Do you really need 2.5 million to retire well?

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mikegerard
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Re: Do you really need 2.5 million to retire well?

Post by mikegerard » Thu Mar 12, 2015 8:20 am

invst65 wrote:According to CNN Money there are only 1.8 million Americans in the U.S. with a net worth over 2 million and the median family net worth of those age 65-74 is $206k.

So if it really takes 2.5 million to retire well I guess not very many will be doing it.
Almost no retired people have 2.5 million...somehow they are getting by.

I agree it's a good goal and it's close to my target but the average person gets by on far less. It all depends on what your definition of retire "well" is.

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Re: Do you really need 2.5 million to retire well?

Post by goodenyou » Thu Mar 12, 2015 8:22 am

Asked another way, "does a $2.5 million nest-egg AND any pension/SS, re-create your current lifestyle in retirement, OR will your quality of life decrease or increase with $2.5 million and pension/SS?" The definition of "well" is only relative to how you are currently living your life. Whether or not $2.5 million is more than most will ever have is irrelevant.
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Re: Do you really need 2.5 million to retire well?

Post by Gropes & Ray » Thu Mar 12, 2015 8:28 am

1210sda wrote:"Average age: 58; Average Savings in Retirement Plan: $385,000 "
Starting with $385,000 at age 58, adding $18,000/year into a 401k, with social security paying about $50k (for a married couple) starting at 65, Firecalc says they make it to age 90 with a 100% success rate if their spending is an inflation adjusted $70k. Spending $80k has about an 86% success rate to age 90. Spending $140k has a 0% success rate.

I think what you're hoping to spend in retirement dictates the amount you actually need. If our hypothetical 58 year old is making $100k, he's just fine. If he makes $200k, he might be in trouble.

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Re: Do you really need 2.5 million to retire well?

Post by goodenyou » Thu Mar 12, 2015 8:36 am

Gropes & Ray wrote:
1210sda wrote:"Average age: 58; Average Savings in Retirement Plan: $385,000 "
Starting with $385,000 at age 58, adding $18,000/year into a 401k, with social security paying about $50k (for a married couple) starting at 65, Firecalc says they make it to age 90 with a 100% success rate if their spending is an inflation adjusted $70k. Spending $80k has about an 86% success rate to age 90. Spending $140k has a 0% success rate.

I think what you're hoping to spend in retirement dictates the amount you actually need. If our hypothetical 58 year old is making $100k, he's just fine. If he makes $200k, he might be in trouble.
He should also be saving $24,000/year in his 401(k), since he is eligible, if he can afford it. He would be even better off.
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Re: Do you really need 2.5 million to retire well?

Post by VictoriaF » Thu Mar 12, 2015 8:40 am

mikegerard wrote:
invst65 wrote:According to CNN Money there are only 1.8 million Americans in the U.S. with a net worth over 2 million and the median family net worth of those age 65-74 is $206k.
Almost no retired people have 2.5 million...somehow they are getting by.

I agree it's a good goal and it's close to my target but the average person gets by on far less. It all depends on what your definition of retire "well" is.
My definition of "retire well" is to live in a major metropolitan area, which is necessarily a high cost of living (HCOL) area. Living well also means that I don't want to have the responsibilities and financial rewards of owning my home. Thus, I need greater assets than a typical retiree living in a paid off house in a LCOL area.

Victoria
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Re: Do you really need 2.5 million to retire well?

Post by Gropes & Ray » Thu Mar 12, 2015 8:43 am

Sure, $24,000 would be even better, and would train him to spend less in retirement. I was just picking 18% of his hypothetical $100k income, but 24% seems doable with children out of the house and no mortgage.

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TheTimeLord
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Re: Do you really need 2.5 million to retire well?

Post by TheTimeLord » Thu Mar 12, 2015 8:49 am

I am surprised by the number of people who are comfortable that they can live well on $50,000/yr. Granted the definition of well is a bit squishy but after all the I have $3 million in investable assets threads these responses were unexpected.
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Re: Do you really need 2.5 million to retire well?

Post by midareff » Thu Mar 12, 2015 8:49 am

HomerJ wrote:Even moderate to high earners don't need that much... Here's the example I often use...

$100k family
saves $10k a year
pays $24k a year on a mortgage
pays $6k in payroll taxes

really living on $60k a year...

In retirement, you won't need to save, pay a mortgage, or pay payroll taxes, so there's 40 THOUSAND DOLLARS a year you don't need to generate.

A $100k income family will probably get $30k a year in SS (assuming two spouses)...

So their investments need to generate the other $30k... So "only" $750k is needed. And that gives them the exact same lifestyle as they had while working making $100k a year (which is a pretty nice lifestyle in most of this country)

Now, most of us want a cushion... Health care costs are always a concern... So we shoot for more...

