What's the ideal safe retirement net worth target?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
hoops777
Posts: 2240
Joined: Sun Apr 10, 2011 12:23 pm

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

Post by hoops777 » Sat Jun 18, 2016 6:10 pm

10,000,000 to live a reasonable lifestyle?I guess if you live an extravagant,pampered rich lifestyle you would need 10M,but for 90 pct of people that live normal lives that figure is ridiculous.
K.I.S.S........so easy to say so difficult to do.

User avatar
zaboomafoozarg
Posts: 1917
Joined: Sun Jun 12, 2011 12:34 pm

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

Post by zaboomafoozarg » Sat Jun 18, 2016 10:16 pm

hoops777 wrote:10,000,000 to live a reasonable lifestyle?I guess if you live an extravagant,pampered rich lifestyle you would need 10M,but for 90 pct of people that live normal lives that figure is ridiculous.
I think it's more like 99.5% of people.

This forum's definition of safety includes surviving the heat death of the universe :D

User avatar
sdsailing
Posts: 525
Joined: Thu Feb 27, 2014 4:42 pm
Location: San Diego

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

Post by sdsailing » Sat Jun 18, 2016 10:21 pm

zaboomafoozarg wrote: This forum's definition of safety includes surviving the heat death of the universe :D
Love this ^^^

User avatar
celia
Posts: 7862
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

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

Post by celia » Sun Jun 19, 2016 2:25 am

sk.dolcevita wrote:Average middle class lifestyle in MCOL location: 28.5 X ($80K - SS - pension). Assumes SWR = 3.5%.
Of all the proposed answers, this one is what I would have said.

There's only one slight problem with this answer: Suppose a pension and SS were $90K or more. Mathematically, that means you would have to be in debt to retire. Guess I need to work on this. :oops:
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

technovelist
Posts: 2917
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

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

Post by technovelist » Sun Jun 19, 2016 3:33 am

zaboomafoozarg wrote:
hoops777 wrote:10,000,000 to live a reasonable lifestyle?I guess if you live an extravagant,pampered rich lifestyle you would need 10M,but for 90 pct of people that live normal lives that figure is ridiculous.
I think it's more like 99.5% of people.

This forum's definition of safety includes surviving the heat death of the universe :D
That should be the forum's motto. :mrgreen:
In theory, theory and practice are identical. In practice, they often differ.

User avatar
coachz
Posts: 1048
Joined: Wed Apr 04, 2007 7:10 am
Location: Charleston, SC

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

Post by coachz » Sun Jun 19, 2016 5:45 am

I love the motto. One of the great lessons of this forum is about risk and really understanding it. While many messages here are about SWR of 3% or 2% which may seem really too little for many, it really makes you consider how much risk you are willing to take and by forcing us to consider past history and future possibilities it then allows us to make our own decisions on acceptable risk. Knowing how you can cut back if needed provides another cushion, along with having a house you can downsize if needed.

One huge consideration is how long we will live. Nothing is truly guaranteed and we see friends and others passing far too soon. Having gone through a tornado literally in September, that has added another eye opener to the fragile and temporary nature of life.

I found many messages here too conservative for my taste but they had a strong affect on me and forced me to reel some risks as we get closer to retirement. My wife retires in 3 weeks at 60 and I'll probably retire in 3 months at 57. Will play guitar for sushi. :beer

carolinaman
Posts: 2999
Joined: Wed Dec 28, 2011 9:56 am
Location: North Carolina

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

Post by carolinaman » Sun Jun 19, 2016 6:58 am

[quote="avalpert
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.[/quote]

Taxes are a major consideration in retirement planning. For example, if someone has a TIRA with $1M in it and they will be in 25% tax bracket in retirement, they will have $750K to spend after taxes. Similarly, if they have taxable investments with large capital gains, those investments net of taxes will be less. Tax rates can change, especially if retirement is many years away, but I think a reasonable approach is to assume current tax rates.

My pension and SS put me in the middle of the 25% tax bracket, so I do not have ability to do anything to change my taxes. But many people on this forum have discussed tax strategies that greatly reduced their taxes in retirement.

As others have stated, whatever number is used should be conservative, factoring in investment returns, inflation, longevity and others. I want to err on the high side of my needs.

