What's the ideal safe retirement net worth target?

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asdf1
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What's the ideal safe retirement net worth target?

Post by asdf1 » Wed Jun 15, 2016 11:08 am

I am curious what everyone think's would be the "safe" net-worth target to enable a couple to retire comfortably, no matter where they live in the country (so obviously assuming they continue to live in HCL area)?

I know everyone has different needs/spending habits, but I am looking for the normal/average retired couple. The "average" couple could definitely never worry if they had $10 million saved up by retirement, but I am sure there is a less number that could be considered.

So, what is the target they should have saved by the time they retire which would mean they never need to worry? What is the number for retiring early?

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Re: What's the ideal safe retirement net worth target?

Post by avalpert » Wed Jun 15, 2016 12:24 pm

It has to be defined in terms of target spending - the 'average' number would be meaningless to everyone except that mythical average person.

I would say 25-30 times expenses is a safe target.

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Re: What's the ideal safe retirement net worth target?

Post by LarryAllen » Wed Jun 15, 2016 12:33 pm

I used to say $6m then bumped it to $10m. I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means. Obviously people could survive on considerably less but for a nice target I think $10m. However, equally as important is having a reasonable lifestyle. I remember clients some years ago who had $10m+ but lived a lifestyle that included things like THREE country club memberships... that is, one at each of their THREE homes. Money goes quick when you live like that.

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Re: What's the ideal safe retirement net worth target?

Post by avalpert » Wed Jun 15, 2016 12:40 pm

LarryAllen wrote:I used to say $6m then bumped it to $10m.
See, this is a great example. Even using Larry's older, lower number with a very conservative 2% withdrawal rate you are asserting that a safe target for a 'reasonable' lifestyle is one that has you spending more in retirement than 92%+ of households make in income in a year.

That doesn't seem very helpful, or particularly relevant, to the 'average' person at all, does it? Unless you think the lifestyle of the vast majority of this country is unreasonable...

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Re: What's the ideal safe retirement net worth target?

Post by qwertyjazz » Wed Jun 15, 2016 12:43 pm

It is 25 times x equals safe amount - but nobody (not even yourself at a different age) knows what x is

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Re: What's the ideal safe retirement net worth target?

Post by bertilak » Wed Jun 15, 2016 12:49 pm

avalpert wrote:It has to be defined in terms of target spending - the 'average' number would be meaningless to everyone except that mythical average person.
Agreed. Income vs. expenses is what counts in the long run.
I would say 25-30 times expenses is a safe target.
It is reasonable to use a ballpark figure like that as a long term goal but be sure not to count your home, your yacht or your his and hers Bentleys as part of that 25x!
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Re: What's the ideal safe retirement net worth target?

Post by mike_slc » Wed Jun 15, 2016 12:56 pm

30 years: 2,130,334
40 years: 2,337,795
50+ years: 2,596,179

Assumptions:
Maximum happiness achieved at $75k per year [1] in 2010, inflation adjusted to $80k in 2016
Investigate 100% success rate on Firecalc with $80k spending, 50/50 portfolio, no SS

[1] https://www.princeton.edu/~deaton/downl ... st2010.pdf

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Re: What's the ideal safe retirement net worth target?

Post by avalpert » Wed Jun 15, 2016 12:56 pm

I would say 25-30 times expenses is a safe target.
It is reasonable to use a ballpark figure like that as a long term goal but be sure not to count your home, your yacht or your his and hers Bentleys as part of that 25x![/quote]
Yes, I was thinking portfolio rather than net worth.

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goingup
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Re: What's the ideal safe retirement net worth target?

Post by goingup » Wed Jun 15, 2016 12:57 pm

I would guess most people on this site hope to have a NW somewhere between $1-5M. That's just not very helpful info to anyone because we all have different circumstances.

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Re: What's the ideal safe retirement net worth target?

Post by digarei » Wed Jun 15, 2016 12:58 pm

avalpert wrote:It has to be defined in terms of target spending - the 'average' number would be meaningless to everyone except that mythical average person.

I would say 25-30 times expenses is a safe target.
More meaningful still might be to multiply your estimated time horizon with the amount of annual expenses not covered by existing income streams.

