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Tiger MT's Carter

Retirement Savings?

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My big concern is the 18 trillion dollar debt and what effect it is going to have on the stock market eventually

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2shot
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.

Sounds reasonable.  I'll be at about 8x when I hit retirement and if my math is correct for my anticipated lifestyle I'll be fine.

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Kansas Big Dog
My big concern is the 18 trillion dollar debt and what effect it is going to have on the stock market eventually

I agree, that is a fundamental risk that is not being accounted for in both the debt market, and the equities market. With the Fed artificially keeping interest rates at historical lows, and the huge budget deficits, the out come could be stagflation with higher tax rates.  Many of the nest eggs maybe silver instead of gold.

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bennelli-banger
I just googled the question of how many x your annual salary do you need to retire?  I found many answers, ranging from 8x to as many as 20x...one study that I saw that was done by the benefits consulting firm Hewitt and Associates suggested that if you are retiring at 65, you need 11x your salary...if you are retiring early, it would be more than 11x, and if you are going later than 65, fewer  than 11x.  I don't think of it in those terms, nor does the College for Financial Planning teach it that way.  It is possible that there are some rules of thumb (such as this) that coincide with other formulas for determining how much you need.  The internet is littered with financial calculators that will give you a number once you quantify things like how much income you want, what you expect inflation to do,  what your risk tolerance is for your $, both prior to and during retirement, etc, etc.  My employer's 401k plan has a calculator that I am confronted by each time I sign on to look at my account, which tells the participant whether they are on track or not. The tough part about planning for retirement is there are so many unknowns, and everyone is different regarding their comfort level with having the range of contingencies  covered.  Frankly, I do see lots of retiree's that don't have nearly enough $, and that scares me a lot.  I do see quite a few that are prepared for several lifetimes, which is overkill.  Anyway, I prefer the 4% rule to determine how much I need, which, I guess is 25x the amount of income that you desire at the beginning of retirement, which may or may not equate to a final salary figure.  Again, lots of deductions come out of that income figure...401k, FICA, benefit payments, etc.  Again, I prefer to back into the lump sum needed by quantifying the income amount desired/needed, and dividing by 4%.

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bigjohnsd

Well, right or wrong, my wife and I, both retired military, have opted to live on our military retirement pay supplemented by 5% of our retirement savings and to use a little more of the capital if needed until we both reach full retirement age.  Two and three years from now we fill file for SS and then reevaluate.

Both Military Retirement and Social Security are somewhat inflation protected.

I sold my business 9 years ago and my wife retired then as well. We were diligent savers/investors during our working years.

My investment guy has done right by us and has generated near 8% for the past few years.  We are fortunate to have more savings/investment today than the day we retired 9 years ago.

I guess we should all be glad we are worried about these First World Problems

My plan has worked

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bennelli-banger
Well, right or wrong, my wife and I, both retired military, have opted to live on our military retirement pay supplemented by 5% of our retirement savings and to use a little more of the capital if needed until we both reach full retirement age.  Two and three years from now we fill file for SS and then reevaluate.

Both Military Retirement and Social Security are somewhat inflation protected.

I sold my business 9 years ago and my wife retired then as well. We were diligent savers/investors during our working years.

My investment guy has done right by us and has generated near 8% for the past few years.  We are fortunate to have more savings/investment today than the day we retired 9 years ago.

I guess we should all be glad we are worried about these First World Problems

My plan has worked

congrats on the great position you worked hard  to find yourself in!

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trust me

My old man worked and saved and scrimped to be able to retire at 60. He put off all his hunting trips, fishing trips, camping trips, for his glorious retirement he had worked out for himself.  All the accumulated guns and fishing rods and bird dogs were going to be put to great use. He had a great plan, set himself up a side business for some part-time work to get the last child through college while he did all the fun stuff he'd planned his whole life.  It was a great plan, until he fell over dead with a heart attack 6 weeks short of retirement. All that retirement money and that great plan did him no good at all.

I was 25 when it happened and I learned my lesson then. So now when I want to go fishing, I go.  When i want to go hunting, I go. If I want to take time off work to do something with the kids, I do it. Today is all I have, no guarantees I will see the sun rise tomorrow.  

My retirement? 8x annual salary will be plenty. My FRA is 67 and I will probably quit before then, live off the savings and take my SS at age 67, may wait till 70 if everything is going well.

I agree that the irrational exuberance of the stock market is a major question mark for us all.  I have planned for that by learning which plants I can eat and how to make fire with dry sticks.

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juneboy1
Damn, I do this for a living. Why in the hell did I look at it on my day off. Posthole me please.

I would think if you do this for a living you would have plenty to offer in this topic.

No chance, job and recreation don't mix for me.

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Bede

I almost feel bad saying this, but there was a small segment of the population for whom the Great Recession was a financial windfall if they played it right. People on the exact opposite of the retirement spectrum than those poor folks approaching retirement who saw their savings and home values plummet.

Those folks just beginning there careers shortly before or soon after the markets hit bottom, and who chose to save aggressively since, really made out. A person just starting out their career in 2008 had the perfect scenario of a bottomed out market and an $8000 first time home buyer tax credit. Anyone early career workers who had the ability and opportunity to start investing and failed to do so missed out on the chance of a lifetime.

