$3 million the new rule of thumb?

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Amadis_of_Gaul
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$3 million the new rule of thumb?

Post by Amadis_of_Gaul »

I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.

That may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
magicrat
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Re: $3 million the new rule of thumb?

Post by magicrat »

Yes, it's clickbait.
Jack FFR1846
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Re: $3 million the new rule of thumb?

Post by Jack FFR1846 »

It's quite a "nothing" article unless basic multiplication is a revelation to you. Ok now....4% of $1M is $40k. Oh, wow! But wait, 4% of 2M is $80k. Can't be! And if you want to eat out, you'll want $120k, or double the medium income of a family of 4. That takes.....wait, let me carry the zero.....$3M.

Or we could skip right to Suze Orman when she's not on her private island and say that you need at least $10M because, well, you're going to have to support 2 parents in $120k per year nursing homes plus pay the kids' student loans and hey...you want to go out to eat, right?
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22twain
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Re: $3 million the new rule of thumb?

Post by 22twain »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pmretirees should expect to need $120K a year from their retirement savings
Absolute BS, unless maybe you're living an upper-middle-class lifestyle in a coastal bubble area (Boswash or Sansan).
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
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CyclingDuo
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Re: $3 million the new rule of thumb?

Post by CyclingDuo »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.

That may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
Seems legit depending on the level of FIRE one wants to attain: lean FIRE, regular FIRE, fat FIRE, or obese FIRE. $120K a year is just into the fat FIRE camp according to this web page...

https://www.campfirefinance.com/fire-is-for-everyone/

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KyleAAA
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Re: $3 million the new rule of thumb?

Post by KyleAAA »

In 30 years, $120k may be the new $60k. The median family making $60K NOW doesn't need $120k NOW, but with inflation the median family may be earning $120k by the time they retire. So sure, that's probably a believable number with a few reasonable assumptions.
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Re: $3 million the new rule of thumb?

Post by abuss368 »

"Investment porn" as Taylor so often describes it. I would not bother to listen.
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LiterallyIronic
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Re: $3 million the new rule of thumb?

Post by LiterallyIronic »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.
Ha! So, our household income is currently $75k. Of that, taxes, savings, and mortgage eat up 72% (and we're still left with excess cash at the end of the month). All of those expenses should be zero (or close to it) in retirement. So I'll need to go from less than $21k to $120k in retirement? Got it. I'll keep that in mind. :oops:
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firebirdparts
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Re: $3 million the new rule of thumb?

Post by firebirdparts »

My wife told me 2 million
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stocknoob4111
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Re: $3 million the new rule of thumb?

Post by stocknoob4111 »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings,
If you are having caviar for lunch and drinking expensive wines with every dinner and traveling to Paris every 2 weeks then yes, you need that much. If you are going to enjoy a simple but comfortable life then you can get by easily on $30K/yr. I'm personally not comfortable with the 4% rule, but at 3% that's a nest egg of just under a million. However, if you're closer to SS age then probably even less would be fine... say $600K.

$3 million is so ridiculous it's not even funny... the vast majority of people on this globe will not even see anything remotely close to that number in their entire lifetimes so stating that it is something normal so casually is a joke.
Last edited by stocknoob4111 on Tue Jan 28, 2020 1:35 pm, edited 2 times in total.
lessismore22
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Re: $3 million the new rule of thumb?

Post by lessismore22 »

I know the 4% rule has been debated to death here, but this is another good reminder it's only a suggested withdrawal rate. Many, many families have kids that are going to be just fine financially on their own and not relying on an inheritance. Their parents can comfortably take more than 4% each year from their nest-egg. It is their money after all.
EddyB
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Re: $3 million the new rule of thumb?

Post by EddyB »

KyleAAA wrote: Tue Jan 28, 2020 1:21 pm In 30 years, $120k may be the new $60k. The median family making $60K NOW doesn't need $120k NOW, but with inflation the median family may be earning $120k by the time they retire. So sure, that's probably a believable number with a few reasonable assumptions.
And in 50 years it will probably be even more, but any article that isn't written in "real" dollars based on the present (or an otherwise specified approach) would be absolutely meaningless.
DB2
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Re: $3 million the new rule of thumb?

