$1 million is still the sweet spot

[ziggy29]

Not only that, just because they say they are getting a DB pension doesn't mean that it's a substantial pension, or fully COLA'd. Most of the people I know with pensions don't have any COLA and the dollar value doesn't amount to a hill of beans anyway.

Good point. I have a pension waiting for me from a past employer -- the first Megacorp I worked for from 1987 to 1999, and they froze the pension even before I left. But since I stuck it out for more than 10 years, I was vested in what I earned before they froze it.

If I take the 100% survivor option, it's going to be about $270 a month in 2020 at age 55 or about $630 a month in 2030 at age 65. And those are not COLA'd amounts.

So do I have a pension waiting for me in retirement? Yes. But it's hardly a significant factor in my financial planning. Better than nothing, sure, but not something that significantly changes my retirement planning.

 

[youbet]

you are right they could be, but even still 51% > 38%. and since we are speculating, i will speculate that most of the people with DB pensions are also in that category as how could they possibly be satisfied with their retirement with that little NW and no DB pension?

Exactly. So we can't really do anything with data that says that 51% of retired folks with less than $250k net worth are "satisfied" because probably a large chunk (we don't know exactly) of those folks are satisfied because of the DB pension rather than by their paltry sub-$250k net worth.

It's too bad the outcome of the analysis is confounded by the unaccounted for 38% DB pensions. One of the most common questions here on the forum is "how much $$$ will I need to be satisified in retirement?" The analysis and spiffy graph would have gone a long way towards answering that question except it left the 38% significant DB pensions unaccounted for.

 

[Alan]

DB's often come with Health insurance also. I have a non-COLA DB plus an excellent retiree health plan to allow me to ER. Along with all the other unknowns they don't fully address this security blanket either.

 

[jdw_fire]

Exactly. So we can't really do anything with data that says that 51% of retired folks with less than $250k net worth are "satisfied" because probably a large chunk (we don't know exactly) of those folks are satisfied because of the DB pension rather than by their paltry sub-$250k net worth.

well actually we can do something with this data. lets look at the 3 possibilities. 1) there are more than 38% with DB pensions in that category, 2) there are exactly 38% with DB pensions in that category, 3) there are less than 38% with DB pensions in that category.

1) this would mean that there are less than 38% with DB pensions in the other categories and would add weight to the argument that a million (maybe down to .5 million) in assets provides a satisfactory retirement.

2) this would support my earlier statement about the higher categories have almost 80% satisfactoy retirements with only 38% having DB pensions.

3) this would raise the % having a DB pension in the higher categories but it would also increase the number of satisfactory retirements in the lowest category without a DB pension.

i think all 3 of these point out that it is possible (even probable) to have a satisfactory retirement with what people on here might consider modest assets even without a DB pension and all support the authors (potentially conservative) premise of 1 million being a sweet spot.

and this assumes that every one with a DB pension feels they have a satisfactory retirement, which probably isnt true. and if it isnt true then there are even more people who dont have a DB pension but still have a staisfactory retirement.

 

[kyounge1956]

It's hard for me to know what to make of this when they don't even tell you whether that is $1M per person or per household/couple, how much the average DB is for those who have one, etc etc etc.

 

[youbet]

well actually we can do something with this data. lets look at the 3 possibilities. 1) there are more than 38% with DB pensions in that category, 2) there are exactly 38% with DB pensions in that category, 3) there are less than 38% with DB pensions in that category.

1) this would mean that there are less than 38% with DB pensions in the other categories and would add weight to the argument that a million (maybe down to .5 million) in assets provides a satisfactory retirement.

2) this would support my earlier statement about the higher categories have almost 80% satisfactoy retirements with only 38% having DB pensions.

3) this would raise the % having a DB pension in the higher categories but it would also increase the number of satisfactory retirements in the lowest category without a DB pension.

i think all 3 of these point out that it is possible (even probable) to have a satisfactory retirement with what people on here might consider modest assets even without a DB pension and all support the authors (potentially conservative) premise of 1 million being a sweet spot.

and this assumes that every one with a DB pension feels they have a satisfactory retirement, which probably isnt true. and if it isnt true then there are even more people who dont have a DB pension but still have a staisfactory retirement.

Me thinks you're starting to stretch the rubber band of statistical probability.

I don't have any issue calling one mil a "sweet spot." With SS that means a SWR of over $50k for a single and $100k for a couple. Sounds like a satisfactory retirement to me!

I just think the author could have done a better job with the data, especially the DB pension data. Then you wouldn't have needed to try to draw conclusions as in your post above.

