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Post by mozart522 on Sept 7, 2022 13:23:33 GMT
a millionaire for Americans after age 70 are 17.7 in 100. (sigh) Somehow I feel less special.
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Post by Chahta on Sept 7, 2022 13:30:04 GMT
You would feel better if it was 15?
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Post by mozart522 on Sept 7, 2022 13:55:52 GMT
You would feel better if it was 15? Maybe like 7 or 8, like the top 10% |
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Post by steadyeddy on Sept 7, 2022 14:11:29 GMT
A million is not what it used to be...😜
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Post by Chahta on Sept 7, 2022 15:30:20 GMT
Us poor folk think a million is a lot.
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Post by bb2 on Sept 8, 2022 0:59:47 GMT
1 != 10
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Post by FD1000 on Sept 8, 2022 11:42:36 GMT
Found a few sites where they said the median net worth, including the house is about $250-300K and far from a million. Investments are much lower than that. In previous searches, I found that 6+% have a median net worth of 2 millions, and 4+% 3 millions. I'm in a good company.
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Post by johntaylor on Sept 8, 2022 13:56:11 GMT
In calculating net worth, better to exclude primary housing, cars, and the like unless "conspicuous consumption" (Veblen)?
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Post by saratoga on Sept 8, 2022 14:06:55 GMT
Found a few sites where they said the median net worth, including the house is about $250-300K and far from a million. Investments are much lower than that. In previous searches, I found that 6+% have a median net worth of 2 millions, and 4+% 3 millions. I'm in a good company. How about annuities, pensions and SS? |
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Post by FD1000 on Sept 8, 2022 14:30:48 GMT
As usual, we already discussed this subject. Several factors are important, such as no mortgage, investment, pensions, SS and others. The subject here is net worth, and it's not high at about $300K, including owning a house.
IMO, you need 20 times your annual expense, on top of being mortgage free + SS. This can cover LTC + healthcare and most other expenses. I went beyond and retired with 25+. Since retirement and investing at 10/90 stocks/bond OEF, it got even better and now it's at 45+. Missing the worst days is better than B&H or missing the best days, but hardly anyone talks about it.
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hondo
Commander
Posts: 148
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Post by hondo on Sept 8, 2022 14:31:00 GMT
I was told by a banker friend, a long time ago, that pensions could not be counted toward ones net worth, as it couldn't be used as security to back-up a bank loan. While I can understand that from the banks point of view, it always seemed to me that the "present value" of a pension should count toward net worth in general terms regarding how much a person would need in investments, say bonds, to produce the annual pension income.
Just another point of view.
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Post by ECE Prof on Sept 8, 2022 14:47:43 GMT
" I found that 6+% have a median net worth of 2 millions, and 4+% 3 millions. I'm in a good company."
I already knew it. Can I join you?
Bank loans can be obtained at cheap rates, if you have a good net worth, even if the bankers do not consider that as the income. In fact, the bankers ask more and deeper questions, such investments, tax-free income (Roth), dividend income, etc. to include as income. Who said, the net worth does not count? Net worth and investments do count indirectly. In fact, they want to download your 1040, and you have to give consent for that too. You can submit your 1040, but they want to download it directly. Mortgage brokers do consider the invisible hand nowadays, and make it work. I have known this for more than a decade.
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Post by FD1000 on Sept 8, 2022 15:06:21 GMT
You can guesstimate a pension. Months ago when I looked at SPIA for age 65 it was about 5-5.5% yearly payout.
So, if someone has $4000-4,500 monthly pension, it's about one million in savings.
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Post by saratoga on Sept 8, 2022 15:23:06 GMT
You can guesstimate a pension. Months ago when I looked at SPIA for age 65 it was about 5-5.5% yearly payout. So, if someone has $4000-4,500 monthly pension, it's about one million in savings. These kinds of reports often do not mention how authors treat pension, etc. |
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hondo
Commander
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Post by hondo on Sept 8, 2022 15:58:00 GMT
You can guesstimate a pension. Months ago when I looked at SPIA for age 65 it was about 5-5.5% yearly payout. So, if someone has $4000-4,500 monthly pension, it's about one million in savings. To find 'present value' of a pension, I would use something like a 30 year treasury bond for comparison, because it has a set rate of return for a long period of time, just as the pension would.
If you have a pension of $4500 per month, (equals $54,000 per year) and the 30 year treasury pays say 3.5%, then your pension replaces $1,542,857 in savings. That would be the present value. Of course as the treasury interest rate changes, the present value will change.
