What's the ideal safe retirement net worth target?

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

Post by LarryAllen »

SuzBanyan wrote:
avalpert wrote:
jharkin wrote:
ticker wrote:$10M is a very standard number that people talk about in the Bay Area. That means decent but not too big house, small property in the mountain and some money in the bank. Nothing very fancy, pretty much basic stuff. More and more i hear 50M as THE Number. (In each bubble the number goes up, then it comes crashing down when the reality hits).

invst65 wrote:
That was meant as some kind of joke, right?
Part of living in a bubble, is that you do not realize though are living in it. Try taking a roadtrip through the Midwest or deep south and then tell us what's average.

You should realize that "the bay area" is something like only a couple % of the US population and is the extreme outlier, by a couple orders of magnitude, for cost of living. Its so far from average you almost need to exclude it from statistical studies of income in this country to get numbers that make sense for the rest of us.
Also keep in mind that when people use 'the Bay Area' in this context they are referring to a fairly small slice of the actual population of the Bay Area that exist in an insulated circle of like-minded individuals.
My retired parents live in the Bay Area in a 2500 sf home on quarter acre with a view of the Bay and the City, a cabin in the Sierras, and a rental property, also in the Bay Area. Their net worth, including their home, is probably less than $2M. They are comfortable with pensions from the school system and military. Yes, even in the Bay Area it is possible to retire on less than $10M.
Having a pension is a totally different story. Their true net worth is MUCH greater if you factor in the value of the pension "annuity." It would take a person a significant sum to duplicate your parent's pensions in the current interest rate environment.
SuzBanyan
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Re: What's the ideal safe retirement net worth target?

Post by SuzBanyan »

autolycus wrote:
SuzBanyan wrote:My retired parents live in the Bay Area in a 2500 sf home on quarter acre with a view of the Bay and the City, a cabin in the Sierras, and a rental property, also in the Bay Area. Their net worth, including their home, is probably less than $2M. They are comfortable with pensions from the school system and military. Yes, even in the Bay Area it is possible to retire on less than $10M.
Based on a lot of the numbers thrown around on the forum, what you say can't be true because the RE must be worth $10MM+ easily unless the home is actually just some propped up plywood and the view of the Bay is across a landfill with a rotten egg factory on the opposite side of the street.
They don't live in the part of the Bay Area that has a "relatively" easy commute to Silicon Valley. I think the schools are also not great. Both factors depress housing prices, meaning their home is probably worth less than $750k. They bought it decades ago, which means their property taxes are low. But bottom line is the house is still "cheap" by CA standards even today.

However, neither easy commute nor great school district matter much when one is retired. So down-sizing here may mean reducing the value but allowing one to stay in the same geographic area. And that increases your liquidity and decreases your "ideal" net worth for retirement.
inbox788
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Re: What's the ideal safe retirement net worth target?

Post by inbox788 »

bobcat2 wrote:
technovelist wrote:
Ok, but how much are the interest, dividends, and distributions? The past 9 years have been pretty good to retired people with a lot invested in the stock market, I believe, ...
What is the average annual real return on the US stock market over the last 9 years before any expenses or taxes?

Real annual return US stock market before any expenses or taxes from June 22, 2007, thru June 22, 2016.
Answer(s)
4.2% annual real return with dividends reinvested before any expenses or taxes.
2.1% annual real return without dividends reinvested before any expenses or taxes.

Calculations made at following link where you can check my results.
http://dqydj.com/wilshire-5000-return-calculator/

I leave it to each reader to decide whether those results have been pretty good to people, retired or not, with a lot invested in the stock market. :wink:

BobK
I'd agree with pretty good since it begins at the last peak of the market and includes the great recession. However, depending on how much you had to withdraw during that time may alter your views.

Now if you retired 7 years ago "with a lot invested in the stock market", you should be doing much better than pretty good.
dbr
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Re: What's the ideal safe retirement net worth target?

Post by dbr »

While the comments about how to fund a given need for spending are helpful, they don't address the actual question, which is

"What is the ideal amount of spending one should provide for a safe and comfortable retirement?"

That question in turn depends on "What amounts to an ideal safe and comfortable retirement?"

It strikes me that when you put ideal in that question that one comes back only with retirements that are luxurious to the point that answers such as more than $10M are exactly right and not facetious at all.

The other answer is that an ideal safe retirement does not depend on any particular amount of saving or spending but rather on factors that are not financial in nature.

It would be nice if the OP would return and enlighten us as to whether the question is being answered.
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bobcat2
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Re: What's the ideal safe retirement net worth target?

Post by bobcat2 »

Will do good wrote:
bobcat2 wrote:
technovelist wrote:
Ok, but how much are the interest, dividends, and distributions? The past 9 years have been pretty good to retired people with a lot invested in the stock market, I believe, ...
What is the average annual real return on the US stock market over the last 9 years before any expenses or taxes?

Real annual return US stock market before any expenses or taxes from June 22, 2007, thru June 22, 2016.
Answer(s)
4.2% annual real return with dividends reinvested before any expenses or taxes.
2.1% annual real return without dividends reinvested before any expenses or taxes.

Calculations made at following link where you can check my results.
http://dqydj.com/wilshire-5000-return-calculator/

I leave it to each reader to decide whether those results have been pretty good to people, retired or not, with a lot invested in the stock market. :wink:

BobK

I would be dancing in the street if I can get 4.2% real return with dividends reinvested before any expenses or taxes.
Ah, the soft prejudice of low expectations. :)

A world where 4% after expenses is pretty good, which must mean 2% is fair and 1% is acceptable. A far cry from those halcyon years of the 1980s & 90s when a year below 9% was a bad year. :D

1980s 11.3% annual real return with dividends reinvested before any expenses or taxes.
1990s 14.1% annual real return with dividends reinvested before any expenses or taxes.

If 4% gets one to dance in the streets, imagine what 14% would do. Although perhaps among polite company such speculation should not proceed. :wink:

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.
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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 »

bobcat2 wrote:
Will do good wrote:
bobcat2 wrote:
technovelist wrote:
Ok, but how much are the interest, dividends, and distributions? The past 9 years have been pretty good to retired people with a lot invested in the stock market, I believe, ...
What is the average annual real return on the US stock market over the last 9 years before any expenses or taxes?

