Amount and time needed to retire

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justsomeguy2018
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Amount and time needed to retire

Post by justsomeguy2018 »

If I have a $300k 75/25 investment portfolio, $160k EF, and can successfully invest $85k/yr into a 75/25 AA, growing slightly more conservative over time and ending at 50/50 AA, how long until the portfolio is big enough to live primarily off the dividends/interest and withdrawals, assuming $100k/yr in expenses for the next 20 years?
mhalley
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Re: Amount and time needed to retire

Post by mhalley »

Why 20 years? Retirement is usually assumed to be 30 years. Anyway, the swr for 20 years was 5% per Bengen study, but could be less due to current conditions. So 100k divided by 5% would be 2 million $. If you got a 6% return it would be about 12 years. 13 at 5%.
https://www.calculator.net/future-value ... &x=64&y=17
Topic Author
justsomeguy2018
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Re: Amount and time needed to retire

Post by justsomeguy2018 »

mhalley wrote: Tue May 05, 2020 10:19 pm Why 20 years? Retirement is usually assumed to be 30 years. Anyway, the swr for 20 years was 5% per Bengen study, but could be less due to current conditions. So 100k divided by 5% would be 2 million $. If you got a 6% return it would be about 12 years. 13 at 5%.
https://www.calculator.net/future-value ... &x=64&y=17
Not sure why I added that part about 20 years....I guess I meant after 20 years, I expect my annual expenses to decrease.....IDK maybe just ignore the 20 year part.....

Sounds like you are saying I could have $2M in 13 years? I estimate I would need $2.5M, maybe more like $3M.
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JoMoney
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Re: Amount and time needed to retire

Post by JoMoney »

Vanguard's Total Corporate Bond Fund has a yield of about 3.5%
Vanguard's US High Dividend Yield stock fund is also yielding about 3.5%
So regardless of the combination you might be able to squeeze 3.5% of dividends out of a stock/bond portfolio if your focus is on yield. You could go with junkier stocks and bonds and maybe get it up, but you'd be reaching further than I would want to go.

To collect $100,000 a year of dividends, at a 3.5% rate, requires a portfolio of just under $3million dollars
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22twain
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Re: Amount and time needed to retire

Post by 22twain »

justsomeguy2018 wrote: Tue May 05, 2020 10:10 pm live primarily off the dividends/interest and withdrawals
Do you mean "primarily off the dividends/interest plus some withdrawals (selling some shares of stock/bond funds)"? If so, how much is "primarily"? 90%? 75%? 60%?
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aristotelian
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Re: Amount and time needed to retire

Post by aristotelian »

Here you go. Depends on your spending. https://www.mrmoneymustache.com/2012/01 ... etirement/
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justsomeguy2018
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Re: Amount and time needed to retire

Post by justsomeguy2018 »

JoMoney wrote: Tue May 05, 2020 10:36 pm Vanguard's Total Corporate Bond Fund has a yield of about 3.5%
Vanguard's US High Dividend Yield stock fund is also yielding about 3.5%
So regardless of the combination you might be able to squeeze 3.5% of dividends out of a stock/bond portfolio if your focus is on yield. You could go with junkier stocks and bonds and maybe get it up, but you'd be reaching further than I would want to go.

To collect $100,000 a year of dividends, at a 3.5% rate, requires a portfolio of just under $3million dollars
So how long to get to $3M based on my criteria given in initial post?
retired@50
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Re: Amount and time needed to retire

Post by retired@50 »

justsomeguy2018 wrote: Tue May 05, 2020 11:29 pm
JoMoney wrote: Tue May 05, 2020 10:36 pm Vanguard's Total Corporate Bond Fund has a yield of about 3.5%
Vanguard's US High Dividend Yield stock fund is also yielding about 3.5%
So regardless of the combination you might be able to squeeze 3.5% of dividends out of a stock/bond portfolio if your focus is on yield. You could go with junkier stocks and bonds and maybe get it up, but you'd be reaching further than I would want to go.