 

[MasterBlaster]

Jeez... What exactly did you want the article to say.​

Would you like something like​

"you, a 58 year old single man living all by yourself in a 2 bedroom condo, active yet suffering from asthma, residing on the west side of Peoria, will be happy to the 93rd percentile when you have a defined benefit COLA pension that pays $1872.37 per month and savings of $932124".​

As I see it many of the posters expectations are over the top.​

So take the article for the one little nugget in there. And that was that beyond a certain amount your retirement contentment maxes out.

More is not better - That's the nugget.​

 

[NW-Bound]

So take the article for the one little nugget in there. And that was that beyond a certain amount your retirement contentment maxes out.

More is not better - That's the nugget.​

Yes, very true. After a certain amount, more is just, well, more.

Our discerning forum members are simply debating what that certain amount is.

 

[youbet]

Yes, very true. After a certain amount, more is just, well, more.

Our discerning forum members are simply debating what that certain amount is.

Thats right. The concept of diminishing marginal returns seems to be well accepted in discussions here. The perplexing thing for many pre-FIRE folks, however, is where the knee in the curve is. How much accumulation, in round numbers, is enough before further sacrifices to accumulate are not rewarded with offsetting amounts of satisfaction?

It looked like the author, after an extensive effort to survey retirees for data, might throw a bone to the pack of knowledge hungry RE-wannebees lusting to understand when to pull the switch.

But I think that the commonly accepted thesis that, as you state, "after a certain amount more is just, well, more" is all we can take away from the article.

No dog in the fight for me. I'm 3.5 yrs into FIRE, loving the hell out of it and can't do a thing about how big my portfolio was when I pulled the switch........... a moot point now.

 

[haha]

Jeez... What exactly did you want the article to say.​

Would you like something like​

"you, a 58 year old single man living all by yourself in a 2 bedroom condo, active yet suffering from asthma, residing on the west side of Peoria, will be happy to the 93rd percentile when you have a defined benefit COLA pension that pays $1872.37 per month and savings of $932124".​

As I see it many of the posters expectations are over the top.​

So take the article for the one little nugget in there. And that was that beyond a certain amount your retirement contentment maxes out.​

More is not better - That's the nugget.​

Hard to imagine that a person who has lived in the world 40+ years would think he might get more information about happiness from some article than he would get from having a look at his own attitudes and life.

I think the nugget is not to expect anything at all useful from popular articles. They aren't intended to be useful; their only purpose is to be read, to get clicks, etc, etc.

Ha

 

[smjsl]

I know that with $1M I will never have to worry about having a roof over my head, food in my stomach and clothes on my back.

How do you know this? $1M will get depleted fast enough under highly-inflationary conditions if you can't keep up with that inflation, and my understanding is it's very hard / impossible to keep up with inflation in such conditions (..and if you try, you'll always feel like you are buying at the top of a huge bubble - like buying gold at $1000, $1500, $2000, etc.)

 

[easysurfer]

Reminds me of reading the book "The Number" where the author asks people what is their "Number" (the amount of worth they would feel comfortable with the last them the rest of their lives)? When he asks, he sees the worried look on their faces...

The number can be different for one person versus another. One person may say he/she can get by with $1 mil. Another would say, no way, at least $2 mil, another would say, no way, at least $5 mil, and so on.

Amazon.com: The Number: What Do You Need for the Rest of Your Life and What Will It Cost? (9780743270328): Lee Eisenberg: Books


The book is a good read for fun. But if you want concrete answers on how to determine "The Number" for you, the book will be disappointing.

 

[FIREd]

How do you know this? $1M will get depleted fast enough under highly-inflationary conditions if you can't keep up with that inflation, and my understanding is it's very hard / impossible to keep up with inflation in such conditions (..and if you try, you'll always feel like you are buying at the top of a huge bubble - like buying gold at $1000, $1500, $2000, etc.)

If hyperinflation can wipe off $1M, it can wipe off $10M just as easily. I find it ironic how this board has evolved over time. I used to come here to read inspiring stories about adventurers and risk takers retiring on $500K-$1M or less in a fishing camp on Lake Pontchartrain or on a sailboat circumnavigating the globe. All I read nowadays are stories of people with multimillion dollar portfolios who think that $1M is chump change and spend their time worrying about every possible financial disaster no matter how unlikely. That is of course your prerogative. But if the consensus around here is that you can never have enough money to retire because sh!t happens, then it is time for me to stop wasting my time and bid you all farewell.