Real annual return US stock market before any expenses or taxes from June 22, 2007, thru June 22, 2016.
Answer(s)
4.2% annual real return with dividends reinvested before any expenses or taxes.
2.1% annual real return without dividends reinvested before any expenses or taxes.

Calculations made at following link where you can check my results.
http://dqydj.com/wilshire-5000-return-calculator/

I leave it to each reader to decide whether those results have been pretty good to people, retired or not, with a lot invested in the stock market. :wink:

BobK

I would be dancing in the street if I can get 4.2% real return with dividends reinvested before any expenses or taxes.
Ah, the soft prejudice of low expectations. :)

A world where 4% after expenses is pretty good, which must mean 2% is fair and 1% is acceptable. A far cry from those halcyon years of the 1980s & 90s when a year below 9% was a bad year. :D

1980s 11.3% annual real return with dividends reinvested before any expenses or taxes.
1990s 14.1% annual real return with dividends reinvested before any expenses or taxes.

If 4% gets one to dance in the streets, imagine what 14% would do. Although perhaps among polite company such speculation should not proceed. :wink:

BobK
BobK,
What can I say, I'm easy :D .

To be honest I don't remember 14% for the 1990's I was too busy working and raising a family. Thank god I was investing back then, just a very small portfolio. Also, 4% is pretty good, 3% is fair and 2% is acceptable, you have got too far down :)
protagonist
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Re: What's the ideal safe retirement net worth target?

Post by protagonist »

Random Poster wrote:
protagonist wrote:25x my expenses would equal over a million dollars in savings . . . .
Based on this statement, I would surmise that your annual expenses are $40K or less.

I'd like to think that my wife and I could live well on that amount of money (or less), but health care costs are a huge unknown and I really doubt that we could travel to Europe or South America each year for an extended period of time (which I take to me for over 2 weeks) and pay for the necessities of life (plus health care) on $40K. Or maybe I'm just deluded.
My annual expenses are about $40-50K, probably much closer to 40K but I am not sure exactly. I have Obamacare and I don't pay for it. My airfares and often hotels are paid for with frequent flier points, mainly from credit card promos. My taxes are low. I am surprised I can live as well as I do on as little as I spend, but I do.
hq38sq43
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Re: What's the ideal safe retirement net worth target?

Post by hq38sq43 »

Very hard to beat Jane Bryant Quinn's recent book How To Make Your Money Last on this topic.

Warm regards,
Harry at Bradenton
protagonist
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Re: What's the ideal safe retirement net worth target?

Post by protagonist »

technovelist wrote: Ok, but how much are the interest, dividends, and distributions?
I am currently not spending more than $10K above what I would be collecting in social security when I start collecting social security. So if I chose to work until I collected social security, and if I had no other income at all, to live the way I am living today would cost me, at best, $10K/year from my nest egg. And as I implied, I am living what I think most people would consider very well in at least a MCOL community, and I am single so I would only collect a single social security check.

If I had to live on social security alone (about $35K/yr in my case if I wait to age 70), and had no savings at all, I would have to give up some things, but I would certainly not consider it "unsafe"- I could still have a decent life. Doubling that, I would think a couple could live very well.

And yes, I realize my assumptions are retiring at age 70 with a good amount of SS benefits. But to NEED 25 x $40K in net worth (eg be a millionaire) to retire safely is madness. That would mean the vast majority of Americans are desperate for survival, and that is simply not the case, regardless of what one reads or hears from the media.

If you are not extravagant and if you stay out of debt, you will be surprised how far your money will go in retirement. I was certainly surprised, given my expenses while working and married. When I retired, right after a very expensive divorce and right before the market crashed in 2008, I was unduly concerned, as I think many people on this website are unduly concerned today. Yes, the market has been kind to me since then, but even if it never recovered from its bottom I would still be OK.
protagonist
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Re: What's the ideal safe retirement net worth target?

Post by protagonist »

SuzBanyan wrote:
autolycus wrote:
SuzBanyan wrote:My retired parents live in the Bay Area in a 2500 sf home on quarter acre with a view of the Bay and the City, a cabin in the Sierras, and a rental property, also in the Bay Area. Their net worth, including their home, is probably less than $2M. They are comfortable with pensions from the school system and military. Yes, even in the Bay Area it is possible to retire on less than $10M.
Based on a lot of the numbers thrown around on the forum, what you say can't be true because the RE must be worth $10MM+ easily unless the home is actually just some propped up plywood and the view of the Bay is across a landfill with a rotten egg factory on the opposite side of the street.
They don't live in the part of the Bay Area that has a "relatively" easy commute to Silicon Valley. I think the schools are also not great. Both factors depress housing prices, meaning their home is probably worth less than $750k. They bought it decades ago, which means their property taxes are low. But bottom line is the house is still "cheap" by CA standards even today.

However, neither easy commute nor great school district matter much when one is retired. So down-sizing here may mean reducing the value but allowing one to stay in the same geographic area. And that increases your liquidity and decreases your "ideal" net worth for retirement.
Here are median household incomes by zip code in SF: http://zipatlas.com/us/ca/san-francisco ... income.htm

Even in the RICHEST zipcode in all of San Francisco (where ~20K residents live), the median HOUSEHOLD income was only about $95K/year.
The median HOUSEHOLD (not "individual") income in SF County was about $78K/year in 2014. http://www.census.gov/quickfacts/table/HCN010212/06075

So clearly, you can retire comfortably in SF on MUCH less than the numbers bantered around on this forum.
Bir48die
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Re: What's the ideal safe retirement net worth target?

Post by Bir48die »

This is so dependent on many factors as mentioned earlier. If I didn't have a wife with a $30k pension and we'll have two SS incomes that equal $48k then my requirements would be more than I currently have. However have a house that's $525k paid for and when I hit 66.2 will only need to draw maybe $30k out of portfolio which would currently relate to 1.6% WR so I don't really take stock in a $5mm to $10mm NW. At that level I'll feel very comfortable. In addition I lived off the same salary for 15 years while stockpiling raises and bonuses so I don't even equate WR with what my previous gross salary was.
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zaboomafoozarg
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Re: What's the ideal safe retirement net worth target?

