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Post by waffle2 on Oct 20, 2023 21:02:28 GMT
Most sites when I google say for some one retiring around age 65-67 need - "Accumulating assets worth 10-12 times your annual salary by retirement age is a common target"
I believe it assumes no mortgage and no debt.
This sounds a bit low, does it not?
(Some say one needs "80% of your pre-retirement annual income to maintain same lifestyle". but not sure how I can translate that in saving goals.)
Also is Long term care cost extra? How much can that be?
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mani
Lieutenant
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Post by mani on Oct 20, 2023 21:16:42 GMT
Most sites when I google say for some one retiring around age 65-67 need - "Accumulating assets worth 10-12 times your annual salary by retirement age is a common target" I believe it assumes no mortgage and no debt. This sounds a bit low, does it not? (Some say one needs "80% of your pre-retirement annual income to maintain same lifestyle". but not sure how I can translate that in saving goals.) Also is Long term care cost extra? How much can that be? Assuming 4% withdrawal, 10-12x Annual salary would result in 40-48% or pre-retirement income. I imagine they assume the other 32-40% (to go to 80) would be SS? For people with larger incomes, 80% seems like a lot anyhow if you stop contributing to retirement accounts and have all paid off.
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Post by steelpony10 on Oct 20, 2023 21:39:01 GMT
waffle2 , I took my last salary minus SS and income invested that shortage. I wanted a sure paycheck to start. In the first 5 years based on reality I adjusted my cash shortage up to meet my actual situation. I just have to add the shortage from cash not provided by SS raises each year. I guessed on what my shortage would be at age 90 using a compound calculator and generated the income as soon as I could. I just reached my goal this year so all the extra income is autoinvested in other areas or with some left in cash. This results in just watching over things or making adjustments to my guesses from now on. My personal results based on our goals came to 25-30% equities, 15-20% in munis, about 40-45% in CEF’s and 10% cash which is rising at the present time. I just had to solve my unknown in a manner I could live with. No charts, no studies, no rules, no particular attention to allocation, diversification or markets etc. The holy grail of answers isn’t out there but your answer is right in front of you. Edit: I saw that article. I interpret it this way. Since in most instances SS covers about half of household needs in retirement 10 years split in half is actually a 20 year supplement to SS. The same voodoo still applies, how much is SS going to rise, how are your invested funds going to do over time and what will your actual financial needs be. That’s why I chose what I thought was a more reliable plan easily adjusted to my changing needs and not so dependent on unknowns out of my control.
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Post by FD1000 on Oct 20, 2023 23:26:35 GMT
I always knew that a portfolio equal to 10 times is not good enough. Fidelity makes the mistake too. The reality is that most Americans retire with much less and why 10 times sounds OK. My calculations show that you need a portfolio = to 20 times your annual expense not including SS and you also don't have debt. This is almost a guarantee you will not go back to work. As usual, I padded even more and retired with 25+ times and now it's a lot more. I also never believed in buckets or my portfolio must supply us a regular monthly check. This would lead you in most cases to high distributions securities which can be out of favor for years. We have seen it with Value stocks, CEFs, MLP and more. There is nothing more important to your portfolio in retirement as risk-adjusted performance. A bigger portfolio is always better than a portfolio that generate higher income. It's pretty easy to generate monthly income from most funds by setting up a monthly order for a certain day+amount.
80% is another bogus number. Before retirement we were saving a lot and finished our mortgage and why we lived on less than 50% of our salaries and why 80% is far from reality.
LTC is another problem that most Americans can't solve. The premiums are too high for most and if you have enough you don't need it. In our case I design 0.5 million for LTC = 5 years at $100K per year for both of us. That sum grew up a lot too. Again, there are no buckets dedicated to anything such as income, LTC, emergency funds and more. I manage one portfolio for the best risk adjusted I can find. Any time I need money beyond the usual, I sell something.
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Post by Mustang on Oct 20, 2023 23:57:51 GMT
If a worker makes $100,000 per year 10 times is $1 million. Using the 4% Rule that would provide a retirement income of $40,000 per year. Social Security would add maybe another $15,000 but there are deductions for Medicare. Very rough estimate would be $52,000 per year before taxes. Just looking at those numbers I would assume that the retiree would need to be out of debt to make retirement work.
By the way, most people will never save $1 million. Little things in life like mortgages, car payments, children, school expenses, etc. get in the way.