Leesbro63
Posts: 5336
Joined: Mon Nov 08, 2010 4:36 pm

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

Post by Leesbro63 » Sun Jun 19, 2016 9:24 am

Something not discussed here are health costs. Medicare premiums are now pegged to income. And dental expenses are not covered. Our grandparents got $69 dentures...how many babyboomers will be satisfied with that when our teeth fail?

I'm not saying you need $10M to retire, but just pointing out that babyboomer's parents benefited from the golden era of retirement healthcare while babyboomers, themselves, will have higher costs (and perhaps better care/longer lives).

Also for those in our 50s and younger, there is the uncertainty in assuming that current retirement rules will be the same once we get there. Long term trends suggest that we might have to plan for less generous rules.

User avatar
Johnnie
Posts: 494
Joined: Sat May 28, 2016 3:18 pm
Location: Michigan

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

Post by Johnnie » Sun Jun 19, 2016 9:49 am

A million-bajillion dollars.

Seriously, I have two alternative retirement futures, "Comfortable and Secure" vs. "Luxurious."

With no debt and a modest but comfortable lifestyle I can live on social security plus a few grand I get from an "accidental" pension. So if markets swoon for 10 years the day after I retire I'll be, "Aw shucks, living the high-life would have been fun - but this ain't bad either."

But if markets do OK then plan B kicks in, which envisions three months snowbirding on the Florida beach, plus trips, cruises, disgustingly spoiled grandchildren, etc.

That's not a bad problem/worry to have.
"I know nothing."

Impromptu
Posts: 345
Joined: Mon Nov 03, 2014 10:09 pm

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

Post by Impromptu » Sun Jun 19, 2016 10:14 am

zaboomafoozarg wrote:
hoops777 wrote:10,000,000 to live a reasonable lifestyle?I guess if you live an extravagant,pampered rich lifestyle you would need 10M,but for 90 pct of people that live normal lives that figure is ridiculous.
I think it's more like 99.5% of people.

This forum's definition of safety includes surviving the heat death of the universe :D
My molecules survived and/or were formed by a supernova. I think I can handle a little heat.
I'll gladly pay you Tuesday for a hamburger today.

Sidney
Posts: 6681
Joined: Thu Mar 08, 2007 6:06 pm

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

Post by Sidney » Sun Jun 19, 2016 10:17 am

Impromptu wrote:My molecules survived and/or were formed by a supernova. I think I can handle a little heat.
As long as it is a dry heat.
I always wanted to be a procrastinator.

User avatar
Hawaiishrimp
Posts: 398
Joined: Tue Apr 14, 2015 4:13 am

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

Post by Hawaiishrimp » Sun Jun 19, 2016 11:03 am

DaftInvestor wrote: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.
100% agree with you here. I have very similar goal and worries. Health care cost so much and will be even more in the future....
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

User avatar
celia
Posts: 7862
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

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

Post by celia » Sun Jun 19, 2016 11:23 am

celia wrote:
sk.dolcevita wrote:Average middle class lifestyle in MCOL location: 28.5 X ($80K - SS - pension). Assumes SWR = 3.5%.
Of all the proposed answers, this one is what I would have said.

There's only one slight problem with this answer: Suppose a pension and SS were $90K or more. Mathematically, that means you would have to be in debt to retire. Guess I need to work on this. :oops:
So have we determined that anyone in debt or up to 10M net worth can retire? Then only those with over 10 million need to keep working! :sharebeer
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

The Wizard
Posts: 11791
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

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

Post by The Wizard » Sun Jun 19, 2016 11:55 am

carolinaman wrote: Taxes are a major consideration in retirement planning. For example, if someone has a TIRA with $1M in it and they will be in 25% tax bracket in retirement, they will have $750K to spend after taxes. Similarly, if they have taxable investments with large capital gains, those investments net of taxes will be less. Tax rates can change, especially if retirement is many years away, but I think a reasonable approach is to assume current tax rates.

My pension and SS put me in the middle of the 25% tax bracket, so I do not have ability to do anything to change my taxes. But many people on this forum have discussed tax strategies that greatly reduced their taxes in retirement...
To clarify, yes taxes are important, but sometimes it's mental accounting that defines which is the base income stream and which later or optional streams are on top of it.

For the OP, it seems that pension + SS form the base to well into the 25% marginal bracket. Thus tIRA withdrawals are taxed at 25% or more from dollar one.

