Retirement goal changed due to inflation?

[Randi]

Moral of the story, if you don't check really really hard, good chance you get screwed over and waste 2 years at the community collage you have to repeat anyway...

Further it's a black mark on your record if you try to get into highly competitive fields. It there are 50 applications from Harvard the kid with 2 years at a community college is never getting an interview.

These two posts are spot on ! There are so many minefields and caveats when trying to get a college education that will allow you to compete in the job market .

The one thing that has not been mentioned is "running start" and IT IS NOT for everyone and must be planned out very carefully. However; it can work. It did work, for me. I have also found that the 2 vs 4 years at a State college, is not the only thing employers look at. For me personally, I have found some who are impressed with the fact I did Running Start and also that I worked all the way thru high school was important to them. I have also been somewhat surprised at the interest some have in my " other interests and awards in those activities" part of the resume.

BUT, as as been stated above, first you have to get that interview and if you do have 4 years ( not running start, or community college ) from, at least, a State university ( Ivy Leage is even better ) it decreases your odds

Sometimes, the other activities and awards hit home with someone that, did that sport or activity or still does even.

 

[hank4elk]

I'm pretty sure my sibs think I am destitute. I think I have it dicked and doing better than most I see.

 

[VikingsGuy]

Two other matters of note that will help you save and retire early:

-Make your kids pay for their college.(Roth 401K for kids)
- Make your kids pay for their cars and their gas. (get an after school job)
-Quit smoking or Chewing and put that money into an IRA yearly (You will be surprised how much you have in there after 20 years...)

I see a ton of people who have to work until they are 70 years old because they cant stop coddling their children. Kids need to spread their wings and fly and if they don't they become leeches on their parents into their 30's and beyond. We have all seen this. Dave Ramsey talks about this in a few of his videos. Later in life if you want to help them that is fine. But, until you have secured your retirement, you should let your kids figure it out on their own.

I know 3 people who "invested in their kids business" only to have their kid loose it all and now they are 70 years old and working at wal-mart.

Some tough love above but its so true.

I use this calculator to check how things appear from time to time. It really provides a reality check on how far your money will go into retirement. Input your best case scenario and your worst case scenarios for how much you will have saved. Just play around with it. You might be surprised how far even just $300,000-$500,000 will take you into retirement.

If you shook your house payment, and retired TODAY, and you and your spouse are used to living on $100,000 combined income and you are retirement age (62) and you have 1 million in your 401K's combined.... That will take you until ~ 2046 to burn through it all......and truthfully, that isnt even factoring in you SS and any savings you may have...

Basically, your money will likely outlive you....the odds of both husband and wife living until their 80's just simply put, is not in your favor.

Retirement Withdrawal Calculator |- MyCalculators.com

Retirement Withdrawal Calculator - If you're already retired, or close to retirement, calculate how much you can withdraw from your savings to last through retirement. Free, fast and easy to use online!

www.mycalculators.com

Its fun to play around with and see the different scenarios.

Retire and Enjoy life!

If you can do it at 55, and you want to, DO IT.

On the topic of inflation, just ride it out. The price of products and services is going to come down quickly once people have blown their wad on those items for the next year or two. For some reason, people are buying as hard as ever right now at inflated prices and it is absolutely crushing their savings buckets. The market will correct itself in my opinion. Sit back, buy only the minimum of everything that you NEED and wait for it all to come down.

Trucks, cars, houses, food, the prices are going to come down, just wait and see.


As for paying off your mortgage early before you retire, if you have a good amount of money in the bank, you may not want to do that actually, but that's a topic for another day.

Having watched my parents' friends retire and now getting in that window myself, I think we need to remain open to a few points:

• Different people value different things - and too often a person's realization comes late in the game. I know plenty of folks that retired early (early 50s) and were miserable, I know others that died or were physically limited after retirement at 65 and missed out on the things they planned to do, I know others that saved every penny and later regretted the missed experiences the funds would have provided for, and others still that saved too little and lived with their final years under great financial stress and regret over choices. Every one of them thought they had it figured out when they were 45.
• Two, three or four decades away is a very long time. Assumptions about one's wellness, joys, interests, family situation, financial situation, tax policy, pension viability, inflation etc. will change - often in ways one cannot honestly predict decades in advance.
• People who view their life goals as being strongly tied to the well-being of others report significantly higher "happiness" than those who pursue individual goals. So, working longer because a person is a teacher who loves to help the kids; or working longer to help your own kids or grandkids with college; or working longer to build jobs in one's community, or to retire early to drive charity interests; etc will likely lead to greater happiness than the "i got mine and I am checking out" approach. (although the later is very attractive some days)
• All that said, being intentional and disciplined with money today will give a person more options and flexibility in a world that will look very different when we are 70.
• Debt is not inherently bad. There is smart debt and dumb debt. Show me someone who doesn't know the difference and I will show you a person that left a lot of money/security on the table.