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tut

I read all of this and my head explodes.  I'm lucky enough to be a retired Fed on Civil Service retirement who put in 30 plus years.  Retired the first time at 55 and then went back to work for 3.5 additional years trying to build up savings.  Still do a bit of consultant work from time to time to earn lunch money as my wife calls it.  She is frugal, I'm frugal (except this damn Fox addiction).  When we go on vacation there are no 5 star hotels and no 5 star dining.  Crackerbarrel for breakfast and Outback Steak House for dinner would be fairly upscale based on what we normally do.  I'm kind of a meatloaf diner guy overall which says a lot.

I could have kept on working and built up the nest egg more.  Watching my dad get dementia and all my folks plans to travel later in life turn to mush changed my plans a bit.  You don't need a pile of money to enjoy life but you certainly need some, but you really need time and good health as well.  Kind of a balancing act I guess.  My Fed retirement is good real good but it wasn't easy.  I spent some time in hell holes from Afghanistan to Iraq hoping a bullet or a bomb wouldn't leave my wife and kids alone and its time to leave that part of the world to others.  Being over there really makes one appreciate being over here where you can do what you want to do and can actually plan your life to a degree.

Hence I'm trying to live the dream just a bit.  New 5 month old bird dog.  Couple of shotgun made to fit me and hopefully plenty of time and health to do what I want to do for as long as I can do it.

I'm simple enough as is my wife that we like simple things.  God, country, family and bird dogs are pretty simple overall and not a bad way to live IMO.

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bennelli-banger
The bottom line is this:  if you don't want to invade principal, you can't withdraw more than a certain % of your $ each year; that % is a function of what your $ earns.  The more conservative you have your $ invested, the larger a lump sum you will need.  For example, if you need 50k annually from your $ above and beyond what your other sources of income are, and, if your $ is in a "balanced" portfolio of roughly half stocks, half bonds, which probably will average around 5% over the next few decades (easily could be above or below that figure; Vanguard's Balanced Index fund has been around since late 1992 and has averaged a bit above 8% annually, though I wouldn't plan on that for the next 20+ years, as bonds will not have the wonderful ride that they have had for the past several decades), then you better have a million bucks, preferably 1.25 million.  On the other hand, if you are OK with the idea of invading principal, then that is a whole different matter.  Retiring as a married couple at 62 or 65 today, one of the two of you very well may be alive into your 90's...I would plan on it, personally.  If you retired with 600k, and it averaged 5% annually, and you took 50k/year, you would be down to about 154k after 15 years. And that 50k won't feel like the 50k felt in year #1!  Look at vehicle prices....whoa!  For those that want to retire early and may not have enough $ based on some of these "models", look into such things as immediate annuities for some of your $...they make a payment to you for as long as you or your spouse are alive...but your principal is gone after you die...and, with interest rates so low today, the insurance  companies aren't offering any great returns on these products, but they can make some sense if you want to make sure you don't outlive your $.    I would end with this--go talk to a fee-only financial planner...spend a few hundred (or more) bucks for a few hours of their time (they don't sell products, just their expertise).  Get an unbiased view of where you are at, and do it several years before you plan on retiring.  I am quite sure that lots of guys I know spend more time planning a 10 day big game hunt then their 25 or 30 year retirement!

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bennelli-banger
I almost feel bad saying this, but there was a small segment of the population for whom the Great Recession was a financial windfall if they played it right. People on the exact opposite of the retirement spectrum than those poor folks approaching retirement who saw their savings and home values plummet.

Those folks just beginning there careers shortly before or soon after the markets hit bottom, and who chose to save aggressively since, really made out. A person just starting out their career in 2008 had the perfect scenario of a bottomed out market and an $8000 first time home buyer tax credit. Anyone early career workers who had the ability and opportunity to start investing and failed to do so missed out on the chance of a lifetime.

absolutely!  I refinanced my mortgage at 3.625% 3 years ago, thanks to the great recession.  The Dow was at 6500, today it is above 18,000.  Trust me, lots of people panicked and pulled out in late 2008 or early 2009, and have not gotten back in.  Losing 30 or 40 or 50% of your $ really F&$@?'s up your retirement plan!  Again, having MORE $ than less--a margin of safety, as they say--isn't such a bad idea.  But, yes, there were bargains of all types to be had 5-6 years ago, real estate included.

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ShortTailGuy
I'm sleeping with my Financial Advisor.  She has us on a smooth steady growth that will keep us in the lifestyle that we are going to be comfortable with.  I am not going to collect SS until 67.  I am 58 now and we bought a small hardware store last year and with hard work and long hours is doing quite well. The only thing that concerns me is health and health care.  No amount of money is going to buy you good health.

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Kansas Big Dog
No amount of money is going to buy you good health.

Or time.

From Dust in The Wind by Kansas:

Now, don't hang on, nothing lasts forever but the earth and sky

It slips away, and all your money won't another minute buy

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fuess
If you were going to take a boatt to sea, or fly private aircraft, would you plan on the exact amount of gas to get you to your destination and back or would you make sure you have a few extra gallons, in case of a storm, a emergency.......

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