But I could easily retire on a million and a paid off house... I will admit I am shooting for 2 million and a paid-off house, so I have a great cushion, and the wife will be happier with a few more luxuries (mostly more trips for vacations or to visit children/grandchildren)

Homer has it right AFAIK. When I was getting close to retirement (3 years ago) I kept doing the math. Annual less deferred compensation, less Roth contribution, less taxable savings....... when it became clear I would be retiring on much more than my working net it was time to go.

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Re: Do you really need 2.5 million to retire well?

Post by goodenyou » Thu Mar 12, 2015 8:52 am

VictoriaF wrote:
mikegerard wrote:
invst65 wrote:According to CNN Money there are only 1.8 million Americans in the U.S. with a net worth over 2 million and the median family net worth of those age 65-74 is $206k.
Almost no retired people have 2.5 million...somehow they are getting by.

I agree it's a good goal and it's close to my target but the average person gets by on far less. It all depends on what your definition of retire "well" is.
My definition of "retire well" is to live in a major metropolitan area, which is necessarily a high cost of living (HCOL) area. Living well also means that I don't want to have the responsibilities and financial rewards of owning my home. Thus, I need greater assets than a typical retiree living in a paid off house in a LCOL area.

Victoria
Not unless the retiree was living in a LCOL area traveling to the major metropolitan area by plane or in his/her Porsche to have expensive dinners and staying in 5-star hotels. Again, it is a matter of choice/priority and definition of "well".
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TheTimeLord
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Re: Do you really need 2.5 million to retire well?

Post by TheTimeLord » Thu Mar 12, 2015 8:53 am

HomerJ wrote:But I could easily retire on a million and a paid off house... I will admit I am shooting for 2 million and a paid-off house, so I have a great cushion, and the wife will be happier with a few more luxuries (mostly more trips for vacations or to visit children/grandchildren)
Would you really be "living well" without the vacation and visits to grandkids?
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Re: Do you really need 2.5 million to retire well?

Post by GoldenFinch » Thu Mar 12, 2015 9:01 am

VictoriaF wrote:
mikegerard wrote:
invst65 wrote:According to CNN Money there are only 1.8 million Americans in the U.S. with a net worth over 2 million and the median family net worth of those age 65-74 is $206k.
Almost no retired people have 2.5 million...somehow they are getting by.

I agree it's a good goal and it's close to my target but the average person gets by on far less. It all depends on what your definition of retire "well" is.
My definition of "retire well" is to live in a major metropolitan area, which is necessarily a high cost of living (HCOL) area. Living well also means that I don't want to have the responsibilities and financial rewards of owning my home. Thus, I need greater assets than a typical retiree living in a paid off house in a LCOL area.

Victoria
"My definition....." Exactly! How could there possibly be anything other than "my definition?" The number needed is completely individualized. Lifestyle has absolutely everything to do with one's number after necessities (including good insurance) are taken into account. Obviously no one NEEDS 2.5 million to retire.

Maybe the question to ask is, "How badly do you WANT to retire with 2.5 million?" Or, "How will retiring with less than 2.5 million reduce your quality of life?"

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Re: Do you really need 2.5 million to retire well?

Post by markcoop » Thu Mar 12, 2015 9:41 am

I personally believe people should have 2 numbers. The first number is the minimum they want to retire with. This amount should be enough to be ok in retirement. The second number should be the amount you really want to retire with. This amount will be enough to do just about everything you want to do in retirement with a buffer. Once you reach the first number, I believe that money should be invested conservatively. Once you reach the second number, if you choose, you are all set to retire. I would think one number may be almost be double the other number. So, perhaps $1 mil for the first and $1.75 mil for the second. For others, maybe $2 mil for the first and maybe $3.5 mil for the second number.
Mark

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Re: Do you really need 2.5 million to retire well?

Post by HomerJ » Thu Mar 12, 2015 9:41 am

TheTimeLord wrote:
HomerJ wrote:But I could easily retire on a million and a paid off house... I will admit I am shooting for 2 million and a paid-off house, so I have a great cushion, and the wife will be happier with a few more luxuries (mostly more trips for vacations or to visit children/grandchildren)
Would you really be "living well" without the vacation and visits to grandkids?
We would still be living at the lake with our boat and jetskis... so they can come visit us... :)

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Re: Do you really need 2.5 million to retire well?

Post by TheTimeLord » Thu Mar 12, 2015 9:43 am

markcoop wrote:Once you reach the first number, I believe that money should be invested conservatively.
Why conservatively after you reach the first number? Seems you would be in a better position to handle risk.
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VictoriaF
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Re: Do you really need 2.5 million to retire well?

Post by VictoriaF » Thu Mar 12, 2015 9:45 am

goodenyou wrote:
VictoriaF wrote:
mikegerard wrote:
invst65 wrote:According to CNN Money there are only 1.8 million Americans in the U.S. with a net worth over 2 million and the median family net worth of those age 65-74 is $206k.
Almost no retired people have 2.5 million...somehow they are getting by.