Retire at full retirement age (FRA) with a inflation-adjusted pension that provides 100% of your expenses and ones safe net worth target could be anything from zero to ?

Retire at age 40 with no anticipated income streams (and very low SS PIA) and you will need a lot more than 25-30 times expenses.
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Re: What's the ideal safe retirement net worth target?

Post by technovelist » Wed Jun 15, 2016 12:59 pm

Enough to buy a (joint, if necessary) life annuity with COLA that will pay all your necessary expenses, and a few hundred thousand $ for "other".
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Re: What's the ideal safe retirement net worth target?

Post by Ged » Wed Jun 15, 2016 1:00 pm

asdf1 wrote:I am curious what everyone think's would be the "safe" net-worth target to enable a couple to retire comfortably, no matter where they live in the country (so obviously assuming they continue to live in HCL area)?
25x expenses is fine so long as you include the value of your pensions and social security in the calculation.

Another reasonable way is 25x expenses not covered by pensions and Social Security.

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Re: What's the ideal safe retirement net worth target?

Post by KlangFool » Wed Jun 15, 2016 1:02 pm

OP,

25 times my current annual expense is my financial independent number. I do not like the word: retirement. It carries a BIG ASSUMPTION aka the person can survive until the retirement age. To many people, that is a stretch goal.

KlangFool

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Re: What's the ideal safe retirement net worth target?

Post by dbr » Wed Jun 15, 2016 1:03 pm

There is no such thing.

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Re: What's the ideal safe retirement net worth target?

Post by avalpert » Wed Jun 15, 2016 1:21 pm

mike_slc wrote:30 years: 2,130,334
40 years: 2,337,795
50+ years: 2,596,179

Assumptions:
Maximum happiness achieved at $75k per year [1] in 2010, inflation adjusted to $80k in 2016
Investigate 100% success rate on Firecalc with $80k spending, 50/50 portfolio, no SS

[1] https://www.princeton.edu/~deaton/downl ... st2010.pdf
Yeah, except that isn't quite what the research actually says. Some aspects of happiness may not continue to increase after $75k in income (now I believe they say it is $83k) - in particular what they call 'emotional well being' - other aspects continue to rise indefinitely with income - what they call 'life evaluation'.

So more money, all else being equal, does always make you happier (or at least you rate your life as better) - the problem is all else is never equal and tradeoffs have to be made somewhere.

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Re: What's the ideal safe retirement net worth target?

Post by Toons » Wed Jun 15, 2016 1:30 pm

An eye opener :happy
"A June 2015 Government Accountability Office analysis found that that average Americans between the ages of 55 and 64 have accrued about $104,000 in retirement savings"

http://www.investopedia.com/articles/pe ... e-2016.asp
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Re: What's the ideal safe retirement net worth target?

Post by mike_slc » Wed Jun 15, 2016 1:31 pm

avalpert wrote:
mike_slc wrote:30 years: 2,130,334
40 years: 2,337,795
50+ years: 2,596,179

Assumptions:
Maximum happiness achieved at $75k per year [1] in 2010, inflation adjusted to $80k in 2016
Investigate 100% success rate on Firecalc with $80k spending, 50/50 portfolio, no SS

[1] https://www.princeton.edu/~deaton/downl ... st2010.pdf
Yeah, except that isn't quite what the research actually says. Some aspects of happiness may not continue to increase after $75k in income (now I believe they say it is $83k) - in particular what they call 'emotional well being' - other aspects continue to rise indefinitely with income - what they call 'life evaluation'.

So more money, all else being equal, does always make you happier (or at least you rate your life as better) - the problem is all else is never equal and tradeoffs have to be made somewhere.
According to the study:

"Emotional well being" - the pleasure you derive from day-to-day experiences - doesn't get better after $75k.
"Life evaluation" - how you feel about your life and accomplishments - can continue to rise with higher income.

I think maximizing emotional well being is a pretty reasonable starting point for an ideal retirement target.
Last edited by mike_slc on Wed Jun 15, 2016 1:36 pm, edited 1 time in total.

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Re: What's the ideal safe retirement net worth target?