 

[W2R]

If hyperinflation can wipe off $1M, it can wipe off $10M just as easily. I find it ironic how this board has evolved over time. I used to come here to read inspiring stories about adventurers and risk takers retiring on $500K-$1M or less in a fishing camp on Lake Pontchartrain or on a sailboat circumnavigating the globe. All I read nowadays are stories of people with multimillion dollar portfolios who think that $1M is chump change and spend their time worrying about every possible financial disaster no matter how unlikely. That is of course your prerogative. But if the consensus around here is that you can never have enough money to retire because sh!t happens, then it is time for me to stop wasting my time and bid you all farewell.

Don't leave - - we still have a variety of members, with different risk taking tolerances and different sized portfolios. Even me. I was going to retire on considerably less than half a million, until I inherited. I would have been just fine. And now, I am still just fine but with more to spend.

Consider the difference in point of view between members such as Ha and Aaron. Different locations, different ideas of what is impossible and what isn't. And both are right, for themselves.

 

[easysurfer]

I think in a way, "The Number" for each person is a lot like one's asset allocation. One one hand, it should be very emperical and on the other it is very subjective.

About asset allocation, it tickles me when after going through all the possible allocations, the common approach (by planners and retirees, alike) is to use one that you feel comfortable with. I am no different -- I have my AA set to my sleeping point.

I suppose looking at a number like $1 million is only part of the equation. Another (as others have mentioned) what income stream, health benefits, age of retiree. Also what lifestyle does one want to live.

I'm pretty much a LBYM person. I have a brother who probably makes more money than me in one year than I did in a lifetime. When I told him I retired, he said it's funny, I even retired before him (he is 6 years older than me). Yet, our circumstancs are different. He lives the "Hollywood lifestyle", as he said. Different strokes for different folks. We are both happy with our choices.

 

[haha]

Now, post recession, talk is more of sub 4% WR's, cushions, safety nets, reserves, padded budgets, cushions for the cushions and the thrill of sitting home and not spending being better than the enjoyment of travel or entertainment.

Different times I guess.

YouTube - Bob Dylan & Joan Baez- Blowin in the wind

So many times over my lifetime I have seen that what we believe, what seems important, what interests us and even how we interpret reality is pretty much carried in on the wind.

Ha

 

[Midpack]

SIRE vs FIRE once again, never goes away, usually doesn't get addressed. And that's what's wrong with the article as many have pointed out. I think we should all have FIRE or SIRE in our signatures...but I won't hold my breath.

 

[jdw_fire]

SIRE vs FIRE once again, never goes away, usually doesn't get addressed. And that's what's wrong with the article as many have pointed out. I think we should all have FIRE or SIRE in our signatures...but I won't hold my breath.

i am thinking almost everyone in the US that retires will have some form of "secure income", most often SS. so doesn't that make almost everyone who retires early SIRE? i know i know, i have heard it all before, "but i am not counting on SS to be able to RE". soo what? the SS is still "secure income" whether you are counting on it or not, whether you are receiving it yet or not.

-start of SIRE vs FIRE rant-

i think people who are FI with/because of a "secure income" stream are still FI but i have gotten the impression that not everyone on here thinks so. for some reason to some people it seems that if you arent FI only based on a big pile of cash (but no "secure income" streams whether you need them or not) you arent FI. (an aside: soo if someone who FIREd with a big pile of cash buys an annuity they are no longer FIREd but now SIREd?) well i dont agree. FI means to me that you have sufficient financial resources (including "secure income" streams) to not ever have to work again for money to be able to live. i have also noticed that being FI isnt enough for some people on here to retire. some people want to be able to spend even more than what is needed to live so they continue to work well after they are FI. not that there is anything wrong with that as it is their life and they can work if they like. the problem comes when they redefine the term FI to mean sufficient financial resources to supply their desired lifestyle instead of the definition above.

- end of rant-

i am thinking FI is closer to what is implied by this article even though there are people on here that wouldnt be comfy RE on that amount.

 

[Alan]

i think people who are FI with/because of a "secure income" stream are still FI but i have gotten the impression that not everyone on here thinks so.

FWIW, I consider myself FI even though I have a non-COLA pension that will initially cover 50% of my expected expenses. For me, living on non-earned income is FI. My DB pension is administered by Prudential and it doesn't matter whether it is my employer that purchases the annuity or gives me a lump sum and I buy an annuity from an insurance company like Prudential.

 

[Gumby]

But if the consensus around here is that you can never have enough money to retire because sh!t happens, then it is time for me to stop wasting my time and bid you all farewell.