I agree it's a good goal and it's close to my target but the average person gets by on far less. It all depends on what your definition of retire "well" is.
My definition of "retire well" is to live in a major metropolitan area, which is necessarily a high cost of living (HCOL) area. Living well also means that I don't want to have the responsibilities and financial rewards of owning my home. Thus, I need greater assets than a typical retiree living in a paid off house in a LCOL area.

Victoria
Not unless the retiree was living in a LCOL area traveling to the major metropolitan area by plane or in his/her Porsche to have expensive dinners and staying in 5-star hotels.
I don't understand this sentence and particularly the meaning of "Not."
goodenyou wrote:Again, it is a matter of choice/priority and definition of "well".
I described why my "well" requires more assets than average retiree "well." Your "well" with a Porsche, hotels and dinners also requires higher than average retirement assets.

Victoria
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Re: Do you really need 2.5 million to retire well?

Post by GoldenFinch » Thu Mar 12, 2015 9:52 am

markcoop wrote:I personally believe people should have 2 numbers. The first number is the minimum they want to retire with. This amount should be enough to be ok in retirement. The second number should be the amount you really want to retire with. This amount will be enough to do just about everything you want to do in retirement with a buffer. Once you reach the first number, I believe that money should be invested conservatively. Once you reach the second number, if you choose, you are all set to retire. I would think one number may be almost be double the other number. So, perhaps $1 mil for the first and $1.75 mil for the second. For others, maybe $2 mil for the first and maybe $3.5 mil for the second number.
So a "live well enough" number and a "live really well" number. :happy

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Re: Do you really need 2.5 million to retire well?

Post by markcoop » Thu Mar 12, 2015 9:53 am

TheTimeLord wrote:
markcoop wrote:you reach the first number, I believe that money should be invested conservatively.
Why conservatively after you reach the first number? Seems you would be in a better position to handle risk.
Why risk this amount when it is your min goal to retire. If you lose that money, you may not be able to retire. Having said that, conservatively does not mean don't invest it at all. Maybe that money is invested 20%-30% in stocks. Any future money can be invested aggressively to reach the second goal.

The two goal idea was the main idea of my post. What you do at the first goal I imagine would change from person to person.
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Re: Do you really need 2.5 million to retire well?

Post by S&L1940 » Thu Mar 12, 2015 9:54 am

kDictavissent wrote: To me, this is a fairly interesting question with fairly horrifying implications, if true.
76+74, we certainly hope it is not true; 20 more years to go and feeling we may actually make it without missing much of the good life we enjoy. of course it depends on what lifestyle you had before retirement. then, $2.5 may not be even close enough!
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Re: Do you really need 2.5 million to retire well?

Post by Caduceus » Thu Mar 12, 2015 9:55 am

Money is not the only axis. You need time to spend your money too. I think you have to figure out the balance between the likelihood of running out of money, or running out of time.

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Re: Do you really need 2.5 million to retire well?

Post by TheTimeLord » Thu Mar 12, 2015 9:59 am

markcoop wrote:
TheTimeLord wrote:
markcoop wrote:you reach the first number, I believe that money should be invested conservatively.
Why conservatively after you reach the first number? Seems you would be in a better position to handle risk.
Why risk this amount when it is your min goal to retire. If you lose that money, you may not be able to retire. Having said that, conservatively does not mean don't invest it at all. Maybe that money is invested 20%-30% in stocks. Any future money can be invested aggressively to reach the second goal.

The two goal idea was the main idea of my post. What you do at the first goal I imagine would change from person to person.
I think I misunderstood your original statement.
markcoop wrote:Once you reach the first number, I believe that money should be invested conservatively.
I took it to mean once you reached the minimum number then that money invested after that should be invested conservatively not that the minimum retired amount should be invested conservatively which I would definitely agree with.
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Re: Do you really need 2.5 million to retire well?

Post by VictoriaF » Thu Mar 12, 2015 9:59 am

Caduceus wrote:Money is not the only axis. You need time to spend your money too. I think you have to figure out the balance between the likelihood of running out of money, or running out of time.
It's a good point. Furthermore, the longer one works, the shorter his or her total lifespan becomes, because most jobs are fundamentally unhealthy.

Victoria
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Re: Do you really need 2.5 million to retire well?

Post by HomerJ » Thu Mar 12, 2015 10:03 am

Caduceus wrote:Money is not the only axis. You need time to spend your money too. I think you have to figure out the balance between the likelihood of running out of money, or running out of time.
This. Living well also includes having TIME to do the things you love.

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Re: Do you really need 2.5 million to retire well?