Post by Phineas J. Whoopee » Wed Jun 15, 2016 1:36 pm

In investing, there is no ideal, and there is no safe. There is only risk and return, with the former being easier to quantify than the latter.
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Re: What's the ideal safe retirement net worth target?

Post by Trader/Investor » Wed Jun 15, 2016 1:38 pm

Toons wrote:An eye opener :happy
"A June 2015 Government Accountability Office analysis found that that average Americans between the ages of 55 and 64 have accrued about $104,000 in retirement savings"

http://www.investopedia.com/articles/pe ... e-2016.asp
Also only 5% of U.S. households have over $1,000,000 in investable assets. Does everyone on this forum live in NYC or the Bay area? Are they all doctors, lawyers and CEOs? I can live the life of luxury with only $2,000,000 as my nest egg. I am single, debt free, and 69. In fact, my worry is becoming more that I will die with too much money than not enough. I had better quit fretting with saving, saving, and saving and start spending, spending, and spending. I know a lot of my former classmates who are now 6 feet under had wished they had spent more and saved less.

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Re: What's the ideal safe retirement net worth target?

Post by Theseus » Wed Jun 15, 2016 1:39 pm

When I did my "number" estimate, I used a consumption based financial planning tool to see what number I need to hit. I used ESPlanner. Back then it used to MS Excel based tool. I didn't care about full precision - but wanted a gut check. Then from there I used financialengines.com to let it help me develop asset allocation for various scenarios (FE seems to follow the same principles as BH). Good thing is that it runs monte-carol-simulations on variety of factors to determine the best case and worst case scenario.

When I was planning all this, I used various inputs (different size of portfolio, income, age, retirement age, etc.) into financial engines to see what will be the outcome. One of the scenarios I used was a $10 million portfolio, with projected to retire both of us in 7 years with no additional contributions during the 7 years and there after. We gave life expectancy to 95 years. It gave me minimum paycheck (in current dollars) ~$500k, Average ~$900k and Best case was $1.5M per year. I remember they also gave one year worst case decline of $1.4M (that was a shocker :-)). For me even the worst case scenario is way too much money for my life style so I concluded that $10M is much higher number for me.

Considering that FE always recommends lowest cost index funds from universe of thousands of funds they have access to, I have come to believe their approach and have generally followed their recommendations for my investments (which is more like 3-5 index fund approach of BH and most of them are Vanguard recommendations).

Above scenario may or may not provide useful data point. But if you like their approach, I highly recommend spending $300 (annual) to sign up and see what happens with your money and where would end up in the best and worst case scenarios according to FE. Gives you an additional data point.

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Re: What's the ideal safe retirement net worth target?

Post by mike_slc » Wed Jun 15, 2016 1:42 pm

LarryAllen wrote:I used to say $6m then bumped it to $10m. I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means. Obviously people could survive on considerably less but for a nice target I think $10m. However, equally as important is having a reasonable lifestyle. I remember clients some years ago who had $10m+ but lived a lifestyle that included things like THREE country club memberships... that is, one at each of their THREE homes. Money goes quick when you live like that.
Just FYI - a 100% success rate on Firecalc with $10m starting portfolio yields spending of $308,154 per year (50+ years, 50/50 portfolio, no SS).

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Re: What's the ideal safe retirement net worth target?

Post by technovelist » Wed Jun 15, 2016 1:44 pm

Toons wrote:An eye opener :happy
"A June 2015 Government Accountability Office analysis found that that average Americans between the ages of 55 and 64 have accrued about $104,000 in retirement savings"

http://www.investopedia.com/articles/pe ... e-2016.asp
Which means that most of those people, at least the married couples who are both going to collect Social Security, are going to leave the surviving spouse in deep trouble if one of them dies soon after retirement...
In theory, theory and practice are identical. In practice, they often differ.

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Re: What's the ideal safe retirement net worth target?

Post by wolf359 » Wed Jun 15, 2016 1:45 pm

I agree that there really isn't one number that answers this question, because it's individual to your situation. 25 times expenses is probably a good guideline.

However, in my experience I've noticed that people from Silicon Valley and NYC answer this question with $10 million, and people from Northern VA answer it with $2-3 million. People in the Midwest tend to say $1 million and a paid off house.

Anecdotal, based on people I've encountered. Others I've asked hear some of those answers in conversation and think all the numbers are obscenely high.