Post by DB2 »

22twain wrote: Tue Jan 28, 2020 1:02 pm
Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pmretirees should expect to need $120K a year from their retirement savings
Absolute BS, unless maybe you're living an upper-middle-class lifestyle in a coastal bubble area (Boswash or Sansan).
Agreed. Not to mention technology advances are going to lower the cost on a number of things.
rascott
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Re: $3 million the new rule of thumb?

Post by rascott »

CyclingDuo wrote: Tue Jan 28, 2020 1:13 pm
Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.

That may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
Seems legit depending on the level of FIRE one wants to attain: lean FIRE, regular FIRE, fat FIRE, or obese FIRE. $120K a year is just into the fat FIRE camp according to this web page...

https://www.campfirefinance.com/fire-is-for-everyone/

Image


Obese fire, please.... LOL.
livesoft
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Re: $3 million the new rule of thumb?

Post by livesoft »

Long Bogleheads.org thread about the $3 million:
viewtopic.php?f=2&t=150595
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Day9
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Re: $3 million the new rule of thumb?

Post by Day9 »

rascott wrote: Tue Jan 28, 2020 1:40 pm
CyclingDuo wrote: Tue Jan 28, 2020 1:13 pm
Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.

That may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
Seems legit depending on the level of FIRE one wants to attain: lean FIRE, regular FIRE, fat FIRE, or obese FIRE. $120K a year is just into the fat FIRE camp according to this web page...

https://www.campfirefinance.com/fire-is-for-everyone/

[Image removed]


Obese fire, please.... LOL.
I would guess Obese fire would be $200,001-$1 million per year retirement spending. Then "Morbidly Obese FIRE" would be >$1 million/yr spending :happy

I would like to remind everyone what Larry Swedroe says about this topic. You should have a written Plan B of steps you would actually take if the risks show up (e.g. sell a vacation home, reduce international trips from every year to once every X years, go back to work, etc). If you have a robust Plan B and substantial "wants" you could eliminate, then a SWR higher than 4% is possible. If you cannot make such a Plan B because your expenses are already nearly totally devoted to needs, not wants, then a 4% rule may be too greedy due to high stock valuations and low bond yields, and a 3%-3.5% rule would be more appropriate. The 4% rule did originally take into account bad times to retire, but had only a 95% success rate in a 30 year retirement, and if you cannot cut any spending, a 1-in-20 chance of catastrophe may be unacceptable. Also of course age is relevant (since we are discussing "FIRE" and the "E" stands for "Early"). People are living a lot longer now. You may need to plan for a longer than 30-year retirement. Even moreso if you are a couple and need to plan for at least one of you living to a ripe old age.
Last edited by Day9 on Tue Jan 28, 2020 2:05 pm, edited 1 time in total.
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Re: $3 million the new rule of thumb?

Post by KyleAAA »

EddyB wrote: Tue Jan 28, 2020 1:35 pm
KyleAAA wrote: Tue Jan 28, 2020 1:21 pm In 30 years, $120k may be the new $60k. The median family making $60K NOW doesn't need $120k NOW, but with inflation the median family may be earning $120k by the time they retire. So sure, that's probably a believable number with a few reasonable assumptions.
And in 50 years it will probably be even more, but any article that isn't written in "real" dollars based on the present (or an otherwise specified approach) would be absolutely meaningless.
Taking the likely audience of this piece's viewpoint into account, it's pretty clear he means $3mm nominal and the retirement date is pretty far in the future. Maybe not 30 years, but not 5 either. I just don't think this article is at all ridiculous. People don't think in real dollars, they think in nominal dollars.
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Re: $3 million the new rule of thumb?

Post by Phineas J. Whoopee »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.
...
Spending $120,000 a year I could keep myself constantly tipsy. On Champagne.

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Re: $3 million the new rule of thumb?

Post by Unladen_Swallow »

The article is standard media fluff piece. I'm sure it will be relevant to some people as any article always is. But it provides very little insight.

The article says that only 3% in the US have a net worth over $1M. And then it goes on to say $3M is the new $1M. I guess the writer is addressing just this 3% of US population. Perhaps his audience is the 50 people that both read MSN and meet his criteria.
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Re: $3 million the new rule of thumb?