A person without a pension could use withdrawals from traditional retirement accounts for living expenses while delaying SS. Top of the 15% bracket is around $37k taxable income, so maybe $47,000 AGI before encountering the 25% marginal rate...
Attempted new signature...

dbr
Posts: 27056
Joined: Sun Mar 04, 2007 9:50 am

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

Post by dbr » Sun Jun 19, 2016 12:00 pm

The Wizard wrote: To clarify, yes taxes are important, but sometimes it's mental accounting that defines which is the base income stream and which later or optional streams are on top of it.
This is correct. It is only in comparing two actionable alternatives that one can talk about marginal rate. There is no such thing as assigning a marginal rate to part of a single set of income items. It does make sense to talk about the total tax cost of a situation.

inbox788
Posts: 5150
Joined: Thu Mar 15, 2012 5:24 pm

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

Post by inbox788 » Sun Jun 19, 2016 12:37 pm

Hawaiishrimp wrote:Health care cost so much and will be even more in the future....
We have only ourselves to blame. It's a self-fulfilling prophecy, starting with healthcare is valuable and worth it regardless of the cost. It's life we're talking about. We (society) saves up and buys insurance to pay for the expensive health care, so the increase in dollars drives up health care costs (demand driven). Those with savings and insurance dollars are able to buy better health care over those without. Then we incentivize health care by allowing tax deduction, or essentially using tax dollars to pay for more health care. With all that money, doctors, hospitals, drug companies all want to compete to provide health care and make money until a higher cost equilibrium is reached. Recently, HSA add more cash around to pay for the health care, and the more HSA balances grow, the more health care costs rise to meet the available funds. It's not all bad, since we are getting more technology, services, and access for all the additional money we're paying, plus it's helping the economy.

College expenses has also followed this upward spiral in cost. It's not surprising that more of the personal and national spending has gone towards health care and education, but people often forget that since the total we have to spend is limited, something else has to be reduced or has been reduced. We can't sustain this trend indefinitely, and we may be reaching or have already reached peak, given the other necessities.

http://www.theatlantic.com/business/arc ... et/255475/
http://www.githy.com/?action=page&id=co ... es-name-89

Shallowpockets
Posts: 533
Joined: Fri Nov 20, 2015 10:26 am

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

Post by Shallowpockets » Mon Jun 20, 2016 7:58 am

A safe target whatever it is, is one thing, and a realistic target is another.
Depends on where you are now and where you will be.
Setting any goal that is not really achievable is an exercise in futility and ultimately frustrating.
Looking at the stats of savers in their 50s and 60s for most of the population you can see that just saving at all may be a huge problem.
An ideal is only a dream if you do not have the means or if your lifestyle precludes reaching that ideal.
All in all a most basic target would be based on the common retirement age of 65 with a minimum of 20 years looking forward. So 20x annual expenses. Sure, it may seem to be less than many think, but it could be a more realistic target.
The key to retirement targets is to know factually what your annual expenses are. You should at least have concrete figures over the last five years to see what they are. I prefer concrete numbers rather than the ball park thoughts that many use. In fact, I have never encountered anyone who can tell me their exact numbers for expenses. They always believe they can summon up such stuff through credit card records and bills. Mostly they never do it.
Without that information you are rudderless. Why anyone would nitpick their investment expenses, and deal with the numerics of credit card points and mileage, and other intricacies of thier spending yet fail to know (to the exact dollar) their expenses over time is behind me.
Easy to cast out the net worth figures of 1-10 million, or 25-30x expenses. Without the "expenses" part it is all speculation.

The first rule of BH is not saving, but spending. Spend less than you make and know it.
Without that as a basis, any targets are whimsical.

michaeljc70
Posts: 2862
Joined: Thu Oct 15, 2015 3:53 pm

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

Post by michaeljc70 » Mon Jun 20, 2016 12:02 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.
Using a 4% withdrawal rate, that is $400k per year. That is in the top 1% of everyone (income wise). That is not a "reasonable" retirement. That is an elite retirement.

TxInjun
Posts: 57
Joined: Fri May 29, 2015 12:05 pm

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

Post by TxInjun » Mon Jun 20, 2016 12:29 pm

Shallowpockets wrote: ...
The key to retirement targets is to know factually what your annual expenses are. You should at least have concrete figures over the last five years to see what they are. I prefer concrete numbers rather than the ball park thoughts that many use
+1. This is a really important point. Knowing where your money goes, is the key to all planning. I religiously track my expenses on Quicken, and I still found it difficult to figure out my real expeneses, since my Quicken summaries include taxes, job expenses, account-to-account transfers, etc. Some of my credit cards don't have online summaries, so all my expenses there show up as a lumpsum with no breakdown on what category they represent.

