If you were X years old, how much would you need to retire?

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Plz
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If you were X years old, how much would you need to retire?

Post by Plz » Thu Mar 14, 2019 11:44 pm

I see a few people who have made a killing on bitcoin and have retired at a young age. This got me thinking, how much, in dollars, not a multiple of annual expenses, would you need to retire at age 20? 30? 40? 50?

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leeks
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Re: If you were X years old, how much would you need to retire?

Post by leeks » Thu Mar 14, 2019 11:48 pm

It depends on how you want to live (ie expenses).
Indicate how much you would want to spend each year and you might get some responses.

DonIce
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Re: If you were X years old, how much would you need to retire?

Post by DonIce » Thu Mar 14, 2019 11:59 pm

Different people have very different ideas of what they want to spend annually which is why its usually expressed as a multiple of annual expenses. 33x annual expenses should usually be enough to have a portfolio that pays perpetually (no difference between age 30,40,50, etc) and probably still grows a bit even while you live off it. If your annual expenses are $50k, more than plenty if you're not in a high cost area, then that's $1.65 million.

LFS1234
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Re: If you were X years old, how much would you need to retire?

Post by LFS1234 » Fri Mar 15, 2019 4:34 am

Plz wrote:
Thu Mar 14, 2019 11:44 pm
This got me thinking, how much, in dollars, not a multiple of annual expenses, would you need to retire at age 20? 30? 40? 50?
Are you financially literate and do you have self-discipline? If the answer is yes on the first count, then you could calculate the answer yourself, and it would have to depend on your expected annual expenses. Some people can live on $20K/year and some people (think they) cannot live on $200K/year. In order not to spend down your assets any quicker than your finances will permit, self-discipline is required in addition to the financial literacy.

You can outsource the financial literacy, but it is generally expensive to do so. A typical way of outsourcing the self-discipline is to put everything in an irrevocable trust, irrevocably agreeing for the trustees to set your allowance. These trust arrangements are expensive, but if someone gives you $10M and you really want to have it last your whole life without being financially literate or having self-discipline, then this would be a way to do it.

Few 20 - 30 year olds have the required self-discipline, partly because 20-year olds aren't wired that way, and partly because the general practice in our society is to spend approximately what we earn - people typically spend somewhere between 90% and over 100% of their income. So the person earning $20K will be frugal because they have no choice, and the person earning $200K may spend $160K/yr and save $40K/yr for retirement. The typical result of a young person receiving a windfall is that they'll spend a significant percentage of it right away (nice car, nice home) and spend the rest of it within 3 - 10 years, necessitating starting over at that point. The good news is, if you retired at 20, you can unretire at 30 and still have lots of time and energy left for a productive and successful career. You will, however, be behind your peers if you made no productive use of your first decade of adult life.

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HomerJ
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Re: If you were X years old, how much would you need to retire?

Post by HomerJ » Fri Mar 15, 2019 5:12 am

Plz wrote:
Thu Mar 14, 2019 11:44 pm
I see a few people who have made a killing on bitcoin and have retired at a young age. This got me thinking, how much, in dollars, not a multiple of annual expenses, would you need to retire at age 20? 30? 40? 50?
Multiple of expenses is more useful because it can apply more generally to everyone.

Just throwing out a number is mostly meaningless, since we all have different expenses.

It is a good question to talk about age however.

The general "rule of thumb" of 25x expenses was generated for 30-year retirements... i.e. someone retiring in their 60s.

If you're 50, you'd want more, and if you're 40, you'd definitely want more.
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snowox
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Re: If you were X years old, how much would you need to retire?

Post by snowox » Fri Mar 15, 2019 5:50 am

For me I wanted to retire after taxes from my withdrawals at 50 with 100k for expenses and zero debt based on a 4% withdrawal and a 10% cushion above that. Running all the numbers through multiple calculators with no less than a 90% success. So if you do the math you could probably come close to what I retired at 50 on. Again, I do not however include my paid for house, HSA , 529s etc..for my own personal reasons pretty much being its either money that I know is spent and or I will need a place to live no matter what so I always err on the conservative side.

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Re: If you were X years old, how much would you need to retire?

Post by RickBoglehead » Fri Mar 15, 2019 5:58 am

Many are clueless of the cost of medical care. We are ready to retire, but need to wait 2 years to get medical benefits far less expensively than we could obtain on our own. $1,500 per month until Medicare, $500 per month after Medicare, including prescriptions, for two people.
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Re: If you were X years old, how much would you need to retire?