Post by zaboomafoozarg »

bobcat2 wrote:If 4% gets one to dance in the streets, imagine what 14% would do.
That would be amazing. I'm quite sad that I wasn't old enough to invest in the 80's and 90's, and I certainly don't expect returns anywhere near that good again in my lifetime. I plan on 5% nominal as an upper bound for stocks in my lifetime.
invst65
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Re: What's the ideal safe retirement net worth target?

Post by invst65 »

zaboomafoozarg wrote:
bobcat2 wrote:If 4% gets one to dance in the streets, imagine what 14% would do.
That would be amazing. I'm quite sad that I wasn't old enough to invest in the 80's and 90's, and I certainly don't expect returns anywhere near that good again in my lifetime. I plan on 5% nominal as an upper bound for stocks in my lifetime.
Have you not heard of the Latin American sovereign debt crisis, or the Savings and Loan Crisis of the 1980's, or Black Monday in 1987, or the junk bond crash, or the crash of the DotCom bubble of the 90's?

I don't think it was the golden age of investment that you think it was and you shouldn't be so pessimistic about the future. If you follow the investment philosophy as expressed by most people in this forum I think you'll do just fine (or maybe not, but there are no guarantees in life).
DKD
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Re: What's the ideal safe retirement net worth target?

Post by DKD »

I would say $3MM is a good minimum to target for retirement in today's world. Obviously, more is better: $3.5MM to 4.0MM would provide a bit of a cushion to relieve natural anxieties during market downturns or years with larger than expected expenses.
WhiteMaxima
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Re: What's the ideal safe retirement net worth target?

Post by WhiteMaxima »

Felix Grandet said no net worth is safe for retirement. Please below that candle off before i can go to another world.
Thesaints
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Re: What's the ideal safe retirement net worth target?

Post by Thesaints »

protagonist wrote:
SuzBanyan wrote:
autolycus wrote:
SuzBanyan wrote:My retired parents live in the Bay Area in a 2500 sf home on quarter acre with a view of the Bay and the City, a cabin in the Sierras, and a rental property, also in the Bay Area. Their net worth, including their home, is probably less than $2M. They are comfortable with pensions from the school system and military. Yes, even in the Bay Area it is possible to retire on less than $10M.
Based on a lot of the numbers thrown around on the forum, what you say can't be true because the RE must be worth $10MM+ easily unless the home is actually just some propped up plywood and the view of the Bay is across a landfill with a rotten egg factory on the opposite side of the street.
They don't live in the part of the Bay Area that has a "relatively" easy commute to Silicon Valley. I think the schools are also not great. Both factors depress housing prices, meaning their home is probably worth less than $750k. They bought it decades ago, which means their property taxes are low. But bottom line is the house is still "cheap" by CA standards even today.

However, neither easy commute nor great school district matter much when one is retired. So down-sizing here may mean reducing the value but allowing one to stay in the same geographic area. And that increases your liquidity and decreases your "ideal" net worth for retirement.
Here are median household incomes by zip code in SF: http://zipatlas.com/us/ca/san-francisco ... income.htm

Even in the RICHEST zipcode in all of San Francisco (where ~20K residents live), the median HOUSEHOLD income was only about $95K/year.
The median HOUSEHOLD (not "individual") income in SF County was about $78K/year in 2014. http://www.census.gov/quickfacts/table/HCN010212/06075

So clearly, you can retire comfortably in SF on MUCH less than the numbers bantered around on this forum.
Median income doesn't tell you anything on whether they own their home or not, which in SF makes a world of difference.
Following the OP question, which is the ideal suit ?
afan
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Re: What's the ideal safe retirement net worth target?

Post by afan »

mike_slc wrote:
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).
I found a reference that says in my area (HCOL) in 2015 a private room in a nursing home had a median annual cost of $142,000. Rounding that up to 150 and doubling for a couple, and one would spend $300,000 for the median nursing home in our part of the country. Firecalc apparently says that would be covered with a $10M portfolio. But what about taxes? The firecalc figure includes taxes in spending. The after tax spending would have to be less. How much less depends on how the money was invested.

Maybe with Social Security the total income would be high enough to support two people in nursing homes in perpetuity, but it might be close. If you figure people rarely survive for decades in nursing homes- since the reason they are in the home likely shortens their lives- then maybe this is OK. Otherwise, based on this spending metric, one would need something north of $10M.

If you enter the home at 70 and figure 100 as a maximum plausible lifespan for someone who spent 30 years in a nursing home, then you can get by with less. Quickly assuming one would need $360,000 to have $300,00 after tax to spend, I got "100%" for a 30 year run with $6,500,000 to start.

Obviously, the longer you work the shorter your time in the nursing home and the less money you need to pay for it. Since no one plans to enter a nursing home at a particular time, this is more interesting in terms of the age at which one retires.

Of course, how long will you really live, what is your current health, could you do with a below median nursing home, are you happy to end up on Medicaid (at least under current law)... Lots of other things determine whether you want to be able to pay for 50 years of nursing home care and how much that would cost.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
lowndes
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Re: What's the ideal safe retirement net worth target?

Post by lowndes »

As everybody said it's different for everybody but my personal goal in today's dollars is $10mm with fully paid for primary home and vacation home. This is equal to $300k a year at a 3% withdrawal rate.
afan
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Re: What's the ideal safe retirement net worth target?

Post by afan »

protagonist wrote: if I chose to work until I collected social security, and if I had no other income at all, to live the way I am living today would cost me, at best, $10K/year from my nest egg. And as I implied, I am living what I think most people would consider very well in at least a MCOL community, and I am single so I would only collect a single social security check.

And yes, I realize my assumptions are retiring at age 70 with a good amount of SS benefits. But to NEED 25 x $40K in net worth (eg be a millionaire) to retire safely is madness. That would mean the vast majority of Americans are desperate for survival, and that is simply not the case, regardless of what one reads or hears from the media.

