Poll: What's your number?

Ok so assuming we are looking to retire between 55-70, in a developed world cost base location (like the US), supporting your current family and not avoid any tax obligations…

Leaving aside a mortgage free primary place of residence, what investment capital asset base in savings and income producing assets would you be looking to achieve in order to allow you to retire if you so wanted to in USD?

  • <$1m
  • $1-2m
  • $2-5m
  • $5-10m
  • $10m

0 voters

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I retired at the end of 2010 with a mammoth mortgage and a portfolio in your second lowest range ($1-2mm). I promptly saw a quarter of it disappear due to too aggressive investing. Hopefully, I don’t need that lesson again :wink: and we’re currently running at about 100% of our original post-retirement portfolio value.

We’ve moved to the sunny South to be near the grandbabies and now only have a ~$200k mortgage. Didn’t need the mortgage, but heck…. I’m borrowing under 4% and investing the proceeds. No body needs to be a financial genius to beat that 4% cost of funds!

We’re operating toward the “official” lower end of financial prudence in terms of having enough money for retirement, I suppose, but I find a combination of growth companies and put option sales (and buying some calls when appropriate) provides more than enough to gradually grow the portfolio.

And for tough markets…… like January of 2016…… we have an adequate cash cushion. About 3 years of cushion at the moment.

I’d probably welcome a downturn in the market. We made a killing with options in front of and after last January’s downturn and I’d like to try that again. Selling options doesn’t appear to be so attractive now and we’re primarily focused on owning shares and…. in some cases…. buying calls.

We don’t lead a deprived life. Not eating cat food. And not trapping the neighbor’s pets for food either. Haven’t had to donate any organs for cash. LOL. Went to Rome and Israel last year, followed by a long motorhome trip out West. Going to Hawaii this year, maybe more…. playing it by ear. Live in a nice (still too big) house. Have plenty left over. In fact, we plan to dial up our spending this year by probably 20%.

For us, the key point is: Invest like you will need to live on it for another century. No…. another million years. Too much conservatism with investing is hazardous to the long term. IMO.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

41 Likes

Curious how you do health care and what your age is but you don’t have to say, obviously.

Good luck and congrats!

Curious how you do health care and what your age is but you don’t have to say, obviously.

Good luck and congrats! – bankersfate

Great questions, bankersfate. And thank you very much.

As a bit of missing background….(and this is especially for those of you who think they started too late to build their portfolio)…… I started investing very early, but we nearly went bankrupt in 1993 thanks to a failed home construction business. I got out just in time to avoid that bankruptcy, returning to a corporate job again that actually had a regular paycheck. I take nothing (like regular paychecks) for granted and I’m very thankful to have been able to get back into my engineering career. Nevertheless, I was able to go from very little in 1993 to retiring early by 2010. 17 years. It CAN be done. And that’s paying for two kids college and our little girl’s marriage in that time frame as well. So remember…… you folks are in the right place here at the Fool to be able to build wealth. :slight_smile:

And…. I’m now 64. Just had my birthday.

Health care.

Self: Still covered by my former employer (Ford) for a smidge less than 12 months (it stops at 65).

Wife: Medicare and BC/BS of North Carolina. Plus dental and vision. Cost is no big deal. High deductible is the way to go…… and mostly the only choice. LOL

For me next year at 65, we’ll see if there are any issues. I have Crohn’s Disease (fortunately, a mild case fully controllable with a simple med) and I had kidney cancer (diagnosed a couple weeks after announcing retirement from Ford….LOL). What will this mean in terms of ongoing insurance after I hit 65? Dunno. But I’m not worried.

Final medical thought: I’ve investigated signing ourselves up with a “concierge” medical group. Immediate appointments if necessary, office visits and a few other items included at a total of $5k each per year. Doesn’t quite seem worth it at this point, but I’ll keep it in mind.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

20 Likes

Interesting data points - thanks everyone for sharing.

In the UK there was a newspaper survey a year or so back. The net net was (on an admittedly skewed readership) that on average Brits felt they could retire in the lifestyle they desired on 50k GBP (with the same assumptions listed including housing paid off).

To generate 50k let’s say that you need 1m GBP at 5%. To protect capital from inflation erosion (let’s also say 5%) you would need another 1m GBP. So 2m GBP. Let’s ignore the current GBP/USD FX due to Brexit and call a medium rate of 1:1.5 then 2m GBP would translate to $3m USD. Not far off the response on this board.