Post by EddyB »

KyleAAA wrote: Tue Jan 28, 2020 2:05 pm
EddyB wrote: Tue Jan 28, 2020 1:35 pm
KyleAAA wrote: Tue Jan 28, 2020 1:21 pm In 30 years, $120k may be the new $60k. The median family making $60K NOW doesn't need $120k NOW, but with inflation the median family may be earning $120k by the time they retire. So sure, that's probably a believable number with a few reasonable assumptions.
And in 50 years it will probably be even more, but any article that isn't written in "real" dollars based on the present (or an otherwise specified approach) would be absolutely meaningless.
Taking the likely audience of this piece's viewpoint into account, it's pretty clear he means $3mm nominal and the retirement date is pretty far in the future. Maybe not 30 years, but not 5 either. I just don't think this article is at all ridiculous. People don't think in real dollars, they think in nominal dollars.
The great news is that it generally seems that the people who "don't think [about retirement] in real dollars" don't save any substantial number of any dollars for retirement, so it's really not an issue.
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Re: $3 million the new rule of thumb?

Post by flaccidsteele »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Thoughts?
Clickbait

But it’s not wrong
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CyclingDuo
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Re: $3 million the new rule of thumb?

Post by CyclingDuo »

rascott wrote: Tue Jan 28, 2020 1:40 pm
CyclingDuo wrote: Tue Jan 28, 2020 1:13 pm
Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.

That may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
Seems legit depending on the level of FIRE one wants to attain: lean FIRE, regular FIRE, fat FIRE, or obese FIRE. $120K a year is just into the fat FIRE camp according to this web page...

https://www.campfirefinance.com/fire-is-for-everyone/

Image


Obese fire, please.... LOL.
:mrgreen:

Obviously, if one is accounting for SS benefits, pension benefits, or other streams of income away from the risk portfolio that would require a SWR of the suggested Trinity Study 4% in the graphic above - then one would adjust their numbers accordingly in terms of risk portfolio size. If one was getting $65K - $95K per year in pension and SS benefits, then you wouldn't need $3M. In that scenario, and if one had the need for $120K, then $1M - $1.4M should be adequate.

Not to mention, cost of living dictates one's target numbers. Retiring in NYC, San Francisco or Seattle would be an entirely different scenario cost wise than Toledo, Bozeman, or Jackson...
"Save like a pessimist, invest like an optimist." - Morgan Housel
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Re: $3 million the new rule of thumb?

Post by smitcat »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.

That may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
"the article says that retirees should expect to need $120K a year from their retirement savings"
The article does not say you need $120K per year - it says that is for travel , dining out and living the life.
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Quirkz
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Re: $3 million the new rule of thumb?

Post by Quirkz »

EddyB wrote: Tue Jan 28, 2020 1:35 pm
KyleAAA wrote: Tue Jan 28, 2020 1:21 pm In 30 years, $120k may be the new $60k. The median family making $60K NOW doesn't need $120k NOW, but with inflation the median family may be earning $120k by the time they retire. So sure, that's probably a believable number with a few reasonable assumptions.
And in 50 years it will probably be even more, but any article that isn't written in "real" dollars based on the present (or an otherwise specified approach) would be absolutely meaningless.
The article is pretty clearly written for people entering the job market. It explicitly talks about getting to 3 million by saving $1k/month for 47 years (ages 20 - 67). It also has a "what if you don't start until you're 30?" option ($1,800/month for 37 years). In that context, $120k is absolutely going to be a run-of-the-mill retirement income in 30 or 40 years.
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Re: $3 million the new rule of thumb?

