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Tiger MT's Carter

Retirement Savings?

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bennelli-banger
One idea that I think makes some sense to look into is to wait as LONG as possible to take social security, as you pretty much can't screw that one up vs. wrecking investment assets...the benefit is obviously a heck of a lot higher if you can wait until  your FRA, or, even age 70.  Spending down your nest egg is probably a reality of doing this, but if you are ultimately concerned about outliving your assets, this makes some sense to look at.  If you have a family history of untimely deaths it is probably NOT the way to go...

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Kansas Big Dog
Hmmm….. I bought into this theory that seems to universally touted by financial planners, brokers, etc, of needing multiple millions to safely retire.  I was probably a very easy sell because I grew up in rural poverty and did NOT want to repeat that experience in my retirement years.  I was lucky in that I didn’t hate my work as so many do, but there were other things I REALLY wanted to do (namely, travel the US for 6 months at a time in my motorhome from one hunting area to another).

As a result, instead of retiring at, say 55 or 60, I waited, worked, saved and invested until age 65.  Exactly 30 days before my retirement date, my wife had a stroke.  She became totally handicapped – could no longer do any of the “activities of daily living” for herself – like eating, bathroom, dressing, etc.  Her personality changed 180 degrees.  I became an 24/7 nursemaid who cannot leave the house except when there is a nurse to watch my wife and even then I can’t go very far or for more than a few hours at a time.  Because I bought into the theory that I needed vast retirement savings, I lost my retirement entirely – have not been able to do what I worked and saved my whole life to do.  Every day I spend as a nursemaid is a day of that precious time lost forever.  Soon, I’ll be too old to do the things I wanted so badly to do, without having gotten to do any of them.

Each time I look at my retirement investments, there is more money in the pile, even with paying substantial amounts each week for my wife’s care.  So, I guess all of my efforts will some day make my heirs wealthy.  Not what I had planned to say the least.  

Maybe my situation is different than others because I had PA Dutch frugality pounded into me as a child and I live very simply back in the woods, heating with wood I cut, etc.  I don’t spend money on fancy clothes or jewelry, dining out, country clubs, vacations in the south of France, etc.  But, I have everything I want or need; and, within reason, I can buy pretty much whatever I might want – lots of birds for the dogs, a new gun or camera or vehicle from time to time, for example.

A careful, REALISTIC assessment of your personal situation is needed, rather than blindly following the recommendations that you need millions to retire.  You certainly don’t want to be eating cat food in retirement wondering whether you should buy food OR medicine – that’s the very worst case scenario.  Neither do you want to be me – being so conservative regarding the size of the money pile needed until you have irrevocably lost everything you’ve worked for.  

I guess what I’m trying to say is that reason must rule when making these decisions and a lot of what one hers isn’t reasonable, IMO.

I must say I heartily agree with you Greg.

To preface what I am about to write, I know money well. I have a BSBA in Accounting with a minor in Finance.  I have 2 MBAs to boot.  I also grew up in rather modest means and at one time had more money than I thought I ever would.  I worked at a mid-level management position and had a pension and a 401-K that I managed.  My ex-wife also had a 401-K that I managed. Similar to Greg, my life became un-raveled and I lost most of what I had worked for my entire life. Now, I have very few financial assets, and a small monthly fixed income. I cashed in all my retirement stuff and paid cash for everything I need.  Live frugally, hunt, fish, drink good beer, eat good food, go where ever I want when I want.  I do pick up small tax-free work from time to time.  LD and I run a couple micro-businesses that pay for hunting expenses.  And, I would not want it any other way.

Let me give you an example of frugality: I have a 2000 F-150 that has 307K miles on it. I have owned it since 2004 and paid cash for the truck.  It has been maintained very well.  The truck needed brakes and the front end re-built recently. The estimate for repairs was over $1000.  More than the value of the truck. While at the Ford dealership service dept trying to decide what to do, there was a brand new 2015 F-150, exactly like my 2000 F-150.  LD was with me and she asked me what I thought the sticker price was for the truck.  I said probably $35K.  She LOL and told we $53K.  This helped me make my decision right there about the repairs as I could spend $1000 and have the same truck that cost $53K brand new. If you live frugally, you can get by on much, a whole lot less than what you think you need.

Financial principles state that there is a risk, reward correlation.  The more risk you assume, the more reward you should gain. I believe this is true, especially with your finances and your time on this earth.  Those that want to maximize there wealth by working until they have a level of financial resources to maintain a certain standard of living, are risking time on this earth to do want you want.  

So, I think what Greg and I are saying is that you need to value your time on this earth more than finances.

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bennelli-banger
Personally, I love the stories where people make it happen early and pull it off, regardless of how...very cool.  There is a website called "mr money mustache", I believe, that is dedicated to this endeavor...

