Another retirement question

[Lawnboy]

Not sure this has been covered and maybe I'm delusional in thinking I can get a answer. It seems that every financial planner has a different idea of the amount you need to retire. I've heard anywhere from 1mill-3mill. I was talking to a gentleman the other day who said his wife and him retired on $300k and still do a little traveling. So I'm a little confused and I realize everyone is going to be different in what is "comfortable retirement" for them. Maybe this is also too personal to ask as well??? Anyway just curious what you are seeing as retirees as far as how much you need to have saved by the time you call it quits?. I am self employed and would have no debt when the time comes. In my mind I would think I could live comfortably on $60K a year the wife thinks higher . Anyway just curious to see if some of you are doing fine without having this nest egg of 1mill-3mill or if that really is what you need? Also someone posted on another question that they wouldn't ask advice on a hunting forum. While there are some I'm sure I would steer clear of I'm convinced there are some very successful folks lurking here. Anyway light me up

 

[Pucky Freak]

Look at the nest egg as a golden goose that lays golden eggs. It is an income-generating tool. Many people instead view it as a cheese wheel; you nibble the cheese until it’s gone and then you live off safety net programs until you die. There are many, many factors that go into “how big should my nest egg be” Just for starters: post-retirement income from working, pensions, health insurance costs, standard of living, life expectancy, number of years in retirement, tax liability, goals for your heirs, if you have dependents, how risky of investments you are comfortable with, age difference between you and your spouse, etc, etc.

A common guideline for estimating the size of the golden eggs is 4% per year of the size of the goose. So if you have 1.5 million balance invested earning an average of 6% annually, that is $90,000 annual income. If you draw off 4% that is a $60,000 annual “salary” for you and your wife, and $30,000 goose food put back into the fund to hedge against market downturns and inflation. This is an over-simplified example, but hopefully it conveys the general idea.

Personally, I’m on track to retire with a lifetime pension that will pay approx the same as my current annual salary, starting 20 years from now. Because I have this fixed income to rely on, my personal retirement savings are somewhere in the neighborhood of just half of what is recommended to have saved up by my age. This is just one example of how someone’s unique situation can vary widely from what the financial experts recommend.

Overall, the exact dollar amount of the golden goose is less important than understanding what that tool is going to do for you, what your level of risk comfort is, and overall the confidence that your particular financial plan is going to serve your goals in retirement.

 

[Southern Elk]

All I know is my wife couldn’t retire on $300k, so I guess that means I couldn’t either.

Interesting question though. I’ve been thinking about retirement a lot lately. But I have a long way to go in both years and cash.

 

[homers]

What's required is dependent on the individual. There is no one size fits all. What are your monthly expenses? Pension? SS? Retirement accounts? Medical insurance paid or you pay premiums? House paid off? etc.

 

[Deleted member 18333]

My parents have been retired for about 15 years. They are 80. Live what I would call a middle to upper middle class life. Only debt they have would be one car payment. Nothing too fancy. Mother travels. Dad not so much. He told me a couple years ago they require about $75k per year in income.

 

[Lawnboy]

I'm self employed so no pension. As i mentioned earlier there would be no other debt. In coming up with my 60K a year number I tried to include all those numbers (insurances, food, property taxes ect...)

I'm more curious to hear if some are doing ok without this giant nest egg or if you really need that much. Elkfever2 your example makes sense.

 

[Dfuller]

My dad and I had this conversation just last week. He’s been retired 2 years now(cashed in @63) and my step mom for 1 1/2 years. He said when they retired they had house paid for, cars paid for and about 200k in bank. Didn’t say if it all invested or just cash in account but knowing him it’s in cd’s and bonds. There social security together is 2300ish a month.

theh live very simply, heat with wood, cook at home, hunt, fish and butcher everything themselves. He helps out his friend who farms for 1-2 days a week if he needs it. Said he shoots to make $500 extra a month so as to not mess with his ss.
He told me that since they retired they have saved another 18k in the bank, and they just traded for a new side by side.

said that they do spend more time doing what they want they do t do much traveling outside 2 vacations a year. They go fishing in the spring for a week and 4wheeling in the fall. Said his work money pays for all of that.

he said the best thing they did was be sent free and have the stuff they wanted to do once they retired bought. He still complains about price of a dozen worms but they don’t go with out and are generally pretty happy.

Moral is you have to know what your style of spending is and what you will have for payments on stuff. If you happy and can get by on less then number is pry pretty small, only you know what you want out of retirement.

 

[TN2shot07]

I’m younger than some here so I’m looking forward to seeing these answers as the option of early retirement is a high priority for me. From talking to grandparents and the older generation in our church healthcare costs seem to be the biggest hurdle, especially if you plan to retire before Medicare age. Being self employed you’ll just need to make sure you’re taking advantage of the retirement plans available SEP, IRAs or something similar depending on your employee situation. Depending on your business selling that may also be a way to fund part of your plan later on. Like stated above it’s really just the number you need to generate and the average amount of time you and your wife expect to need it. If you can do that without touching the nest egg, even better.

 

[mdhunter]

People work for so many reasons beyond just money. I could probably be done but I have a son in the business and want to make sure he is ready before I step back. Your will know in your heart as only you know what your financial comfort level will be post work.

