For retirement at 55 what is a good multiplier?

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aristotelian
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Re: For retirement at 55 what is a good multiplier?

Post by aristotelian » Mon Jun 04, 2018 11:03 am

I would target 25X. A lot can happen between now and 55, so reevaluate every few years. Among other things, you don't know what health care or SS will look like 25 years from now.

Horsefly
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Re: For retirement at 55 what is a good multiplier?

Post by Horsefly » Mon Jun 04, 2018 11:19 am

We retired at age 55 a little over 5 years ago (1-May-2013). I had targeted 30x and was pretty close to that in my savings, but I have the benefit of having retiree medical insurance from my former employer, and about $30K in monthly non-COLA pension checks. As a result, we've spent less than 3% every year, except for 2015 when we paid off our mortgage. As a result, we are building up more of a buffer. Our tax-advantaged assets have grown 60% since we retired (we're not drawing on it at all), and our post-tax investment account is nearly exactly what it was when we retired, even though we use it every month for some of our expenses and for estimated tax payments.

Someone earlier in the thread mentioned how time goes by fast, and that the period from age 31 to age 55 would go faster than expected. It reminds me of a phrase a friend of mine uses:
Life is like a roll of toilet paper - The closer you get to the end, the faster it goes!

drg02b
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Re: For retirement at 55 what is a good multiplier?

Post by drg02b » Mon Jun 04, 2018 11:42 am

Horsefly wrote:
Mon Jun 04, 2018 11:19 am
We retired at age 55 a little over 5 years ago (1-May-2013). I had targeted 30x and was pretty close to that in my savings, but I have the benefit of having retiree medical insurance from my former employer, and about $30K in monthly non-COLA pension checks. As a result, we've spent less than 3% every year, except for 2015 when we paid off our mortgage. As a result, we are building up more of a buffer. Our tax-advantaged assets have grown 60% since we retired (we're not drawing on it at all), and our post-tax investment account is nearly exactly what it was when we retired, even though we use it every month for some of our expenses and for estimated tax payments.

Someone earlier in the thread mentioned how time goes by fast, and that the period from age 31 to age 55 would go faster than expected. It reminds me of a phrase a friend of mine uses:
Life is like a roll of toilet paper - The closer you get to the end, the faster it goes!
I LOVE that quote.... appears to be from Andy Rooney.

Horsefly
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Location: Colorado, mostly

Re: For retirement at 55 what is a good multiplier?

Post by Horsefly » Mon Jun 04, 2018 11:46 am

accidental re-post deleted.
Last edited by Horsefly on Mon Jun 04, 2018 5:03 pm, edited 1 time in total.

Spirit Rider
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Re: For retirement at 55 what is a good multiplier?

Post by Spirit Rider » Mon Jun 04, 2018 12:12 pm

RAchip wrote:
Mon Mar 05, 2018 9:40 pm
GratefulinNC wrote:
Mon Mar 05, 2018 2:55 pm
Maybe y'all are overthinking this.

Just do a 4% per year SWR. You Will be fine of at least the next 30 years.

After that time:
(A) Most likely you either will be dead; or
(B) so out of your mind as not to care.

The fact is most people don't live as long as they think they will.
+1
-2 = 0. No and no.

You do understand that SWR is an acronym for Safe Withdrawal Rate The 4% SWR is for people retiring at 65 and would have a far greater risk of failure for someone 55. The fact is that while the average mortality rates are going down, they are doing so because of specific groups.

The survival bias in mortality tables is increasing. There is a one (1) in five (5) chance that one member of a age 65 couple will live to 95.

truenorth418
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Re: For retirement at 55 what is a good multiplier?

Post by truenorth418 » Mon Jun 04, 2018 12:49 pm

I'm 54, already retired.

Beginning next year at age 55 I intend to spend 3% annually going forward - so that's 33X annual spending.

I have a small pension available to me at age 65, and SS, but I consider both of those "reinforcements" for now. I'll consider how to work them into the plan when I get a little closer.

(EDIT: As for health insurance, I'll just have to include it in my annual spending as best I can. Part of my plan is to minimize extraneous spending such as state and local income taxes i.e. by moving out of NYC to a lower tax state this year).

