rather be pleasantly surprised than on the street.

I appreciate your perspective.
User avatar
FrugalInvestor
Posts: 5703
Joined: Fri Nov 07, 2008 12:20 am

Re: Do we have enough to retire?

Post by FrugalInvestor »

I would want a minimum of $2.5 million. Plan to live on 3% and SS will be a bonus.

I'm assuming that with a 35 year time frame you are planning to retire before SS kicks in. If this is the case medical expenses should be a concern but the "riddle, wrapped in a mystery, inside an enigma" is how to deal with long-term care.

Beyond that, be prepared to adjust your budget to the unknowable and unexpected. Leaving room for budget flexibility is key.

Enjoy!
Have a plan, stay the course and simplify. Then ignore the noise!
User avatar
Dinero
Posts: 307
Joined: Thu Jul 19, 2007 9:34 am

Re: Do we have enough to retire?

Post by Dinero »

Is there a mortgage payment in that $70K + SS? If so, it might be prudent to pay that off and reduce the amount your portfolio needs to generate before retiring.
livesoft
Posts: 75224
Joined: Thu Mar 01, 2007 8:00 pm

Re: Do we have enough to retire?

Post by livesoft »

Also, I would not use the value of my retirement portfolio at the current time as a reason to pull the plug. The reason is that we are at essentially a 5 year high in the market. Yes, one has to be at such a point if the market is going to go higher, but I would not want to use the highwater mark like today. Instead, I might use my portfolio value at the previous low for the past 12 months as a metric. Unfortunately, that might lead to a "just one more year" syndrome which would also not be good.
Wiki This signature message sponsored by sscritic: Learn to fish.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

This is all so helpful. Thank goodness, we have no debt, so no mortgage to pay down. Predicting medical expenses will be a challenge, but that is a challenge for everyone.

Thank you very much for your guidance. Would you experience indicate that a portfolio of $2-2.5 million might support a $70K withdrawal over 35 years?
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Do we have enough to retire?

Post by The Wizard »

Yes, I think the $2.5M number is on the mark.
But we need to under stand how much will be coming from SS and when.
Will you need to bridge the gap to start of SS for five yrs or more?
And do you have a spreadsheet categorizing all your expenses as Livesoft suggested?
Attempted new signature...
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Do we have enough to retire?

Post by The Wizard »

Use firecalc to see how that 35 year run plays out with different starting amounts...
Attempted new signature...
User avatar
bobcat2
Posts: 5496
Joined: Tue Feb 20, 2007 3:27 pm
Location: just barely Outside the Beltway

Re: Do we have enough to retire?

Post by bobcat2 »

If we need about $70K after SS (and have no other income)and expect a 35-year retirement, what balance, today, would support that, given a 50/50 balance of stocks and bonds?
There is not enough information provided to give reasonable advice.

For example -

How did you arrive at the $70k?

At what ages are you retiring? Are you taking SS at retirement or are you delaying taking SS to a later age? Have you thought about when to take SS? It makes a difference. Often it makes a very significant difference. Do you have medigap coverage and/or LTCi?

It is unreasonable to expect a 35 year retirement. The reality is that you don't know how long you will live. You have to take the uncertainty of how long you will live into account when planning for retirement. Thus you have to decide how much weight to give the high probability you will both be alive one year from now vs. how much weight to give to the extremely low probability you will both be alive in 35 years. (Unless you are retiring at very tender ages. :wink:)

Why do you start out assuming 50% stocks and 50% bonds? Shouldn't that ratio be determined by trading off your retirement income goals vs the risks you are willing to take to reach those goals, i.e. shouldn't that ratio be determined later on in the retirement planning process and not simply an arbitrary rule at the beginning of your planning?

BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you all.

I do have a spreadsheet categorizing all expenses, and I've reviewed it frequently. I am 59 and my husband is 71, so I've tried to plan until my age 95 (understanding that the more I worry about retirement, the less likely I will live to be 95). I would take SS at 62, and my husband is already receiving it (though he continues to work). As I learn more from all of you, I will have a better idea how to best balance our portfolio, but we are about 50/50 now.

I have used firecalc. Is this a calculator you particularly like?
ResNullius
Posts: 2091
Joined: Wed Oct 24, 2007 3:22 pm

Re: Do we have enough to retire?