I found a simple solution: most (all) of my daily transactions goes through my checking account, including credit card payments, etc.. I simply looked at the balance of Savings + Checking Acct for 6/1/2015, and then again at 5/31/2016 - a 1 year span. I know how much money came in (26 paychecks), and how much went out for expenses / income I don't want to include into my expense tally(e.g. interest in Savings acct, estimated tax payments, etc). Once you have those numbers, it is very simple math to get to your real expenses. It was eye-opening for me, in that the actual number was larger than myself or my wife - we're both engineers, good with numbers, and mostly believe in financial caution - thought it was.

I agree it is important to look at more than 1 year: for example we did not have a car payment last year, but on average you will have to account for buying a new car say once every 10 years. Having said that, even with a couple of data-points and some thought, you should be able to come up with a 99% confidence factor on your real cash outflow.
Shallowpockets wrote: The first rule of BH is not saving, but spending. Spend less than you make and know it.
It does take a lot more effort than I've suggested earlier to really understand where that money is going, and how you can be more thrifty.

michaeljc70
Posts: 2862
Joined: Thu Oct 15, 2015 3:53 pm

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

Post by michaeljc70 » Mon Jun 20, 2016 2:32 pm

TxInjun wrote:
Shallowpockets wrote: ...
The key to retirement targets is to know factually what your annual expenses are. You should at least have concrete figures over the last five years to see what they are. I prefer concrete numbers rather than the ball park thoughts that many use
+1. This is a really important point. Knowing where your money goes, is the key to all planning. I religiously track my expenses on Quicken, and I still found it difficult to figure out my real expeneses, since my Quicken summaries include taxes, job expenses, account-to-account transfers, etc. Some of my credit cards don't have online summaries, so all my expenses there show up as a lumpsum with no breakdown on what category they represent.

I found a simple solution: most (all) of my daily transactions goes through my checking account, including credit card payments, etc.. I simply looked at the balance of Savings + Checking Acct for 6/1/2015, and then again at 5/31/2016 - a 1 year span. I know how much money came in (26 paychecks), and how much went out for expenses / income I don't want to include into my expense tally(e.g. interest in Savings acct, estimated tax payments, etc). Once you have those numbers, it is very simple math to get to your real expenses. It was eye-opening for me, in that the actual number was larger than myself or my wife - we're both engineers, good with numbers, and mostly believe in financial caution - thought it was.

I agree it is important to look at more than 1 year: for example we did not have a car payment last year, but on average you will have to account for buying a new car say once every 10 years. Having said that, even with a couple of data-points and some thought, you should be able to come up with a 99% confidence factor on your real cash outflow.
Shallowpockets wrote: The first rule of BH is not saving, but spending. Spend less than you make and know it.
It does take a lot more effort than I've suggested earlier to really understand where that money is going, and how you can be more thrifty.
I agree.

I've used Quicken for 20+ years to track almost every expense. Most of it downloads automatically from bank, investment and credit card accounts so it is not that hard.

People that claim they know what they spend their money on are guessing if they don't keep track somehow. They tend to really underestimate smaller recurring expenses (Starbucks, dining out, etc.)

For the car issue, I pay cash for cars but in Quicken I setup as a recurring depreciation "payment". I use 7 years, but you could use whatever you want. Then it reflects my car buying expense in any reports I run on expenses and smooths it out. It also more accurately reflects your net worth as the car is being depreciated.

avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

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

Post by avalpert » Mon Jun 20, 2016 3:17 pm

carolinaman wrote: Tax rates can change, especially if retirement is many years away, but I think a reasonable approach is to assume current tax rates.
It may be a reasonable approach for your situation - it definitely would not be for mine. I have no pension coming and don't expect to be tapping social security at all until I turn 70, two decades into my retirement. If I am in the same tax bracket during those decades as I am now it means I have so much taxable income being generated without any work that the additional tax burden isn't really relevant to my lifestyle.