Obviously if you are a high roller retiring in upper east side NYC it’s going to cost more than say the Carolinas or where I’m currently holed up in Cartagena - don’t know how Denny’s Caracas figures; still it’s an interesting result.

Cheers
Ant

Ok so assuming we are looking to retire between 55-70, in a developed world cost base location (like the US), supporting your current family and not avoid any tax obligations…

How much an individual needs in retirement depends on what that individual will be able to do with investing whatever assets that person has and how successful or not he is with them. It also depends on how long you live.

For example My wife and I retired over 13 years ago

No pension,no annuity, no other source of income and no one to lean on in an emergency, and most important, no debt OF ANY KIND during any part of retirement

Portfolio value at start-In the 1st choice

Total Portfolio value removed for all living expenses including FED and STATE taxes over the years -Low 2nd choice

Current Portfolio Value After 13 1/2 years-- High 3rd choice-Low 4th choice and so far still growing.

IMHO What you do in retirement will not be dependant on your starting portfolio, I believe it will be dependant on what you do with that portfolio.

good luck
b&w

6 Likes

To generate 50k let’s say that you need 1m GBP at 5%. To protect capital from inflation erosion (let’s also say 5%) you would need another 1m GBP. So 2m GBP. Let’s ignore the current GBP/USD FX due to Brexit and call a medium rate of 1:1.5 then 2m GBP would translate to $3m USD. Not far off the response on this board. – Ant

My opinion….

I think retirees are much better off if they:

  1. Develop a strong understanding of the math behind retirement models.

and

  1. Ignore retirement guidance from experts and develop your own guidance.

Just like I ignore “financial experts” in the media. Keep in mind that these retirement guys have been trained with the same education as the financial experts. It’s too narrow minded. It’s faulty, just like “modern portfolio theory”.

Like I mentioned in an earlier post, plan as if you’re going to live for a million years and you need a growing portfolio. And BUILD A GROWING PORTFOLIO with LONG term in mind. Not this “it only needs to last for 30-40 years.”

In doing so, you avoid self limiting portfolio design. No bonds. No mutual funds. No CD ladders. Build for growth.

Why?

You’ll find out you don’t need to save as much as the retirement people will tell you……

Spend some time examining this “rule breaking” thinking. If you can figure it out, you’ll find it well worth your time.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

16 Likes

Ahhh….

IMHO What you do in retirement will not be dependant on your starting portfolio, I believe it will be dependant on what you do with that portfolio. – b&w

Congratulations, b&w!

Looks like you figured out the whole retirement funding thing too.

It ISN’T what the retirement/financial industry tells you. That’s not because they’re bad people. They just don’t know any better. Each person reading this can do better. MUCH better.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

2 Likes

I wouldn’t disagree Rob, however it is proven that folks mis-estimate the costs involved in retirement - in particular under estimating the healthcare costs especially if you have been living in a country where you have been assuming free healthcare and then something like co-pay is introduced (a la Europe) or fail to consider the cost of deteriorating health.

Ant

1 Like

I wouldn’t disagree Rob, however it is proven that folks mis-estimate the costs involved in retirement - in particular under estimating the healthcare costs especially if you have been living in a country where you have been assuming free healthcare and then something like co-pay is introduced (a la Europe) or fail to consider the cost of deteriorating health. – Ant

Well, I won’t argue the point. I’m just pointing out what works, believe it or not. And b&w pointed it out as well. If someone prefers a different approach, that’s fine by me. :slight_smile:

Just for reference, I live in the US. Perhaps not a free healthcare mecca.

Rob
He is no fool who gives what he cannot keep to gain what he cannot lose.

It ISN’T what the retirement/financial industry tells you. That’s not because they’re bad people. They just don’t know any better. Each person reading this can do better. MUCH better.

They can do better --If they get rid of their bad habits long before they retire. If they don’t they will be at the mercy of the state, the fed and the politicians.

b&w

1 Like

It ISN’T what the retirement/financial industry tells you. That’s not because they’re bad people. They just don’t know any better.

I’m sure that varies from person to person. I would guess at some (high) level, there’s some greedy folks saying “Hey, let’s convince people they need a ton of money saved to retire, so they’ll invest it with us and we can earn lots of commissions”. Plus, most retirement planning models are based on surviving “worst case scenarios” (which means a market crash right after you retire). If you don’t experience a worst case scenario, but still stick with conservative draws for spending, you will probably end up accumulating a lot of money in your portfolio in retirement.