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Curt

I love reading about all the formulas, the retirement strategies, planning, etc. that folks go through in preparation for that time in life when they 'punch out' on that final work day.

Reading Greg Hartman's post brings to light the old adage about "life is what happens while you're making other plans."  Unfortunate things can happen to any of us at any moment, throwing our plans out the window.

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irish Eyes

Before I retired at 55 I went to a financial planner to revoew my options. I had an excellent retirement plan with a county government, had a decent IRA and my wife had her profit sharing plan. The house was paid off and all three children were out on their own.

The planner reviewed our situation and told us we would run through our money within 4 years? We argued with him and finally left in disgust.

13 years later we now have not touched our savings. The savings took a big hit and luckily we didn't have to take anything out during the down turn. I am now looking forward to HAVING to take money out. Money I intend to enjoy and not spend wisely.

You do know how much money you have in the bank but no one knows how much time they have. When I thought I may retire onto a boat there was a lot of discussion on how and when. Many folks waited too long and retired when they were too old to put up with the rigors of living aboard full time. The mantra was.....go simple, go now. Makes sense even when living on land.

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Mike Connally

Dreams and opinions aside, income is necessary to retire. I was fortunate to start my retirement investments when I turned 18. I thought that was what everyone did when they moved away from home. Evidently it's not all that common. I just turned 63 and I feel pretty good about my income stream when I  hang it up in two years.

I have no debt. I have lived frugally my whole life. I don't expect that to change when I retire.

That's my retirement plan.

Some folks will retire with a lot more than me. Many will retire with a lot less. I suppose everyone will adjust to their situation and find happiness.

I've seen too many people lose their health and mobility with age to even consider working past 65. My advice is that if you have any way to retire in your mid 60's, DO IT!

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fuess
One idea that I think makes some sense to look into is to wait as LONG as possible to take social security, as you pretty much can't screw that one up vs. wrecking investment assets...the benefit is obviously a heck of a lot higher if you can wait until  your FRA, or, even age 70.  Spending down your nest egg is probably a reality of doing this, but if you are ultimately concerned about outliving your assets, this makes some sense to look at.  If you have a family history of untimely deaths it is probably NOT the way to go...

Jus a different twist on this.  

1-  SSI is calculated to pay out the same amount regardless of when you start, unless you outlive the tables.  (Many are doing ti today)

2- Why spend down your own assets in place of SSI?

3- Are you not making the assumption that the SSI payment is outpacing your own investment performance??

I make the exact opposite recommendation to my clients!  Take it as early as possible.  While I KNOW the payment looks extremely attractive waiting till 70, no one has the crystal ball.  If you die early, THE GREATEST PLAN inthe world only looks good on paper.

If you DONT need the money from SSI, take it and save it for later!

The SSI trust fund is not sending you a check if you die too soon!

I take the bird in the hand

Just a different view on it

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fuess

As an aside. Everyone should do a young person a favor!  Everyone 401k plan I manage for companies, I find the "senior" group and ask them to do this for their younger work mates.

Teach everyone the value of saving early!  The amount is not important.  Its the discipline that matters.  And most importantly, its the time value of money!  Its the most important lesson we can teach to our friends, kids, or work mates!  They wont really understand until they start to get their first gray hairs!

Have a great holiday!  off to play golf!

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Tiger MT's Carter
I’m 58 and retired last July at 57. I will start taking social security at 62. I think deferring S.S. is a huge risk.

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Ben Hong
I'd rather talk hockey :(  :down: .

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caleb

Rule of thumb is 20x annual income as a guide

Why is your annual income during your highest earning years taken as a starting point for what you'll need in retirement?

If I'm 50, I'm likely paying:

- 10%+ to retirement savings

- 10%+ to college savings/expenses

- 15%+ on a mortgage

That's 35% (at the very least) for expenditures that should no longer exist in retirement, right?  And that's before thinking about ways of cutting costs like only having one vehicle, eating out less, doing your own lawn and home maintenance, downsizing your home, moving to a state with a lower tax burden, etcetera.  It seems like you could cut back to living in retirement on 50% of your peak income years without any great lifestyle sacrifices, no?

I'm 31, so I really have no idea what I'm talking about.  I pay my max percentage, my employer matches, and I forget about it.  I should probably pay more attention.  But as someone who intends to work until I'm at least 65 (I have colleagues in their 80s who are still full time), I'm just not really sure what I'd need 20x my annual income for unless all investment growth goes to zero, social security goes bust, I live to be 100, and we simultaneously feel the urge for three timeshares around the world in exotic locations.  In that case the world as we know it will pretty much have ended, and should the end of the world really be the guiding principle of our lives?

Given that the financial advisor braintrust seems to be assembled here, can someone explain the logic of the 20x figure to me?