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Re: What's the ideal safe retirement net worth target?

Post by technovelist » Wed Jun 15, 2016 1:46 pm

Trader/Investor wrote:
Toons wrote:An eye opener :happy
"A June 2015 Government Accountability Office analysis found that that average Americans between the ages of 55 and 64 have accrued about $104,000 in retirement savings"

http://www.investopedia.com/articles/pe ... e-2016.asp
Also only 5% of U.S. households have over $1,000,000 in investable assets. Does everyone on this forum live in NYC or the Bay area? Are they all doctors, lawyers and CEOs? I can live the life of luxury with only $2,000,000 as my nest egg. I am single, debt free, and 69. In fact, my worry is becoming more that I will die with too much money than not enough. I had better quit fretting with saving, saving, and saving and start spending, spending, and spending. I know a lot of my former classmates who are now 6 feet under had wished they had spent more and saved less.
I live in rural East Texas, and I'm not a doctor, lawyer, or CEO.

As for your dying with too much money, I can take care of that. Just tell me where you live and I'll allow you to give me the excess cash! :mrgreen:
In theory, theory and practice are identical. In practice, they often differ.

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Re: What's the ideal safe retirement net worth target?

Post by Mike Scott » Wed Jun 15, 2016 1:54 pm

Ideal and safe are probably not realistic terms.

On the other end of the spectrum, the vast majority of people simply retire with what they have and make it work out. What other choices do they have?

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Re: What's the ideal safe retirement net worth target?

Post by avalpert » Wed Jun 15, 2016 1:54 pm

mike_slc wrote:
avalpert wrote:
mike_slc wrote:30 years: 2,130,334
40 years: 2,337,795
50+ years: 2,596,179

Assumptions:
Maximum happiness achieved at $75k per year [1] in 2010, inflation adjusted to $80k in 2016
Investigate 100% success rate on Firecalc with $80k spending, 50/50 portfolio, no SS

[1] https://www.princeton.edu/~deaton/downl ... st2010.pdf
Yeah, except that isn't quite what the research actually says. Some aspects of happiness may not continue to increase after $75k in income (now I believe they say it is $83k) - in particular what they call 'emotional well being' - other aspects continue to rise indefinitely with income - what they call 'life evaluation'.

So more money, all else being equal, does always make you happier (or at least you rate your life as better) - the problem is all else is never equal and tradeoffs have to be made somewhere.
According to the study:

"Emotional well being" - the pleasure you derive from day-to-day experiences - doesn't get better after $75k.
"Life evaluation" - how you feel about your life and accomplishments - can continue to rise with higher income.

I think maximizing emotional well being is a pretty reasonable starting point for an ideal retirement target.
That's not really an accurate summation of the two categories. This article at Vox does a decent job of covering it: http://www.vox.com/2015/6/20/8815813/or ... ness-study

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Re: What's the ideal safe retirement net worth target?

Post by LarryAllen » Wed Jun 15, 2016 1:59 pm

mike_slc wrote:
LarryAllen wrote:I used to say $6m then bumped it to $10m. I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means. Obviously people could survive on considerably less but for a nice target I think $10m. However, equally as important is having a reasonable lifestyle. I remember clients some years ago who had $10m+ but lived a lifestyle that included things like THREE country club memberships... that is, one at each of their THREE homes. Money goes quick when you live like that.
Just FYI - a 100% success rate on Firecalc with $10m starting portfolio yields spending of $308,154 per year (50+ years, 50/50 portfolio, no SS).
That would make me feel great if I a) had $10m and b) spent less than $308k gross a year. :)

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Re: What's the ideal safe retirement net worth target?

Post by MathWizard » Wed Jun 15, 2016 2:00 pm

I go with 25x (expenses - 75% of SS) + whatever I think I need for fun money + self-insure of LTC.

For me that will be in the 1.25 to 1.5 Million range + maybe 1/4 million for fun money (that 10K/yr to
spend on travel, other enjoyable things.
So I need 1.25 to 1.5 Million. I plan to work additional time to get to 1.5 to 1.75 million.
Most of that will be tax-deferred, but about 1/4 million should be ROTH for tax diversification.
The figures are in 2016 dollars, not inflated dollars.