Each person reading this can do better. MUCH better.

Easy to say several years into one of the greatest bull markets in history. But if you do experience a crash right after you retire–and some people will whenever the next bear comes–things can get ugly in a hurry. Let’s say the market drops 20% in 2 years after you retire, and you’re spending 5% during that time, so your port is down 30% in 2 years. You need to earn almost 50% from there just to get back to where you started, and if you’re spending 5% per year, that’s not so easy.

So…prudence is called for, unless you’ve got so much money that you don’t need to worry about it. The first few years are key.

Carpian (targeting retiring in four years at age 60 with $1M plus a paid off residence, and roughly 4% spending rate plus Social Security when it kicks in)

9 Likes

There’s actually a fair amount of research on the topic of how much you need to retire, and the general answer is enough that your anticipated expenses will be less than 4% of the value of your diversified portfolio. That number was calculated using Monte Carlo simulations, and what it really means is that if you only spend that much, there’s a 95% chance (or something like that) that you won’t run out of money before you die.

For what it’s worth, I sort of retired a couple years ago at 42, using a 2.5% withdrawal rate. My number was lower than the 4% because I’m pretty risk-adverse. I REALLY don’t want to run out of money when I’m 75.

FWIW, I’ve also done an AMA on reddit about my experiences:

https://www.reddit.com/r/financialindependence/comments/5eg5…

Generally, the financialindependence subreddit has lots of information about this topic.

It’s also worthwhile noting that I’m living in Canada, so medical costs are much more predictable than in the USA. (I think if I lived in the USA, I would probably need five times as much money before I’d feel comfortable.)

Richard

14 Likes

I think retirees are much better off if they:

1) Develop a strong understanding of the math behind retirement models.

and

2) Ignore retirement guidance from experts and develop your own guidance.

Just like I ignore “financial experts” in the media. Keep in mind that these retirement guys have been trained with the same education as the financial experts. It’s too narrow minded. It’s faulty, just like “modern portfolio theory”.

Like I mentioned in an earlier post, plan as if you’re going to live for a million years and you need a growing portfolio. And BUILD A GROWING PORTFOLIO with LONG term in mind. Not this “it only needs to last for 30-40 years.”

In doing so, you avoid self limiting portfolio design. No bonds. No mutual funds. No CD ladders. Build for growth.

Why?

You’ll find out you don’t need to save as much as the retirement people will tell you……

Spend some time examining this “rule breaking” thinking. If you can figure it out, you’ll find it well worth your time.

small different point of view

  • most people who reach retirement age are investors or not. Most are not. Developing that skill late in life is unlikely
  • the market hasn’t had a major decline since the 1st quarter of 2009. Eventually it will. Going for growth in a 2% treasury world is great but some prudence is required too, esp. if the retiree lives on the income and has regular drawdowns - 99% do.
  • at some point, you don’t want the mantra here to go too far, esp. when the vast majority who post are unverified success stores - there are plenty of good mutual funds which do well, bonds that fit specific time horizons and return goals, and CD ladders that at least provide stability. Most people are not stock pickers - I’m thrilled Saul has done well but there is a downside to his approach if we get any sort of drop - he’ll more than likely go down considerably more (no great shakes there) but he knows that but most investors, ESP. older ones, don’t handle volatility well.
  • going into debt even at 4% when you are retired sounds like a poor decision for most; glad it has worked out for you, but again you’ve been investing in an absolutely charmed market environment

I think retirees are better off if they 1) get rid of 100% of their debt, 2) carefully budget for expenses and assume things are going to be more expensive than they are, 3) plan for declines in the market and design the portfolio accordingly, and 4) if they do manage their own portfolio, measure the performance accurately (hardly anyone does) and have a least one or two knowledgeable people give them a 2nd opinion on the approach and style. In my experience, maybe 1 in 1,000 retirees do this.

Ignore retirement guidance from experts and develop your own guidance.

I feel differently - you read ALL YOU CAN from experts - like this one:

https://smile.amazon.com/Make-Your-Money-Last-Indispensable/…

And then you carefully consider whether you agree with what has been said. ‘Developing your own guidance’ sounds wonderful but many people will get infected with a bull market - know a guy on our neighborhood whose investing plan is not day trading options. I hope it works for him…

14 Likes

don’t know how Denny’s Caracas figures;

Arithmetic works the same the world over. :wink:

All you need to know is how much you want to spend and apply Ant’s arithmetic to it. You should arrive somewhere between two and five million. But you can always tighten your belt, work down your principal and trade your home for a lifetime rent in a retirement home.