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Post by FD1000 on Sept 8, 2022 17:04:24 GMT
You can guesstimate a pension. Months ago when I looked at SPIA for age 65 it was about 5-5.5% yearly payout. So, if someone has $4000-4,500 monthly pension, it's about one million in savings. To find 'present value' of a pension, I would use something like a 30 year treasury bond for comparison, because it has a set rate of return for a long period of time, just as the pension would.
If you have a pension of $4500 per month, (equals $54,000 per year) and the 30 year treasury pays say 3.5%, then your pension replaces $1,542,857 in savings. That would be the present value. Of course as the treasury interest rate changes, the present value will change.
I tried to keep it "simple". I just used the Fidelity site for the simplest situation. For 1 million you get about $5500 monthly at age 65 which is 6.6% annual payout. If you want to add 2% inflation per year it goes down to $4500, which is 5.4% annually. Your beneficiaries would receive a lump-sum payout of your initial investment less any payments received Remember, you can die in 10 years or 40 years, and it doesn't have volatility. I would not compare it to treasuries. I'm sure there are more possibilities and calculations.  ============= Saratoga: These kinds of reports often do not mention how authors treat pension. FD: If you want to take into consideration everything, you will end up with a book. Most times, guesstimation come pretty close without spending hours and complicated calculation. Before I retired, I found a financial adviser with a sophisticated software to do all that. He agreed to play with me what if for a chance to get my business. We set together about 2 hours and played with many options, some I never thought about. After all that, he told me, I'm in top shape. He didn't get my business. Why did it work? When your portfolio is 20 times your annual expenses + SS + mortgage free, it should do the trick. I came up with this formula based on guesstimation and common sense, which I have done for many things in my life. BTW, Fidelity says, you need 10 time...and they are wrong, see ( link). Voltaire - Common sense is not so common (that's my signature too). Unfortunately, they don't teach guesstimation and common sense. |
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Post by saratoga on Sept 8, 2022 19:44:16 GMT
I am not objecting to roughly estimating the value of a pension. I think some authors include pension, for example, and others do not and reports sometimes do not state what they are doing.
By the way, the following seems an over-estimation of the value of a pension to me. Otherwise, I am a lot richer than I thought: a pension of $4500 per month, (equals $54,000 per year) and the 30 year treasury pays say 3.5%, then your pension replaces $1,542,857 in savings
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Post by ECE Prof on Sept 8, 2022 19:59:31 GMT
I am not objecting to roughly estimating the value of a pension. I think some authors include pension, for example, and others do not without stating what they are doing. We borrowed from Wells Fargo and bought a condo after retirement. The major income was SS + Pension, and small investment income. They included everything and gave us a loan – 30-year, with 1/8% more than I would have preferred. Two years later, we borrowed again, showing the same income, but this time, including the rental income, but the other mortgage was subtracted in their calculation, with a higher number now, because we had also paid some of our previous loan balance in my HELOC account. The brokers and banks can come up with innovative way to lend you money. The reason is simple: They want to lend money for good customers by taking all the factors into account. The credit score says that.
Once when I went to get the medallion signature to transfer from TIAA to Vanguard, the bank's VP noted the balance, and he wanted us to borrow more. He also introduced us to a broker there, just in case. I still get e-mails from the bank's broker, who sits there. There is one more factor. How long have you had the relationship with them?
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Post by retiredat48 on Sept 8, 2022 21:55:19 GMT
Quick reply...BTW I have recommended people DO NOT include the worth/asset value of either a pension or Social security in your portfolio total value.
Reason is: You do not control these in any way, and the assets go to zero eventually. Best is to subtract the annual income from your spending needs, and this becomes what you need from your investment portfolio each year. Example...you need $65,000 a year to live on. Let's say SS provides $25,000; a pension provides $20,000 a year. Subtracting each, you need to draw $20,000 from your portfolio. 4% SWR rule means if you have a portfolio of investments totaling $500,000, you can retire. Much easier to deal with this. Lastly, calling SS a bond valued at like $200,000 completely misrepresents your asset allocation.
BTW IF you make a bond equivalent out of your social security annual payment, what duration/maturity will you assign to it?? Hope its not a short term bond!