Things can change, so I have a range.

If things go belly up, I'll retire with what I have, and we'll scrape by the best we can, like everyone else.

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Re: What's the ideal safe retirement net worth target?

Post by HomerJ » Wed Jun 15, 2016 2:05 pm

asdf1 wrote:I know everyone has different needs/spending habits
Which means the question can't be answered.

25x expenses is a decent answer. But everyone's expenses are different.

I don't know if we have any statistics on the "average" person's expenses... We have statistics on the "average" person's income, but not's the same thing. Someone who makes $60,000 a year, but only spends $40,000 needs less than someone with the same salary who spends $50,000 a year.

Expenses are what matters.

I guess you could use income as proxy for expenses, and say you are quoting absolute top end. So what, around $50k or $60k? So the average person needs $1.25 million to $1.5 million.

But that doesn't account for SS. If SS gives the average household $20k, then they only need $30k or $40k, so $750,000 or $1 million. If they get $30k as a couple, even less. If they have a paid off house, even less.

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Re: What's the ideal safe retirement net worth target?

Post by HomerJ » Wed Jun 15, 2016 2:09 pm

LarryAllen wrote:I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means.
Heh, it takes $400,000 a year for most people to afford a "reasonable" lifestyle? Interesting perspective.

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Re: What's the ideal safe retirement net worth target?

Post by nedsaid » Wed Jun 15, 2016 2:09 pm

I wish there was a magic net worth target that would solve all my retirement issues. Problem is, no such number exists. I don't know how long I will live, the state of my health, the investment returns I will get, and many other things. There are some good rules of thumb out there but nothing is perfect.

I actually do have a number that I am shooting for but I won't disclose that here.

But I have had the retirement projections run and the Monte Carlo analysis. I have a pretty good idea but again nothing is precise and nothing is perfect. Just educated guesswork. As long as you know that there is no one answer to this and that this is all imprecise, you will be okay.

When you put together your plan, use conservative assumptions. Assume that you will live a long time and that market returns will be lower than what we have been used to. As far as a target, 12X to 15X your annual income is a good place to start. Might need more, might need less. Depends on whether or not you have a pension, how much Social Security you will get, any inheritances you might receive and many other things.
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Re: What's the ideal safe retirement net worth target?

Post by jjface » Wed Jun 15, 2016 2:09 pm

$1m with a paid for house assuming no social security would be plenty in a LCOL area.

Probably 50% more in a HCOL area though I have no idea about HCOL areas!
Last edited by jjface on Wed Jun 15, 2016 2:22 pm, edited 1 time in total.

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Re: What's the ideal safe retirement net worth target?

Post by technovelist » Wed Jun 15, 2016 2:16 pm

jjface wrote:$1m with a paid for house assuming no social security would be plenty in a LCOL area.

Probably 50% more in a HCOL area.
Assuming a M-F couple both aged 67, $1 million in an immediate annuity without COLA would generate about $5000/month as long as either is alive, with no market or sequence of returns risk. Of course, it would be best to divide the money up into pieces that would be covered by the state guaranty association of whatever state they live in.

Obviously these numbers will change according to the ages of the couple and whether they want the COLA. A single person, especially a male, could get a much higher payout at the same age, e.g., a single male 67 could get about $5700/month (no COLA) for life for $1 million.
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Re: What's the ideal safe retirement net worth target?

Post by HomerJ » Wed Jun 15, 2016 2:18 pm

wolf359 wrote:However, in my experience I've noticed that people from Silicon Valley and NYC answer this question with $10 million, and people from Northern VA answer it with $2-3 million. People in the Midwest tend to say $1 million and a paid off house.
Pretty accurate... I'm from the Mid-west... and that looks about right to me. My wife wants to travel so we will probably want $1.5 million instead of $1 million, but I absolutely could have a very satisfying retirement in a nice house right next to a beautiful lake with a jetski and a boat with $1 million and the house paid-off.

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Re: What's the ideal safe retirement net worth target?