If you are not extravagant and if you stay out of debt, you will be surprised how far your money will go in retirement.
All of which assumes you are able to control your expenses. If you become sufficiently impaired, you may not be making the decisions about how your money gets spent. If you have to go into assisted living or a nursing home, your expenses could skyrocket while your standard of living declines.

One can hope Medicaid will continue to pay for the later years, but by that time YOUR assets are gone. No one knows whether they will get hit by a truck while running a marathon, or end up a long term care patient. "How much do I need" includes the more expensive possibilities with little or no control over what happens.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
Dottie57
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Re: What's the ideal safe retirement net worth target?

Post by Dottie57 »

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

This makes me sad.
dharrythomas
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Re: What's the ideal safe retirement net worth target?

Post by dharrythomas »

Dottie57 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

This makes me sad.
If that makes you sad, consider that it is probably the mean, not the median. The mean is thrown off by overachievers like many on this board. Without going back and doing research, I think the median is closer to $20K with many at $0.

I try to look at the Federal Reserve's Consumer Survey that comes out every 3 years. For all the mistakes I have made and for the money we've spent maintaining a lifestyle, I'm very well off if I benchmark there. Much more satisfied than if I use this group as my benchmark.
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MP123
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Re: What's the ideal safe retirement net worth target?

Post by MP123 »

dharrythomas wrote:
Dottie57 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

This makes me sad.
If that makes you sad, consider that it is probably the mean, not the median. The mean is thrown off by overachievers like many on this board. Without going back and doing research, I think the median is closer to $20K with many at $0.

I try to look at the Federal Reserve's Consumer Survey that comes out every 3 years. For all the mistakes I have made and for the money we've spent maintaining a lifestyle, I'm very well off if I benchmark there. Much more satisfied than if I use this group as my benchmark.
Yes, it does make interesting reading:
https://www.federalreserve.gov/pubs/bul ... /scf14.pdf

"Overall, the median net worth of all families fell a modest 2 percent to $81,200, while mean net
worth was effectively unchanged at $534,600."


The spread between mean and median is a bit shocking and a good reminder to understand what kind of average we're talking about.
Nectarineman
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Re: What's the ideal safe retirement net worth target?

Post by Nectarineman »

I think there are a lot of assumptions that go into the 25x model. For one it assumes people will live off about 75% of their pre retirement income and live to mid 80's.

This may sound envious and it is not, but I frankly don't care much about people who need 10 million to retire. That assumes a lifestyle to be top 01% of the top 1% in the richest country in the world. If someone wants that so be it,BUT back to the original question.

I think most people want to be comfortable, not super luxurious and their main goal/fear is to run out of money, especially when physically challenged later in life.
lowndes
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Re: What's the ideal safe retirement net worth target?

Post by lowndes »

Nectarineman wrote:I think there are a lot of assumptions that go into the 25x model. For one it assumes people will live off about 75% of their pre retirement income and live to mid 80's.

This may sound envious and it is not, but I frankly don't care much about people who need 10 million to retire. That assumes a lifestyle to be top 01% of the top 1% in the richest country in the world. If someone wants that so be it,BUT back to the original question.

I think most people want to be comfortable, not super luxurious and their main goal/fear is to run out of money, especially when physically challenged later in life.
Why would the amount somebody else wants for retirement make you think less of them? Everybody has different goals. Some want to retire as soon as possible, others want to work as long as possible and leave as much to their family as possible, others want to travel the world in comfort and others might want to spend time in town hanging out with their neighbors and family. There isn't a right or wrong answer here.

I know my main goal with retirement saving is not out of fear (at least not right now) but that I'd like to travel with my family multiple times a year in retirement which can be costly. I'd also like to leave them an inheritance if possible. And of course continue living the way I live prior to retirement without downsizing my living (a comfortable standard of living as you mention).
Last edited by lowndes on Tue Jul 04, 2017 8:12 am, edited 1 time in total.
10YearPlan
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Re: What's the ideal safe retirement net worth target?

Post by 10YearPlan »

I am still trying to figure this out myself. I move my number up every time I get on this forum, it seems. I am definitely going to suffer from Terminal One More Year Syndrome.

In general, though, my goal is 27.5x Expenses not taking SS or taxes into consideration (this ASSumes they cancel eachother out, I suppose). And a paid off house. This is a 2.5 buffer over 25x, which seems conservative without being too extreme. I think we're on track, but even still I think I will have a very hard time when it comes time to actually retire.
sixtyforty
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Re: What's the ideal safe retirement net worth target?

Post by sixtyforty »

You might try http://www.firecalc.com/ The "Investigate" tab will allow you to run the simulation to determine a starting portfolio value, given expenses, SS, retirement date etc.
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Re: What's the ideal safe retirement net worth target?

Post by RadAudit »

Nectarineman wrote:I think most people want to be comfortable, not super luxurious and their main goal/fear is to run out of money, especially when physically challenged later in life.
+1. Works for me. That's the primary goal.

I'm about seven years in to retirement. Same goals / fears. Maybe I've expanded the number of interim goals to include making sure DW doesn't run out of money, too. Somewhat of a challenge because she doesn't seem to care about investing. I'll probably have to leave helping out with the grandkids college education to DW - 15 years off for the first one. Then, I guess the kids might expect something in the end, too. (Didn't they read the linked BH articles I sent them?)

How to make allowances in the kids' distribution for the winner of the grandkids lottery? How much do you need to make it all come out even? What goals get axed if the money runs short? To paraphrase my old math teacher, the derivation of that answer is left as an exercise for the DW.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Nectarineman
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Re: What's the ideal safe retirement net worth target?

Post by Nectarineman »

lowndes wrote:
Nectarineman wrote:I think there are a lot of assumptions that go into the 25x model. For one it assumes people will live off about 75% of their pre retirement income and live to mid 80's.

This may sound envious and it is not, but I frankly don't care much about people who need 10 million to retire. That assumes a lifestyle to be top 01% of the top 1% in the richest country in the world. If someone wants that so be it,BUT back to the original question.