Post by core4portfolio » Fri Mar 15, 2019 7:28 am

DonIce wrote:
Thu Mar 14, 2019 11:59 pm
Different people have very different ideas of what they want to spend annually which is why its usually expressed as a multiple of annual expenses. 33x annual expenses should usually be enough to have a portfolio that pays perpetually (no difference between age 30,40,50, etc) and probably still grows a bit even while you live off it. If your annual expenses are $50k, more than plenty if you're not in a high cost area, then that's $1.65 million.
Thanks for the example. 50k example fit my needs exactly. I dont get when i will reach 1.65M
If i max out 401k -18k, roth -11k, hsa-6k
I wonder how many years it will take for me to reach 1.65M if my balance is 250k now ??
Even though i know the end number, I may not able to know when i reach that number.
I google and come across this
https://www.daveramsey.com/smartvestor/ ... calculator

But i still dont know whats percentage of SP 500 return to reach that magic number
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MJS
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Re: If you were X years old, how much would you need to retire?

Post by MJS » Fri Mar 15, 2019 1:20 pm

Plz wrote:
Thu Mar 14, 2019 11:44 pm
I see a few people who have made a killing on bitcoin and have retired at a young age. This got me thinking, how much, in dollars, not a multiple of annual expenses, would you need to retire at age 20? 30? 40? 50?
According to Suze Orman (a respected personal finance guru,) you need a minimum of $5,000,000. Seven million would probably be better at age 20.
https://www.marketwatch.com/story/these ... 2018-10-15

Quirkz
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Re: If you were X years old, how much would you need to retire?

Post by Quirkz » Fri Mar 15, 2019 2:19 pm

core4portfolio wrote:
Fri Mar 15, 2019 7:28 am

Thanks for the example. 50k example fit my needs exactly. I dont get when i will reach 1.65M
If i max out 401k -18k, roth -11k, hsa-6k
I wonder how many years it will take for me to reach 1.65M if my balance is 250k now ??
Well, the short answer is, you can't know when you'll get there until you get there. Any calculator is a guess, based on imaginary future gains.

The best you can do is look at a range of possible returns and see what might happen, and any calculator should let you do that. Plug in 250,000 for the starting amount, 29,000 for the annual contribution (I don't count HSA as retirement money), and then see what happens when you change the returns rate.

At 6% gains, it might take you 18 years. At 8% gains, it could be 16 years. With 5% gains it could be 20 years.

Of course that's excluding inflation - 1.6 million in 20 years won't be worth as much, so you might be spending more. On the other hand, you might be able to contribute more per year between now and then.

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Re: If you were X years old, how much would you need to retire?

Post by radiowave » Fri Mar 15, 2019 3:23 pm

OP, try Firecalc: https://firecalc.com/ . You can put in as many different assumptions as you like and see the effects into the future. Try some absurd scenarios to see how fast you can crash a portfolio. This is just a simulation so YMMV, but it does help looking at long range projections like you are asking.
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jdilla1107
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Re: If you were X years old, how much would you need to retire?

Post by jdilla1107 » Fri Mar 15, 2019 3:42 pm

I have found this to be very useful:

https://earlyretirementnow.com/2016/12/ ... t-1-intro/

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Re: If you were X years old, how much would you need to retire?

Post by LadyGeek » Fri Mar 15, 2019 3:44 pm

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
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Re: If you were X years old, how much would you need to retire?

Post by KyleAAA » Fri Mar 15, 2019 4:00 pm

Realistically, 3.25% is just about the floor regardless of how long you need the money to last and even assuming an unfavorable sequence of returns. If you want to be extra conservative, 3% wouldn't be unreasonable. So anywhere in the 30-33.3x range should do it. If you have a lot of flexibility in your budget to reduce spending (by say, at least 40% or so) should you get a bad sequence of returns, 25x is probably fine. Since you can't actually predict your expenses accurately more than a few years out (what will healthcare cost in 15 years???), trying to put too fine a point on it is probably a mistake. I intend to include at least a 20% fudge factor in my expected expenses and go from there. Plus, my budget will include plenty of "luxury" spending I could cut if I needed, so I have two levels of safety.

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Re: If you were X years old, how much would you need to retire?