Post by ResNullius »

Keep in mind that the data supporting the 4% withdrawal rate also shows that in the vast majority of time periods a person would have a large amount left over at death. Nobody can predict the future, either way it goes...higher than anticipated or lower than anticipated. I think anywhere between $2M and $2.5M should more than cover things under 95% or more of the various possibilities. Also keep in mind that should there be a total collapse of the world economy, then we'll all be sucking air regardless of how large our portfolio. Good luck.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you, ResNullius. You are right, of course. I appreciate your perspective and experience.
scone
Posts: 1457
Joined: Wed Jul 11, 2012 4:46 pm

Re: Do we have enough to retire?

Post by scone »

If you haven't tried Firecalc (it's on the web), I'd recommend it. The best retirement calculator I've ever found.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore
User avatar
steadyeddy
Posts: 763
Joined: Tue Mar 31, 2009 5:01 pm
Location: The Alps of the Midwest

Re: Do we have enough to retire?

Post by steadyeddy »

ResNullius wrote:Keep in mind that the data supporting the 4% withdrawal rate also shows that in the vast majority of time periods a person would have a large amount left over at death. Nobody can predict the future, either way it goes...higher than anticipated or lower than anticipated. I think anywhere between $2M and $2.5M should more than cover things under 95% or more of the various possibilities. Also keep in mind that should there be a total collapse of the world economy, then we'll all be sucking air regardless of how large our portfolio. Good luck.

+1

In my opinion, the 4% rule is already sufficiently conservative. If your home is paid for and medicare holds up then your biggest inflation worries are food and entertainment...relatively easy areas to cut back if the sky is falling. My firm belief is that a small dose of flexibility in your standard of living, based on market conditions, is more important than the precise size of your portfolio on the day you quit working.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you, Scone, for the additional recommendation of firecalc. If you have found it helpful in your own situation, that's the kind of feedback that is invaluable.

And thank you, Steadyeddy, for your perspective on the 4% rule. An advisor swears by it, but I've read enough on this board and others to make me wonder. If it's working for you, that's helpful counsel.

I really appreciate the help.
User avatar
LadyGeek
Site Admin
Posts: 70104
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Do we have enough to retire?

Post by LadyGeek »

Welcome! We have an entire section of the wiki that addresses your questions. Take your time and start here: Retirement spending
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you, LadyGeek. I will continue to read this valuable information.

In addition, I'm interested in the experiences of those who have retired or about to retire, even if their circumstances are different. This board provides such a gift in that regard, i.e., adding real experience to the very good information provided.

Thanks very much.
covertfantom
Posts: 224
Joined: Thu Feb 02, 2012 7:42 pm

Re: Do we have enough to retire?

Post by covertfantom »

62 seems early to start collecting social security if you are planning to live to 95. I would suggest holding off as long as you can to maximize what you can squeeze out of the system.
User avatar
FrugalInvestor
Posts: 5703
Joined: Fri Nov 07, 2008 12:20 am

Re: Do we have enough to retire?

Post by FrugalInvestor »

Mintee wrote:Thank you, LadyGeek. I will continue to read this valuable information.

In addition, I'm interested in the experiences of those who have retired or about to retire, even if their circumstances are different. This board provides such a gift in that regard, i.e., adding real experience to the very good information provided.

Thanks very much.
I think it generally splits into two camps; (1) Those who have or find hobbies and other diversions to keep themselves stimulated and enjoy retirement and, (2) those who miss work and the sense of accomplishment and companionship it offers and are bored to tears without it (and often go back).

I am in camp #1. For me the purpose of work was always to eventually stop working. I had a mental list of things I'd like to do in retirement and as I accomplish one I seem to add two more. :D
Have a plan, stay the course and simplify. Then ignore the noise!
User avatar
midareff
Posts: 7417
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Do we have enough to retire?

Post by midareff »

livesoft wrote:No one knows for sure. All answers are debatable. How much of the $70K is for essential, non-discretionary expenses? How much is for fun discretionary stuff?

By asking this question, you are just going to add more confusing data points to the one's you already have. That said, have you read Jim C. Otar's "Unveiling the Retirement Myth" yet?

And a specific answer: I suggest you have $2 million.
+1 On reading Otar's book. From memory I believe his research indicates 25 to 31 times needed income invested for a 30 year retirement and more would be required for 35 years. If memory serves Otar's work would have a range of roughly $1.75 to $2.2M for a $70K annual withdrawal. I also remember Otar leaned to the higher side numbers for US markets as he felt the Canadian market was more closely tied to materials prices producing a return that was slightly more intune with inflation. Just my recollection, but the book is highly recommended.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you very much for the additional recommendations regarding SS, retirement activities and the Otar book. I will look for the book and read it.