But this all goes back to why I think it is important to separate tax planning from your portfolio allocation - it is too easy to bury assumptions in there that work against your interests.

dbr
Posts: 27056
Joined: Sun Mar 04, 2007 9:50 am

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

Post by dbr » Mon Jun 20, 2016 4:36 pm

avalpert wrote:
carolinaman wrote: Tax rates can change, especially if retirement is many years away, but I think a reasonable approach is to assume current tax rates.
It may be a reasonable approach for your situation - it definitely would not be for mine. I have no pension coming and don't expect to be tapping social security at all until I turn 70, two decades into my retirement. If I am in the same tax bracket during those decades as I am now it means I have so much taxable income being generated without any work that the additional tax burden isn't really relevant to my lifestyle.

But this all goes back to why I think it is important to separate tax planning from your portfolio allocation - it is too easy to bury assumptions in there that work against your interests.
I think assuming tax rates remain the same means that the rates charged in each bracket are not changed around and that the cut points for the brackets don't change in real dollars (but are indexed with inflation). You are correct, of course, that the tax bracket one is in could be very different at different points in time.

User avatar
digarei
Posts: 759
Joined: Sat Jul 05, 2014 1:41 am
Location: Sacramento
Contact:

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

Post by digarei » Mon Jun 20, 2016 6:15 pm

ryman554 wrote:
digarei wrote: 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 ?
I 100% agree with this. Your nest egg needs to account for unfunded liabilities.
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.
I 100% disagree with this. Right idea, but wrong way to look at it. You will *always* need 25-33 x expenses. (gets less as you approach death, if you can predict that one 20 years out!) Expenses may grow or shrink over time. But if you are honest about your expenses -- and I mean *all* of your expenses, even the unplanned ones -- then the 3-4% *rule* will likely serve you well, no matter the retirement length.

Retiring at 40 means you don't get to rely on SS, so the "unfunded" expenses are larger, therefore the nest egg needs to be larger than somebody retiring with a pension and SS. That person simply needs 25-33x of a lesser amount.

So your message should read the early retiree needs to have a larger nest egg. That's because the unfunded liabilites are that much larger than the late retiree with pension income.
ryman554,

I just now read your response and think... you were right to disagree.

I should not have conflated the annual expense factor used for projecting "safe" withdrawals with the difficulty encountered in retiring early with too little money on the pile.

So, we'll axe the last six words:
  • 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.

Retire at age 40 with no anticipated income streams (and very low SS PIA) and you will need a lot more.
Good catch! :D

thanks, digarei
Connect with Bogleheads in Northern California! Click the link under my user info/avatar.

User avatar
jharkin
Posts: 1550
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

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

Post by jharkin » Tue Jun 21, 2016 4:49 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.
+1. The average family earns about50 k and would consider even 1mm manna from heaven. If you think millions are average you are living in a bubble.

User avatar
Toons
Posts: 12756
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

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

Post by Toons » Tue Jun 21, 2016 8:59 pm

jharkin wrote:
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.
+1. The average family earns about50 k and would consider even 1mm manna from heaven. If you think millions are average you are living in a bubble.

+1 :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

invst65
Posts: 576
Joined: Thu Nov 27, 2014 11:04 am

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

Post by invst65 » Tue Jun 21, 2016 10:09 pm

LarryAllen wrote:I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means.
That was meant as some kind of joke, right?

User avatar
jharkin
Posts: 1550
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

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

Post by jharkin » Wed Jun 22, 2016 6:35 am

Toons wrote:
jharkin wrote:
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.
+1. The average family earns about50 k and would consider even 1mm manna from heaven. If you think millions are average you are living in a bubble.

+1 :happy
And to add a more constructive answer, I ran the numbers for my wife and I and the number I'm targeting is 2mm + paid off house and kids college. Using conservative estimating (5% max stock returns, 3% SWR and SS only paying out 75% of expected) I still figure we can retire on this at 60 and live a top5% lifestyle indefinitely in Boston + leave a significant estate.

If thing go wrong and I get forced out of the work world at 1mm we will still live above average, just less vacations.


Of course these plans don't allow for his and hers S class' and a 5000sq ft beach house, but nobody actually NEEDS those.....

IlliniDave
Posts: 2272
Joined: Fri May 17, 2013 7:09 am

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

Post by IlliniDave » Wed Jun 22, 2016 7:53 am

The subject question is pretty open-ended. "Ideal" would presumably mean optimal for the retiree which is a hugely individual consideration. "Safe" is also relative, and difficult to quantify.