 

[BigHornRam]

The one thing you can't predict is how long you will live. Better to have a little extra set aside in case you live longer than expected. We have no debt, and I think we could do well on $60,000 annually. The wife is extra frugal, and could get by on less.

 

[LopeHunter]

If you will be paying for healthcare premiums up until age 65 when can jump on medicare then I can tell you the cost for my wife and myself, both about age 60, is $20,000 a year in premiums and then can easily spend another $10,000 a year due to high deductible, out of pocket, etc.

So, I am still working but she retired. My employer subsidizes healthcare so am out $11,000 a year in premiums and could pay another $20,000 if major health issues arise.

Why work? I sock away about $20,000 a year in tax-deferred and more than that in taxable savings and avoid up to $20,000 in health costs so that is why am still working. I have gone way beyond what any planner says my wife and I need in retirement. I just enjoy what I do and there is still upside that will accumulate the next few years before stop working which is money that will likely end up being used by our grandkids as they see fit.

 

[brnsvllyjohn]

There is no one answer that fits everyone. We use 2 different investment firms to manage our retirement accounts. One person told us we had no chance of living on the income we would earn. The other firm told me we would do fine if we did not over spend. That was 14 years ago. We have each purchased new cars and remodeled the house a little in the last few years. We owned everything when we retired so we had no bills. We saved money to purchase the new items and refused to finance anything. We have more money in savings now than when we retired. I have multiple friends and family that have no chance of making it on what we earn. Some say they need the same income they have now to retire. We make about 30% of what we did when we worked and we are fine. I doubt you will find many advisors that think you can retire on half or less of what you are earning now. They all think you need at least as much income when you retire as you are used to. Obviously I disagree.

We downsized our home and don't travel much. We almost never eat out. One of my best hunting buddies said I was too stubborn to fail and then go back to work. He may be right. If you can be happy not traveling and eating out a lot then you can live on a lot less than some can.

I still launch my boat and fish 75 days per year and deer hunt about 3 weeks per year. My wife has her hobbies that aren't free. We don't worry about what the other one spends as long as we spend less than we make. That has always been the way we lived.
You need to figure out your own budget and be realistic. Then in our case we figured out how to earn 30% or more than our budget before we retired. Our budget number was more than we spend so we are still saving money. We also structured our income so that as we aged we could give ourselves a raise. Our income has increased some in the last 5 years and it will increase a little more in the future.

 

[Pucky Freak]

I am familiar with my parents’ situation; they make their savings work for them well through a variety of little things that together add up: delaying retirement age, optional gig work, minimizing health care costs, anticipating a modest inheritance, a careful and strategic investment strategy, zero debt, own their primary residence, modest lifestyle, living below their means, knowing what they want to do in retirement more or less, social security income x2, and a small pension. The dollar amount of the retirement account is important, definitely one of the top factors, but all things considered it is still just 1 piece of the puzzle.

 

[nontyp]

Just one more factor to consider is the type of retirement accounts that you have. You could retire on much less if it’s mostly Roth because you don’t have to pay Uncle Sam.

 

[Nick87]

I really need to do more with this. The way my pension is looking I'll be working til I'm dead. Last couple years I'm starting to realize my body isnt going to hold up forever.

 

[Dinkshooter]

I don’t know what the numbers are, but I’ve never heard a single person ever say they wished they would have retired later.

 

[VikingsGuy]

@ElkFever2 gave spot-on advice. Only two things I would add - First, some studies suggest 5% is the sustainable amount so take your annual "draw" and multiply it times 20 instead of 25 if you are comfortable with a bit more risk. Second, and most important, invest in low load (0.1% or less) index funds with no sales fees or other hidden costs Vanguard is my preference for no-nonsense retirement savings. Have the mix between stock index and bond market index funds closer to 80-20 when in your 20s/30s and gradually move towards 60-40 in your sixties/seventies. In my opinion, actively managed funds, day trading, market timing, leverage or speculative trading (puts, calls, trading on margin, etc), money markets, banks savings, and CDs are absolute losers for 99% of Americans. To the extent you can, max your savings into these index funds via Roth IRAs, 401ks, etc. Some vary in availability and there are strategic reasons for each, but whatever you can do to save in tax-favored accounts the faster your money will grow. Realize that if you are trying to get $60k income from a tax-deferred account you probably end up taking out $75k to cover the taxes if that is your only income + SS. That is one reason for folks in currently low tax brackets Roth accounts are hard to beat.

 

[VikingsGuy]

I don’t know what the numbers are, but I’ve never heard a single person ever say they wished they would have retired later.

I watched my father (a wonderful man) nearly in tears when he realized his kids had to start paying his bills due to a questionable early retirement decision - it took part of his soul and totally screwed my mom who is still with us - so circumstances vary.

 

[Nick87]

I watched my father (a wonderful man) nearly in tears when he realized his kids had to start paying his bills due to a questionable early retirement decision - it took part of his soul and totally screwed my mom who is still with us - so circumstances vary.

Not exact same circumstances but I've seen similar. Shitty situation to say the least.

 

[Dinkshooter]

That sucks, maybe I don’t know enough retired people?

I’d say, based on what I’ve seen of self employed retired people. The ones the best off, found a way to incorporate one of their kids into the business and took a salary slowly over the years and gifted the company to them. Win/win. Second generation business are solid players and you don’t have to rely on chitheads on Wall Street as much.