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Post by Chahta on Oct 21, 2023 0:32:13 GMT
If a worker makes $100,000 per year 10 times is $1 million. Using the 4% Rule that would provide a retirement income of $40,000 per year. Social Security would add maybe another $15,000 but there are deductions for Medicare. Very rough estimate would be $52,000 per year before taxes. Just looking at those numbers I would assume that the retiree would need to be out of debt to make retirement work. By the way, most people will never save $1 million. Little things in life like mortgages, car payments, children, school expenses, etc. get in the way. SS of $15000 is too low. More like $35,000 for someone making $100k for working years.
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Post by kathiel on Oct 21, 2023 21:40:22 GMT
I did my figuring differently. I started from how much income I needed each month. I get a pension, a small amount from Social Security and subtracted that subtotal from how much I needed each month. The resulting amount was how much my portfolio needs to produce each month. I used the actual amount my portfolio was producing as opposed to a standard amount, like 4%.
I retired 9 years ago, and I continue to have more income than I need. I donate to charities from my IRA, and I have saved enough to plan for a new car next year.
We all have different circumstances, so I expect we will all do our planning a bit differently.
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Post by win1177 on Oct 21, 2023 22:35:58 GMT
Most sites when I google say for some one retiring around age 65-67 need - "Accumulating assets worth 10-12 times your annual salary by retirement age is a common target" I believe it assumes no mortgage and no debt. This sounds a bit low, does it not? (Some say one needs "80% of your pre-retirement annual income to maintain same lifestyle". but not sure how I can translate that in saving goals.) Also is Long term care cost extra? How much can that be? I’m like FD, I worked my rear end off to accumulate 25 times my annual salary(minimum), before I considered retirement. I based this off the old “4% rule”. Wound up retiring with over that, thanks to a couple of “lucky” stock buys that wound up giving us a bigger cushion. I also did NOT use my wife’s salary (real estate agent) or count my pension I receive from the Medical school, and didn’t count SS, as I always worried it might be cut/ taxed highly/ or go away for higher incomes. Also planned on no mortgage, no debt, etc. So when I retired last year, we are doing quite well. I FINALLY can relax “a little” about finances! Feels great! Now, if I can get my wife to retire! Win
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Post by gman57 on Oct 21, 2023 23:00:59 GMT
Most sites when I google say for some one retiring around age 65-67 need - "Accumulating assets worth 10-12 times your annual salary by retirement age is a common target" I believe it assumes no mortgage and no debt. This sounds a bit low, does it not? (Some say one needs "80% of your pre-retirement annual income to maintain same lifestyle". but not sure how I can translate that in saving goals.) Also is Long term care cost extra? How much can that be? I think you need at least 100%. You may spend 80% of your pre retirement income but you'll buy that refrigerator, new carpeting, new washer & dryer, new roof, new car, that boat you always wanted, inflation, paint the house, remodel the kitchen and/or bathrooms etc.. over the years. Those big ticket items add up to more than a few pennies per year. Long term care is another story...
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Post by FD1000 on Oct 22, 2023 8:42:43 GMT
The % of one's salary in retirement depends on several things such as 1) The more you make, the less % you may need. If the household makes $100K annually, it is more limited than $300K. The $300K can live on just half at retirement. Think about smaller house, no kids, no need to save and pay loans anymore. 2) We always saved a lot but also took the max zero to low loans because our investments made a lot more. It is not for everyone, it works well for people who are responsible with their money and take calculated risk.
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Post by mozart522 on Oct 22, 2023 16:25:00 GMT
I hope most of us realize that we have a partner for some of our money; The IRS. You may have a 400k IRA but it really a lot less than that. If it is a TIRA or a 401K and you take 4%, you aren't getting 4% income. And most of us will give up 15% of our SS as taxable also. I have been converting up to my bracket to a Roth for years. I believe that federal tax is set to go back to 15% from 12 in 2025 unless Congress does something. Because of this, I believe 25 times expenses may be low for many unless your number is more like 3%.
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Post by Mustang on Oct 22, 2023 17:24:36 GMT
Just a reminder, 4% is commonly used but it is based on the worst 30-year retirement period in history. If someone is retiring at full retirement age (67) it is unlikely that they will live to 97. The same research that supports the 4% rule also shows that 5% can be used for a 20 year payout and 6% for a 15 year payout. And this is still based upon the worst retirement period in history.