Post by KyleAAA »

EddyB wrote: Tue Jan 28, 2020 2:28 pm
KyleAAA wrote: Tue Jan 28, 2020 2:05 pm
EddyB wrote: Tue Jan 28, 2020 1:35 pm
KyleAAA wrote: Tue Jan 28, 2020 1:21 pm In 30 years, $120k may be the new $60k. The median family making $60K NOW doesn't need $120k NOW, but with inflation the median family may be earning $120k by the time they retire. So sure, that's probably a believable number with a few reasonable assumptions.
And in 50 years it will probably be even more, but any article that isn't written in "real" dollars based on the present (or an otherwise specified approach) would be absolutely meaningless.
Taking the likely audience of this piece's viewpoint into account, it's pretty clear he means $3mm nominal and the retirement date is pretty far in the future. Maybe not 30 years, but not 5 either. I just don't think this article is at all ridiculous. People don't think in real dollars, they think in nominal dollars.
The great news is that it generally seems that the people who "don't think [about retirement] in real dollars" don't save any substantial number of any dollars for retirement, so it's really not an issue.
I'm 100% certain that isn't the case.
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Re: $3 million the new rule of thumb?

Post by EddyB »

Quirkz wrote: Tue Jan 28, 2020 4:22 pm
EddyB wrote: Tue Jan 28, 2020 1:35 pm
KyleAAA wrote: Tue Jan 28, 2020 1:21 pm In 30 years, $120k may be the new $60k. The median family making $60K NOW doesn't need $120k NOW, but with inflation the median family may be earning $120k by the time they retire. So sure, that's probably a believable number with a few reasonable assumptions.
And in 50 years it will probably be even more, but any article that isn't written in "real" dollars based on the present (or an otherwise specified approach) would be absolutely meaningless.
The article is pretty clearly written for people entering the job market.
It would at least seem less ridiculous if that were the audience, but the article starts off addressing the situation of someone who has already "ridden this relentless bull market into glorious millionaire territory," but notes that "isn’t cutting it these days." I have no doubt that a day will come when $120,000 in nominal dollars will be a floor for retirement, but I don't think that tells anyone much.
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Amadis_of_Gaul
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Re: $3 million the new rule of thumb?

Post by Amadis_of_Gaul »

CyclingDuo wrote: Tue Jan 28, 2020 2:53 pm
:mrgreen:

Obviously, if one is accounting for SS benefits, pension benefits, or other streams of income away from the risk portfolio that would require a SWR of the suggested Trinity Study 4% in the graphic above - then one would adjust their numbers accordingly in terms of risk portfolio size. If one was getting $65K - $95K per year in pension and SS benefits, then you wouldn't need $3M. In that scenario, and if one had the need for $120K, then $1M - $1.4M should be adequate.

Not to mention, cost of living dictates one's target numbers. Retiring in NYC, San Francisco or Seattle would be an entirely different scenario cost wise than Toledo, Bozeman, or Jackson...
I'd love to retire to Bozeman. It's beautiful there! Well, for half the year, it's beautiful there. . .
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Re: $3 million the new rule of thumb?

Post by HomerJ »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pmThat may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
Everything you said was correct.

Ridiculous is the correct description.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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Re: $3 million the new rule of thumb?

Post by willthrill81 »

Jack FFR1846 wrote: Tue Jan 28, 2020 1:00 pm It's quite a "nothing" article unless basic multiplication is a revelation to you. Ok now....4% of $1M is $40k. Oh, wow! But wait, 4% of 2M is $80k. Can't be! And if you want to eat out, you'll want $120k, or double the medium income of a family of 4. That takes.....wait, let me carry the zero.....$3M.

Or we could skip right to Suze Orman when she's not on her private island and say that you need at least $10M because, well, you're going to have to support 2 parents in $120k per year nursing homes plus pay the kids' student loans and hey...you want to go out to eat, right?
:sharebeer

When I heard Suze Orman on the Afford Anything podcast, I was shaking my head and laughing almost the whole time. She's so far out of touch with the reality of how most people live their lives that it's utterly ridiculous.

The idea that retirees must spend double the median U.S. household income is almost as ridiculous.
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Re: $3 million the new rule of thumb?

Post by bikechuck »

lessismore22 wrote: Tue Jan 28, 2020 1:33 pm I know the 4% rule has been debated to death here, but this is another good reminder it's only a suggested withdrawal rate. Many, many families have kids that are going to be just fine financially on their own and not relying on an inheritance. Their parents can comfortably take more than 4% each year from their nest-egg. It is their money after all.
I cannot take more than 4% each year and do so comfortably, I have been influenced by Wade Pfau and Larry Swedroe and with today's low interest rates and high PE ratios I am far more comfortable at 3.0 to 3.5 percent.
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Re: $3 million the new rule of thumb?