Post by HomerJ » Wed Jun 15, 2016 2:20 pm

LarryAllen wrote:
mike_slc wrote:
LarryAllen wrote:I used to say $6m then bumped it to $10m. I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means. Obviously people could survive on considerably less but for a nice target I think $10m. However, equally as important is having a reasonable lifestyle. I remember clients some years ago who had $10m+ but lived a lifestyle that included things like THREE country club memberships... that is, one at each of their THREE homes. Money goes quick when you live like that.
Just FYI - a 100% success rate on Firecalc with $10m starting portfolio yields spending of $308,154 per year (50+ years, 50/50 portfolio, no SS).
That would make me feel great if I a) had $10m and b) spent less than $308k gross a year. :)
You might have a better chance of reaching (a) if you worked harder on making (b) true. (or more accurately, not needing to reach (a) at all)

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Re: What's the ideal safe retirement net worth target?

Post by sk.dolcevita » Wed Jun 15, 2016 2:20 pm

Average middle class lifestyle in MCOL location: 28.5 X ($80K - SS - pension). Assumes SWR = 3.5%.

I differ from BHs in definition of "average" middle class. I define it as someone making $80K or so. BHs (on this forum) seem to define it as $150-200K.

BHs also seem to believe that they will all live to 100+ defying the SS mortality charts.

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Re: What's the ideal safe retirement net worth target?

Post by technovelist » Wed Jun 15, 2016 2:25 pm

sk.dolcevita wrote:Average middle class lifestyle in MCOL location: 28.5 X ($80K - SS - pension). Assumes SWR = 3.5%.

I differ from BHs in definition of "average" middle class. I define it as someone making $80K or so. BHs (on this forum) seem to define it as $150-200K.

BHs also seem to believe that they will all live to 100+ defying the SS mortality charts.
I'm likely to live into my 90's according to family history and recent life insurance rating, and relative lack of financial stress doesn't hurt either.

But anyone who expects to live a long time should be even more interested in annuities than the general public, as that's pretty much the only way to be certain that you won't run out of money due to living too long.
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Re: What's the ideal safe retirement net worth target?

Post by DaftInvestor » Wed Jun 15, 2016 2:26 pm

Ideally I'd love $10M but my target is $3M to $5M in today's dollars in my portfolio (NOT including my house - I don't plan on selling my primary residence so don't factor it in - house will be paid off in retirement).
With $3M and SWR of 3.5% this gives me $105K a year spending in addition to SS. The stretch goal of $5M would allow for additional "comfort" - more river-cruise type of vacations and so on.
Health-care costs in retirement are the biggest unknown in my opinion.

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Re: What's the ideal safe retirement net worth target?

Post by novicemoney » Wed Jun 15, 2016 2:29 pm

avalpert wrote:
I would say 25-30 times expenses is a safe target.
It is reasonable to use a ballpark figure like that as a long term goal but be sure not to count your home, your yacht or your his and hers Bentleys as part of that 25x!
Yes, I was thinking portfolio rather than net worth.[/quote]



But that is problematic with the OP's original question. It asks for a net worth number and that includes all assets not only investable ones. In my state (Hawaii) the median home price is ~$750,000. Here it is not uncommon for retiree's to be house poor. A $1million net worth with a paid off house can mean that 75% of your NW is in your house. IMHO maybe what the question should be is not what your NW number should be, but whether is NW is the appropriate measure for a safe retirement. If you have a pension and SS then maybe 25 x RLE is the appropriate measure.

inbox788
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Re: What's the ideal safe retirement net worth target?

Post by inbox788 » Wed Jun 15, 2016 2:37 pm

Ged wrote:25x expenses is fine so long as you include the value of your pensions and social security in the calculation.

Another reasonable way is 25x expenses not covered by pensions and Social Security.
Do you count your taxes as part of your annual expenses? Do you take into consideration whether the 25x is housed in IRA, Roth or Taxable? And does the cost basis matter? Not an issue in Roth, but definitely affects outcomes in other accounts once taxes on gains withdrawal are considered.

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Re: What's the ideal safe retirement net worth target?

Post by technovelist » Wed Jun 15, 2016 2:40 pm

novicemoney wrote:
avalpert wrote:
I would say 25-30 times expenses is a safe target.
It is reasonable to use a ballpark figure like that as a long term goal but be sure not to count your home, your yacht or your his and hers Bentleys as part of that 25x!
Yes, I was thinking portfolio rather than net worth.