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Post by yogibearbull on Oct 22, 2023 17:54:10 GMT
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Post by steelpony10 on Oct 22, 2023 18:10:52 GMT
I did my figuring differently. I started from how much income I needed each month. I get a pension, a small amount from Social Security and subtracted that subtotal from how much I needed each month. The resulting amount was how much my portfolio needs to produce each month. I used the actual amount my portfolio was producing as opposed to a standard amount, like 4%. I retired 9 years ago, and I continue to have more income than I need. I donate to charities from my IRA, and I have saved enough to plan for a new car next year. We all have different circumstances, so I expect we will all do our planning a bit differently. Great minds think alike. I posted something similar several posts above you. Compounding of excess income to needs faster then my personal inflation rate makes this a no brainer.
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Post by FD1000 on Oct 22, 2023 23:04:04 GMT
In the link below, you can see that someone who covered her monthly income fell short behind the TR portfolio by millions. Eventually, this high income portfolio invested in MLP total portfolio is so low it could not support the yearly expense. On the other hand, someone who cared a lot more about performance and using QQQ with very low income is in a lot better shape. This lady had to sell some shares but her portfolio is 6+ million bigger + the SD was lower = a much better risk-adjusted return portfolio. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=6jzlkM7IEANgsfcAzGI0IW
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Post by FD1000 on Oct 22, 2023 23:47:11 GMT
Win, I never believed in working t hard, but working smart. I hardly worked overtime + looked for companies that think highly about good balance of work to home. What helped us? 1) Immigrating to best country in the world with nothing. 2) Staying employed by polishing my skills. 3) Investing in the right categories most times. That's huge. 4) Investing monthly in 401K, paid all our bills in full. 5) Taking zero to low % loans for big items while our investments have done much better. This is only recommended for reposible people who know how to handle money. 6) Live below our means but still living well. That meant never own a business and always take all the vacation and enjoy it. Same with big items such as home + vehicles. I did all the above in just 23 years, starting at age 38 and retiring at age 61.
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Post by mnfish on Oct 23, 2023 10:09:04 GMT
There's was no great genius or investing wizardry required in the last 30 years required in my view. Just the ability and good sense to invest and to live well within ones means. Since 1995 (when I started in earnest) the Dow is up +700% and SPY +1,000% and that doesn't include any additional contributions. The greater trick is going to be keeping most of what you have in the next year or so.
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Post by yogibearbull on Oct 23, 2023 12:40:06 GMT
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Post by FD1000 on Oct 23, 2023 13:27:00 GMT
There's was no great genius or investing wizardry required in the last 30 years required in my view. Just the ability and good sense to invest and to live well within ones means. Since 1995 (when I started in earnest) the Dow is up +700% and SPY +1,000% and that doesn't include any additional contributions. The greater trick is going to be keeping most of what you have in the next year or so. There is a very easy "trick" to have more money in the next year or so with zero risk or volatility. Just pick any of the following 3 choices: MM,CD, Treasuries. To do well in the stock market most people must live below their mean, pay all their bills on time, invest high % in stocks monthly and never used this money until retirement. If the above is so easy why most Americans don't have enough at retirement? I also would mention that the SP500 lost money in 10 years, including all the distributions, during 2000-2010.
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hondo
Commander
Posts: 145
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Post by hondo on Oct 23, 2023 14:33:37 GMT
There's was no great genius or investing wizardry required in the last 30 years required in my view. Just the ability and good sense to invest and to live well within ones means. Since 1995 (when I started in earnest) the Dow is up +700% and SPY +1,000% and that doesn't include any additional contributions. The greater trick is going to be keeping most of what you have in the next year or so. mnfish: I agree on every point of your above post. Well stated.
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Deleted
Deleted Member
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Post by Deleted on Oct 23, 2023 17:40:36 GMT
There's was no great genius or investing wizardry required in the last 30 years required in my view. Just the ability and good sense to invest and to live well within ones means. Since 1995 (when I started in earnest) the Dow is up +700% and SPY +1,000% and that doesn't include any additional contributions. The greater trick is going to be keeping most of what you have in the next year or so. Wait a minute! Are you suggesting that I haven't been the king of investing for the last 30 years? What a bummer. Where's my benzodiazepine!