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Reb Tevye
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Re: For retirement at 55 what is a good multiplier?

Post by Reb Tevye » Mon Jun 04, 2018 1:34 pm

GratefulinNC wrote:
Mon Mar 05, 2018 2:55 pm
Maybe y'all are overthinking this.

Just do a 4% per year SWR. You Will be fine of at least the next 30 years.

After that time:
(A) Most likely you either will be dead; or
(B) so out of your mind as not to care.

The fact is most people don't live as long as they think they will.
We all approach this based on seeing some others various life experiences.
For sure, there are people who have a couple unfortunate turns later in life and run out of money in their 80’s and lose their house.
For sure, there are people who loose their physical or mental health and have a decade of expensive care. And then either become a financial burden to others, or get moved to deplorable conditions.
I don’t believe that a responsible person can be cavelier after seeing those outcomes first hand.

Why wouldn’t a 31 year old on a solid trajectory *aim* to safely avoid those truly bad outcomes?

And isn’t it true that for *average* 55 year old couple today there is both a 20% chance one will live past 90, and a 20% chance one will die by age 70? Which translates to me as, “hurry up and retire/semi-retire with >35 years of money (pension, savings, SS)”
"So, what would have been so terrible if I had a small fortune?"

MrPotatoHead
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Re: For retirement at 55 what is a good multiplier?

Post by MrPotatoHead » Mon Jun 04, 2018 5:18 pm

Pont one: So think this one statement says a lot.

Thanks for the replies. I know the mantra on here is save as much as you are able, but if we tried we could save +55% of our earnings but that just doesn't seem to be a "healthy" thing for a 30 year old family of 4. I don't want to forgo joy now unless it is necessary to achieve my goals.

It appears you value spending and garner some sort of innate pleasure by the experiences your income affords. So for you gaining an understanding on what those type of experiences may cost you in retirement above your base expenses will likely be key. And there is no criticism or judgment in that statement. You need to understand what that may or may not mean for your retirement plans For example you may be all traveled and experienced out by the time you are 50 indicating a more modest lifestyle in retirement, tus lowering the threshold. Then again you may just be getting started. So it may impact your budget a great deal. So it may be a case where you could cut back on lifestyle and retire early but it may not be the retirement you want. Hence the need to understand.

Point 2: I am not sure what calculator I had access to and if it was really a Fidelity calculator or something furnished with my retirement plan, but I did learn if you are looking at early retirement you need to actually read the fine print in regard to what the calculator is doing. One of them I used made the assumption that retirement was to last 30 years and a zero balance in year 31 was okay. Only it did not give you an ending balance or tell you overtly they were using a 30 year time frame. There was just a hurrah message that I looked good to retire based on my current assets and desired age to retire. I had to do some digging to find out how to tweak the calculator to look at a 40 years plus span of time, which changed the results and the recommended asset allocation.

Point 3; Medical technology and treatments will likely be radically different as likely will SS benefits. If I were you, I would factor in the potential for a much longer healthy life for one of you.

In the end, I would target 40X less the value of your pension (if you think you will get it, not sure if it govie or otherwise, but you will still need to make a call on SS). That implies a 2.5% withdraw rate. Given you or your spouse may be a centenarian, it seems reasonable. If you don't get there by age 55 you can always reevaluate and shift to a lower multiple.

CnC
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Re: For retirement at 55 what is a good multiplier?

Post by CnC » Mon Jun 04, 2018 10:41 pm

Wow this is one of my first threads. It looks like someone stumbled upon it.

Just an update to those interested.

Right now my plan is to be FI by the time I hit 25x expenses without subtracting my pension and social security. This will be anywhere from 45 (typical market returns) to 52 (50% typical market returns.) With longer working timeframes reserved for job loss or other big financial failures.

If and when I do hit 25x I then work ±1 more year just to make sure it doesn't crash during my first year of retirement.

Then depending on my age I will plan to retire within the year.

This all is shooting in the dark I now realize but by disregarding my sizable pension and working couples social security and still trying to the 25x mark I should cover my bases since pension + SS combined should nearly match our yearly expenses.