I can only speak for myself where 33X-40X expected average annual spending from assets during retirement (i.e., residual spending after SS, etc.) seems to balance my desires in the dimensions of retiring early (goal of NLT age 55), funding a content (on my terms) retirement lifestyle, feeling financially comfortable at/during retirement (SWAN), and eventual legacy goals.

I would think the range of 20X to 50X residual spending needs would cover most people, but that is a pretty wide range in dollars even for people like me that, relatively speaking, don't spend a whole lot of money.
Don't do something. Just stand there!

User avatar
Toons
Posts: 12756
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

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

Post by Toons » Wed Jun 22, 2016 1:26 pm

jharkin wrote:
Toons wrote:
jharkin wrote:
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.
+1. The average family earns about50 k and would consider even 1mm manna from heaven. If you think millions are average you are living in a bubble.

+1 :happy
And to add a more constructive answer, I ran the numbers for my wife and I and the number I'm targeting is 2mm + paid off house and kids college. Using conservative estimating (5% max stock returns, 3% SWR and SS only paying out 75% of expected) I still figure we can retire on this at 60 and live a top5% lifestyle indefinitely in Boston + leave a significant estate.

If thing go wrong and I get forced out of the work world at 1mm we will still live above average, just less vacations.


Of course these plans don't allow for his and hers S class' and a 5000sq ft beach house, but nobody actually NEEDS those.....

I like the numbers you "crunched' :thumbsup
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

ticker
Posts: 16
Joined: Mon Aug 04, 2014 6:08 pm

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

Post by ticker » Wed Jun 22, 2016 2:53 pm

$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:
LarryAllen wrote:I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means.
That was meant as some kind of joke, right?

User avatar
jharkin
Posts: 1550
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

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

Post by jharkin » Wed Jun 22, 2016 3:15 pm

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:
LarryAllen wrote:I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means.
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.

avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

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

Post by avalpert » Wed Jun 22, 2016 3:19 pm

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:
LarryAllen wrote:I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means.
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.

technovelist
Posts: 2917
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

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

Post by technovelist » Wed Jun 22, 2016 4:03 pm

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:
LarryAllen wrote:I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means.
That was meant as some kind of joke, right?
Pikers. I want $1 billion or I'm not retiring.
In theory, theory and practice are identical. In practice, they often differ.

User avatar
Johnnie
Posts: 494
Joined: Sat May 28, 2016 3:18 pm
Location: Michigan

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

Post by Johnnie » Wed Jun 22, 2016 6:31 pm

I smile because the lifestyle available in a sunny part of northern Michigan, say a nice Great Lakes waterfront home near a small city, can he had for the cost of a garage in the Bay area, literally. Two people there need no more than $40k-$50k a year to live a modest but comfortable life in that paid-off home. Every after-tax dollar added to that is vacation and luxury money.

So it's relative. :sharebeer


***
ETA,added to avoid 'jacking the thread and in response to the snow-phobics below, note that I specified a sunny part of the north - not one in the lee of one of the Lakes where indeed it snows practically every day. ;-)

Also, the "every dollar above that" basic-necessities amount is what pays for the three months on the beach in FL, Belize, Costa Rica, wherever!
Last edited by Johnnie on Thu Jun 23, 2016 8:21 am, edited 4 times in total.
"I know nothing."

technovelist
Posts: 2917
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

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

Post by technovelist » Thu Jun 23, 2016 5:46 am

Johnnie wrote:I smile because the lifestyle available in a sunny part of northern Michigan, say a nice Great Lakes waterfront home near a small city, can he had for the cost of a garage in the Bay area, literally. Two people there need no more than $40k-$50k a year to live a modest but comfortable life in that paid-off home. Every after-tax dollar added to that is vacation and luxury money.

So it's relative. :sharebeer
And the great thing is that since you can't leave the house for 6 months a year due to 100 feet of lake effect snow, you won't be able to spend much money on anything else either. Win-win! :moneybag
In theory, theory and practice are identical. In practice, they often differ.

