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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 05:47 PM   #21
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Re: Ben Stein - More doom and Gloom on Retirement............

Well, I might need 85%, but I sure am not spending it.* I guess I am getting it, but reinvesting all dividends keeps me way below any pre-ordained 85 percent.* So, he's wrong about that.*

And nobody wants to own up to being average! I have met a few average folks, but they sure don't admit it.* I mean, Jarhead, are you average?? REW?? Couldn't be, huh?*
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 06:27 PM   #22
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by Eagle43

And nobody wants to own up to being average! I have met a few average folks, but they sure don't admit it.* I mean, Jarhead, are you average?? REW?? Couldn't be, huh?*
Eagle43: Can you be average if you're suave, sophisticated, handsome, and intelligent?

Cuz Bubba and me am all that.
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 06:34 PM   #23
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by Jarhead*
Cuz Bubba and me am all that.
Jarhead, thanks much for including me in your response. And while I've got your attention, hold my beer and watch this...

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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 07:33 PM   #24
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by d
am reminded of a line: "the average person is a little bit below average" ... but I'd attribute it to most folks incredibly short time horizon coupled with unreasonable and inordinately high discount factors.*
Isn't this true. Ever time some psychologist or economist studes human decision maiking, very high implied discount factors is one thing he finds.

Ha
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 08:23 PM   #25
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Re: Ben Stein - More doom and Gloom on Retirement............

How about this: Even so-called above-average folks can't make the right decision about which index fund to purchase.

In the NYTimes April 9th is an article by Mark Hulbert entitled either "Same Portfolio, Higher Cost. So Why Choose It?" or possibly* "Avoiding High Cost Funds Takes More than Intelligence".* http://home.flash.net/~factoids/fact6/fact.htm (scroll down to get to the article in the digest).

Quote:
Originally Posted by Mark Hulbert
The researchers wanted to find out whether the students would be able to assess how returns are affected by funds' fees. In the first simulation, the professors asked undergraduates and M.B.A. students to allocate a hypothetical $10,000 among four S&P500 index funds that would be held for one year. All four funds invested in the same 500 companies, and matched the index's allocation for each stock, so the only significant difference in the funds' returns would come from their fees — their front-end loads, or sales charges, and their management expenses. And because of the way the professors designed the experiment, these four funds had relatively high fees, ranging from 3.09% to 5.89%.
...
The rational response, the professors argue, would have been to allocate all the money to the fund with the lowest fees. Yet fewer than 20% of either group of students did so.
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 09:11 PM   #26
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Re: Ben Stein - More doom and Gloom on Retirement............

Audrey,
It sounds like you've recently come up the curve and taught yourself this stuff. Most of us here probably found managing finances something of a hobby. So you're in a pretty good position to tell us -- what were the key factors that you think might have made you different? What hurdles did you stumble on? Why would you want to do this when most people would rather not? Just curious, and congrats on making the transformation.
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 09:14 PM   #27
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by DOG51
The article states "85% of pre-retirement salary". I have even seen some articles state 85% of gross income. True, if it is 85% of net after savings and all deducted........that may not be too far off.
85% of slaray is ridiculous. If you are planning to ER you should be saving a good %age of your salary already. If you need 85% of your salary you'll be working for a long time. I save 45% and live of 55% of my salary, and once the house is paid off that will go down to 20%
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 09:21 PM   #28
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Re: Ben Stein - More doom and Gloom on Retirement............

Same here, save ~12% (this year) of my salary, and mortgage makes up ~33%, so since I plan on paying it off before I retire, I'll need about 55% to live very well.
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 09:42 PM   #29
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by ESRBob
Audrey,
It sounds like you've recently come up the curve and taught yourself this stuff.* Most of us here probably found managing finances something of a hobby.* So you're in a pretty good position to tell us -- what were the key factors that you think might have made you different?* What hurdles did you stumble on?* Why would you want to do this when most people would rather not?* Just curious, and congrats on making the transformation.*
Well, I think like most ER folks on this forum, I had the strong desire for financial independence, and learning how to manage my finances was part of the requirement.

It didn't take much to look at what advisors charge for portfolio management for me to figure out that it was a heck of a lot of money in real dollars.