I hope you don't leave. I think the general economic woes have turned more than a few of us into pessimists in the past year and a half. Things were much sunnier here in 2007 and it seemed that we feared less. I expect a bolder spirit to return if the economy continues to improve.

 

[Moemg]

All I read nowadays are stories of people with multimillion dollar portfolios who think that $1M is chump change and spend their time worrying about every possible financial disaster no matter how unlikely. That is of course your prerogative. But if the consensus around here is that you can never have enough money to retire because sh!t happens, then it is time for me to stop wasting my time and bid you all farewell.

Do not leave ! You really inspire me with how balanced you are with saving and spending . I think you have found the perfect balance . If people think the worse that could happen is to lose their money they must not be reading the Health posts .

 

[oldtrig]

The more I read here the more I get depressed. I thought I could retire on far less than $300,00.00. Now you people are saying a million is not enough. I am planning on going out of here just like when I got here, with nothing. Everywhere I go I find out that it takes so much just to live with the basics. I made to age 62 making way less than most here, I mean way way less. I have one thing that is on my side. I am happy with what I have. I owe nothing. No body but DW and me. I also have ways of making a few $ as long as I am healthy. Heck, I think I am already retired and I am still working. I watch TV a lot at night and I see where people are buying homes that range from $500,00.00 and up. A home like that where I live is a mansion. Are we in the same country or what ? I am rambling so goodnight for now

 

[smjsl]

If hyperinflation can wipe off $1M, it can wipe off $10M just as easily. I find it ironic how this board has evolved over time. I used to come here to read inspiring stories about adventurers and risk takers retiring on $500K-$1M or less in a fishing camp on Lake Pontchartrain or on a sailboat circumnavigating the globe. All I read nowadays are stories of people with multimillion dollar portfolios who think that $1M is chump change and spend their time worrying about every possible financial disaster no matter how unlikely. That is of course your prerogative. But if the consensus around here is that you can never have enough money to retire because sh!t happens, then it is time for me to stop wasting my time and bid you all farewell.

No reason for you to leave! I doubt very much that my views represent any sort of consensus here; but more importantly I enjoy reading your posts.

Now, $10M will not get wiped out as easily as $1M, but yes, given enough hyper-inflation, it will get wiped out too. $30k/year expenses, 10% real returns with 20% inflation wipes out $1M in ~15 years. $10M will last you 40.

Years ago I used to think $600k would have me set for life (I naively had figured 5% interest at $30k/year would give me more than I needed and left overs would be enough to cover inflation that is "never" high in US). Then I realized it's not even close when I started playing with numbers and learned a bit of history.

I do come from a country which experienced hyper-inflation (think 200%, 300%, 900% inflation year after year - you can imagine how people would be happy with the current ~10% inflation there). I am sure that colors my views (or is it called "experience"?), and this will be the reason I may never "KNOW" that $1M is going to be enough unless I find some good ways to protect against such conditions... Sorry I can't give you an inspirational story though as my parents lost a lot of their savings to the hyper-inflation.

 

[NW-Bound]

The more I read here the more I get depressed. I thought I could retire on far less than $300,00.00. Now you people are saying a million is not enough...

Why get depressed? If you are happy with what you have, you should feel good and pity the "poor folks" (count me in there )who keep on toiling because they have too much "stuff", or are too scared of losing their lifestyle.

Heh heh heh... I keep telling myself and everybody else that as long as I have enough funds left to get a class-C RV, I should be all set. Heh heh heh... I was surprised to find out that a nice used one costs less than a new car. Spend a bit more, then you can have a roomy used class A.

Can you believe that? I can have my "backup" house for less than people pay for their car. Of course, it would hurt like crazy to fill it up to drive anywhere, but hey, let's get a roof over my head before we talk about traveling here.



PS. Used diesel class As cost more, but I was surprised how inexpensive the used gas models were. Low mileage too, as previous owners couldn't afford to drive them very far. But since driving is optional, the low gas mileage is not insurmountable. Heh heh heh...

 

[Bikerdude]

i think people who are FI with/because of a "secure income" stream are still FI but i have gotten the impression that not everyone on here thinks so. for some reason to some people it seems that if you arent FI only based on a big pile of cash (but no "secure income" streams whether you need them or not) you arent FI. (an aside: soo if someone who FIREd with a big pile of cash buys an annuity they are no longer FIREd but now SIREd?) well i dont agree. FI means to me that you have sufficient financial resources (including "secure income" streams) to not ever have to work again for money to be able to live.

I agree! Lots of "pension" envy around here. Hey, it's compensation in benefit form not $$$. Same with my retiree health care benefit, part of compensation. It was not a gift. Simple.