Finally, I think your view on inflation is off - while I expect future inflation to come back down over the next 2-3 years, the price increases are almost never elastic. Some goofy things like used cars in light of chip limitations, etc might, but in general, food, housing, utilities, services, medical, etc will not go back. They are up 10-25% and they will not come back down. Pretty much whatever we have in savings is worth 15-20% less than it was 2 years ago and we will never get that purchase power back. I would also guess with increased long-term govt spending across the G8, increased cost/complexity of an energy system in transition, and a stepping back from cost-driven global supply chains, I would expect inflation to return to the 3-5% range not to the 0-2% we had grown accustomed to.

 

[Deleted member 18333]

I typically find the financial advice on huntalk more solid than the hunting advice.

This thread has bolstered my opinion that financial advice on HT is better than the hunting advice. Lots of really well thought out, detailed, analytical responses on this thread. Mostly BS opinion but that's ok. @Ben Long asks for moose hunting advice on another thread and gets "they're big" and "bring paracord".

 

[BuzzH]

Having watched my parents' friends retire and now getting in that window myself, I think we need to remain open to a few points:

• Different people value different things - and too often a person's realization comes late in the game. I know plenty of folks that retired early (early 50s) and were miserable, I know others that died or were physically limited after retirement at 65 and missed out on the things they planned to do, I know others that saved every penny and later regretted the missed experiences the funds would have provided for, and others still that saved too little and lived with their final years under great financial stress and regret over choices. Every one of them thought they had it figured out when they were 45.
• Two, three or four decades away is a very long time. Assumptions about one's wellness, joys, interests, family situation, financial situation, tax policy, pension viability, inflation etc. will change - often in ways one cannot honestly predict decades in advance.
• People who view their life goals as being strongly tied to the well-being of others report significantly higher "happiness" than those who pursue individual goals. So, working longer because a person is a teacher who loves to help the kids; or working longer to help your own kids or grandkids with college; or working longer to build jobs in one's community, or to retire early to drive charity interests; etc will likely lead to greater happiness than the "i got mine and I am checking out" approach. (although the later is very attractive some days)
• All that said, being intentional and disciplined with money today will give a person more options and flexibility in a world that will look very different when we are 70.
• Debt is not inherently bad. There is smart debt and dumb debt. Show me someone who doesn't know the difference and I will show you a person that left a lot of money/security on the table.

Finally, I think your view on inflation is off - while I expect future inflation to come back down over the next 2-3 years, the price increases are almost never elastic. Some goofy things like used cars in light of chip limitations, etc might, but in general, food, housing, utilities, services, medical, etc will not go back. They are up 10-25% and they will not come back down. Pretty much whatever we have in savings is worth 15-20% less than it was 2 years ago and we will never get that purchase power back. I would also guess with increased long-term govt spending across the G8, increased cost/complexity of an energy system in transition, and a stepping back from cost-driven global supply chains, I would expect inflation to return to the 3-5% range not to the 0-2% we had grown accustomed to.

I totally agree with your post.

While retirement planning is important, so is living life, that to me isn't "things" but experiences.

If you wait to hunt sheep, goats, hell, even elk...its not going to be as fun at age 55-65 as it is at age 35. Plus doing those things may not even be available when you wait to retire to "live life".

I've seen both extremes, those living like hermits and afraid to take a vacation, go out to dinner, etc. and saving every penny for retirement and paying off their house a year early. What a miserable way to live.

Of course the opposite extreme, living for today and simply no chance at retirement, sounds great now, but its going to suck when you're old.

I show no mercy to either of those 2 extremes.

The only folks I feel bad for are those that simply can not afford to put money away for retirement. I don't see how paying for rent, food, modest transportation, etc. on minimum wage-$10/$12 an hour leaves a person much room to participate...let alone maxing out retirement savings.