Post by markcoop » Thu Mar 12, 2015 10:04 am

GoldenFinch wrote:
markcoop wrote:I personally believe people should have 2 numbers. The first number is the minimum they want to retire with. This amount should be enough to be ok in retirement. The second number should be the amount you really want to retire with. This amount will be enough to do just about everything you want to do in retirement with a buffer. Once you reach the first number, I believe that money should be invested conservatively. Once you reach the second number, if you choose, you are all set to retire. I would think one number may be almost be double the other number. So, perhaps $1 mil for the first and $1.75 mil for the second. For others, maybe $2 mil for the first and maybe $3.5 mil for the second number.
So a "live well enough" number and a "live really well" number. :happy
Right.

For myself, I track both numbers. At age 49, I currently have 85% of my first goal and about 45% of my second goal. By my projections, I will hit my first goal at age 55 and the second goal at age 64. I'm hoping to retire, or at least slow down work, the year I hit 59.5. It may take a stock market run or something else. We'll see.
Mark

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Re: Do you really need 2.5 million to retire well?

Post by TheTimeLord » Thu Mar 12, 2015 10:06 am

VictoriaF wrote:
Caduceus wrote:Money is not the only axis. You need time to spend your money too. I think you have to figure out the balance between the likelihood of running out of money, or running out of time.
It's a good point. Furthermore, the longer one works, the shorter his or her total lifespan becomes, because most jobs are fundamentally unhealthy.

Victoria
I thought it was pretty well accepted that people who work longer tended to live longer because it gave their life purpose. Now that may not translate into a longer retirement but a longer life. My guess is your level of engagement in retirement plays into this heavily too.

http://www.cbsnews.com/news/does-workin ... -lifespan/
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Re: Do you really need 2.5 million to retire well?

Post by VictoriaF » Thu Mar 12, 2015 10:22 am

TheTimeLord wrote:
VictoriaF wrote:
Caduceus wrote:Money is not the only axis. You need time to spend your money too. I think you have to figure out the balance between the likelihood of running out of money, or running out of time.
It's a good point. Furthermore, the longer one works, the shorter his or her total lifespan becomes, because most jobs are fundamentally unhealthy.

Victoria
I thought it was pretty well accepted that people who work longer tended to live longer because it gave their life purpose. Now that may not translate into a longer retirement but a longer life. My guess is your level of engagement in retirement plays into this heavily too.

http://www.cbsnews.com/news/does-workin ... -lifespan/
I am referring to the negative physical effects of employment as follows:
- Typical office work involves a lot of sitting, which was shown to shorten one's lifespan.
- Most employees below executive level do not have window offices and thus have limited access to daylight.
- Ever more people work around the clock and are always connected, which increases stress.
- Many employees don't get sufficient sleep.
- Many employees have a stressful commute.

Life's purpose is important for one's well-being and longevity, but in my opinion, it's easier to find this purpose outside the constraints of employment, when one can control his or her goals, tasks, calendar, and location.

Victoria
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Re: Do you really need 2.5 million to retire well?

Post by HomerJ » Thu Mar 12, 2015 10:25 am

TheTimeLord wrote:I am surprised by the number of people who are comfortable that they can live well on $50,000/yr. Granted the definition of well is a bit squishy but after all the I have $3 million in investable assets threads these responses were unexpected.
Like others have said, it all depends on the individual.

If we retired to our lake condo in the Mid-west, we could easily live on $50k a year...

Property taxes, insurance, HOA fees, and utilities last year cost us $7k total... If we lived there year-round, expect the utilities to jump, and maybe the total would be $10k a year.

Then we need food... That's another $10k a year...

So for $20k a year, we have comfortable heated and cooled housing with a beautiful view, TV, Internet, library, great walking trails, a pool, workout room...

Throw in another $5k a year to pay for gadgets, another $10k a year for car and boat stuff (gas, taxes, maintenance, insurance), and another $5k for misc housing stuff.

Now we're up to $40k... Heck, Social Security for the two of us will almost cover all that...

Still have to worry about health care, travel, gifts, etc. but I think $50k would give us a good life. $50k plus $35k SS would give us a great life. Having the paid-off condo is key of course.

Now, we'd LIKE to spend our winter months elsewhere... like 3 months a year renting in Florida or Belize or something... So that's why I want MORE... But I certainly wouldn't be unhappy retiring on $50k...

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Re: Do you really need 2.5 million to retire well?

Post by HomerJ » Thu Mar 12, 2015 10:26 am

VictoriaF wrote:
TheTimeLord wrote:
VictoriaF wrote:
Caduceus wrote:Money is not the only axis. You need time to spend your money too. I think you have to figure out the balance between the likelihood of running out of money, or running out of time.
It's a good point. Furthermore, the longer one works, the shorter his or her total lifespan becomes, because most jobs are fundamentally unhealthy.