This will allow me to do sizable Roth conversions my first few years of retirement.

smitcat
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Re: For retirement at 55 what is a good multiplier?

Post by smitcat » Tue Jun 05, 2018 7:04 am

MrPotatoHead wrote:
Mon Jun 04, 2018 5:18 pm
Pont one: So think this one statement says a lot.

Thanks for the replies. I know the mantra on here is save as much as you are able, but if we tried we could save +55% of our earnings but that just doesn't seem to be a "healthy" thing for a 30 year old family of 4. I don't want to forgo joy now unless it is necessary to achieve my goals.

It appears you value spending and garner some sort of innate pleasure by the experiences your income affords. So for you gaining an understanding on what those type of experiences may cost you in retirement above your base expenses will likely be key. And there is no criticism or judgment in that statement. You need to understand what that may or may not mean for your retirement plans For example you may be all traveled and experienced out by the time you are 50 indicating a more modest lifestyle in retirement, tus lowering the threshold. Then again you may just be getting started. So it may impact your budget a great deal. So it may be a case where you could cut back on lifestyle and retire early but it may not be the retirement you want. Hence the need to understand.

Point 2: I am not sure what calculator I had access to and if it was really a Fidelity calculator or something furnished with my retirement plan, but I did learn if you are looking at early retirement you need to actually read the fine print in regard to what the calculator is doing. One of them I used made the assumption that retirement was to last 30 years and a zero balance in year 31 was okay. Only it did not give you an ending balance or tell you overtly they were using a 30 year time frame. There was just a hurrah message that I looked good to retire based on my current assets and desired age to retire. I had to do some digging to find out how to tweak the calculator to look at a 40 years plus span of time, which changed the results and the recommended asset allocation.

Point 3; Medical technology and treatments will likely be radically different as likely will SS benefits. If I were you, I would factor in the potential for a much longer healthy life for one of you.

In the end, I would target 40X less the value of your pension (if you think you will get it, not sure if it govie or otherwise, but you will still need to make a call on SS). That implies a 2.5% withdraw rate. Given you or your spouse may be a centenarian, it seems reasonable. If you don't get there by age 55 you can always reevaluate and shift to a lower multiple.
"That implies a 2.5% withdraw rate. Given you or your spouse may be a centenarian, it seems reasonable"
The natural extension to looking at a % that is this conservative is to then go to 2% or maybe 1.5% - I would say the thought process that drives the decisions really has no boundaries.

MrPotatoHead
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Re: For retirement at 55 what is a good multiplier?

Post by MrPotatoHead » Tue Jun 05, 2018 9:06 am

smitcat wrote:
Tue Jun 05, 2018 7:04 am
The natural extension to looking at a % that is this conservative is to then go to 2% or maybe 1.5% - I would say the thought process that drives the decisions really has no boundaries.
I have targeted 1.4 to 1.6% sans SS in order to error on the conservative side and also for legacy reasons.

jalbert
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Re: For retirement at 55 what is a good multiplier?

Post by jalbert » Tue Jun 05, 2018 9:22 am

You could also get an annuity quote every year for age 55 to estimate what you would need at age 55 in real terms based on dollar value at time of quote.
Index fund investor since 1987.

Admiral
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Re: For retirement at 55 what is a good multiplier?

Post by Admiral » Tue Jun 05, 2018 9:25 am

CnC wrote:
Thu Jul 06, 2017 12:48 pm
Thanks for the replies. I know the mantra on here is save as much as you are able, but if we tried we could save +55% of our earnings but that just doesn't seem to be a "healthy" thing for a 30 year old family of 4. I don't want to forgo joy now unless it is necessary to achieve my goals.

I currently have a pension worth $1600 a month if I quit today and 5100 a month if I stay till 55 DW has one that should be around 1800 if she stays at her current job till 55.

If we do retire at 55 we should be receiving around 2/3 of our current expenses adjusted for inflation covered by pensions. So I feel that we are going to end up pretty far on the plus side if everything works out.