I think most people want to be comfortable, not super luxurious and their main goal/fear is to run out of money, especially when physically challenged later in life.
Why would the amount somebody else wants for retirement make you think less of them? Everybody has different goals. Some want to retire as soon as possible, others want to work as long as possible and leave as much to their family as possible, others want to travel the world in comfort and others might want to spend time in town hanging out with their neighbors and family. There isn't a right or wrong answer here.

I know my main goal with retirement saving is not out of fear (at least not right now) but that I'd like to travel with my family multiple times a year in retirement which can be costly. I'd also like to leave them an inheritance if possible. And of course continue living the way I live prior to retirement without downsizing my living (a comfortable standard of living as you mention).
My choice of words could have been better. To each his own. However, I was trying to convey the difference between what most people likely perceive as a comfortable retirement versus a very extravagant lifestyle. I make no judgment, but worrying about maintaining a lifestyle only the very, very wealthy maintain is far different than what most view as a comfortable retirement.

It is far different to live on a $750k/year lifestyle and have financial challenges that make you come down to a $100k lifestyle in retirement. I think the vast majority here are concerned about the number to reach that takes into account what can go wrong that would force a $60k-$100k / year lifestyle become a $30k-$50 k lifestyle if finances turn south.
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Re: What's the ideal safe retirement net worth target?

Post by lowndes »

Nectarineman wrote:
lowndes wrote:
Nectarineman wrote:I think there are a lot of assumptions that go into the 25x model. For one it assumes people will live off about 75% of their pre retirement income and live to mid 80's.

This may sound envious and it is not, but I frankly don't care much about people who need 10 million to retire. That assumes a lifestyle to be top 01% of the top 1% in the richest country in the world. If someone wants that so be it,BUT back to the original question.

I think most people want to be comfortable, not super luxurious and their main goal/fear is to run out of money, especially when physically challenged later in life.
Why would the amount somebody else wants for retirement make you think less of them? Everybody has different goals. Some want to retire as soon as possible, others want to work as long as possible and leave as much to their family as possible, others want to travel the world in comfort and others might want to spend time in town hanging out with their neighbors and family. There isn't a right or wrong answer here.

I know my main goal with retirement saving is not out of fear (at least not right now) but that I'd like to travel with my family multiple times a year in retirement which can be costly. I'd also like to leave them an inheritance if possible. And of course continue living the way I live prior to retirement without downsizing my living (a comfortable standard of living as you mention).
My choice of words could have been better. To each his own. However, I was trying to convey the difference between what most people likely perceive as a comfortable retirement versus a very extravagant lifestyle. I make no judgment, but worrying about maintaining a lifestyle only the very, very wealthy maintain is far different than what most view as a comfortable retirement.

It is far different to live on a $750k/year lifestyle and have financial challenges that make you come down to a $100k lifestyle in retirement. I think the vast majority here are concerned about the number to reach that takes into account what can go wrong that would force a $60k-$100k / year lifestyle become a $30k-$50 k lifestyle if finances turn south.
Fair enough, but even with a number like $10mm that is a far cry from being very wealthy in my opinion. $10mm is my goal as that allows me to have a conservative 3% retirement withdrawal at my current base salary ($300k a year). Could we make it on less - absolutely. However, when goal setting I'm going to set those goals to be what I would like to obtain not what I'm willing to get by with. Key is these numbers are different for everybody and that is what makes op question tough to answer.
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CyclingDuo
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Re: What's the ideal safe retirement net worth target?

Post by CyclingDuo »

protagonist wrote:
qwertyjazz wrote:It is 25 times x equals safe amount
I think this is a gross exaggeration of a "safe" target. Most Americans live on social security alone plus a little retirement savings, and if they are relatively frugal they do fine.

(skip)

25x my expenses would equal over a million dollars in savings, and still there are many ways I could trim my budget if I so needed. There aren't that many millionaires in America. To the average American, a millionaire is still very rich- if all non-millionaires were not "safe", every street in America would be teeming with homeless, panhandling octagenarians.
With regard to the bolded statement above, true. Only 3.3% or our population at the end of 2016 were "millionaires".

That number, according to the link below, was 10.8M Millionaires at the end of 2016 live in the US thanks to the bull market. That figure is up 400K from 2015's 10.4M Millionaires.

http://www.cnbc.com/2017/03/24/a-record ... shows.html

Snip from the article...

In 2016, there were 9.4 million individuals with net worth between $1 million and $5 million, 1.3 million individuals with net worth between $5 million and $25 million, and 156,000 households with more than $25 million in net worth, the report says.


326,495,785 (and growing live per minute) current US Population

http://www.worldometers.info/world-popu ... opulation/
"Save like a pessimist, invest like an optimist." - Morgan Housel
bradshaw1965
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Re: What's the ideal safe retirement net worth target?

Post by bradshaw1965 »

10YearPlan wrote:I am still trying to figure this out myself. I move my number up every time I get on this forum, it seems. I am definitely going to suffer from Terminal One More Year Syndrome.
This is my number one complaint about Boglehead style retirement planning. It is very, very important to be prudent about a life decision as important as retirement but it is counterproductive to always talk yourself out of what a reasonable plan might look like. That is how you end up at 40-50x expenses goals and always talking about how you need just a couple of more years to be safe.
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Re: What's the ideal safe retirement net worth target?

Post by zaboomafoozarg »

bobcat2 wrote:1980s 11.3% annual real return with dividends reinvested before any expenses or taxes.
1990s 14.1% annual real return with dividends reinvested before any expenses or taxes.
One decade of returns like that would leave me set for life, let alone 2 decades! But I don't think I will see any decades like that in the next 60-70 years.
MnD
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Re: What's the ideal safe retirement net worth target?

Post by MnD »

I'm probably going to retire this fall and it would cost about $4M to purchase my portfolio, paid-off home and other retirement income streams.
How I'll manage being $6 million short of the ideal safe number I'll never know.
If you see me behind the 7-11 looking for aluminum cans in the dumpster in a few years you can shake your head and tsk tsk tsk - another reckless unprepared retiree that should have worked another 20 years to get to a safe number. :(
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
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Re: What's the ideal safe retirement net worth target?