Post by Quirkz »

EddyB wrote: Tue Jan 28, 2020 4:42 pm
It would at least seem less ridiculous if that were the audience, but the article starts off addressing the situation of someone who has already "ridden this relentless bull market into glorious millionaire territory," but notes that "isn’t cutting it these days." I have no doubt that a day will come when $120,000 in nominal dollars will be a floor for retirement, but I don't think that tells anyone much.
Fair point. I guess it's more muddled than I remembered. I agree it's not a typical baseline in today's dollars.
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Re: $3 million the new rule of thumb?

Post by Unladen_Swallow »

Jack FFR1846 wrote: Tue Jan 28, 2020 1:00 pm It's quite a "nothing" article unless basic multiplication is a revelation to you. Ok now....4% of $1M is $40k. Oh, wow! But wait, 4% of 2M is $80k. Can't be! And if you want to eat out, you'll want $120k, or double the medium income of a family of 4. That takes.....wait, let me carry the zero.....$3M.

Or we could skip right to Suze Orman when she's not on her private island and say that you need at least $10M because, well, you're going to have to support 2 parents in $120k per year nursing homes plus pay the kids' student loans and hey...you want to go out to eat, right?
I saw this mentioned recently here somewhere, about Suze Ormans $5 - $10M recommendation. I thought, surely this was in jest.

I guess not.

I wonder if some public figures make ridiculous pronouncements to make a headline (after which they would back peddle), or are they truly preaching from a bubble to only a select audience. But Orman has a varied audience, am I mistaken?

Well, we are talking about her.
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Re: $3 million the new rule of thumb?

Post by quantAndHold »

$3M is an absolutely reasonable number, if you want to retire on $120k/year.

That said, we live a solidly upper middle class retirement life in a HCOL city. We managed to spend $103k last year. Nearly half of it was on travel. This year, we'll probably spend $120k, but we're cash flowing a major bathroom remodel, and spending 3 months traveling in Europe.

I'm pretty sure people can retire on less than $120k per year.
Yes, I’m really that pedantic.
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Re: $3 million the new rule of thumb?

Post by Beehave »

KyleAAA wrote: Tue Jan 28, 2020 1:21 pm In 30 years, $120k may be the new $60k. The median family making $60K NOW doesn't need $120k NOW, but with inflation the median family may be earning $120k by the time they retire. So sure, that's probably a believable number with a few reasonable assumptions.
Exactly - - and it may be sooner than 30 years. The article may be clickbait, but considering the possibility of meaningful inflation is very reasonable when thinking about asset allocation and potential asset needs.
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Re: $3 million the new rule of thumb?

Post by Katietsu »

Yes clickbait. Yes, probably not useful to anyone who has spent any time on this forum. But, I felt the article was realistic. It did not say that you couldn’t retire with $1 million, it said that would not be enough for what people imagined to be a glorious lifestyle.

$1 million is not enough for a SWR equal to a typical school teacher pension. You need to annuitize almost $3 million in household savings to put you on equal footing with a dual teacher couple in my locale who started teaching at 25 and retired at 60. So, for those of us with no pension, that does not seem to be an “obese” retirement. I am fully aware though that almost all retirees will live on less than this.
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Re: $3 million the new rule of thumb?

Post by Dottie57 »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 4:44 pm
CyclingDuo wrote: Tue Jan 28, 2020 2:53 pm
:mrgreen:

Obviously, if one is accounting for SS benefits, pension benefits, or other streams of income away from the risk portfolio that would require a SWR of the suggested Trinity Study 4% in the graphic above - then one would adjust their numbers accordingly in terms of risk portfolio size. If one was getting $65K - $95K per year in pension and SS benefits, then you wouldn't need $3M. In that scenario, and if one had the need for $120K, then $1M - $1.4M should be adequate.

Not to mention, cost of living dictates one's target numbers. Retiring in NYC, San Francisco or Seattle would be an entirely different scenario cost wise than Toledo, Bozeman, or Jackson...
I'd love to retire to Bozeman. It's beautiful there! Well, for half the year, it's beautiful there. . .
The other part f the year it is beautiful, cold and snowy. Not too bad.
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Re: $3 million the new rule of thumb?