R48
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hondo
Commander
Posts: 148
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Post by hondo on Sept 8, 2022 22:22:07 GMT
Quick reply...BTW I have recommended people DO NOT include the worth/asset value of either a pension or Social security in your portfolio total value. Reason is: You do not control these in any way, and the assets go to zero eventually. Best is to subtract the annual income from your spending needs, and this becomes what you need from your investment portfolio each year. Example...you need $65,000 a year to live on. Let's say SS provides $25,000; a pension provides $20,000 a year. Subtracting each, you need to draw $20,000 from your portfolio. 4% SWR rule means if you have a portfolio of investments totaling $500,000, you can retire. Much easier to deal with this. Lastly, calling SS a bond valued at like $200,000 completely misrepresents your asset allocation. BTW IF you make a bond equivalent out of your social security annual payment, what duration/maturity will you assign to it?? Hope its not a short term bond! R48 I completely agree with you. A pension and SS should not be a part of the portfolio, nor should you home be part of the portfolio. I was talking about 'net worth', not portfolio. There are a lot of things that are part of the net worth that should not be a part of the portfolio. |
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hondo
Commander
Posts: 148
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Post by hondo on Sept 8, 2022 22:31:23 GMT
I am not objecting to roughly estimating the value of a pension. I think some authors include pension, for example, and others do not and reports sometimes do not state what they are doing.
By the way, the following seems an over-estimation of the value of a pension to me. Otherwise, I am a lot richer than I thought: a pension of $4500 per month, (equals $54,000 per year) and the 30 year treasury pays say 3.5%, then your pension replaces $1,542,857 in savings
Seems pretty simple to me. If I have $1,542,857 invested @3.5% = $54,000 per year income. Maybe I'm wrong. Wouldn't be the first time.  |
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Post by steadyeddy on Sept 8, 2022 23:19:47 GMT
Found a few sites where they said the median net worth, including the house is about $250-300K and far from a million. Investments are much lower than that. In previous searches, I found that 6+% have a median net worth of 2 millions, and 4+% 3 millions. I'm in a good company. |
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Post by mozart522 on Sept 9, 2022 0:42:37 GMT
Some people, specifically Jack Bogle, suggested considering your pension and SS a bond with a known coupon (income) which means the rest of your portfolio would tend to have a higher allocation to stocks, maybe even 100% depending on your wanted bond percentage. This advice was given, however, with the realization that most retirees have SS and relatively modest portfolios, so it was a way to stretch the returns by increasing equity allocation above what most would be comfortable with.
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Post by Fearchar on Sept 9, 2022 1:45:36 GMT
I'm starting to feel lonely...
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Post by ECE Prof on Sept 9, 2022 2:14:14 GMT
"Some people, specifically Jack Bogle, suggested considering your pension and SS a bond with a known coupon (income) which means the rest of your portfolio would tend to have a higher allocation to stocks, maybe even 100% "
I also remember that, and I do agree. After all, they are inflation-adjusted fixed income, like bond income. When people say, you need a portfolio of "12 times" your current income under retirement, they should include this as part of that "12 times." But, most FAs will ignore that.
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Post by saratoga on Sept 9, 2022 2:20:17 GMT
I am not objecting to roughly estimating the value of a pension. I think some authors include pension, for example, and others do not and reports sometimes do not state what they are doing.
By the way, the following seems an over-estimation of the value of a pension to me. Otherwise, I am a lot richer than I thought: a pension of $4500 per month, (equals $54,000 per year) and the 30 year treasury pays say 3.5%, then your pension replaces $1,542,857 in savings
Seems pretty simple to me. If I have $1,542,857 invested @3.5% = $54,000 per year income. Maybe I'm wrong. Wouldn't be the first time. In a standard pension, you forfeit your income stream when you die. Perhaps the easiest way is to get a quote for an annuity for the income stream. |
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Post by Chahta on Sept 9, 2022 2:34:22 GMT
You would feel better if it was 15? Maybe like 7 or 8, like the top 10% Not very inclusive of you. Seems like 75-80 would be kinder. |
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Post by ECE Prof on Sept 9, 2022 3:47:23 GMT
I have two life annuity like retirement benefit. It will automatically transfer to the survivor of me or my spouse. So, it's ok to include it. But 12 or 15 times is a separate issue. 15 times is a better margin of safety.
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Post by steelpony10 on Sept 9, 2022 10:41:07 GMT
Fearchar , We’re all anonymous posters. Just say you’re in the 3-4 mil club. Just leave out the part about shopping at ALDI’s, buying knockoff’s and driving 15 year old cars. Makes you look really cheap or worse. Chahta , I’ll just say I’m good so we’re both in the same club with everyone else.
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Post by retiredat48 on Sept 9, 2022 14:09:14 GMT
Fearchar , We’re all anonymous posters. Just say you’re in the 3-4 mil club. Just leave out the part about shopping at ALDI’s, buying knockoff’s and driving 15 year old cars. Makes you look really cheap or worse. Chahta , I’ll just say I’m good so we’re both in the same club with everyone else. Hmmm...makes me feel bad with my 1996 Cadillac, only 145000 miles. But wait, my car is now becomming an antique, and going up each year in value!! R48 |
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