User avatar
jharkin
Posts: 1550
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

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

Post by jharkin » Thu Jun 23, 2016 6:32 am

technovelist wrote:
Johnnie wrote:I smile because the lifestyle available in a sunny part of northern Michigan, say a nice Great Lakes waterfront home near a small city, can he had for the cost of a garage in the Bay area, literally. Two people there need no more than $40k-$50k a year to live a modest but comfortable life in that paid-off home. Every after-tax dollar added to that is vacation and luxury money.

So it's relative. :sharebeer
And the great thing is that since you can't leave the house for 6 months a year due to 100 feet of lake effect snow, you won't be able to spend much money on anything else either. Win-win! :moneybag
Wimps ;). All that snow is what skis and snowmobiles where made for.

User avatar
jose
Posts: 36
Joined: Thu Feb 05, 2015 3:19 pm

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

Post by jose » Thu Jun 23, 2016 7:01 am

The ideal net worth is... more than what you have. If you focus on that, you will never retire. That is the One More Year (OMY) syndrome.

Instead, focus on your ideal age of retirement. I think it is ideal to retire before 60. When you have the age, the what, and the who, and enough net worth, then you should retire.

Happiness is another story. The best predictor of a happy retirement is happiness at work.

Regarding risk, financial risk is negligible compared to the risk of death or disease. Is running out of retirement money at 80 or 85 really a failure, or pretty close to success?

1. When do you whant to retire and what do you want to do in retirement? You need a plan, a net worth is not a plan.
2. With who? That is important. Are they on board? How many people will you support?
3. Do you have enough for that? Use the 25X rule. Invest Boglehead. Enjoy.

jose
Last edited by jose on Thu Jun 23, 2016 7:28 am, edited 1 time in total.

qwertyjazz
Posts: 1048
Joined: Tue Feb 23, 2016 4:24 am

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

Post by qwertyjazz » Thu Jun 23, 2016 7:26 am

Interesting forum and I did not realize how much my mindset matches it for in some ways ill. Having left the pension system - if it ever existed for all and for more than a period of time - we need to know this in general. My response and others is very individualistic and personal spending based rather than what should a society provide for a retirement in safety and dignity - what is the ideal in that manner. Take a high spending number multiply it by 25 and add in medical expenses that only a few can afford. I am not sure I like myself right now. In a different mindset, this is a nontrivial important question that should be answered as a society.
G.E. Box "All models are wrong, but some are useful."

moghopper
Posts: 111
Joined: Fri Oct 18, 2013 10:07 am

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

Post by moghopper » Thu Jun 23, 2016 7:28 am

jose wrote:
Happiness is another story. The best predictor of a happy retirement is happiness at work.
Many of us assume that it is an inverse relationship.

User avatar
jose
Posts: 36
Joined: Thu Feb 05, 2015 3:19 pm

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

Post by jose » Thu Jun 23, 2016 7:40 am

moghopper wrote:
jose wrote:
Happiness is another story. The best predictor of a happy retirement is happiness at work.
Many of us assume that it is an inverse relationship.
I can be happiER in retirement, but if I am not happy before retirement, I am unlikely to be happy after retirement. Basic happiness comes from other places, not from retirement. I would say that retirement can make you perhaps 20% or 50% happier, but it will not do miracles.

jose

protagonist
Posts: 5257
Joined: Sun Dec 26, 2010 12:47 pm

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

Post by protagonist » Thu Jun 23, 2016 8:27 am

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.

Your expenses will likely drop precipitously when you retire. I am 64, retired at 55, and will not collect SS until age 70. I have had almost no income since I retired, other than interest, dividends and distributions. I travel to Europe and S America every year for long periods, I eat out a lot, and I am in NYC every other weekend. I live in a 4 br home in a college town in Massachusetts- not Boston, but still hardly what one would call a LCOL area. I don't deny myself anything I want and don't budget. I don't have a lot of material needs, but I live very well. Still, I am currently only spending maybe $10K/year more than what I will collect in social security starting age 70, if that much. I imagine if I was married and had double my projected SS benefits we could collectively live off that very comfortably with no savings. I could afford to spend much more, but I have no need or desire to do so. It would not buy me any more happiness. Barring financial collapse, my heirs will likely inherit a windfall.

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.

The moral of the story- don't worry so much. Be happy.

protagonist
Posts: 5257
Joined: Sun Dec 26, 2010 12:47 pm

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

Post by protagonist » Thu Jun 23, 2016 8:52 am

jose wrote:
Happiness is another story. The best predictor of a happy retirement is happiness at work.
That makes a tremendous amount of sense, and it probably has nothing to do with your work per se.