Of course us keeping our jobs will be a major factor in planning for retirement, if one or both of us lose our jobs and have to pick up a new one I would like to haveva chance at keeping ahold of the age 55 retirement goal.

That's what the expense multiplier is for. We currently have between 6 and 7x our yearly expenses saved. If we need 25x we will dedicate to saving enough to hit that if we need 45x we will 'try' to dedicate to saving enough to hit that.


We have always been conservative, no debt own our home and our vehicles outright and we likely will not drastically change our lifestyle. But there is no reason to put an additional $5,000 in our brokerage account rather than spend it on a family vacation if it is not needed.
You are basing your calculations on a pension that you have not yet earned (the $5100 is not vested). If your job changes, the entire calculation is moot. Most people do not keep the same job for decades. If you were 10 years from this pension...then OK, maybe. But you are too far from this amount being vested for it to have any affect on your savings (or at least it shouldn't). In other words, are you going to save LESS because you think/hope you will have this money? That would be ill advised in my view.

Just keep saving as much as you can and you'll be fine. Better to have too much than too little. Put some in Roth and then use it for education if you need to. Life is full of surprises.

My $.02.

smitcat
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Re: For retirement at 55 what is a good multiplier?

Post by smitcat » Tue Jun 05, 2018 9:31 am

MrPotatoHead wrote:
Tue Jun 05, 2018 9:06 am
smitcat wrote:
Tue Jun 05, 2018 7:04 am
The natural extension to looking at a % that is this conservative is to then go to 2% or maybe 1.5% - I would say the thought process that drives the decisions really has no boundaries.
I have targeted 1.4 to 1.6% sans SS in order to error on the conservative side and also for legacy reasons.
Ahh - I think that your legacy reasons may be like ours in some way. That and our tendency to be conservative leads us to a lower % as well as you.
But.... that is a different goal/answer than just a retirement plan alone and we are examples of that same conservative 'creep'.

CnC
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Re: For retirement at 55 what is a good multiplier?

Post by CnC » Tue Jun 05, 2018 11:30 am

Admiral wrote:
Tue Jun 05, 2018 9:25 am
CnC wrote:
Thu Jul 06, 2017 12:48 pm
Thanks for the replies. I know the mantra on here is save as much as you are able, but if we tried we could save +55% of our earnings but that just doesn't seem to be a "healthy" thing for a 30 year old family of 4. I don't want to forgo joy now unless it is necessary to achieve my goals.

I currently have a pension worth $1600 a month if I quit today and 5100 a month if I stay till 55 DW has one that should be around 1800 if she stays at her current job till 55.

If we do retire at 55 we should be receiving around 2/3 of our current expenses adjusted for inflation covered by pensions. So I feel that we are going to end up pretty far on the plus side if everything works out.

Of course us keeping our jobs will be a major factor in planning for retirement, if one or both of us lose our jobs and have to pick up a new one I would like to haveva chance at keeping ahold of the age 55 retirement goal.

That's what the expense multiplier is for. We currently have between 6 and 7x our yearly expenses saved. If we need 25x we will dedicate to saving enough to hit that if we need 45x we will 'try' to dedicate to saving enough to hit that.


We have always been conservative, no debt own our home and our vehicles outright and we likely will not drastically change our lifestyle. But there is no reason to put an additional $5,000 in our brokerage account rather than spend it on a family vacation if it is not needed.
You are basing your calculations on a pension that you have not yet earned (the $5100 is not vested). If your job changes, the entire calculation is moot. Most people do not keep the same job for decades. If you were 10 years from this pension...then OK, maybe. But you are too far from this amount being vested for it to have any affect on your savings (or at least it shouldn't). In other words, are you going to save LESS because you think/hope you will have this money? That would be ill advised in my view.

Just keep saving as much as you can and you'll be fine. Better to have too much than too little. Put some in Roth and then use it for education if you need to. Life is full of surprises.

My $.02.
5100 is not vested but ±2k is vested and guaranteed by law when I turn 55 even if I quit this afternoon.

Most people do not keep the same job for decades that is true, but considering I have been at my current job for a decade already and just took a promotion that is more secure than my previous position I'm fairly confident that if I want to stay here I can.