Post by itstoomuch »

^cans and bottles are worth 10cnts in Oregon.
I often dumpser dive when I see the obvious and tax free :dollar :dollar :dollar :oops:
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Re: What's the ideal safe retirement net worth target?

Post by Stormbringer »

asdf1 wrote:What's the ideal safe retirement net worth target?
I think that is the wrong question to ask. Real income is a bigger driver of retirement security than net worth is. We tend to live life on the income statement more than the balance sheet, and net worth doesn't do a retiree much good unless it can be converted to income. Your paid off house doesn't pay the bills.
“The greatest shortcoming of the human race is our inability to understand the exponential function.” - Albert Allen Bartlett
itstoomuch
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Re: What's the ideal safe retirement net worth target?

Post by itstoomuch »

^^^ Income goals and security is a tough concept for many BH :annoyed
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo
EnjoyIt
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Re: What's the ideal safe retirement net worth target?

Post by EnjoyIt »

lowndes wrote:
Nectarineman wrote:
lowndes wrote:
Nectarineman wrote:I think there are a lot of assumptions that go into the 25x model. For one it assumes people will live off about 75% of their pre retirement income and live to mid 80's.

This may sound envious and it is not, but I frankly don't care much about people who need 10 million to retire. That assumes a lifestyle to be top 01% of the top 1% in the richest country in the world. If someone wants that so be it,BUT back to the original question.

I think most people want to be comfortable, not super luxurious and their main goal/fear is to run out of money, especially when physically challenged later in life.
Why would the amount somebody else wants for retirement make you think less of them? Everybody has different goals. Some want to retire as soon as possible, others want to work as long as possible and leave as much to their family as possible, others want to travel the world in comfort and others might want to spend time in town hanging out with their neighbors and family. There isn't a right or wrong answer here.

I know my main goal with retirement saving is not out of fear (at least not right now) but that I'd like to travel with my family multiple times a year in retirement which can be costly. I'd also like to leave them an inheritance if possible. And of course continue living the way I live prior to retirement without downsizing my living (a comfortable standard of living as you mention).
My choice of words could have been better. To each his own. However, I was trying to convey the difference between what most people likely perceive as a comfortable retirement versus a very extravagant lifestyle. I make no judgment, but worrying about maintaining a lifestyle only the very, very wealthy maintain is far different than what most view as a comfortable retirement.

It is far different to live on a $750k/year lifestyle and have financial challenges that make you come down to a $100k lifestyle in retirement. I think the vast majority here are concerned about the number to reach that takes into account what can go wrong that would force a $60k-$100k / year lifestyle become a $30k-$50 k lifestyle if finances turn south.
Fair enough, but even with a number like $10mm that is a far cry from being very wealthy in my opinion. $10mm is my goal as that allows me to have a conservative 3% retirement withdrawal at my current base salary ($300k a year). Could we make it on less - absolutely. However, when goal setting I'm going to set those goals to be what I would like to obtain not what I'm willing to get by with. Key is these numbers are different for everybody and that is what makes op question tough to answer.
Your salary does not matter, it is how much you spend from that salary. If you are making $300k/yr, spending $75k on taxes, and saving $100k/yr, then you are only spending $125k/yr and can live very comfortably spending the same $125k/yr with $3.13-4.16 million. Hey, if you want $10 million than more power to you. We each have goals that are important to us. One of my goals is to semi-retire early so that I have more free time. Although $10 million is a possibility, if I hit $10 million I did something terribly wrong in my life.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
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CyclingDuo
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Re: What's the ideal safe retirement net worth target?

Post by CyclingDuo »

MnD wrote:I'm probably going to retire this fall and it would cost about $4M to purchase my portfolio, paid-off home and other retirement income streams.
How I'll manage being $6 million short of the ideal safe number I'll never know.
If you see me behind the 7-11 looking for aluminum cans in the dumpster in a few years you can shake your head and tsk tsk tsk - another reckless unprepared retiree that should have worked another 20 years to get to a safe number. :(
^^This.

$10M is stretching it to the absurd for the majority. :sharebeer

Plus, in addition to the comment earlier in the thread about needing $10M as a "safe number" for whatever small group that was targeted, the comment about the San Francisco Bay Area concerning also owning a 2nd home (vacation home up in the mountains) as norm along with the $10M, seems to be a stretch as well.

The data shows that at the end of 2016, only 10.17 Million people in the entire US owned a "2nd Home". That pretty much couples with the 10.8 Million Millionaires in terms of #'s spread throughout the USA, but certainly doesn't equate that your typical "Bay Area" retirement number includes $10M plus a second home in the mountains. The "Bay Area" is only about 7.68 Million people. They may have a higher percentage of millionaires than other areas of the country, as well as second home owners than other areas of the country, but I think the data clearly shows that it is not the norm - except for a smaller percentage of the elite in the Bay Area.

In spite of this article entitled "For Bay Area tech elite, a second home is just, you know, normal"...

http://www.mercurynews.com/2016/03/10/f ... ow-normal/

...it is far from the norm for the 7.68 Million residents of the "Bay Area". Let alone the rest of the country.

That doesn't preclude that for some, perhaps the $10M mark is their "number". It's certainly not our number! With regard to the OP's question, let's just say that for at least 96.7% of the population in the US, the number is going to be vastly lower in a wide ranging scale based on location, household income, age, income stream(s) in retirement, longevity, health issues, goals/desires, annual expenses, cost of living, philanthropy/charitable gifting, etc... .
"Save like a pessimist, invest like an optimist." - Morgan Housel
hoops777
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Re: What's the ideal safe retirement net worth target?

