$1 million is still the sweet spot

[easysurfer]

According to this, $1 million (and an old fashion pension) is still the sweet spot for satisfaction and retirement.

retirement-steps-that-work: Personal Finance News from Yahoo! Finance

 

[rescueme]

For me, the $1M (plus) along with a still wor*ing DW is all that I need to make me happy...

(Yeah, I'm happy )...

 

[ziggy29]

For me, the $1M (plus) along with a still wor*ing DW is all that I need to make me happy...

Well, yeah -- I guess one of the best tickets to FIRE is having a spouse who has a secure j*b that he/she truly enjoys.

Mine has told me that she'd love to allow me to "retire" while she still works, assuming she finds something she (relatively) enjoys and has health insurance (at least as things are now). I know she feels bad about all the years I've had to put up with j*bs that my heart isn't in, even as she did a lot of soul-searching, education and "leisure time" while I put up with it all. She'd like to return the favor which is something I don't insist on but welcome hearing, as long as she can be happy in what she's doing. Someday, I can hope...

As for this article, it rehashes all the usual stuff: live below your means, eliminate all your debt, save as much as you can, yadda yadda yadda. They even tell people in their 20s and 30s to consider looking for a j*b with a secure DB pension if possible, which they probably should do before budget pressures (and public resistance to never-ending tax hikes) shut off that deal to new hires completely.

 

[rescueme]

Well, yeah -- I guess one of the best tickets to FIRE is having a spouse who has a secure j*b that he/she truly enjoys.

Enjoy? I don't think so. Her problem is that she has not yet understood that she will be "making" the same salary/income in retirement, as she does currently employed.

I guess that's a challange for anybody who is facing retirement (e.g. "can I do it").

Her passion is travel, and she spends most of her income in traveling around the world (sometimes with me, luckly sometimes without - with her female "travel buddy" - who we met years ago in our joint travel).

Also, we're lucky since I cover retirement medical under my former company's retirement plan. She dosen't pay for medical nor any other "required expenses" (e.g. home, food, taxes, insurance, etc.) - but that's another story, based upon my upbringing.

 

[MasterBlaster]

How Much is Enough ?

The article goes over lots of much disclosed information, however the value here is in helping to discern exactly how much is enough.

As the article states, those with around $1M have nearly as much satisfaction in retirement as those with more. So why kill yourself getting to that next rung.

here's the key graph from the article.

In my opinion this graph should be linked in the FAQ section of the forum.

 

[ziggy29]

The article goes over lots of much disclosed information, however the value here is in helping to discern exactly how much is enough.

As the article states, those with around $1M have nearly as much satisfaction in retirement as those with more. So why kill yourself getting to that next rung.

Here's the thing: When I look way ahead, I think the difference between $1M and $2M is going to be a lot less than it is today given my expectations for increased (and more progressive) income taxes and more means-tested entitlements (and health insurance). Together with other income sources I'd have, no debt and a low-cost lifestyle, I don't anticipate my standard of living being THAT much higher with $2M than with $1M (in today's dollars).

I see $1M as a pretty secure and inflation-adjusted $30K per year. Together (perhaps) with part-time stuff until other income streams kick in, that would get me most of the way to where I think we need to be. Doubling my nest egg to $2M and adding another $30K to our income would probably do very little, after factoring in everything I mentioned above, to increae our standard of living.

 

[MasterBlaster]

Ziggy:

I don't disagree with you regarding potential future inflation and tax increases. Planning for that is prudent.

The value in the graph is just showing that you don't need to have the biggest stash to be happy in retirement. In fact striving for that bigger stash just may be counter-productive. The goal here is to maximize your life satisfaction and not necessarily your stash.

So throw in your personal fudge factor to your FIRE goal, and keep this little nugget in mind for your FIRE plans. It really is possible to save too much to your personal detriment.

 

[sirion]

Yes, I agree you can save too much. This is one reason why we are deciding to spend $15k on a home renovation instead of saving even more. We aim for a 20% savings rate and figure we can spend the rest to enhance our current quality of life. That said, I think i worry the most about healthcare and feel like I can't have too much (I'm 35 now).