 

[Deleted member 28227]

Two other matters of note that will help you save and retire early:

Retirement Withdrawal Calculator |- MyCalculators.com

Retirement Withdrawal Calculator - If you're already retired, or close to retirement, calculate how much you can withdraw from your savings to last through retirement. Free, fast and easy to use online!

www.mycalculators.com

This is a really great tool thanks for sharing.

So plugging in some numbers...

If at 35 years old a household 150,000 in their retirement and then they maxed there contributions 401k + IRA, retired at 65, lived till 85, and then wanted $300,000 in reserve in case one lived longer. (not increasing max contribution cap over time, but staying fixed at 2022 level, and no employer match)

This would be their annual withdrawal amount in 2022 $, based on various market conditions
4% ROR = $93,000
5% ROR = $121,000
6% ROR = $161,140
Same couple at 1 spouse max retirement
4% ROR = $56,000
5% ROR = $67,000
6% ROR = $93,000

This calculator makes me want to build out a full table that allows you to vary contribution rate by year to view the effect of front loading a la FIRE versus backloading savings. Obviously front loading is better but how much better.

 

[TheTone]

I totally agree with your post.

While retirement planning is important, so is living life, that to me isn't "things" but experiences.

If you wait to hunt sheep, goats, hell, even elk...its not going to be as fun at age 55-65 as it is at age 35. Plus doing those things may not even be available when you wait to retire to "live life".

I've seen both extremes, those living like hermits and afraid to take a vacation, go out to dinner, etc. and saving every penny for retirement and paying off their house a year early. What a miserable way to live.

Of course the opposite extreme, living for today and simply no chance at retirement, sounds great now, but its going to suck when you're old.

I show no mercy to either of those 2 extremes.

The only folks I feel bad for are those that simply can not afford to put money away for retirement. I don't see how paying for rent, food, modest transportation, etc. on minimum wage-$10/$12 an hour leaves a person much room to participate...let alone maxing out retirement savings.

This 100%. My old boss was doing a humble brag the other day about how well off financially he and his wife are now; buying a new home, soon to be completely debt free, has a huge chunk of money set aside to buy a new pickup with cash and was bragging how he always put an extra $500 on his mortgage principal every month. I also know he basically doesn’t do anything for fun, has spent next to nothing on his children that he has a crummy relationship with, and is grumpy and unhappy more often than not. He purchased his previous property about 20 years ago for next to nothing and is certainly way, way out of what a person in our career path can afford as a starter home now. I just kinda laughed to myself and was happy he is no longer my boss. I’m going to keep putting away what I can afford to, look forward to my well funded employer pension,and enjoy things and spend money on things I like doing now because their isn’t a promise for anything in the future

 

[TOGIE]

thread reminding me i need to nut up and book a baby moon to hawaii this summer.

been real on the fence about spending that money.

f*&k it.

 

[VikingsGuy]

On the college angle. The key is to align costs with expected job outcomes. There is no one-size-fits-all answer. For some jobs ivy league makes no sense, for other jobs community college isn't going to get you there.

If you want to be an elementary teacher, get your degree as cheaply as possible. The entry-level salary and peak late-career salary do not justify spending $300,000 in college costs.

If you want to be a lawyer doing big litigation, then go to the best college and law school you can get into - starting salaries for first-year lawyers at these firms is $200,000 and with 10 yr experience they are pushing $500,000 per year - with partners making 7 figures. If you can make this work, your student loans will be a rounding error in your lifetime earnings.

Doctor, lawyer, engineer, chemist, teacher, cop, etc etc - people need to do the math and see what they are buying.

I see kids in MN paying $250,000 to get elem ed degrees from our top liberal arts schools - what a financial waste. I know other ones that want to go to a top law school and get $250,000 "art history" degrees on the way - that if it results in top law school admission will easily pay for itself. But if not, it will be an albatross.

Post-secondary education needs to be a financial decision, not a "how I feel" decision. I find it hard to feel sorry for students/families who spend a small fortune for degrees that from the start had no line of sight to paying off.

 

[npaden]

A question that I always have, probably also a good one for @SAJ-99 and @npaden are what have you seen as average real portfolio returns over 30 years. One of my biggest petpeeves is guys that use the historical growth of the market as a means of projecting portfolio performance.

How many people have actually been in an index fun for 40 years, probably almost no one, some peoples portfolios might mimic them still... likely big differences right?

