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Bonzo1972
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My retirement plan  Reply with quote  

I'm doing some very simple retirement planning. I won't be retiring for about 20 years. I have about $160,000 saved for retirement right now. I'm figuring I'll need about $1.3M to retire. I make $58,000 per year now, and have assumed 1.5% annual pay raises.

I contribute 17% of my gross income to retirement right now. That includes employer match. Im assuming a 7.0% annual fund growth until 2032, then slowing that down to 4.0% for the last three years 2033, 34, and 35.
Retiring with $1.3M should last my wife and me until were both about 100, assuming:

85% of pre retirement income annual living expenses, year one of retirement. Annual living expenses to increase 1% each year.

Social Security income of $15,000 per year, starting at age 70.

Retirement fund growth of 4% per year, after withdrawals.

I know I could assume 8-10% annual retirement fund growth, but hope for the best, plan for the worst, right? Also, big question mark regarding SS income. Im assuming my benefit will be about 75% of what someone retiring right now would get.

My wife is not currently working outside the home. She may re-enter the work force once the kids are out of the house, but our youngest is 4, so not many years between her re-entering the workforce, and my current target retirement date.

Any critiques on my thinking, assumptions, calculations, etc. would be appreciated.

Thanks!
Post Fri Sep 26, 2014 2:34 pm
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stockbrokers
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your plan is good for the future........


What your stock broker doesnt want you to see


Last edited by stockbrokers on Sat Sep 27, 2014 2:12 am; edited 1 time in total
Post Fri Sep 26, 2014 4:17 pm
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oldguy
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quote:
Retiring with $1.3M should last my wife and me until were both about 100, assuming:


I avoid the retirement plans that deplete your holdings so that you die broke. I think it would bother me to watch that deterioration - you get accustomed to the confidence/safety that wealth provides & it would be unpleasant to watch it wither.

We planned ours so that we can live on the returns w/o going into principle - and we leave at least 3%/yr to offset inflation. So our fund should last in perpetuity and the purchasing power should also be maintained.

If you invest roughly $10k/yr until 2032 @ 11%/yr that adds $560k to your fund. And your existing $160,000 would grow to $1,050,000 @ 11%/yr. So - $1.6M. And then, as you say, lower the risk level for the last 3 years. (I split the $1.6M into two pieces to show that you have already done more than half of the work, ie $1.05M is a result of work already done.)

You are probably being way conservative on SS at age 70, it's closer to $35,000. Plus 50% for your wife, making it $52,000 in todays' dollars, about $80,000 when you're 70.

If your account is in an IRA/ 401k, your RMD at age 70.5 will be about $45k/yr. That plus your SS might be about what you need. (I'm age 75, our SS's and our RMD are more than enough, we re-invest some most years).
Post Fri Sep 26, 2014 5:49 pm
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Bonzo1972
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[quote="oldguy"]
quote:

You are probably being way conservative on SS at age 70, it's closer to $35,000. Plus 50% for your wife, making it $52,000 in todays' dollars, about $80,000 when you're 70.




I'm 41 - a genXer.

There is a lot of conversation among people my age about the future of SS. Many believe the system will bankrupt, and people my age and younger will draw nothing from SS.

My thoughts are that SS will not completely bankrupt, but rather people my age will see reduced benefits, and draw at later ages.

Obviously no one knows with any degree of certainty. But, I'm assuming a reduction from current levels, any way. Again, hope for the best, plan for the worst (within reason).

I've got about another 20 years to plan. Hopefully a better picture of the future of SS in another 15 years, after all the baby boomers are retired.

Until then, I'll continue to balance current needs and wants with future needs and wants, all while trying to help put a couple of kids through college.

Thanks for your input.
Post Fri Sep 26, 2014 6:10 pm
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littleroc02us
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Bonzo1972, I'm 43 so I'm a genexer myself. Personally, I'm not waiting on the government to fund my retirement, because we all know what type that would be. If SS is still around when I retire then it's just spending cash.
From the numbers you gave us I can tell that your well on your way. I might add though that I don't include my employers contribution into my saving %. So if your employer is contributing 5%, then your truly only putting 12% into retirement. And since your wife isn't working either, then IMO you need to be putting away at least 15-20% of your own money, that way you can easily achieve your goal of a million and some.
My wife and I both work and she contributes 17% of her net income and I contribute around 15%. These percentages are a mixture of maxed out Roth IRA's, 401k's and savings. We also saved an additional 50k and bought a rental duplex in a good neighborhood with great tenants. So in additon this has added to our networth and monthly cash flow. We plan to buy others and our goal is to have additional income from rental properties that are all paid for. I had to work additional jobs to save money to buy investment properties.

So again, my point is that don't hope for SS, make your own goals and work to achieve them.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Fri Sep 26, 2014 7:51 pm
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oldguy
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quote:
There is a lot of conversation among people my age about the future of SS. Many believe the system will bankrupt, and people my age and younger will draw nothing from SS.


Yes. And I think my generation (WW2) has done a dis-service to the gen-xers and the millennials - the political fear-mongering for the purpose of gaining political advantage, has led young folks to believe that the "trust fund" will run empty in 2036, that "nothing can be done", etc. First, there is no trust fund, hasn't been for 30 years - nor should there be. Do we really want our Gov't to hold $2.7 TRILLION in a safe to fund future retirees? $2.7T of dead money sitting idle? That's an entire year of US Budget money.