 

[seabourne]

Something that bothers me about these sorts of articles is that, while they mention the pensions in the article, they don't address how they are dealt with in the net worth calcs. A net worth of $500k with a $60k pension is a lot different than $700k retirement off of a 401k, and given the changing demographics of retirement will have a huge impact on the numbers and the comfort levels for any given net worth.

 

[FIREd]

For me, $1M is really the sweet spot. 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. It might not be a Mc mansion, gourmet food or Versace suits, but the basics of life will be taken care of until I die. That's huge! Anything over $1M merely makes life a bit more comfortable and fun.

 

[haha]

Something that bothers me about these sorts of articles is that, while they mention the pensions in the article, they don't address how they are dealt with in the net worth calcs. A net worth of $500k with a $60k pension is a lot different than $700k retirement off of a 401k, and given the changing demographics of retirement will have a huge impact on the numbers and the comfort levels for any given net worth.

They likely don't account for them at all. They just publish this rubbish and some people will always resonate to whatever they publish.

As far as $1m that you actually have to live on guaranteeing anything much beyond very bare bones, it doesn't in most places.

Ha

 

[audreyh1]

The article goes over lots of much disclosed information, however the value here is in helping to discern exactly how much is enough.

As the article states, those with around $1M have nearly as much satisfaction in retirement as those with more. So why kill yourself getting to that next rung.

here's the key graph from the article.

Well, for one thing, that article is probably for retirees 65 or older with SS and medicare, not early retirees. ERs also need their portfolios to last longer, and that probably means more money.

I know that for us who have no pension, pay our own healthcare insurance, $40K per year (or say $35K after taxes) would require us to be extremely frugal. We wouldn't dare have high-deductible health insurance because we wouldn't have enough to cover the deductible out of our annual income.

If you bought an RV before retiring, you might be OK for more traveling, but you had better hope no major repairs needed any given year because that could severely cut into annual income. Those extra vehicles add a lot of insurance expense too.

In fact, you had better be sure that you already had a paid-off home or were willing to move to a lower-cost area and significantly down-size the house.

So if you are older and have medicare and SS, maybe $1M is plenty. But I sincerely doubt it is enough for ERs.

So I think that's why ERs work hard to get to the next run.

Audrey

 

[Tesaje]

The article did say the $1M was with a DB. The world does look different with that and really should be considered as a present value addition to your net worth if you have one and are comparing to someone who does not have a secure DB.

 

[rescueme]

a secure DB.

Is there such a thing ?

Ok - federal/local government (due to taxing authority), but even those plans are going to be strained if taxes cannot be extracted from those without j*bs.

 

[ziggy29]

Is there such a thing ?

Ok - federal/local government (due to taxing authority), but even those plans are going to be strained if taxes cannot be extracted from those without j*bs.

Actually, the Feds solved the worst of their pension problems 25 years ago when they moved civil servants from CSRS to FERS, as FERS is a much more sustainable retirement plan.

State and local governments, on the other hand, are hurting because they are often more generous, particularly the "3% at 50" type of plan which allow someone age 50 with 30 years of service to retire at 90% of final pay (with health insurance). These plans are ruinous to some state and local entities and in reality, at some point I think there will be no choice but to change the deal for new hires. The best way to make sure you can honor past promises is to stop making new ones where this issue is concerned.

 

[youbet]

Because the article glibly tosses a DB pension into the mix, it's pretty worthless. What it's really saying is that if your ongoing income in retirement (DB Cola'd pension, SS, etc) meets your basic budget, you probably won't gain significant marginal satisfaction from a net worth greater than a half mil. So, if the article is being addressed to a bunch of career govt employees with that type of pension, they might take away the message that once they get to a half mil go ahead and do some enjoyable spending now. For the rest of us getting by with a mix of income sources in retirement, none of which is a generous COLA'd pension, the graph depicting satisfaction levels vs net worth means very, very little.