I'm just one of those folks who has to figure out things for themselves - I am naturally distrustful.* I think most people aren't like that.* Plus there appears to be a huge conflict of interest for a financial advisor, so I had strong cause to be distrustful in this case.

And unlike most folks, I am not easily intimidated by people spouting off technical jargon - whatever the field.* This all might have something to do with having been an engineer.

Oh - I came up the curve a while back in 1999/2000!* And then I got a trial by fire in 2000-2003!* And I came out ahead!!!* I guess now I feel pretty "seasoned" - LOL!!

Audrey

P.S. I have to credit the www.morningstar.com site and forums for really helping me scale that learning curve.* What a great resource.* And somehow I stumbled across Frank Armstrong's "Investing for the 21st Century" http://www.investorsolutions.com/v2c...book/index.cfm - taught me asset allocation which as an investment style fits well with my personality.* I also watched way too much CNBC and that got me used to the short-term insanity of the markets and reinforced my contrarian instincts as I watched most pundits be wrong, wrong, and wrong again.
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 09:51 PM   #30
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Re: Ben Stein - More doom and Gloom on Retirement............

Thanks, Audrey;
Maybe that isn't so different from others. A poignant vision of the goal, an instinctive 'frugality' when it comes to forking over your savings to a clip joint, a lot of research and then getting the tar kicked out of you a few times by bear markets... Maybe we should hand the model over to our local high schools and see if it could help the kids learn math and science?

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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 09:55 PM   #31
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Re: Ben Stein - More doom and Gloom on Retirement............

Yep - I don't think I'm that different from the other folks here after all.

Just that money management is not a favored hobby for me.* I deliberately picked a simple plan that didn't require much maintenance after the initial setup (i.e. rebalance once every year or so).* Got better things to do with my time* .

Amazing summary by the way!* You've got quite a head on your shoulders.* I enjoy the way you express yourself.

Audrey
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-17-2006, 10:52 PM   #32
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by nun
85% of slaray is ridiculous.
Have another glass of wine!
Quote:
If you are planning to ER you should be saving a good %age of your salary already.
That's something I think we can all agree with!
Quote:
If you need 85% of your salary you'll be working for a long time.
But if that's what you need, you better work for a long time or get ready to live on less than you need.
Quote:
I save* 45% and* live of 55% of my salary, and once the house is paid off that will go down to 20%
Ridiculous!* You should live off 5% and save 95%!* If you didn't retire yesterday, you made a BIG mistake

Everyone seems to be getting caught up in their underwear concerning this percentage of current expenditures. income, salary, budget, whatever thing, and it isn't a percentage that matters.* What matters is what you need in the future and your resources to to provide for that need in absolute terms.

Aw.....just* kidding.....* working with percentages makes no sense in these calculations nun.* If you make one billion bux per day now and can live happily off of a nickle a day in the future, work tomorrow, save 99.9% of it and retire.* If you make a dollar a day and need 5 dollars a day in the future, well, you're gonna be working along time.* Absolute dollars matter.* Percentages don't.
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-18-2006, 07:26 AM   #33
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Re: Ben Stein - More doom and Gloom on Retirement............

youbet

I am not sure you understood the percentage thing.
If you can sustain living off x% of your salary then you can do it in the future too. Since you SWR is about 4% you need to save 25 times x% before you can retire. This determines immediately how many years you need prior to retrement.

Example
You make $100k/yr and lives on $40K/yr (save $60k/yr). You need 40k*25=$1M to retire. Goal that you will reach in 16.7 years.

You live on $85k instead and save $15k per year means you will need 85k*25=$2.25M for retirement. You can reach your goal in 150 years!!!! (ie never reached your goal)

IT IS ALL ABOUT PERCENTAGE.

As rule of thumb the time to reach your goal is about T=10/(pct savings)
if your investments at least keeps up with inflation.
Save 25% and you retire after 40 years at 65 (thats not early retirement)
Save 33% and you retire after 30 years at 55
Save 50% and you retire after 20 years at 45

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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-18-2006, 08:43 AM   #34
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by perinova
youbet

I am not sure you understood the percentage thing.
Perinova,

The reason I am not comfortable with using percentage of salary as a basis for RE is that our income has not been a steady stream of "salary."* Our budget stays fairly steady but our income varies widely. Thus, the budget that supports our lifestyle consumes various percentages of our income from year to year since our income varies from year to year. I'm more comfortable building up a budget to support the retirement lifestyle I aspire to and then working to acquire the assets and income flow to support that budget/ lifestyle.