I appreciate the guidance very much.
hoops777
Posts: 3462
Joined: Sun Apr 10, 2011 12:23 pm

Re: Do we have enough to retire?

Post by hoops777 »

You of course know your living expenses but 70k plus SS seems very high wih no debt or mortgage unless you have some extraordinary expenses. :moneybag
K.I.S.S........so easy to say so difficult to do.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you, Hoops. I have budgeted a considerable sum for health care (premiums, expenses). I hope we need/spend much less. I appreciate the question.
User avatar
midareff
Posts: 7417
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Do we have enough to retire?

Post by midareff »

Mintee..... all accolades for Firecalc acknowledged, Fidelity has the best retirement planner/calculator I've encountered. It allows for starting and ending dates for expenses such as financed future car payments, additionl medical expenses coming online in xyz month and year, ss starting at a later date, etc. Takes some digging in their tool menu to get to it and I think you will have to register (free) for a logon ID/password at their site, but IMHO well worth the potentially couple of hours it may take to get through it thoroughly understanding it and what you are entering.

I retired April 12th this year and the psychology of "pulling that cord" was real, even after doing the math a couple of thousand times from every possible direction. It's a huge step.... I started my embracement of Bogledom with a Bill Bernstein book about asset allocation maybe a decade ago. One book let to another, and another. ... and to Ferri, Schultheis, Mr. B, etc. I would have found this board and Boglehead way a lot earlier, I would be several years into retirement by now if I had. Besides Otar, a book by Easterling ... Unexpected Returns is the title.... is also highly recommended. There are many excellent works referred to here on the board regarding the accumulation phase but much less on the distribution (decumulation) stage, bucket methods, etc. It is well worth the twenty something dollars it costs at Amazon IMHO.

Everything you heard about the joys of retired life are true.
chaika
Posts: 90
Joined: Sat Nov 10, 2007 2:53 pm
Location: Chapel Hill

Re: Do we have enough to retire?

Post by chaika »

Don't forget about spousal retirement SS. If you don't really need your own SS before you reach full retirement age (65 or so), when you reach full retirement age you can take SS payments on the basis of your husband, and let your own continue to grow until you are 71, then take yours at the full amount. I think you get about half of your spouse's SS. I am assuming your full amount will be larger than half your spouse's.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you for the reassurance, Midareff. I've used a Fidelity calculator, but maybe not the one you are referencing. I will look at the Fidelity site, again. Based on the good guidance I've received here, I also used the Otar calculator.

I will look into the Easterling book. Thank you so much for the recommendation.

So many people don't have jobs or aren't able to decide when to leave the workforce--so we are lucky. All choices have risks, but I like making informed risks. Your thoughts are reassuring.

Chalka, if I don't need the SS at 62, this is a good suggestion. The challenge for us is our 12-year age difference. I'm afraid that, if I wait too long, we won't have SS at the same time for long. But I will look into this. Thank you for the suggestion.
bb
Posts: 326
Joined: Wed Apr 25, 2007 10:04 pm

Re: Do we have enough to retire?

Post by bb »

http://assetbuilder.com/blogs/scott_bur ... worth.aspx
Somehow, it doesn’t seem sensible to be 95 percent prepared for something you only have an18 percent chance of experiencing. Honk if you feel the same way
Scott Burns seems to present a somewhat balanced view of saving and retirement.
User avatar
Watty
Posts: 21881
Joined: Wed Oct 10, 2007 3:55 pm

Re: Do we have enough to retire?

Post by Watty »

ResNullius wrote:Keep in mind that the data supporting the 4% withdrawal rate also shows that in the vast majority of time periods a person would have a large amount left over at death. Nobody can predict the future, either way it goes...higher than anticipated or lower than anticipated.

One thing to consider is that at some point a single premium immediate annuity could be worth considering. (This is the only type of annuity that is a good choice) This would allow you spend more without the risk of running out of money. Some people choose to keep the money invested until one spouse survives the other and they buy an immediate annuity then. 59 is way too young to buy one since there is such a long time for inflation to cause problems even if it is just a few percent a year. I would likely not buy one for myself until I was in my 70's.

You can also buy several different immediate annunities from different compnaies, with different options, at different ages for diversification.
Topic Author
Mintee
Posts: 90
Joined: Sun Aug 12, 2012 2:23 pm

Re: Do we have enough to retire?

Post by Mintee »

Thank you, Watty and bb.
Post Reply