Victoria
I thought it was pretty well accepted that people who work longer tended to live longer because it gave their life purpose. Now that may not translate into a longer retirement but a longer life. My guess is your level of engagement in retirement plays into this heavily too.

http://www.cbsnews.com/news/does-workin ... -lifespan/
I am referring to the negative physical effects of employment as follows:
- Typical office work involves a lot of sitting, which was shown to shorten one's lifespan.
- Most employees below executive level do not have window offices and thus have limited access to daylight.
- Ever more people work around the clock and are always connected, which increases stress.
- Many employees don't get sufficient sleep.
- Many employees have a stressful commute.

Life's purpose is important for one's well-being and longevity, but in my opinion, it's easier to find this purpose outside the constraints of employment, when one can control his or her goals, tasks, calendar, and location.

Victoria
All good points... I know I would be a lot healthier if I was retired... Easy to work out 2 hours a day when you have nothing to do and all day to do it. And I could definitely use more sleep.
Last edited by HomerJ on Thu Mar 12, 2015 10:46 am, edited 1 time in total.

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Re: Do you really need 2.5 million to retire well?

Post by cusetownusa » Thu Mar 12, 2015 10:26 am

TheTimeLord wrote:
VictoriaF wrote:
Caduceus wrote:Money is not the only axis. You need time to spend your money too. I think you have to figure out the balance between the likelihood of running out of money, or running out of time.
It's a good point. Furthermore, the longer one works, the shorter his or her total lifespan becomes, because most jobs are fundamentally unhealthy.

Victoria
I thought it was pretty well accepted that people who work longer tended to live longer because it gave their life purpose. Now that may not translate into a longer retirement but a longer life. My guess is your level of engagement in retirement plays into this heavily too.

http://www.cbsnews.com/news/does-workin ... -lifespan/
I don't think this thought is well accepted. That article that you attached does not prove it either. Classic case of confusing correlation with causation.

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Re: Do you really need 2.5 million to retire well?

Post by larsm » Thu Mar 12, 2015 10:41 am

VictoriaF wrote: My definition of "retire well" is to live in a major metropolitan area, which is necessarily a high cost of living (HCOL) area. Living well also means that I don't want to have the responsibilities and financial rewards of owning my home. Thus, I need greater assets than a typical retiree living in a paid off house in a LCOL area.

Victoria
Not to hijack thread, but curious, Victoria, how much "more" do you think you need (% wise) to insulate you from risk of renting (and thus not having responsibilities of home ownership) versus owning. I agree wholeheartedly that renting is far less stressful than home ownership with one big exception: and that is future cost. By not owning you are not hedged for "roof over your head" expense. This is particularly worrisome to me in the current environment where inflation may (will) return with a vengeance thus potentially causing substantial rental increases.

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Re: Do you really need 2.5 million to retire well?

Post by TheTimeLord » Thu Mar 12, 2015 10:41 am

cusetownusa wrote:
TheTimeLord wrote:
VictoriaF wrote:
Caduceus wrote:Money is not the only axis. You need time to spend your money too. I think you have to figure out the balance between the likelihood of running out of money, or running out of time.
It's a good point. Furthermore, the longer one works, the shorter his or her total lifespan becomes, because most jobs are fundamentally unhealthy.

Victoria
I thought it was pretty well accepted that people who work longer tended to live longer because it gave their life purpose. Now that may not translate into a longer retirement but a longer life. My guess is your level of engagement in retirement plays into this heavily too.

http://www.cbsnews.com/news/does-workin ... -lifespan/
I don't think this thought is well accepted. That article that you attached does not prove it either. Classic case of confusing correlation with causation.
http://www.independent.co.uk/life-style ... 18317.html#
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VictoriaF
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Re: Do you really need 2.5 million to retire well?

Post by VictoriaF » Thu Mar 12, 2015 11:06 am

larsm wrote:
VictoriaF wrote: My definition of "retire well" is to live in a major metropolitan area, which is necessarily a high cost of living (HCOL) area. Living well also means that I don't want to have the responsibilities and financial rewards of owning my home. Thus, I need greater assets than a typical retiree living in a paid off house in a LCOL area.

Victoria
Not to hijack thread, but curious, Victoria, how much "more" do you think you need (% wise) to insulate you from risk of renting (and thus not having responsibilities of home ownership) versus owning. I agree wholeheartedly that renting is far less stressful than home ownership with one big exception: and that is future cost. By not owning you are not hedged for "roof over your head" expense. This is particularly worrisome to me in the current environment where inflation may (will) return with a vengeance thus potentially causing substantial rental increases.
I did not calculate the metropolitan renting cushion. The bottleneck of my retirement was not income and assets but the eligibility for a health insurance in retirement. By my calculations, I expect to able to rent forever.

Furthermore, as you pointed out, rent is tied to inflation, and so are my future Social Security, one of my pensions, and my annual I Bond purchases. As my rent will be rising, my ability to pay it out of my annual income will be rising in parallel, independently from the performance of my assets.

Victoria
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frugalecon
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Re: Do you really need 2.5 million to retire well?