I am saving less than possible because by my current calculation I should hit 25x expenses anywhere between 45 and 52. Attempting to get to 30x my experiences by 45 for early retirement without a pension would take actual sacrifices. I simply have not seen any reason to make those.

If my pension is not there for whatever reason I just won't retire between 45 and 52. I will retire between 55 and 60 with +35x expenses instead of 25x.

You simply don't retire 2 decades early if things go wrong.

Admiral
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Re: For retirement at 55 what is a good multiplier?

Post by Admiral » Tue Jun 05, 2018 3:06 pm

CnC wrote:
Tue Jun 05, 2018 11:30 am
Admiral wrote:
Tue Jun 05, 2018 9:25 am
CnC wrote:
Thu Jul 06, 2017 12:48 pm
Thanks for the replies. I know the mantra on here is save as much as you are able, but if we tried we could save +55% of our earnings but that just doesn't seem to be a "healthy" thing for a 30 year old family of 4. I don't want to forgo joy now unless it is necessary to achieve my goals.

I currently have a pension worth $1600 a month if I quit today and 5100 a month if I stay till 55 DW has one that should be around 1800 if she stays at her current job till 55.

If we do retire at 55 we should be receiving around 2/3 of our current expenses adjusted for inflation covered by pensions. So I feel that we are going to end up pretty far on the plus side if everything works out.

Of course us keeping our jobs will be a major factor in planning for retirement, if one or both of us lose our jobs and have to pick up a new one I would like to haveva chance at keeping ahold of the age 55 retirement goal.

That's what the expense multiplier is for. We currently have between 6 and 7x our yearly expenses saved. If we need 25x we will dedicate to saving enough to hit that if we need 45x we will 'try' to dedicate to saving enough to hit that.


We have always been conservative, no debt own our home and our vehicles outright and we likely will not drastically change our lifestyle. But there is no reason to put an additional $5,000 in our brokerage account rather than spend it on a family vacation if it is not needed.
You are basing your calculations on a pension that you have not yet earned (the $5100 is not vested). If your job changes, the entire calculation is moot. Most people do not keep the same job for decades. If you were 10 years from this pension...then OK, maybe. But you are too far from this amount being vested for it to have any affect on your savings (or at least it shouldn't). In other words, are you going to save LESS because you think/hope you will have this money? That would be ill advised in my view.

Just keep saving as much as you can and you'll be fine. Better to have too much than too little. Put some in Roth and then use it for education if you need to. Life is full of surprises.

My $.02.
5100 is not vested but ±2k is vested and guaranteed by law when I turn 55 even if I quit this afternoon.

Most people do not keep the same job for decades that is true, but considering I have been at my current job for a decade already and just took a promotion that is more secure than my previous position I'm fairly confident that if I want to stay here I can.

I am saving less than possible because by my current calculation I should hit 25x expenses anywhere between 45 and 52. Attempting to get to 30x my experiences by 45 for early retirement without a pension would take actual sacrifices. I simply have not seen any reason to make those.

If my pension is not there for whatever reason I just won't retire between 45 and 52. I will retire between 55 and 60 with +35x expenses instead of 25x.

You simply don't retire 2 decades early if things go wrong.
And if something happens and you cannot work in your current job for all those years? Or in any job? I am simply pointing out that one cannot get years of compounding back, period. Thus it is (in general) wise to save as much as possible while you can. Only you can judge what is a "sacrifice" and what isn't, in terms of your lifestyle or whatever it is you want to do/buy that you otherwise couldn't if you saved more. Clearly no one is saying to live on Ramen noodles.

I would use a retirement calculator to game out your current (that is, vested) pension and what savings are needed to get you where you want to be. You can then change the vested pension amount yearly (or every five years, or whatever) to see what level of (reduced) savings is needed.

BTW I am 10-11 years from early retirement (assuming things go well), also have a vested pension but expect it to be greater, and the above is exactly what I do. That said, we save as if there will be no pension. It does require the occasional sacrifice (in terms of discretionary spending) but I can live with it. Builds character :wink:

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