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Post by FD1000 on Oct 23, 2023 22:34:39 GMT
The problem with the SP500 is the fact that most investors don't invest everything in the SP500, they have too much diversification, and trading.
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Post by retiredat48 on Oct 24, 2023 4:16:55 GMT
There's was no great genius or investing wizardry required in the last 30 years required in my view. Just the ability and good sense to invest and to live well within ones means. Since 1995 (when I started in earnest) the Dow is up +700% and SPY +1,000% and that doesn't include any additional contributions. The greater trick is going to be keeping most of what you have in the next year or so. waffle2 , mani , steelpony10 , FD1000 , Mustang , Chahta , kathiel , win1177 , gman57 , mozart522 , yogibearbull , mnfish , hondo ,@axe , Hmmm. I've now been retired 30 years. Some how I don't recall it being all that easy! For starters, going back 30 years, the majority of investors were individual stock pickers...big chances for failure. And market timing same individual stocks, meant many did not achieve good returns. Decisions were not straight forward. Like, when I retired, the guru's were urging using 6.5% inflation rate in computer models. (My model had to get 40 years to age 88!). I chose to use 4.5%, enabling me to retire. Actual inflation was less...at least gvt numbers were less. A generation kept away from the market after the dot com bubble/crash. Not many invested in the market, and few invested in high tech. BTW I was a small minority who stayed with FSPTX Fido Select Technology Fund, accumulated since inception about five decades ago. It is now my largest holding. Not so easy to hang on all these years...for "taking profits" is always enticing. And...we did not have computers, index funds, Roth IRAs, the internet, cell phones, tons of investing info, and investment forums! Just some observations. Want another observation...With the advent of businesses incorporating efficiencies from Artif. Intell., AND an expected very high inflation rate in next decade, I view stock markets will have very large price appreciation...larger than historic 9% return standards. Owning companies will be the primary method to cope...don't be talked out of it. The primary challenge or dilemma being how to keep what you own. Good luck... R48
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Post by mozart522 on Oct 24, 2023 13:21:55 GMT
retiredat48, We did have some index funds before 1993 (30 years ago) I was investing in the 500 index and the developed markets index before the Total stock market fund became available in 1992. Most working boomers I knew were in 401Ks, 459Bs and/or IRAs. Those early index years are why I have no money worries now.
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Post by yakers on Oct 28, 2023 17:55:00 GMT
COLAd pension covers all our basic exenses. Investments are for travel, gifts, charity and passing on. Never a decision to save a particular % but saved a good bit. Had some ideas about leaving ( small by rich people standards) 'generational wealth' but the kids & grandkids may have their own ideas.
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Post by Mustang on Oct 29, 2023 0:26:01 GMT
Hmmm. I've now been retired 30 years. Some how I don't recall it being all that easy! For starters, going back 30 years, the majority of investors were individual stock pickers...big chances for failure. And market timing same individual stocks, meant many did not achieve good returns. Decisions were not straight forward. Like, when I retired, the guru's were urging using 6.5% inflation rate in computer models. (My model had to get 40 years to age 88!). I chose to use 4.5%, enabling me to retire. Actual inflation was less...at least gvt numbers were less. 30 years ago... 1993. That was just after Markowitz won a Nobel Price for his Modern Portfolio Theory (1990) and before William Bengen published his first paper (1994). Advisors had not yet fully grasped the importance of risk/diversification and were using average returns to calculate initial withdrawals (which were catastrophic if a sequence of return failure occurred). Bengen conducted his research and published his paper because he thought that was the wrong approach.
I retired from the military in 1996 and went to work as the CFO of a manufacturing company. One of my duties was overseeing the company's 401k program. Myself and our fiduciary advisor picked the plan's possible investments. We never picked individual stocks. All alternatives were mutual funds ranging from aggressive stock funds to bond funds.
You are correct. Decisions were not simple but we tried to make them as simple as possible. Our employees were salesmen, truck drivers, and factory workers with little to no experience in investing. Our plan's advisor talked with each employee and based on age and tolerance for risk steered him or her into an appropriate balanced portfolio. Those with college degrees tended to be more aggressive. I was still young enough back then (retirement still 20 year ahead0 to go with an 80/20 portfolio of various funds. I think it was 12. Our advisor steered older employees into more conservative, simpler portfolios. Often when an employee retired they were steered to an annuity. It was the best way to get maximum income for an individual with a modest portfolio. I transferred my 401k into a traditional IRA and continued teaching.