Post by frugalecon » Thu Mar 12, 2015 11:30 am

I don't anticipate "needing" $2.5 million, but that is approximately my goal. It is calculated as the amount where our income will be approximately the same in retirement, taking account of pensions, SS, and a SWR of about 3%. Income will be the same as it is now net of taxes and saving, but not net of the mortgage, which will be gone by then. That is a cautious goal, but it gives a significant buffer for the unexpected, as well as the opportunity to do fun things if things turn out as expected. My parents currently live a perfectly fine life with income of about 35% of what I am targeting, but I want to have the option of travel and HCOL cultural amenities (theater, opera, music). I also want to be able to take advantage of significant medical advances, which I could imagined will be price-rationed at some point in the future. I also want to be able to buy a good personal care robot when the time comes that I will need that.

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VictoriaF
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Re: Do you really need 2.5 million to retire well?

Post by VictoriaF » Thu Mar 12, 2015 11:41 am

frugalecon wrote:I also want to be able to take advantage of significant medical advances, which I could imagined will be price-rationed at some point in the future.
Please explain "price-rationed."

I would like to ride the wave of life extensions, getting access to ever more potent medical technologies. In the beginning, individualized genetic treatments, stem-cell-based technologies, nano-medicine, and alike will be prohibitively expensive. With time, the prices will be coming down until they will become affordable by those with lower incomes and assets. The same treatment may become affordable in Thailand before the U.S., and one will have an option of medical tourism, which is far easier in retirement than while working.

Victoria
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Re: Do you really need 2.5 million to retire well?

Post by walletless » Thu Mar 12, 2015 11:42 am

I like the 3% SWR rule.. you can argue whether it is enough or not given the expected low yields & adjust the percentage to your liking.. but if you assume 3% SWR, having a 2.5 million retirement fund means that you can safely withdraw $75,000 each year without running out of money. That is a decent number for most parts of U.S.

I live in Northern California, and have not really thought on where I will live once I retire. Assuming NorCal is where I stay, $75,000 will not be nearly enough to cut it for me.. I think I will likely need something closer to 5 million in order to retire comfortably and withdraw $150000. Property Taxes are on the high side here (I pay $8,600 currently for me 2b townhome), cost of living is high, and state taxes add to the woes. I would not feel comfortable to retire with 2.5 million if I were to stay in North California.. but for several parts of U.S., this would be a sufficient amount for my standard of living.

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Re: Do you really need 2.5 million to retire well?

Post by frugalecon » Thu Mar 12, 2015 11:56 am

VictoriaF wrote:
frugalecon wrote:I also want to be able to take advantage of significant medical advances, which I could imagined will be price-rationed at some point in the future.
Please explain "price-rationed."

I would like to ride the wave of life extensions, getting access to ever more potent medical technologies. In the beginning, individualized genetic treatments, stem-cell-based technologies, nano-medicine, and alike will be prohibitively expensive. With time, the prices will be coming down until they will become affordable by those with lower incomes and assets. The same treatment may become affordable in Thailand before the U.S., and one will have an option of medical tourism, which is far easier in retirement than while working.

Victoria
By "price-rationed," I merely mean not covered by subsidized insurance, so that there is a substantial out-of-pocket component. And I am thinking of technologies that will augment our own performance, not merely treat diseases. It is dangerous to speculate, but I would expect that there will be greater human-machine integration in the future. I doubt that everyone will have access to the same "parts." I have always viewed that as a key risk that the Mr. Money Mustache crowd doesn't seem to acknowledge. There is significant option value in having more than $24,000 of annual income available to spend.

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Re: Do you really need 2.5 million to retire well?

Post by HomerJ » Thu Mar 12, 2015 12:01 pm

walletless wrote:I would not feel comfortable to retire with 2.5 million if I were to stay in North California.. but for several parts of U.S., this would be a sufficient amount for my standard of living.
Change "several parts of the U.S." to "the vast majority - probably 95% - of the U.S", and this would be a more accurate statement. :)

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Re: Do you really need 2.5 million to retire well?

Post by HomerJ » Thu Mar 12, 2015 12:02 pm

frugalecon wrote:By "price-rationed," I merely mean not covered by subsidized insurance, so that there is a substantial out-of-pocket component. And I am thinking of technologies that will augment our own performance, not merely treat diseases. It is dangerous to speculate, but I would expect that there will be greater human-machine integration in the future. I doubt that everyone will have access to the same "parts." I have always viewed that as a key risk that the Mr. Money Mustache crowd doesn't seem to acknowledge. There is significant option value in having more than $24,000 of annual income available to spend.
Plus, I'm going to want a holo-deck when they get invented in 2035. :)

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VictoriaF
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Re: Do you really need 2.5 million to retire well?