My personal 401k has been invested since 1991 and my average return over those 31 years is 12.44%. Probably not something someone starting out right now can count on and that doesn't include the butchering I've taken so far in 2022 because I just keep track of it annually. YTD I'm down 22.67% so far in 2022. If that holds for the rest of the year it would be my 4th worst year in 32 years. 2001, 2002 and 2009 were all worse (I had a 45.79% negative return in 2009). If I plug it in as a final return, that would drop me down to 11.34% return over 32 years. I don't believe in bonds and have an aggressive investment mix. Past performance is not a guarantee of future returns. Blah, Blah, Blah.

P.S. - I've never tried to "time the market" with my 401k. Pure dollar cost averaging. After the dot come bubble burst in 2001 I learned my lesson and re-balance my funds religiously at the end of every year to my target percentages.

 

[Europe]

This is a really great tool thanks for sharing.

So plugging in some numbers...

If at 35 years old a household 150,000 in their retirement and then they maxed there contributions 401k + IRA, retired at 65, lived till 85, and then wanted $300,000 in reserve in case one lived longer. (not increasing max contribution cap over time, but staying fixed at 2022 level, and no employer match)

This would be their annual withdrawal amount in 2022 $, based on various market conditions
4% ROR = $93,000
5% ROR = $121,000
6% ROR = $161,140
Same couple at 1 spouse max retirement
4% ROR = $56,000
5% ROR = $67,000
6% ROR = $93,000

This calculator makes me want to build out a full table that allows you to vary contribution rate by year to view the effect of front loading a la FIRE versus backloading savings. Obviously front loading is better but how much better.

and-----depending on your age when you start "preparing for retirement" hits your brain, you need to at least consider how much longer we are living now than in the past.

For me, we discussed preparing for retirement in the 1950's, when the average American lived to a ripe old age of 67 approximately . Now it is almost 80.

If we had planned our retirement based on being dead at 67, even 70, we would have run out of money years ago ( or I would have ).

Will-------- I think it was you who said some debt is good, Is that just so you can maintain a good credit score ? We preferred to pay off everything as quickly as possible. However in our lifetime we lived through some terrible interest rate eras. Today, possibly you can make more on your money by investing it than you can by paying off your home, because of the low rates ? I still believe if I was i n my twenties today and buying a home, I would ask for a thirty year loan but pay it off in fifteen ---your thoughts

 

[TheTone]

thread reminding me i need to nut up and book a baby moon to hawaii this summer.

been real on the fence about spending that money.

f*&k it.

Heck yeah!

Financially do I want to go back to Alaska this summer, no. But the charter/guide I fished with in the past is retiring and I’d rather spend the money to go fishing with him again than look back in a few years and wish I had

 

[BuzzH]

Heck yeah!

Financially do I want to go back to Alaska this summer, no. But the charter/guide I fished with in the past is retiring and I’d rather spend the money to go fishing with him again than look back in a few years and wish I had

Is there anything worse than your Alaska Charter Captain retiring?

I was appalled that my guy had a solid retirement plan when he sold his boat and retired on us last year.

It sucks having to train another boat Captain on how we like to fish.

 

[Deleted member 28227]

and-----depending on your age when you start "preparing for retirement" hits your brain, you need to at least consider how much longer we are living now than in the past.

For me, we discussed preparing for retirement in the 1950's, when the average American lived to a ripe old age of 67 approximately . Now it is almost 80.

If we had planned our retirement based on being dead at 67, even 70, we would have run out of money years ago ( or I would have ).

Great point, hard to know what the saving horizon needs to be, if you're eating at burger king 3 meals a day you probably don't need to worry about a 401k.

Will-------- I think it was you who said some debt is good, Is that just so you can maintain a good credit score ? We preferred to pay off everything as quickly as possible. However in our lifetime we lived through some terrible interest rate eras. Today, possibly you can make more on your money by investing it than you can by paying off your home, because of the low rates ? I still believe if I was i n my twenties today and buying a home, I would ask for a thirty year loan but pay it off in fifteen ---your thoughts

Depends on the context, in terms of a house if you can beat your mortgage rate in the market why sink your capital. More or less your getting a 3% rate of return on your mortgage payment while in the market you could get a 6% rate. So if debt is cheap it's not a bad thing to carry some.

Credit scores are a bit different. Credit agencies companies look at utilization and payment history.
850 is the max score, here is who gets an 850 (minimums)

You need somewhere between 15-20 years of credit history. Your "history" starts when a card/loan is opened in your name.
You need to have a very low utilization rate. The easiest way to do this is to pay off your card in full before the statement period ends, ie. your credit card bill should be 0 every month. You also need to get your credit limits relatively high. So something like over 30-40k combined credit limit for your accounts.