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SODAKer
As an aside. Everyone should do a young person a favor!  Everyone 401k plan I manage for companies, I find the "senior" group and ask them to do this for their younger work mates.

Teach everyone the value of saving early!  The amount is not important.  Its the discipline that matters.  And most importantly, its the time value of money!  Its the most important lesson we can teach to our friends, kids, or work mates!  They wont really understand until they start to get their first gray hairs!

Have a great holiday!  off to play golf!

+1!

I ride the young folks at work on this. Pencil and paper in hand and a few simple calculations can really change how a person thinks about this, especially if they have never put pencil to paper to see the numbers.

Sometimes I don't get it but the fact of the matter is that a lot of youngn's are not being taught to save but rather pay for instant gratification in the moment. Spend, don't save much less invest. I think it has something to do with kids not working anymore eg mowing lawns etc and not getting that life lesson.

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Tiger MT's Carter
Given that the financial advisor braintrust seems to be assembled here, can someone explain the logic of the 20x figure to me?

I think the biggest thing is to understand your income streams and what it costs you to live in retirement. I tracked every penny that was spent for one year prior to retirement. I got out with 8X my annual income.

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bennelli-banger

One idea that I think makes some sense to look into is to wait as LONG as possible to take social security, as you pretty much can't screw that one up vs. wrecking investment assets...the benefit is obviously a heck of a lot higher if you can wait until  your FRA, or, even age 70.  Spending down your nest egg is probably a reality of doing this, but if you are ultimately concerned about outliving your assets, this makes some sense to look at.  If you have a family history of untimely deaths it is probably NOT the way to go...

Jus a different twist on this.  

1-  SSI is calculated to pay out the same amount regardless of when you start, unless you outlive the tables.  (Many are doing ti today)

2- Why spend down your own assets in place of SSI?

3- Are you not making the assumption that the SSI payment is outpacing your own investment performance??

I make the exact opposite recommendation to my clients!  Take it as early as possible.  While I KNOW the payment looks extremely attractive waiting till 70, no one has the crystal ball.  If you die early, THE GREATEST PLAN inthe world only looks good on paper.

If you DONT need the money from SSI, take it and save it for later!

The SSI trust fund is not sending you a check if you die too soon!

I take the bird in the hand

Just a different view on it

      As with any of this stuff, there is no "right" answer...that only comes with knowing when you are going to die, which none of us do.  What rate do SSI benefits increase with each year you wait, 8%?  I am not sure everyone's $ is earning that once they are 62, but certainly it is true for some.  I am married, and my wife hasn't worked in 22 years, and she probably won't work before I retire.  So, she will get half of my SSI benefit; I believe I have heard of a "file and suspend" strategy that makes some sense for a married couple where one spouse doesn't have a significant earnings record.  Frankly, I haven't read many articles or heard many "experts" recommend taking SS at the earliest possible date unless you absolutely need the $ now, or, if you have a likelihood of not living all that long.  But, I may be reading/listening to people that you are not, and vice-versa.  If you can do what you want, and have the peace of mind to not be fretting about your money all the time, and, your needs are being met, then that is a good strategy, as far as I am concerned!

       I looked at my SS benefits estimate...waiting until 70 generates $18,000 a  year more than taking at 62...for me, at least, certain financial decisions are made taking "worst case" scenarios into account...like, extreme longevity, for example, for at least one of us, probably my wife.  I am not sure what I will do, it is at least 13 years away at the earliest. I am not certain of anything pertaining to this topic, but I am FAIRLY certain that there isn't a "one size fits all" answer that works for everyone.  I will say this--I know people who "open  their books" to me, and have clearly found themselves in situations where they do not have enough income during retirement, and they have to make some pretty tough choices.  Again, part of me approaches these topics with a certain amount of "worst case scenario" thinking.

        I just read that 2/3 of americans take SS at age 62; this thread began with the comment that the average family in their 60's have about $170,000 in retirement assets saved, I believe...seems to me they don't really have any option but to take at 62.  I looked at the Schwab website and they spend a fair amount of time looking at the different choices that people have...the pros/cons.  The only thing I will say about their take is that there is no "one size fits all" decision...and, they make a fairly strong case for waiting, for a good portion of the populace, at least.  They have a box highlighted that said, essentially, "If you think it may be difficult to wait, you're not alone.  Even though most people would probably be better off delaying benefits, 2/3 of  eligible workers take early benefits".  The article was from 2014, and written by Rande Spiegelman, CPA, CFP, Vice President of Financial Planning for the Schwab Research Center for Personal Finance.

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Gunflint Charlie

I'm 62, retired for almost 4 years, savings in a balanced mix of funds with about half "capital preservation". Aside from the chance of dying before collecting, an otherwise risk free 8% return on deferred Social Security looks pretty damn good to me.

Jay

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