But that is problematic with the OP's original question. It asks for a net worth number and that includes all assets not only investable ones. In my state (Hawaii) the median home price is ~$750,000. Here it is not uncommon for retiree's to be house poor. A $1million net worth with a paid off house can mean that 75% of your NW is in your house. IMHO maybe what the question should be is not what your NW number should be, but whether is NW is the appropriate measure for a safe retirement. If you have a pension and SS then maybe 25 x RLE is the appropriate measure.[/quote]

I would say that investible assets are what counts. You can't spend your house.

And this is not a problem only in HCOL areas; most of the "net worth" of households headed by someone 55-64 consists of home equity, leaving only $50-100K (depending on source) or so for generating returns.
In theory, theory and practice are identical. In practice, they often differ.

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PhysicianOnFIRE
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Re: What's the ideal safe retirement net worth target?

Post by PhysicianOnFIRE » Wed Jun 15, 2016 2:46 pm

I don't know what The ideal retirement net worth target is, but My target is in the range of $3 million to $4 million, or 40x to 50x anticipated annual expenses, with a paid off home and cabin.

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Will do good
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Re: What's the ideal safe retirement net worth target?

Post by Will do good » Wed Jun 15, 2016 2:50 pm

PhysicianOnFIRE wrote:I don't know what The ideal retirement net worth target is, but My target is in the range of $3 million to $4 million, or 40x to 50x anticipated annual expenses, with a paid off home and cabin.
Is that with or without SS?

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JoMoney
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Re: What's the ideal safe retirement net worth target?

Post by JoMoney » Wed Jun 15, 2016 2:54 pm

My ideal would be
a * b
wheree a = annual desired income and b = remaining years of life expectancy
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: What's the ideal safe retirement net worth target?

Post by N10sive » Wed Jun 15, 2016 2:56 pm

this 25 times calculation based on the average salary you think you would need to live off of in old age, do you subtract what you expect to get in SS? I know some argue that it won't be there when millenials retire but just wondering about this calculation

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Re: What's the ideal safe retirement net worth target?

Post by technovelist » Wed Jun 15, 2016 2:58 pm

JoMoney wrote:My ideal would be
a * b
wheree a = annual desired income and b = remaining years of life expectancy
That would fail just about exactly 50% of the time. :oops:
In theory, theory and practice are identical. In practice, they often differ.

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Re: What's the ideal safe retirement net worth target?

Post by qwertyjazz » Wed Jun 15, 2016 3:00 pm

technovelist wrote:
JoMoney wrote:My ideal would be
a * b
wheree a = annual desired income and b = remaining years of life expectancy
That would fail just about exactly 50% of the time. :oops:
You are assuming no investment returns and a large distribution of life expectancy formula

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Phineas J. Whoopee
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Re: What's the ideal safe retirement net worth target?

Post by Phineas J. Whoopee » Wed Jun 15, 2016 3:07 pm

technovelist wrote:
JoMoney wrote:My ideal would be
a * b
wheree a = annual desired income and b = remaining years of life expectancy
That would fail just about exactly 50% of the time. :oops:
I don't understand why you're calling yourself stupid.
PJW

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JoMoney
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Re: What's the ideal safe retirement net worth target?

Post by JoMoney » Wed Jun 15, 2016 3:11 pm

technovelist wrote:
JoMoney wrote:My ideal would be
a * b
wheree a = annual desired income and b = remaining years of life expectancy
That would fail just about exactly 50% of the time. :oops:
You could buy a ladder of TIPs in early years, towards the end a SPIA could guarantee success.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: What's the ideal safe retirement net worth target?

Post by avalpert » Wed Jun 15, 2016 3:12 pm

inbox788 wrote: Do you count your taxes as part of your annual expenses?
Yes
Do you take into consideration whether the 25x is housed in IRA, Roth or Taxable?
No
And does the cost basis matter?
No

While managing my tax expenses and withdrawal strategy is obviously an important part of retirement planning, I think that when people try to integrate tax planning into these calculations they are more likely to make sub-optimal choices then when they treat them separately because of the high error-bar assumptions they have to make.

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