I believe there is also an income threshold, not sure where the line is but just above $85k

Having any mortgage or car loan dings someone so for a perfect credit score renting is better. You can still have a very high credit score with a mortgage but it's hard to hit 850, though depends on age 35 you have a more limited credit history so mortgage is worse than if you are 60.

Note there is absolute no benefit to an 850 credit score over an 800.

 

[SAJ-99]

It's really interesting having this intergenerational retirement conversations. Obviously the mechanism that current 30 year olds use will be totally different than 65 year olds used, but the fundamentals are the same.

A question that I always have, probably also a good one for @SAJ-99 and @npaden are what have you seen as average real portfolio returns over 30 years. One of my biggest petpeeves is guys that use the historical growth of the market as a means of projecting portfolio performance.

How many people have actually been in an index fun for 40 years, probably almost no one, some peoples portfolios might mimic them still... likely big differences right?

Agree, likely big difference between portfolios and any benchmark. The last 25yrs the return 70%/30% portfolio is around 9.3%. That doesn't account for any fees or transaction costs and assumes a day 1 investment. Obviously, your performance will vary.

 

[VikingsGuy]

You need to have a very low utilization rate. The easiest way to do this is to pay off your card in full before the statement period ends, ie. your credit card bill should be 0 every month.

I can't speak to all cases, but many (maybe most) banks report, and some (maybe all) credit scoring companies use, average daily balance - so while paying in full prevents payment of interest it doesn't necessarily keep your "utilization rate" zero.

 

[npaden]

Credit scores are a bit different. Credit agencies companies look at utilization and payment history.
850 is the max score, here is who gets an 850.

You need somewhere between 15-20 years of credit history. Your "history" starts when a card/loan is opened in your name.
You need to have a very low utilization rate. The easiest way to do this is to pay off your card in full before the statement period ends, ie. your credit card bill should be 0 every month. You also need to get your credit limits relatively high. So something like over 30-40k combined credit limit for your accounts.

I believe there is also an income threshold, not sure where the line is but just above $85k

Having any mortgage or car loan dings someone so for a perfect credit score renting is better. You can still have a very high credit score with a mortgage but it's hard to hit 850.

Note there is absolute no benefit to an 850 credit score over an 800.

I took a screenshot when I hit 850! That was after all my refunds from New Mexico hit my credit card and it was a large negative balance. You can see the big dip right before it jumped up, that was when my balance was high and then I paid it off that month and then got the credits put back on the card and it jumped all the way up.

I generally don't worry about my score. I think it is in the mid 700's now. Damn annual fee on my Alaska Airlines credit card didn't get paid because I don't ever use it and couldn't figure out how to get logged in to pay it and kept forgetting about it so they reported it as a delinquent account.

 

[Deleted member 28227]

I can't speak to all cases, but many (maybe most) banks report, and some (maybe all) credit scoring companies use, average daily balance - so while paying in full prevents payment of interest it doesn't necessarily keep your "utilization rate" zero.

Terminology is hard here...

Cycle starts-> 30 days of purchases -> Cycle ends -> 30 days to Pay-> interest accrues

You pay off the total balance on day 29 of the purchase period. I've had my card completely maxed, payed on day 29 and had zero effect on my score.

 

[Deleted member 28227]

View attachment 222293
I took a screenshot when I hit 850! That was after all my refunds from New Mexico hit my credit card and it was a large negative balance. You can see the big dip right before it jumped up, that was when my balance was high and then I paid it off that month and then got the credits put back on the card and it jumped all the way up.

I generally don't worry about my score. I think it is in the mid 700's now. Damn annual fee on my Alaska Airlines credit card didn't get paid because I don't ever use it and couldn't figure out how to get logged in to pay it and kept forgetting about it so they reported it as a delinquent account.

To quote @Ben Lamb...

Dork

 

[npaden]

Terminology is hard here...

Cycle starts-> 30 days of purchases -> Cycle ends -> 30 days to Pay-> interest accrues

You pay off the total balance on day 29 of the purchase period. I've had my card completely maxed, payed on day 29 and had zero effect on my score.

My score yo yos based on my actual balance even though I pay it off every month and don't pay interest.

My balance swings wildly this time of year and sometimes I even have to pay mid month to stay under my credit limit so it is more likely more pronounced for me but 100% it does affect my score. I will even get alerts saying my score changed because of my outstanding balance increase.