Post by VictoriaF » Thu Mar 12, 2015 12:04 pm

frugalecon wrote:
VictoriaF wrote:
frugalecon wrote:I also want to be able to take advantage of significant medical advances, which I could imagined will be price-rationed at some point in the future.
Please explain "price-rationed."

I would like to ride the wave of life extensions, getting access to ever more potent medical technologies. In the beginning, individualized genetic treatments, stem-cell-based technologies, nano-medicine, and alike will be prohibitively expensive. With time, the prices will be coming down until they will become affordable by those with lower incomes and assets. The same treatment may become affordable in Thailand before the U.S., and one will have an option of medical tourism, which is far easier in retirement than while working.

Victoria
By "price-rationed," I merely mean not covered by subsidized insurance, so that there is a substantial out-of-pocket component. And I am thinking of technologies that will augment our own performance, not merely treat diseases. It is dangerous to speculate, but I would expect that there will be greater human-machine integration in the future. I doubt that everyone will have access to the same "parts." I have always viewed that as a key risk that the Mr. Money Mustache crowd doesn't seem to acknowledge. There is significant option value in having more than $24,000 of annual income available to spend.
I think similarly. My earlier comments about life-extending technologies were related more to health enhancements than to disease treatments. And I, too, do not expect most of them to be covered by insurance.

Victoria
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Runalong
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Re: Do you really need 2.5 million to retire well?

Post by Runalong » Thu Mar 12, 2015 12:11 pm

It always amazes me that retired people always say that health is more important than wealth, but most pre-retirees focus more on how much money they will have rather than on how healthy, fit and mobile they will be.

We have far more control (not perfect, but more) over our health and fitness than we do over our future wealth.

And this also has an effect on our spending. Obviously healthy people have lower health care costs. Runners, for example, live a little longer than non-runners on average, but stay mobile much longer.

My wife and I frequently hike up mountains that other retirees are paying to fly or be otherwise carried up to.

I love to backpack and it costs almost nothing.

I could go on and on but you get the point.

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Re: Do you really need 2.5 million to retire well?

Post by cusetownusa » Thu Mar 12, 2015 12:46 pm

This article seems to be very similar to the first one you posted. Again, this doesn't prove anything but correlation, not causation. There are so many variables involved...for example, a lot of people retire because of health reasons...those same health reasons can cause the person to die shortly after retiring.

Retirement versus working and it's effects are all individual. Understanding how retirement affects a large group of people may be interesting, but it doesn't necessarily have anything to do with how it will affect you.

If you have a stressful, unrewarding, or tiring job, retirement may come as a relief. For this person, not working may be associated with better health. However, people who structure their life and self identity around work may see retirement in a different light, especially if they had to retire because of a company age policy (like in your above article)...Those who did little besides work may find filling time more of a challenge, feel like they lost their identity, and self worth...possibly leading to depression, lack of motivation, etc...all leading to declining health.

People who have a lot of interests outside of work (hobbies, passions, volunteer opportunities), good relationship with their spouse, use there time to exercise more, eat healthier foods, stay active, etc. generally experience much better long-term health.

Also, as already mentioned above...People who retire because they don’t feel well, or have had a heart attack or stroke, or have been diagnosed with cancer, diabetes, or other chronic condition may not enjoy retirement as much and will also show up in study's like the ones you posted showing a correlation between retirement and declining health.

Retirement enjoyment, health, etc...have been discussed on this forum repeatedly by boglehead retirees...the overwhelming majority of them have claimed improved health, well being, happiness, etc...being prepared financially and emotionally for retirement goes a long way in enjoying a healthy happy retirement.

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Re: Do you really need 2.5 million to retire well?

Post by ruralavalon » Thu Mar 12, 2015 1:50 pm

Do you really need 2.5 million to retire well?

Of course not! Just read the linked article.
nbc news wrote:How much do you really need to retire?

Of course, most people won't need to save $2.5 million to have a comfortable retirement.
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Re: Do you really need 2.5 million to retire well?

Post by goodenyou » Thu Mar 12, 2015 2:31 pm

VictoriaF wrote:
goodenyou wrote:
VictoriaF wrote:
mikegerard wrote:
invst65 wrote:According to CNN Money there are only 1.8 million Americans in the U.S. with a net worth over 2 million and the median family net worth of those age 65-74 is $206k.
Almost no retired people have 2.5 million...somehow they are getting by.

I agree it's a good goal and it's close to my target but the average person gets by on far less. It all depends on what your definition of retire "well" is.
My definition of "retire well" is to live in a major metropolitan area, which is necessarily a high cost of living (HCOL) area. Living well also means that I don't want to have the responsibilities and financial rewards of owning my home. Thus, I need greater assets than a typical retiree living in a paid off house in a LCOL area.