I am reasonably certain most companies with 401k plans did the same for their employees. Most employees are not stock pickers or market timers.
Last 30 years Previous 30 years
May 2023 $33,303 April 1993 $7,527
May 1993 7,527 April 1963 7,242 up 342% up 3.9%
Low point: April 2009 $11,786 April 1982 $2,751
The last 30 years saw a fall from a peak of $20,518 in October 2007 that didn't recover until June 2013 (5 years, 8 months) and the lowest point never fell below the starting value. That is nothing compared to the previous period. The previous 30 years saw a fall from a peak of $9,155 in May 1966 that didn't recover until September 1995 (29 years, 4 months) and the low point was only 40% of the starting dollar value.
Yes, if someone didn't make money during the last 30 years they were doing something very wrong. An investor could make money by accident. Pretty much all they had to do is pick good a fund and leave it alone. My foggy crystal ball says the future will not be that rosy.
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Post by Chahta on Oct 29, 2023 10:21:27 GMT
"Advisors had not yet fully grasped the importance of risk/diversification and were using average returns to calculate initial withdrawals (which were catastrophic if a sequence of return failure occurred)"
When I first started saving/investing in 1978, I remember asking my advisor about withdrawing for retirement. He told me the average stock market return was 7-8%, so a person could use that as a withdrawal rate. My advisor at the time was my father's cousin, a retired Lt. Colonel in the Air Force, who started a second career with State Bond Sales. He was instrumental getting me on the right track.
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Post by yogibearbull on Oct 29, 2023 10:39:35 GMT
"Advisors had not yet fully grasped the importance of risk/diversification and were using average returns to calculate initial withdrawals (which were catastrophic if a sequence of return failure occurred)" When I first started saving/investing in 1978, I remember asking my advisor about withdrawing for retirement. He told me the average stock market return was 7-8%, so a person could use that as a withdrawal rate. My advisor at the time was my father's cousin, a retired Lt. Colonel in the Air Force, who started a second career with State Bond Sales. He was instrumental getting me on the right track.That is guaranteed to run out of money. It's one thing that people should NOT do. Using TR overtime completely ignores the SOR. Mathematically, the TR being a geometric average of monthly/yearly TRs is commutative, so the SOR risk isn't accounted for. The SOR risk is very high for uniform or inflation-adjusted withdrawals (PV has data for fund SWRs), less for %withdrawal (PV PWR).
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Post by Chahta on Oct 29, 2023 12:50:05 GMT
"Advisors had not yet fully grasped the importance of risk/diversification and were using average returns to calculate initial withdrawals (which were catastrophic if a sequence of return failure occurred)" When I first started saving/investing in 1978, I remember asking my advisor about withdrawing for retirement. He told me the average stock market return was 7-8%, so a person could use that as a withdrawal rate. My advisor at the time was my father's cousin, a retired Lt. Colonel in the Air Force, who started a second career with State Bond Sales. He was instrumental getting me on the right track.That is guaranteed to run out of money. It's one thing that people should NOT do. Using TR overtime completely ignores the SOR. Mathematically, the TR being a geometric average of monthly/yearly TRs is commutative, so the SOR risk isn't accounted for. The SOR risk is very high for uniform or inflation-adjusted withdrawals (PV has data for fund SWRs), less for %withdrawal (PV PWR). yogibearbull, that was 1978 when I first started out of college. No way after learning "the ropes" would I consider 7%. The yield only earned now, plus a cash buffer is plenty for me. At 71 I have yet to tap my IRAs and won't until 73 years old. Not sure what you are saying. Are you saying 4%, inflation adjusted, is not safe to avoid SOR risk?
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Post by Mustang on Oct 29, 2023 13:03:26 GMT
"Advisors had not yet fully grasped the importance of risk/diversification and were using average returns to calculate initial withdrawals (which were catastrophic if a sequence of return failure occurred)" When I first started saving/investing in 1978, I remember asking my advisor about withdrawing for retirement. He told me the average stock market return was 7-8%, so a person could use that as a withdrawal rate. My advisor at the time was my father's cousin, a retired Lt. Colonel in the Air Force, who started a second career with State Bond Sales. He was instrumental getting me on the right track.
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