Post by H-Town »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.

That may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
I think it's fair. $1M retirement goal is really for the past decade. The article talked about "retirement dreams" and $120k per year. It should give a couple (or single retiree) much room to enjoy traveling and discretionary spending. Will it be reality for most Americans? No. But if you can, shoot for $3M for a "fat FIRE", as they call it nowadays.
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Re: $3 million the new rule of thumb?

Post by willthrill81 »

Dottie57 wrote: Tue Jan 28, 2020 6:18 pm
Amadis_of_Gaul wrote: Tue Jan 28, 2020 4:44 pm
CyclingDuo wrote: Tue Jan 28, 2020 2:53 pm
:mrgreen:

Obviously, if one is accounting for SS benefits, pension benefits, or other streams of income away from the risk portfolio that would require a SWR of the suggested Trinity Study 4% in the graphic above - then one would adjust their numbers accordingly in terms of risk portfolio size. If one was getting $65K - $95K per year in pension and SS benefits, then you wouldn't need $3M. In that scenario, and if one had the need for $120K, then $1M - $1.4M should be adequate.

Not to mention, cost of living dictates one's target numbers. Retiring in NYC, San Francisco or Seattle would be an entirely different scenario cost wise than Toledo, Bozeman, or Jackson...
I'd love to retire to Bozeman. It's beautiful there! Well, for half the year, it's beautiful there. . .
The other part f the year it is beautiful, cold and snowy. Not too bad.
I was just skiing at Big Sky a few days ago. The mountains surrounding Bozeman are breathtaking. We could very happily live there.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: $3 million the new rule of thumb?

Post by HawkeyePierce »

Amadis_of_Gaul wrote: Tue Jan 28, 2020 4:44 pm
CyclingDuo wrote: Tue Jan 28, 2020 2:53 pm
:mrgreen:

Obviously, if one is accounting for SS benefits, pension benefits, or other streams of income away from the risk portfolio that would require a SWR of the suggested Trinity Study 4% in the graphic above - then one would adjust their numbers accordingly in terms of risk portfolio size. If one was getting $65K - $95K per year in pension and SS benefits, then you wouldn't need $3M. In that scenario, and if one had the need for $120K, then $1M - $1.4M should be adequate.

Not to mention, cost of living dictates one's target numbers. Retiring in NYC, San Francisco or Seattle would be an entirely different scenario cost wise than Toledo, Bozeman, or Jackson...
I'd love to retire to Bozeman. It's beautiful there! Well, for half the year, it's beautiful there. . .
Bozeman in summer, San Antonio in winter. An option I've been giving serious thought to.

Or to put it another way, eat great Mexican food for half the year, then spend the other half hiking up mountains to burn it off. :D
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Re: $3 million the new rule of thumb?

Post by Dottie57 »

HawkeyePierce wrote: Tue Jan 28, 2020 6:31 pm
Amadis_of_Gaul wrote: Tue Jan 28, 2020 4:44 pm
CyclingDuo wrote: Tue Jan 28, 2020 2:53 pm
:mrgreen:

Obviously, if one is accounting for SS benefits, pension benefits, or other streams of income away from the risk portfolio that would require a SWR of the suggested Trinity Study 4% in the graphic above - then one would adjust their numbers accordingly in terms of risk portfolio size. If one was getting $65K - $95K per year in pension and SS benefits, then you wouldn't need $3M. In that scenario, and if one had the need for $120K, then $1M - $1.4M should be adequate.

Not to mention, cost of living dictates one's target numbers. Retiring in NYC, San Francisco or Seattle would be an entirely different scenario cost wise than Toledo, Bozeman, or Jackson...
I'd love to retire to Bozeman. It's beautiful there! Well, for half the year, it's beautiful there. . .
Bozeman in summer, San Antonio in winter. An option I've been giving serious thought to.

Or to put it another way, eat great Mexican food for half the year, then spend the other half hiking up mountains to burn it off. :D
I like me some spicy flavorful food. How is the winter weather in San Antonio?
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Re: $3 million the new rule of thumb?

