Scott Walker for president.
Lots of Amish there?
Based on my travles through there and knowing some people who live there, it seems quality of life in central PA is among the highest in the country. Relatively cheap and a ton to do.
My number is 867-5309. Call me.
i need minimum of 500k to permanently not work as option. this is overseas living.
i need 1m if staying in US with part work. 2m for no work.
before i die, i want to reach up to the estate tax number or be in the 1% of net worths. right now its $8.5m. but i assume this adjusts with inflation.
will i reach this? i think so. but i dont care if i dont hit it. i think i just want enough money to not answer to anyone and be happy. and annually that is either 25k in philippines or 100k in us.
I’m targeting about $3.5 MM when I retire in 15-20 years. Would have to be a fair bit north of that for me to retire now. I think a lot of people underestimate how expensive it can be to be retired unless they just plan to tend to their garden for the rest of their lives.
$1M portfolio growing at a rate of 5.5% and withdrawing $60,000 per year will last roughly 35 years. This produces about $2.2M in spending ability over that timeframe. Depending on your views of what social security will deliver, you might add on an additional 1-2M in lifetime income. Assuming you somehow avoid earning a single dollar over that timeframe through any productive work, that’s 3-4M right there. For those that are saying their number is more like $2M, this is going to be north of the $5M in total spending number you’ve listed.
I could be wrong on the above…it has been a few years since I reviewed L3 material
^ Well done. /thread
But those numbers assume you don’t suffer some catastrophe, like stock market crash, abnormal high inflation or unexpected medical cost. This is why I said that, after some point, the purpose of further savings is risk mitigation, not just increasing your standard of living. Also, the optimal strategy is obviously different whether we are considering “how much do I need at retirement” or “how much do I need to retire now”, since your cost of working and investment horizons are different.
^“Normal” inflation kills that plan.
Anyone have any experience (first or second hand) using a whole life insurance policy as collateral for a loan from the bank? Will they issue a loan 1:1?
No loans for those with a whole life policy. The applicants financial acumen becomes seriously in question. I only say this half-jokingly.
Ohai, I fully agree. Everyone is going to have different comfort levels when it comes to risk mitigation. Everyone’s also going to have a different definition of ‘retirement’. Personally, I see retirement as reaching a state where I no longer need to save to meet future needs. As income taxes and saving eat up more than 50% of my paycheck, I can reduce my income substantially and still continue my current lifestyle, without dipping into my investments much, if at all.
Maybe you’d consider this not being retired, but I envision the first 20-30 years of my retirement to include 10-15 hours per week of income generating activities. These will be the activities I’m most interested in doing, and will probably vary throughout the year. Summer months will probably contain a whole lot less work and winter months might contain more. Heck, a full kitchen renovation with my brother in law can net me 5K and that wouldn’t even take a week to do… you can say ‘well then you’re not retired’, and I’ll accept that. But I’m also free to spend weeks or months in the summer doing nothing but sitting by a pool or hiking in the mountains if I’d like.
Ghibli, I’m always willing to hear an objective analysis of my plan. I think that ‘normal’ return numbers would more than offset your ‘normal’ inflation concern. Here are what I consider to be my conservative estimates (all in today’s dollars, feel free to adjust for inflation 10 years from now):
· retire at 40
· $1M in 401K assets
· 5.5% real rate of return on investments
· $40,000 in spending/year (mortgage is paid off, no debt whatsoever)
· $40,000 in income/year age 40-60 (That’s 20k for each spouse…not difficult)
· Social security at age 70, assume it meets 40% of my spending
My plan gets thrown off if tax laws change and no longer allow substantially equal periodic payments, at which point I’d have to reassess. As long as this remains, starting at age 40, where I’m pretty much not going to be paying any income taxes, I’ll start pulling money out of my 401k and putting it into a Roth tax free. Allows me to reduce the taxes I pay when that SS income starts coming in and my RMDs start.
I can see why some might say ‘$3,300 per month in after-tax income, how can you possibly survive on so little! I can never do that’. That response wouldn’t suprise me, especially for those that live in a big city. However, for me, I can survive on much less and so that’s a lot of money each month. I probably won’t be able to spend it all. But, if there’s some big flaw in the plan that I’m missing, I’d be happy to learn about it now before it’s too late.
how are you pulling money out of 401k penalty free at 40?
Now it’s 5.5% REAL rate of return. Big difference. Going to have accept some volatility in order to get that. A big market crash could really hurt if you have to continue to take distributions, especially in the qualified accounts. Not a whole lot of margin for error. There’s a reason annuity payouts suck.
igor, substantially equal periodic payments. Allows you to take a small amount each year without penalty. Still have to pay income tax if you earn enough, but on a $1M portfolio I’d be able to pull about $35k per year out penalty free
http://www.bankrate.com/calculators/retirement/72-t-distribution-calculator.aspx
Well, considering a 20 year time period (age 40-60) where the only withdrawals needed are to convert to a roth and be reinvested, what type of asset allocation would you suggest? Given the long time horizon, and the substantial human capital that can be tapped if necessary, I’d say an aggressive investment allocation is suitable. And given that allocation, what real rate of return would you conservatively estimate?
Huskie, are you accounting for health insurance premiums?
many reasonable financiers are forecasting nominal equity returns of 0%-3% over the next 7-10 years or so. an agressive allocation may not be able to get you there. makes sense from my pov as equities are priced off the risk free rate which is negative in much of the world. asking for ~7% returns over 20 years may be very ambitious and ridiculous at this point in the cycle and given where fixed rates lie.
Apparently, a lot of pension funds are still assuming 6% or higher returns to meet their future obligations. This might have been conservative when rates were 5%. Today, it seems that many will become underfunded. I’m not sure I want to know what all these government retirement funds are assuming, and are modeling into their projected account balance.