 

[jdw_fire]

The article did say the $1M was with a DB. The world does look different with that and really should be considered as a present value addition to your net worth if you have one and are comparing to someone who does not have a secure DB.

Because the article glibly tosses a DB pension into the mix, it's pretty worthless. What it's really saying is that if your ongoing income in retirement (DB Cola'd pension, SS, etc) meets your basic budget, you probably won't gain significant marginal satisfaction from a net worth greater than a half mil. So, if the article is being addressed to a bunch of career govt employees with that type of pension, they might take away the message that once they get to a half mil go ahead and do some enjoyable spending now. For the rest of us getting by with a mix of income sources in retirement, none of which is a generous COLA'd pension, the graph depicting satisfaction levels vs net worth means very, very little.

the atricle actually says

But notably, even among those who reported having less than $250,000 in net worth, more than half were highly satisfied with their retirement. In addition, 38 percent of retirees said they depended on a defined-benefit pension for a significant portion of their income.

soo 62% of the retirees dont depend on a DB pension. and if it took depending on a DB pension to be happy how can there be just under 80% statisfied when only 38% are depending on a DB pension?

 

[haha]

the atricle actually says



soo 62% of the retirees dont depend on a DB pension. and if it took depending on a DB pension to be happy how can there be just under 80% statisfied when only 38% are depending on a DB pension?

The other possibiity is that the writer or the interviewees lied.

Ha

 

[W2R]

62% of the retirees dont depend on a DB pension. and if it took depending on a DB pension to be happy how can there be just under 80% statisfied when only 38% are depending on a DB pension?

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.

 

[NW-Bound]

A high percentage of the retirees is happy, but are they early retirees? A $1M portfolio+SS (and/or pension)+Medicare would make many people happy. My mother does not have $1M, and her small pension provides her with much less than the $40K/year that such portfolio would yield, yet she is happy.

Now, we forgot to look at the responses of people who have not retired. These poor working stiffs do not appear happy at all. See excerpt below.

Median net worth dropped 30 percent for those still working. In fact, 23 percent weren't sure they'd be able to retire. More than half of those said they wouldn't have enough money to live without working. Only 19 percent of workers were highly satisfied with their retirement planning.​

 

[jdw_fire]

The other possibiity is that the writer or the interviewees lied.

Ha

well that is hard to argue with. maybe they lied about being satisfied too, or maybe they lied about ...

 

[audreyh1]

The article did say the $1M was with a DB. The world does look different with that and really should be considered as a present value addition to your net worth if you have one and are comparing to someone who does not have a secure DB.

Not exactly the article said that:

In addition, 38 percent of retirees said they depended on a defined-benefit pension for a significant portion of their income.

Well, that pretty much throws it out right there! If such a large number polled had a significant DB, then of course the sweet-spot net worth number is going to be lower. It pretty much makes the whole thing pointless!

Sheesh!

Audrey

 

[youbet]

how can there be just under 80% statisfied when only 38% are depending on a DB pension?

The article doesn't say that just under 80% are satisfied. We don't know how many individuals are in each category. For example, most of the individuals could be in the sub-$250k category where only 51% are satisfied.

 

[Midpack]

Originally Posted by Tesaje The article did say the $1M was with a DB. The world does look different with that and really should be considered as a present value addition to your net worth if you have one and are comparing to someone who does not have a secure DB.

Not exactly the article said that:

Quote: In addition, 38 percent of retirees said they depended on a defined-benefit pension for a significant portion of their income. In addition, 38 percent of retirees said they depended on a defined-benefit pension for a significant portion of their income.

Well, that pretty much throws it out right there! If such a large number polled had a significant DB, then of course the sweet-spot net worth number is going to be lower. It pretty much makes the whole thing pointless!

Sheesh!

Audrey

Pretty much what I concluded too, back to the salt mines for me.

'Hi-ho, hi-ho, it's off to work we go'...

 

[jdw_fire]

The article doesn't say that just under 80% are satisfied. We don't know how many individuals are in each category. For example, most of the individuals could be in the sub-$250k category where only 51% are satisfied.

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?