Post by Cheez-It Guy »

I won't need anything close to this. The internet doesn't tell me what to do!
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Re: $3 million the new rule of thumb?

Post by abuss368 »

Cheez-It Guy wrote: Tue Jan 28, 2020 7:03 pm I won't need anything close to this. The internet doesn't tell me what to do!
Well said.
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Re: $3 million the new rule of thumb?

Post by abuss368 »

Aspen is the most beautiful ski resort I ever visited. Breathtaking views.
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Re: $3 million the new rule of thumb?

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
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Re: $3 million the new rule of thumb?

Post by CyclingDuo »

rascott wrote: Tue Jan 28, 2020 1:40 pm
CyclingDuo wrote: Tue Jan 28, 2020 1:13 pm
Amadis_of_Gaul wrote: Tue Jan 28, 2020 12:48 pm I have a bad habit of clicking on financial clickbait. This one is worse than normal:

https://www.msn.com/en-us/news/other/re ... ar-BBZnv6v

Essentially, the financial planner quoted in the article says that retirees should expect to need $120K a year from their retirement savings, so using the good ole 4 percent rule, you'd better have $3 million saved up by the time you retire.

That may be true for some (maybe true for many on here), but it isn't true for the vast majority of Americans. More than 75 percent of American households don't bring in $120K a year, period, and so hardly would need to replace an amount of income they don't have. It ignores the impact of Social Security, which is significant for higher-earning households. It ignores the decline in expenses that most older folks see once the house is paid off and the kids move out. Realistically, a household would have to have a standard of living around $200K to need that much in savings, which is less than 10 percent of the population.

In short, one-size-fits-all retirement numbers are silly, and this one is particularly ridiculous. For most workers, achieving such a goal is impossible, and setting it up can only lead to discouragement for them. Instead, the only way to determine what your needs will be in retirement is to look at your budget.

Thoughts?
Seems legit depending on the level of FIRE one wants to attain: lean FIRE, regular FIRE, fat FIRE, or obese FIRE. $120K a year is just into the fat FIRE camp according to this web page...

https://www.campfirefinance.com/fire-is-for-everyone/

Image


Obese fire, please.... LOL.
Ask, and ye shall receive...

moFIRE (morbidly obese FIRE):

https://thedarwiniandoctor.com/mofire/
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Re: $3 million the new rule of thumb?

Post by Clever_Username »

I'm not even 40 years old yet, and I believe that a portfolio of $3M in today's dollars could very well last me the rest of my life if I had it today. So I don't think the average person needs it to retire at a traditional time.
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Re: $3 million the new rule of thumb?

Post by willthrill81 »

Clever_Username wrote: Tue Jan 28, 2020 8:17 pm I'm not even 40 years old yet, and I believe that a portfolio of $3M in today's dollars could very well last me the rest of my life if I had it today. So I don't think the average person needs it to retire at a traditional time.
Same here. I'm planning on a 40-45 year retirement, and I'd be quite happy with $2 million in today's dollars.
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Re: $3 million the new rule of thumb?

Post by abuss368 »

Clever_Username wrote: Tue Jan 28, 2020 8:17 pm I'm not even 40 years old yet, and I believe that a portfolio of $3M in today's dollars could very well last me the rest of my life if I had it today. So I don't think the average person needs it to retire at a traditional time.
Agreed and more people are living longer today so yes, plan for a possible longer retirement.
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Re: $3 million the new rule of thumb?

Post by MathIsMyWayr »

It may not be outrageous. Today's $1M will be $2M and $3M in 30 years for an annual inflation rate of 2.3% and 3.7%, respectively.
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Re: $3 million the new rule of thumb?

Post by Tdubs »

willthrill81 wrote: Tue Jan 28, 2020 8:19 pm
Clever_Username wrote: Tue Jan 28, 2020 8:17 pm I'm not even 40 years old yet, and I believe that a portfolio of $3M in today's dollars could very well last me the rest of my life if I had it today. So I don't think the average person needs it to retire at a traditional time.
Same here. I'm planning on a 40-45 year retirement, and I'd be quite happy with $2 million in today's dollars.
If you were planning on 30 years, what would you be happy with?
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