Try your math with an extremely uneven income flow.* Assume you can't project future income based on past averages.* Throw in some windfalls and some bust years.* Add in a factor for changing your future lifestyle from what it is now. It makes it much more interesting!

For me, working in absolute numbers is far better that working with percentages of a rapidly changing income stream.*

BTW, your method and examples are very good for illustrative purposes for people with regular, steady income flow! Thanks for your inputs!*

*
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-18-2006, 09:40 AM   #35
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by youbet
Perinova,

The reason I am not comfortable with using percentage of salary as a basis for RE is that our income has not been a steady stream of "salary." Our budget stays fairly steady but our income varies widely. Thus, the budget that supports our lifestyle consumes various percentages of our income from year to year since our income varies from year to year. I'm more comfortable building up a budget to support the retirement lifestyle I aspire to and then working to acquire the assets and income flow to support that budget/ lifestyle.

Try your math with an extremely uneven income flow. Assume you can't project future income based on past averages. Throw in some windfalls and some bust years. Add in a factor for changing your future lifestyle from what it is now. It makes it much more interesting!

For me, working in absolute numbers is far better that working with percentages of a rapidly changing income stream.

BTW, your method and examples are very good for illustrative purposes for people with regular, steady income flow! Thanks for your inputs!

Getting back to the basic 85% of before retiremement income number that is often quoted, I really think that it is very misleading and dangerous information to give people. I wish financial planners would encourage people to spend less and save more before they even talked about investing or %ages of income required. Of course that would severly cut into their fees as people would realize that the key to building wealth isn't so much investing, but saving and living within your means......Remember Mr Mcorber
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-18-2006, 09:46 AM   #36
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Re: Ben Stein - More doom and Gloom on Retirement............

perinova, nice first post, welcome to the board. Feel free to start a thread under "Hi, I am" and tell us about yourself!
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-18-2006, 09:49 AM   #37
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Re: Ben Stein - More doom and Gloom on Retirement............

Perinova:

For most of us, we expect our investments to do better than the inflation rate.

Therefore, for most of us, your time span to retirement numbers are pretty pessimistic.
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-18-2006, 10:51 AM   #38
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Re: Ben Stein - More doom and Gloom on Retirement............

Stein's column was so full of contradictions that I too considered writing an email to him. Instead, I'll just post about it here!

1) He says that his hypothetical woman needs to save 20% of her pay so that she can spend 85% when she retires. She gets used to living on 80% of her pay, but after retirement she needs 85%?

2) Not including *any* social security income? For someone retiring at about age 65, this seems far too pessimistic.

3) She's going to get 3% raises, on average, over the next 25 years?* I seriously doubt that. There is all kinds of news out there telling me that the rich get richer and the poor get poorer. She's not exactly rich, so it must be all downhill from here for her, right?

4) I guess the calculations are so complicated that not even Ben's friend PHIL DEMUTH could get it right.
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-18-2006, 11:13 AM   #39
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by perinova
Example
You make $100k/yr and lives on $40K/yr (save $60k/yr). You need 40k*25=$1M to retire. Goal that you will reach in 16.7 years.
Welcome to the forum Perinova!

I think sometimes people forget that a HUGE chunk of their salary goes to payroll taxes. I'd be surprised if someone clears more than $80K after taxes (income, SS, medicare, etc.) in your example. So I could see someone saving $40K/year in your example, but not $60K/year. Hard to believe that the "living on $40K/yr" would include all those taxes.

I know it's just an example to illustrate a point. But taxes is one reason it's so hard to put aside a really huge chunk of earned income.

Audrey
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Re: Ben Stein - More doom and Gloom on Retirement............
Old 04-18-2006, 05:16 PM   #40
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Re: Ben Stein - More doom and Gloom on Retirement............

Quote:
Originally Posted by slepyhed
Stein's column was so full of contradictions that I too considered writing an email to him.
while your at it you can mention in his linked article "three big mistakes" that it is las olas blvd, not las olas street. also next time he should try le bonne crepe. not only is the food pretty good, but they always brought wolf puppy his own water dish.
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