Post by HomerJ » Fri Mar 15, 2019 8:33 pm

KyleAAA wrote:
Fri Mar 15, 2019 4:00 pm
I intend to include at least a 20% fudge factor in my expected expenses and go from there. Plus, my budget will include plenty of "luxury" spending I could cut if I needed, so I have two levels of safety.
Me too, and I own two homes, so I could always sell one (probably will WANT to as I get older), so I have three levels of safety.
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JGoneRiding
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Re: If you were X years old, how much would you need to retire?

Post by JGoneRiding » Fri Mar 15, 2019 10:15 pm

For.us i have determined 1.5 to 1.8 mil any time after 55 WITH a paid for house should be sufficient. Before that age would need to be 2.5 mil to 3

core4portfolio
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Re: If you were X years old, how much would you need to retire?

Post by core4portfolio » Fri Mar 15, 2019 10:29 pm

Quirkz wrote:
Fri Mar 15, 2019 2:19 pm
core4portfolio wrote:
Fri Mar 15, 2019 7:28 am

Thanks for the example. 50k example fit my needs exactly. I dont get when i will reach 1.65M
If i max out 401k -18k, roth -11k, hsa-6k
I wonder how many years it will take for me to reach 1.65M if my balance is 250k now ??
Well, the short answer is, you can't know when you'll get there until you get there. Any calculator is a guess, based on imaginary future gains.

The best you can do is look at a range of possible returns and see what might happen, and any calculator should let you do that. Plug in 250,000 for the starting amount, 29,000 for the annual contribution (I don't count HSA as retirement money), and then see what happens when you change the returns rate.

At 6% gains, it might take you 18 years. At 8% gains, it could be 16 years. With 5% gains it could be 20 years.

Of course that's excluding inflation - 1.6 million in 20 years won't be worth as much, so you might be spending more. On the other hand, you might be able to contribute more per year between now and then.
I believed 6% gain is nominal and 18 years is what iam also planning.. otherwise have to move to some other country with low cost...
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Re: If you were X years old, how much would you need to retire?

Post by Clever_Username » Sat Mar 16, 2019 12:49 am

Are we talking retire early or recreational employment?

It also depends how much of it is in various forms of access, as taxes are very different in different scenarios.
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Re: If you were X years old, how much would you need to retire?

Post by Jags4186 » Sat Mar 16, 2019 6:24 am

Plz wrote:
Thu Mar 14, 2019 11:44 pm
I see a few people who have made a killing on bitcoin and have retired at a young age. This got me thinking, how much, in dollars, not a multiple of annual expenses, would you need to retire at age 20? 30? 40? 50?
I’m going to go out on a limb and say young people who made a killing on Bitcoin are more likely than not to blow through their money and need to work at some point. They’re basically lottery winners.

ohai
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Re: If you were X years old, how much would you need to retire?

Post by ohai » Sat Mar 16, 2019 6:31 am

Also, Bitcoin is $3800 now, not $19,000. A lot of those big winners are now somewhat smaller winners and some became losers.

I know one guy who bought 1 million shares of Ripple at like 0.001 cents, or whatever low value - basically zero. It went to like $3.70 or whatever. So, he had $3.7 million on paper, did not sell. Now, each unit is worth $0.32. So, he still made $300k+, but early retirement is gone.

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Re: If you were X years old, how much would you need to retire?

Post by Stormbringer » Sat Mar 16, 2019 8:02 am

Plz wrote:
Thu Mar 14, 2019 11:44 pm
I see a few people who have made a killing on bitcoin and have retired at a young age. This got me thinking, how much, in dollars, not a multiple of annual expenses, would you need to retire at age 20? 30? 40? 50?
Out of curiosity, I checked what an inflation-adjusted $60,000 per year single-life annuity for a single male at various ages would cost:

Code: Select all

Age	 Amount 	Payout Ratio
20	 $3,083,036 	1.95%
30	 $2,723,027 	2.20%
40	 $2,326,014 	2.58%
50	 $1,891,420 	3.17%
60	 $1,472,451 	4.07%
70	 $1,048,262 	5.72%
Interestingly, it starts to outperform the 4% SWR at about age 60 in terms of the size of the portfolio needed to generate the required income (assuming no need for bequests).
"Compound interest is the most powerful force in the universe." - Albert Einstein

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Re: If you were X years old, how much would you need to retire?

Post by Green Street » Sat Mar 16, 2019 8:39 am

For me, at 41 I’ll need 2.25M to retire, could do it on less but I like traveling.
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