The SS takes in about $850 billion per year - and it pays out about $850B /yr in pensions - ie, it is nearly in balance. Some years there is as much as a $50B surplus, some years there is a shortfall. So the general fund fixes the variance. In a nation where the 'federal salary' is about a billion per hour, a variance

As the boomer-bulge goes thru the system for 22 more yrs, there may be more short-falls, and later when the X-ers go thru there will be surpluses.

An easy way to keep the input/output in balance is to periodically adjust the age eligibility. Right now it is 67 to 82 (average death), a 15-yr population block. If congress adjusted it to 68, it would be a 14-yr-block, ie 7% less payout, about $60B.
Post Fri Sep 26, 2014 10:18 pm
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RetirementER
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Just a couple of comments to add...

Social Security (I'm in Canada so ours is Canada Pension Plan) will definitely be there for retirees when they need it. For any government to eliminate it would be political suicide. As for how they may adjust it, that could be another story - later qualification age, less benefit, benefits kept the same but eroded by inflation... lot's of possibilities there.

If you keep the focus that it is only a part (and hopefully a small part) of your retirement plan, you should be good to go.

I also like that you're taking less income from your retirement plan than you think you could do. A margin of error is always good.
Post Mon Sep 29, 2014 8:03 pm
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llancaster
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I think "oldguy" (no disrespect!) brings up a good point. How much you're contributing is important but more so (in my opinion) is the return you're getting.

Kind of like that riddle, if you could choose $1,000,000 today or a penny doubled once a day for a month...

I'm sure you've heard of the rule of 72. Basically take 72 and divide by your interest rate/investment return and the resulting answer is the number of years it will take your investment to double. So if you have $1000 earning 4% it will take you 18 years to double the $1000 (72/4 = 18 ). If you're earning 12% on the other hand, you will double your $1000 in just 6 years.

Most people seem to think they have little control over what their IRA/401k is earning. I personally know people that consistently earn double digit returns in their retirement accounts.

Just something to think about - you'll get to that $1.3M a lot quicker in the right investment vehicle.
Post Wed Oct 01, 2014 5:49 pm
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losangelescpa
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Your plan is good for future.Social Security is much more important for retirement.By saving from current you can invest more at the time of retirement.It's more important how much you contribute for future except all day expenditure.If you keep the focus and dedicate towards your savings for retirement then it is only a part (and hopefully a small part) of your retirement plan, you carry on with your thoughts.
Post Mon Apr 20, 2015 6:12 am
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pooja.lily
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Re: My retirement plan  Reply with quote  

quote:
Originally posted by Bonzo1972
I'm doing some very simple retirement planning. I won't be retiring for about 20 years. I have about $160,000 saved for retirement right now. I'm figuring I'll need about $1.3M to retire. I make $58,000 per year now, and have assumed 1.5% annual pay raises.

I contribute 17% of my gross income to retirement right now. That includes employer match. Im assuming a 7.0% annual fund growth until 2032, then slowing that down to 4.0% for the last three years 2033, 34, and 35.
Retiring with $1.3M should last my wife and me until were both about 100, assuming:

85% of pre retirement income annual living expenses, year one of retirement. Annual living expenses to increase 1% each year.

Social Security income of $15,000 per year, starting at age 70.

Retirement fund growth of 4% per year, after withdrawals.

I know I could assume 8-10% annual retirement fund growth, but hope for the best, plan for the worst, right? Also, big question mark regarding SS income. Im assuming my benefit will be about 75% of what someone retiring right now would get.

My wife is not currently working outside the home. She may re-enter the work force once the kids are out of the house, but our youngest is 4, so not many years between her re-entering the workforce, and my current target retirement date.

Any critiques on my thinking, assumptions, calculations, etc. would be appreciated.

Thanks!


Your plan is not that bad
But don't forget to enjoy everything being conservative
Post Tue Apr 28, 2015 1:13 pm
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Wino
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Duplicate

Last edited by Wino on Tue Apr 28, 2015 6:31 pm; edited 1 time in total
Post Tue Apr 28, 2015 6:28 pm
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Wino
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I constantly see the "80% of pre-retirement income for spending" statistic quoted - you used 85%, but nonetheless...

If you are spending 80% of your pre-retirement income, you are not maintaining your lifestyle, you're INCREASING your lifestyle.

Think about it: pre-retirement, you're working, which costs clothes (uniforms or suits or shoes or whatever), transportation (car, gas, insurance, maintenance, etc.), lost time for misc (doctor's visits, school calls, sick kids, tax office, Div of Motor Vehicles), lunches out, and probably a dozen more I'm not naming.

Include, as well: mortgage, Company health insurance, fica, medicaid, ESOP, IRA, etc.

Soon, you'll see that BEFORE you retire, you're probably spending 50% of what you earn on your actual living expenses. Most folks could easily retire at 50% or less of their pre-retirement pay.

I'm using 40% as my goal in retirement. As I'm currently socking away more than 50% in retirement, I see no reason why I can't live quite well on 40% of my pay.

This is why I hate online calculators. Every one that I've found ASSUMES you'll need 80% of your pay for a "comfortable retirement." If I got 80% per annum, I could cruise everyday for my entire retirement and STILL be growing my nestegg. Why don't online calculators make THAT variable something I could enter, rather than their own arbitrary calculation?
Post Tue Apr 28, 2015 6:29 pm
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27Rocks
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Re:retirement plan  Reply with quote  

Great plan, it seems that you have every thing planned out for your future.
Post Fri May 15, 2015 11:07 am
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