Post by hoops777 »

My wife and I live in the Bay Area where the cost of living is about as high as it gets.When we start taking SS in a few years,about 5000 a month when we both are 70,it will cover all of our basic living expenses.Our house is paid off of course.
I have no idea how people need 3 to 10 million in investments to live a comfortable life.I will also say,having traveled quite a bit around the country,that if you have a paid off house,the cost of living for a retired couple is not that much different wherever you live in the U.S.You certainly do not need an extra million for food,gas,etc because you live in the Bay Area vs.the Midwest.
Let's be honest,it all comes down to how extravagant your lifestyle is.There is a big difference between safe retirement and do whatever you want retirement.It is nice to do whatever you want but that ability is limited to a very small pct of the population.No criticism of those fortunate enough to achieve that status,but let's be real.
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ReadyOrNot
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Re: What's the ideal safe retirement net worth target?

Post by ReadyOrNot »

You can see that the average Boglehead needs or wants a lot more than other "average" people. One indication of what other "average" people would want is a common level given in popular advice: If you have somewhere between 1 and 2 million (maybe between 1.5 to 2 million is safer), they advise that they are not worried about your having to set up something to preserve your assets -- you should have plenty to pay out-of-pocket. For example, you shouldn't need long-term care insurance or some scheme to get public assistance. That is still more than most retirees will have, but less than other numbers you see here.
The Wizard
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Re: What's the ideal safe retirement net worth target?

Post by The Wizard »

Nectarineman wrote:I think there are a lot of assumptions that go into the 25x model. For one it assumes people will live off about 75% of their pre retirement income and live to mid 80's.

This may sound envious and it is not, but I frankly don't care much about people who need 10 million to retire. That assumes a lifestyle to be top 01% of the top 1% in the richest country in the world. If someone wants that so be it,BUT back to the original question...
That $10M number for someone, or even a couple, starting retirement in 2017 is definitely on the upscale side.
But for a younger person looking to retire in 2047 it might be just a comfortable amount.

As for myself, I wanted to be able to Carry On in retirement, and four years in, I still do.
So at a minimum, I wanted the same net amount hitting my checking account each month as when I was working my last few years.
Because I was saving ~30% of gross pay for retirement those last few high earning years, the bar was set at ~70% of gross employment income, with allowances for taxation factors.
Fortunately, I've been able to exceed my minimum requirement in retirement and thus my future excursions aren't constrained too much by finances...
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The Wizard
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Re: What's the ideal safe retirement net worth target?

Post by The Wizard »

MnD wrote: ...If you see me behind the 7-11 looking for aluminum cans in the dumpster in a few years you can shake your head and tsk tsk tsk - another reckless unprepared retiree that should have worked another 20 years to get to a safe number. :(
This makes me sad...
:(
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lowndes
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Re: What's the ideal safe retirement net worth target?

Post by lowndes »

EnjoyIt wrote:
lowndes wrote:
Nectarineman wrote:
lowndes wrote:
Nectarineman wrote:I think there are a lot of assumptions that go into the 25x model. For one it assumes people will live off about 75% of their pre retirement income and live to mid 80's.

This may sound envious and it is not, but I frankly don't care much about people who need 10 million to retire. That assumes a lifestyle to be top 01% of the top 1% in the richest country in the world. If someone wants that so be it,BUT back to the original question.

I think most people want to be comfortable, not super luxurious and their main goal/fear is to run out of money, especially when physically challenged later in life.
Why would the amount somebody else wants for retirement make you think less of them? Everybody has different goals. Some want to retire as soon as possible, others want to work as long as possible and leave as much to their family as possible, others want to travel the world in comfort and others might want to spend time in town hanging out with their neighbors and family. There isn't a right or wrong answer here.

I know my main goal with retirement saving is not out of fear (at least not right now) but that I'd like to travel with my family multiple times a year in retirement which can be costly. I'd also like to leave them an inheritance if possible. And of course continue living the way I live prior to retirement without downsizing my living (a comfortable standard of living as you mention).
My choice of words could have been better. To each his own. However, I was trying to convey the difference between what most people likely perceive as a comfortable retirement versus a very extravagant lifestyle. I make no judgment, but worrying about maintaining a lifestyle only the very, very wealthy maintain is far different than what most view as a comfortable retirement.

It is far different to live on a $750k/year lifestyle and have financial challenges that make you come down to a $100k lifestyle in retirement. I think the vast majority here are concerned about the number to reach that takes into account what can go wrong that would force a $60k-$100k / year lifestyle become a $30k-$50 k lifestyle if finances turn south.
Fair enough, but even with a number like $10mm that is a far cry from being very wealthy in my opinion. $10mm is my goal as that allows me to have a conservative 3% retirement withdrawal at my current base salary ($300k a year). Could we make it on less - absolutely. However, when goal setting I'm going to set those goals to be what I would like to obtain not what I'm willing to get by with. Key is these numbers are different for everybody and that is what makes op question tough to answer.
Your salary does not matter, it is how much you spend from that salary. If you are making $300k/yr, spending $75k on taxes, and saving $100k/yr, then you are only spending $125k/yr and can live very comfortably spending the same $125k/yr with $3.13-4.16 million. Hey, if you want $10 million than more power to you. We each have goals that are important to us. One of my goals is to semi-retire early so that I have more free time. Although $10 million is a possibility, if I hit $10 million I did something terribly wrong in my life.
Ok, but I said base salary and I'm 33 and hopefully get some type of raise in the next 30 years. My base salary is also approximately about 75% of my total pay (which is what I'm trying to replace in retirement). Maybe my number is too high and maybe it's too low. I can't predict the future. Only point of my post was to offer my personal perspective and subsequently to say I don't know why it's necessary to judge somebody negatively for coming up with a different arbitrary retirement number that is higher than another believes is necessary.

I do have hobbies that cost a lot which others might find a waste. My favorite thing to do is heli ski. Is that a necessity in life - absolutely not. If I can plan now in a way that allows me to do it as long as I'm physically able am I going to do so - absolutely.

Anyways I'm getting off topic but I think this shows how hard the question is to answer. Everybody values different things differently and what we will use our resources for. Only point I was trying to make is let's not judge people negatively based on the goals they are trying to accomplish in life or what they feel is needed. Maybe try to understand where they are coming from and then agreeing to disagree is a better approach.
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Re: What's the ideal safe retirement net worth target?