What’s different in Caracas is that our currency had been devaluating at 35% a year since 1984 and that just accelerated with the “revolution.” The black market rate rose 24% in one month from this January, over 300% on an annualized basis. You can’t save in local currency. In dollar terms the cost of living stayed the same from 1984 until after the start of the revolution, then it started to diverge even more with local stuff getting cheaper and imported stuff getting more expensive. I think that might be on account of the multiple rates of exchange, two or three official ones plus the black (real) market.

Owning your home free and clear is the best thing that can happen to you, it’s one heck of a safety net.

Denny Schlesinger

1 Like

(targeting retiring in four years at age 60 with $1M plus a paid off residence, and roughly 4% spending rate plus Social Security when it kicks in)

So you plan on spending $40K a year–4 years from now? I assume you are figuring in about a 5% annual inflation rate per year because in my 13+ years of retirement mine has been around 8% per year. Also, do you have a wife to help you spend the $40K, Or other family obligations?. How about the government? have you figured on taxes that will be due? It would probably help you to have an income figure your portfolio is generating, and that figure should be above your current expenses. The problem is–when you stop working for money and retire, your portfolio better be ready to work for money on your behalf.

Do you know how much you are spending now? Before retirement?
Most important–How much annual income does your $1 M retirement fund generate? And is that at least equal to your estimated income in 4 years (Plus estimated inflation cost) when you plan to retire?

b&w

1 Like

(targeting retiring in four years at age 60 with $1M plus a paid off residence, and roughly 4% spending rate plus Social Security when it kicks in)

Another caveat or assumption I should have included is “what’s your number” in today’s money. Are you targeting $1m in today’s money or $1m in 4 years time’s money as inflation will mean you need to shoot for a bit more if in today’s money.

Denny’s point brings up another assumption I should have suggested - constant USD accounting for currency devaluation if you live outside a USD zone.

Ant

So you plan on spending $40K a year–4 years from now? I assume you are figuring in about a 5% annual inflation rate per year because in my 13+ years of retirement mine has been around 8% per year.

Poor choice of words on my part–I said “spending rate” and should have used “withdrawal rate”. Yes, I expect to spend more each year for inflation. The target I gave of $1M with a 4% withdrawal rate plus Social Security was a very simple “ballpark” version, just to show that I think I can retire in reasonable comfort on $1M and don’t need $2M. More would be nice to be sure, but I don’t think I need it. At that point it becomes a trade-off between how much do I want to stop working and free up time vs. how much do I want more money.

Also, do you have a wife to help you spend the $40K, Or other family obligations? None at this time–that would certainly change things.

How about the government? have you figured on taxes that will be due? Yes. The big unknown at this moment is health insurance, and will there continue to be subsidies for low incomes (at present, keeping my taxable income below $40K would give a significant subsidy on health insurance, but that may go away).

It would probably help you to have an income figure your portfolio is generating, and that figure should be above your current expenses.

As has been discussed many times here and elsewhere, that’s one way of looking at it. But I don’t differentiate between dividend income and capital appreciation in my planning.

My planning is all rough estimates at this point. I continue to monitor my situation constantly. I’m not retiring today, I can say with certainty. As far as the future goes, it is all uncertain. But other things remaining equal, I think $1M four years from now would put me in a good position to have retirement as an option. There is flexibility built in to the plan. I live in a nice, high cost of living area in southern California, and would always have the option of moving to a lower cost area if necessary. And I’m quite happy to stay here and take walks on the beach and play with the dog–I can live happily pretty simply and don’t need to spend a ton of money if I don’t have it.

2 Likes

As has been discussed many times here and elsewhere, that’s one way of looking at it. But I don’t differentiate between dividend income and capital appreciation in my planning.

Maybe you don’t, but I do. And here is why. In retirement you just might need money when the market is going through a 1 or 2 year downdraft and prices might not be what you want. I personally believe dividend/distribution income is more stable during bear markets than security prices and more likely to be there when you need them.

b&w

3 Likes

I figure by the time I retire, I’ll be able to pull in a combination of pension and social security that will amount to more than my current salary. That may be more an indication of a low salary than of a high pension, but it will allow me to live at my current rate of consumption, while meanwhile the 401(k) will continue to grow and will be available for big-ticket items.

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