To collect $100,000 a year of dividends, at a 3.5% rate, requires a portfolio of just under $3million dollars
So how long to get to $3M based on my criteria given in initial post?
You might be able to work out the time frame by playing around in Excel with some of the financial functions. What you proposed in the OP is called a cash flow analysis. This sort of analysis is also possible on a financial calculator. You have a starting amount, an annual or monthly additional amount, and you have to make an assumption about the growth rate. This is where it gets tricky, because you're trying to guess at the future returns of the stock and bond markets. No easy task.

Regards,
This is one person's opinion. Nothing more.
bltn
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Re: Amount and time needed to retire

Post by bltn »

justsomeguy2018 wrote: Tue May 05, 2020 10:10 pm If I have a $300k 75/25 investment portfolio, $160k EF, and can successfully invest $85k/yr into a 75/25 AA, growing slightly more conservative over time and ending at 50/50 AA, how long until the portfolio is big enough to live primarily off the dividends/interest and withdrawals, assuming $100k/yr in expenses for the next 20 years?
Does the 100,000 a year include tax expenses?
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justsomeguy2018
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Re: Amount and time needed to retire

Post by justsomeguy2018 »

bltn wrote: Wed May 06, 2020 12:15 am
justsomeguy2018 wrote: Tue May 05, 2020 10:10 pm If I have a $300k 75/25 investment portfolio, $160k EF, and can successfully invest $85k/yr into a 75/25 AA, growing slightly more conservative over time and ending at 50/50 AA, how long until the portfolio is big enough to live primarily off the dividends/interest and withdrawals, assuming $100k/yr in expenses for the next 20 years?
Does the 100,000 a year include tax expenses?
Not income tax. Would include sales tax and property taxes.
Luckywon
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Re: Amount and time needed to retire

Post by Luckywon »

Not your question but IMO the 160k EF will be an unnecessary drag. I'd cut that down to three months expenses. Many would disagree, that's just my opinion.

Another note, my portfolio has not gone according to plan or even come close over the last 25 years. I'm not very confident about the next 25 years.
JamesJonesJrJr
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Re: Amount and time needed to retire

Post by JamesJonesJrJr »

If you're 40 and invest some of that big EF you should be able to retire at age 55 with a lump sum of $3.2MM which could sustain you with an inflation-adjusted $100k income until age 100. Here's a link to the report I've generated for you if you'd like to see the numbers or adjust anything. Best of luck.
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ruralavalon
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Re: Amount and time needed to retire

Post by ruralavalon »

justsomeguy2018 wrote: Tue May 05, 2020 10:10 pm If I have a $300k 75/25 investment portfolio, $160k EF, and can successfully invest $85k/yr into a 75/25 AA, growing slightly more conservative over time and ending at 50/50 AA, how long until the portfolio is big enough to live primarily off the dividends/interest and withdrawals, assuming $100k/yr in expenses for the next 20 years?
Do you have a solid estimate of your retirement living expenses, if so then what amount is that annually? What is your Social Security benefit predicted to be annually? Will you be eligible for a pension, if so then what will that be annually?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

Here are calculators you can use for estimates of the range of possibilities at various rates of contributions:
1) www.firecalc.com; and
2) www.i-orp.com.
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JamesJonesJrJr
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Re: Amount and time needed to retire

Post by JamesJonesJrJr »

ruralavalon wrote: Wed May 06, 2020 11:10 am
justsomeguy2018 wrote: Tue May 05, 2020 10:10 pm If I have a $300k 75/25 investment portfolio, $160k EF, and can successfully invest $85k/yr into a 75/25 AA, growing slightly more conservative over time and ending at 50/50 AA, how long until the portfolio is big enough to live primarily off the dividends/interest and withdrawals, assuming $100k/yr in expenses for the next 20 years?
What is your Social Security benefit predicted to be annually?
How do you estimate what SS will give you? Last I checked it was a patchwork of apps that made assumptions that didn't line up very well with retiring any time before 60.
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ruralavalon
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Re: Amount and time needed to retire

Post by ruralavalon »