Post by Ron Ronnerson »

hoops777 wrote:My wife and I live in the Bay Area where the cost of living is about as high as it gets.When we start taking SS in a few years,about 5000 a month when we both are 70,it will cover all of our basic living expenses.Our house is paid off of course.
I have no idea how people need 3 to 10 million in investments to live a comfortable life.I will also say,having traveled quite a bit around the country,that if you have a paid off house,the cost of living for a retired couple is not that much different wherever you live in the U.S.You certainly do not need an extra million for food,gas,etc because you live in the Bay Area vs.the Midwest.
Let's be honest,it all comes down to how extravagant your lifestyle is.There is a big difference between safe retirement and do whatever you want retirement.It is nice to do whatever you want but that ability is limited to a very small pct of the population.No criticism of those fortunate enough to achieve that status,but let's be real.
I agree. We're in our early 40s and live in the Bay Area. Our monthly expenses in retirement, if we were to maintain our current lifestyle, would be about $5k/month (house should be paid off by then). A figure like 10M seems unnecessary, even if we decided to increase our lifestyle by quite a bit. I'm not sure why some people think they need $10M or $50M but suppose these things are a personal decision. Personally, if setting an arbitrarily high number, I think one billion dollars has a much nicer ring to it.
lowndes
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Re: What's the ideal safe retirement net worth target?

Post by lowndes »

Ron Ronnerson wrote:
hoops777 wrote:My wife and I live in the Bay Area where the cost of living is about as high as it gets.When we start taking SS in a few years,about 5000 a month when we both are 70,it will cover all of our basic living expenses.Our house is paid off of course.
I have no idea how people need 3 to 10 million in investments to live a comfortable life.I will also say,having traveled quite a bit around the country,that if you have a paid off house,the cost of living for a retired couple is not that much different wherever you live in the U.S.You certainly do not need an extra million for food,gas,etc because you live in the Bay Area vs.the Midwest.
Let's be honest,it all comes down to how extravagant your lifestyle is.There is a big difference between safe retirement and do whatever you want retirement.It is nice to do whatever you want but that ability is limited to a very small pct of the population.No criticism of those fortunate enough to achieve that status,but let's be real.
I agree. We're in our early 40s and live in the Bay Area. Our monthly expenses in retirement, if we were to maintain our current lifestyle, would be about $5k/month (house should be paid off by then). A figure like 10M seems unnecessary, even if we decided to increase our lifestyle by quite a bit. I'm not sure why some people think they need $10M or $50M but suppose these things are a personal decision. Personally, if setting an arbitrarily high number, I think one billion dollars has a much nicer ring to it.
It's not an arbitrarily high number if somebody based it off of maintaining their lifestyle. If somebody's lifestyle needed them to have $30-$40mm a year to spend then $1 billion would be an appropriate number. I don't know what I would do to spend that much a year but maybe somebody out there does. Really not my issue. If somebody wants to be able to spend $25k a year or so then $10mm is a decent number.

What is more interesting isn't the numbers as much as the multiples etc. My multiply is 33. Yes, it is overly conservative but I'm 30 years from retirement and prefer to be conservative at this stage of life.
Last edited by lowndes on Tue Jul 04, 2017 3:00 pm, edited 1 time in total.
The Wizard
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Re: What's the ideal safe retirement net worth target?

Post by The Wizard »

Ron Ronnerson wrote: ... A figure like 10M seems unnecessary, even if we decided to increase our lifestyle by quite a bit. I'm not sure why some people think they need $10M or $50M but suppose these things are a personal decision. Personally, if setting an arbitrarily high number, I think one billion dollars has a much nicer ring to it.
A billion is a good start for the yacht lifestyle, yes.
Wikipedia says that Paul Allen's 400-foot yacht costs $384,000 per WEEK to operate. I'd assume that includes fuel, of course.

So really, it's the scope of your toys that matter...
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dbr
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Re: What's the ideal safe retirement net worth target?

Post by dbr »

One characteristic of money is that there is no upper limit. In addition to that the playing field seems infinitely compliant* It seems appallingly easy to multiply by ten again and ten again and ten again and somehow it all still seems plausible.

*I first was going to say infinitely elastic but as a physicist I thought compliant was more correct. High compliance means it is easy to stretch things with little force while high elasticity means a resistance to deformation. In economics we mean the opposite, namely a variable that has a strong response to a change in something else.
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Re: What's the ideal safe retirement net worth target?

Post by seed4great »

I also live in a Bay Area, single and spend around $32K per year for everything, including property tax. This even include some expensive overseas trips. Unfortunately, job opportunities in my occupation are shrinking and by that reason I try to estimate what would be the net worth when I stop worrying about job. I have a health insurance from employer and though my cost is also included, I expect it to be much higher when I'm out of job. Taking into account current situation with health care, I even don't know how much to allocate for it. $10K per year? $20K per year? In other words. $32K x 25 = $800K seems quite reasonable goal, but $52K x 25 - $1.3M is kind of difficult to achieve. This is why I don't think there is any number for "safe retirement": there may be just a number, which someone is comfortable with.
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Re: What's the ideal safe retirement net worth target?

Post by sfchris »

When people say things like "25x investable assets" is that before tax or after tax? The tax on standard IRA withdrawls could be considerable in high tax states. Do I count them at 65% of their value for this purpose?
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Re: What's the ideal safe retirement net worth target?

Post by hoops777 »

seed4great wrote:I also live in a Bay Area, single and spend around $32K per year for everything, including property tax. This even include some expensive overseas trips. Unfortunately, job opportunities in my occupation are shrinking and by that reason I try to estimate what would be the net worth when I stop worrying about job. I have a health insurance from employer and though my cost is also included, I expect it to be much higher when I'm out of job. Taking into account current situation with health care, I even don't know how much to allocate for it. $10K per year? $20K per year? In other words. $32K x 25 = $800K seems quite reasonable goal, but $52K x 25 - $1.3M is kind of difficult to achieve. This is why I don't think there is any number for "safe retirement": there may be just a number, which someone is comfortable with.
I think 10 million would offer you a safe retirement 8-)
K.I.S.S........so easy to say so difficult to do.
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