Victoria
Not unless the retiree was living in a LCOL area traveling to the major metropolitan area by plane or in his/her Porsche to have expensive dinners and staying in 5-star hotels.
I don't understand this sentence and particularly the meaning of "Not."
goodenyou wrote:Again, it is a matter of choice/priority and definition of "well".
I described why my "well" requires more assets than average retiree "well." Your "well" with a Porsche, hotels and dinners also requires higher than average retirement assets.

Victoria
The meaning of the sentence is that in order to live in a HCOL metropolitan area (presumably in a nice area with low crime), you would need a lot more assets to fund such a lifestyle priority. The NOT, is that you wouldn't necessarily need more assets than a LCOL area person desiring to travel more and spend in a different way; you could need just as much
Thus, I need greater assets than a typical retiree living in a paid off house in a LCOL area.
.
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Re: Do you really need 2.5 million to retire well?

Post by The Wizard » Thu Mar 12, 2015 2:37 pm

HomerJ wrote: ...A $100k income family will probably get $30k a year in SS (assuming two spouses)...
I once pondered the idea of having two spouses concurrently, but people kept telling me it would never work...
Attempted new signature...

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Re: Do you really need 2.5 million to retire well?

Post by ruralavalon » Thu Mar 12, 2015 2:51 pm

The Wizard wrote:
HomerJ wrote: ...A $100k income family will probably get $30k a year in SS (assuming two spouses)...
I once pondered the idea of having two spouses concurrently, but people kept telling me it would never work...
Made me laugh. :D :D :D
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Re: Do you really need 2.5 million to retire well?

Post by OutInThirteen » Thu Mar 12, 2015 3:40 pm

It all depends, if we had $2.5 million in addition to pensions and SS, we would only need to withdraw at 2.4% from our portfolio to equal my annual salary during my final year of work. And we were only spending slightly more than half of my salary. So for us, we would only need $0 to retire well.

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Re: Do you really need 2.5 million to retire well?

Post by rob » Thu Mar 12, 2015 3:44 pm

ruralavalon wrote:
The Wizard wrote:
HomerJ wrote: ...A $100k income family will probably get $30k a year in SS (assuming two spouses)...
I once pondered the idea of having two spouses concurrently, but people kept telling me it would never work...
Made me laugh. :D :D :D
I'm pretty sure two spouses falls to the expense side of the balance sheet NOT to the revenue side..... and will change the nbr from 2.5M to something higher :happy
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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whatusername?
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Re: Do you really need 2.5 million to retire well?

Post by whatusername? » Thu Mar 12, 2015 3:53 pm

$2.5 MM will let me retire for 35 years (from 60-95) and draw an inflation-adjusted $90K after taxes each year - based on my expected tax profile and current tax rates/rules - while only needing to generate 1% real return and drawing a SS benefit (70%) at age 62. I think that's a pretty conservative scenario to plan for.

Other possible outcomes, though:

With a 0% real return in retirement on my $2.5MM, I'd need SS to come through at 90% of the estimated benefit at age 70 (and I'm not sure that's going to happen) to keep my $90K/year.

At a 3% real return in retirement, I will have a $500K cushion on that $90K/year if SS disappears all together.

At a 0% real return and no SS, it would still take $1.75MM to retire if I only spent $50K/year. I'm not even sure that is realistic given healthcare costs.

It may be too much, but I think $2.5MM (real) will give me options and generous buffers.

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Re: Do you really need 2.5 million to retire well?

Post by Caduceus » Thu Mar 12, 2015 6:54 pm

I think the paradigm may change in years to come. People under, say, the age of 45 are much more international and mobile in terms of their work history and social connections.

If they don't have enough, they can retire elsewhere, or even just travel perpetually (that sounds amazing to me, actually). I mean, you can get a villa on an Indonesian island for $150,000, cuisine that exceeds the standards of most American fare (so, instead of eating at an ethnic restaurant where the chef is flown to the U.S, you will eat the same food by that chef for 30% of the price in his home country).

Family is a key reason to staying close, and maybe there are special situations in which the U.S. or other countries provide better legal rights (adoption, same-sex couples), but ... if you don't have 2.5 million, you can just make your dollars go farther somewhere else. You can retain home country health insurance, and buy medical evacuation coverage (which effectively transposes your coverage overseas for catastrophic situations).

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Re: Do you really need 2.5 million to retire well?

Post by Leesbro63 » Fri Mar 13, 2015 8:59 am

Excellent point. We're already seeing that with Millennials, as they are in no hurry (or perhaps cannot afford) to buy cars and houses. The financial crisis seems to have changed the paradigm for young people just entering the workforce and if there is a retirement crisis, the paradigm will change again to accommodate to the circumstances. Which, I guess, is a sugar coated way of acknowledging that standards of living may decline.

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Re: Do you really need 2.5 million to retire well?

Post by wander » Fri Mar 13, 2015 9:05 am

25 times my pre-retirement income is ideal. So, if I make $50,000 a year at 59, then a portfolio of $1,250,000 should be enough for me to retire at 60.

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