Most of happiness, I think, is probably genetic. You can't buy it and, though you can tweak it, you can't force it. Some people are just happy no matter what, and vice versa. Circumstances matter of course, but not nearly as much as one might think, and for most people not living under extreme circumstances, they are likely a minor factor.

Random Poster
Posts: 1624
Joined: Wed Feb 03, 2010 10:17 am

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

Post by Random Poster » Thu Jun 23, 2016 9:23 am

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.

SuzBanyan
Posts: 147
Joined: Thu Jun 02, 2016 11:20 am

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

Post by SuzBanyan » Thu Jun 23, 2016 10:01 am

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:
LarryAllen wrote:I think at $10m most people can find a "reasonable" lifestyle that they are comfortable with and live within their means.
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.

technovelist
Posts: 2917
Joined: Wed Dec 30, 2009 9:02 pm
Contact:

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

Post by technovelist » Thu Jun 23, 2016 10:09 am

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.

Your expenses will likely drop precipitously when you retire. I am 64, retired at 55, and will not collect SS until age 70. I have had almost no income since I retired, other than interest, dividends and distributions. I travel to Europe and S America every year for long periods, I eat out a lot, and I am in NYC every other weekend. I live in a 4 br home in a college town in Massachusetts- not Boston, but still hardly what one would call a LCOL area. I don't deny myself anything I want and don't budget. I don't have a lot of material needs, but I live very well. Still, I am currently only spending maybe $10K/year more than what I will collect in social security starting age 70, if that much. I imagine if I was married and had double my projected SS benefits we could collectively live off that very comfortably with no savings. I could afford to spend much more, but I have no need or desire to do so. It would not buy me any more happiness. Barring financial collapse, my heirs will likely inherit a windfall.

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.

The moral of the story- don't worry so much. Be happy.
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, but that is not always going to be the case...

Not that I think people should worry too much, but insufficient worry can also cause problems. See "The ant and the grasshopper" for details. :mrgreen:
In theory, theory and practice are identical. In practice, they often differ.

User avatar
HomerJ
Posts: 11206
Joined: Fri Jun 06, 2008 12:50 pm

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

Post by HomerJ » Thu Jun 23, 2016 10:12 am

technovelist wrote:
Johnnie wrote:I smile because the lifestyle available in a sunny part of northern Michigan, say a nice Great Lakes waterfront home near a small city, can he had for the cost of a garage in the Bay area, literally. Two people there need no more than $40k-$50k a year to live a modest but comfortable life in that paid-off home. Every after-tax dollar added to that is vacation and luxury money.

So it's relative. :sharebeer
And the great thing is that since you can't leave the house for 6 months a year due to 100 feet of lake effect snow, you won't be able to spend much money on anything else either. Win-win! :moneybag
You can also buy a lake-front home in a warm southern state for the same price as a garage in SF.

OR... live in Michigan, and with all the money you save, you can travel the world in the winter months.

My wife and I have a lake condo in Missouri.. Weather is very pleasant from April to October... We will enjoy the change of seasons in the fall, and the holidays (I LIKE the cold and snow in November and December - just makes everything seem Christmas), and then spend Janaury-March (by then I'm tired of cold and snow) renting a place in Belize or St. Thomas for a tiny fraction of the cost of living in SF.
Last edited by HomerJ on Thu Jun 23, 2016 10:27 am, edited 1 time in total.

User avatar
HomerJ
Posts: 11206
Joined: Fri Jun 06, 2008 12:50 pm

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

Post by HomerJ » Thu Jun 23, 2016 10:17 am

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.
If you have a time machine and can go back to 1980 and buy a house.

Joking aside... when did they buy those homes?

User avatar
bobcat2
Posts: 5177
Joined: Tue Feb 20, 2007 3:27 pm
Location: just barely Outside the Beltway

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

Post by bobcat2 » Thu Jun 23, 2016 10:32 am

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
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.

autolycus
Posts: 151
Joined: Thu Jul 31, 2014 3:01 pm

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

Post by autolycus » Thu Jun 23, 2016 10:40 am

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.

User avatar
Will do good
Posts: 641
Joined: Fri Feb 24, 2012 8:23 pm

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

Post by Will do good » Thu Jun 23, 2016 11:28 am

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.

Post Reply