JamesJonesJrJr wrote: Wed May 06, 2020 2:14 pm
ruralavalon wrote: Wed May 06, 2020 11:10 am
justsomeguy2018 wrote: Tue May 05, 2020 10:10 pm If I have a $300k 75/25 investment portfolio, $160k EF, and can successfully invest $85k/yr into a 75/25 AA, growing slightly more conservative over time and ending at 50/50 AA, how long until the portfolio is big enough to live primarily off the dividends/interest and withdrawals, assuming $100k/yr in expenses for the next 20 years?
What is your Social Security benefit predicted to be annually?
How do you estimate what SS will give you? Last I checked it was a patchwork of apps that made assumptions that didn't line up very well with retiring any time before 60.
I believe that Social Security can give a figure for age 62, 67, and 70.
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retired@50
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Re: Amount and time needed to retire

Post by retired@50 »

JamesJonesJrJr wrote: Wed May 06, 2020 2:14 pm
How do you estimate what SS will give you? Last I checked it was a patchwork of apps that made assumptions that didn't line up very well with retiring any time before 60.
Since you cannot claim Social Security before 62, that is typically when the projections would start.

You can log onto ssa.gov and create a "My Social Security" account. This allows you to make certain they have an accurate earnings record for your particular work history. I actually found an error in my own work history that was eventually corrected after writing a letter to the Social Security Administration. As an additional note, if you have less than 35 years of work history your SS benefit will be reduced because of the way the calculation is performed. They use the top 35 years of your work history. If you have less than 35, they fill in the remaining years with zeros.

Regards,
This is one person's opinion. Nothing more.
JamesJonesJrJr
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Re: Amount and time needed to retire

Post by JamesJonesJrJr »

retired@50 wrote: Wed May 06, 2020 3:10 pm
JamesJonesJrJr wrote: Wed May 06, 2020 2:14 pm
How do you estimate what SS will give you? Last I checked it was a patchwork of apps that made assumptions that didn't line up very well with retiring any time before 60.
Since you cannot claim Social Security before 62, that is typically when the projections would start.

You can log onto ssa.gov and create a "My Social Security" account. This allows you to make certain they have an accurate earnings record for your particular work history. I actually found an error in my own work history that was eventually corrected after writing a letter to the Social Security Administration. As an additional note, if you have less than 35 years of work history your SS benefit will be reduced because of the way the calculation is performed. They use the top 35 years of your work history. If you have less than 35, they fill in the remaining years with zeros.

Regards,
Doesn't it assume you work until you start receiving social security? This behavior would overestimate benefits for those who retire before 62.

I also found an error after reviewing my income history with social security. One of my past employers reported my social security number as '111-11-1111', which is needless to say, not my actual SSN. I was able to fix it relatively easily but I went years without noticing it.
retired@50
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Re: Amount and time needed to retire

Post by retired@50 »

JamesJonesJrJr wrote: Wed May 06, 2020 3:43 pm
Doesn't it assume you work until you start receiving social security? This behavior would overestimate benefits for those who retire before 62.

I also found an error after reviewing my income history with social security. One of my past employers reported my social security number as '111-11-1111', which is needless to say, not my actual SSN. I was able to fix it relatively easily but I went years without noticing it.
I think it probably does make that assumption, about wages continuing until claiming. You may be able to find other online calculators that allow you to make different assumptions. This might be one... I have not used it.

https://ssa.tools/

Regards,
This is one person's opinion. Nothing more.
Rudedog
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Re: Amount and time needed to retire

Post by Rudedog »

Rough estimate--$ 2.5 to $ 3 million would do it.
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Watty
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Re: Amount and time needed to retire

Post by Watty »

justsomeguy2018 wrote: Wed May 06, 2020 12:17 am
bltn wrote: Wed May 06, 2020 12:15 am
justsomeguy2018 wrote: Tue May 05, 2020 10:10 pm If I have a $300k 75/25 investment portfolio, $160k EF, and can successfully invest $85k/yr into a 75/25 AA, growing slightly more conservative over time and ending at 50/50 AA, how long until the portfolio is big enough to live primarily off the dividends/interest and withdrawals, assuming $100k/yr in expenses for the next 20 years?
Does the 100,000 a year include tax expenses?
Not income tax. Would include sales tax and property taxes.
While some retired people do spend $100K a year(or a lot more) that would be well into the high end of retirement budgets, especially if you will have a paid off house by then.

Be sure that sounds like a reasonable estimate for your desired lifestyle.

If you picked $100K because that is what you are making now then keep that you will not have FICA taxes and retirement savings then which could easily be $25K a year that you would not need to replace to match your current income.
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