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10-16-2010, 08:00 AM
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#41
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Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
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Quote:
Originally Posted by cardude
.. if you and your wife make 110K combined, I bet you would need about 3.5MM to keep living like you are used to living
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It should be based on expenses. If the expenses were $60,000, the tax rate was 30%, income required is $85,715 (60000 /(1-30%)). With a SWR of 4%, a portfolio of $2,142,857 should suffice.
Quote:
So to feel "rich", I would agree with others that $7.5MM is what you would need.
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One can feel rich with any amount - it's all relative. On the same token, one can feel poor with billions.
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10-16-2010, 08:08 AM
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#42
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Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
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Quote:
It totally depends. Someone who owns their home free and clear, lives frugally and has a $50K COLA'd pension and health insurance may have "enough" even if their retirement savings is zero.
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This is true iff (if and only if) the payee will not default its obligation.
__________________
May we live in peace and harmony and be free from all human sufferings.
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10-16-2010, 09:51 AM
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#43
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by cardude
On NPR this morning they were talking about a poll someone recently did, and only 49% of people polled had even tried to calculate what they would need for retirement, and of that 49%, 14% admitted to just guessing what they would need in the future.
Whay don't our high schools teach this stuff
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Maybe because this would require that our grade schools teach arithmetic? Or that our high school teachers understand retirement arithmetic?
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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10-16-2010, 10:50 AM
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#44
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Thinks s/he gets paid by the post
Join Date: Oct 2009
Posts: 1,190
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Quote:
Originally Posted by Spanky
On the same token, one can feel poor with billions.
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Wanna bet... . I'll buy not happy, but poor with billions (even with today's Bernanke induced crappy US $) that's a hard one to agree with.
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10-16-2010, 12:59 PM
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#45
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Thinks s/he gets paid by the post
Join Date: Apr 2006
Posts: 1,684
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Quote:
Originally Posted by cardude
On NPR this morning they were talking about a poll someone recently did, and only 49% of people polled had even tried to calculate what they would need for retirement, and of that 49%, 14% admitted to just guessing what they would need in the future.
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Somewhere I read that those who have tried to do the calculation are much more likely to retire the to the lifestyle they prefer than those who have not.
Great idea, but could most high schoolers imagine themselves retired?
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10-16-2010, 01:17 PM
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#46
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Thinks s/he gets paid by the post
Join Date: Sep 2008
Posts: 2,171
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Quote:
Originally Posted by cardude
(snip) Whay don't our high schools teach this stuff(snip)
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Quote:
Originally Posted by haha
Maybe because this would require that our grade schools teach arithmetic? Or that our high school teachers understand retirement arithmetic?
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And if high school teachers understood retirement arithmetic, maybe they would stop being high school teachers? I've heard that lots of teachers' retirement plans are junk, and that 401ks and other retirement accounts are often much better vehicles, with better investment choices and lower fees. Any truth to the rumors?
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10-16-2010, 01:28 PM
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#47
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Thinks s/he gets paid by the post
Join Date: Sep 2008
Posts: 2,171
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Quote:
Originally Posted by Rustward
Somewhere I read that those who have tried to do the calculation are much more likely to retire the to the lifestyle they prefer than those who have not.
Great idea, but could most high schoolers imagine themselves retired?
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I think, given a little help, they could. The NYT did a retirement supplement a little while ago. I don't have the link immediately to hand, but I think it was about the middle of last month. One of the articles was about a behavioral finance study, in which one group of subjects were shown age-progressed photos of themselves and the other group wasn't. (A sample set of photos was included with the article.) The students who saw their aging selves said they would save more toward retirement than those who didn't. IIRC, their answers also suggested they would invest more realistically—they were less likely to take inappropriate risks and so on. I think these were college students, or possibly post-grads, but they weren't vastly older than high-schoolers.
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10-16-2010, 04:15 PM
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#48
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Recycles dryer sheets
Join Date: May 2010
Posts: 131
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About 300-400 times your monthly expenses. 400 is safe, 300 is close to critical at your age. Now the question is, how much do you want to spend? Consider the worst case scenario e.g. you need expensive medical treatments or you suddenly develop an uncontrollable desire to travel the world first class. Use that expense level and multiply by the above numbers.
Also consider that in most cases it is possible to find the same level of joy for much less than what people normally spend.
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10-16-2010, 05:53 PM
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#49
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Thinks s/he gets paid by the post
Join Date: Sep 2008
Posts: 2,171
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Quote:
Originally Posted by dizzy
Short answer:
dizzy's "what's my number" test (tm). Take your current salary, multiply by 3, add a 0. If you have that much or more in investments, FIRE AWAY!
Long answer:
Your "number" is a function of 2 factors: expenses and SWR, i.e:
MyNumber = MyRetirementExpenses * (1/SWR).
SWR is a function of life expectancy, desire to leave a legacy, and the expected real return sequence of your portfolio. Of course none of these terms can be known with certainty, but assuming you follow all the good boglehead advice here, conventional wisdom seems to be that SWR = 4% @ age 65, and SWR = 3% @ age 45. This means MyNumber = MyRetirementExpenses*25 at age 65 and MyNumber = MyRetirementExpenses*33 @ age 45. (snip)
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Shouldn't that be "take your current salary, subtract pension &/or SS if applicable, multiply remainder by 3, add a zero"? To be on the safe side, subtract less than the full amount for a non-COLA'd pension, maybe less than the full amount for SS, too. I know you mentioned pensions and SS in the adjustments to MyRetirementLifeStyleFactor, but for many people these two items taken together can make up more than half of the income available in retirement. Ignoring such a large income source would cause such people using the test to vastly overestimate the amount of saving they need.
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(BTW, folks advocating ultrasafe SWR like 1% or 2% are just loony. In the limit of an ultrasafe 0% real return portfolio and no legacy, 1/SWR = YearsToLive (just divide the portfolio into 1/SWR buckets and spend one bucket each year). At an SWR of 1% a portfolio will last 100 years if invested in "risk free" bonds (e.g. bonds that just keep even with inflation). I think we can safely say that 1% SWR is overkill unless you are worried about having more than 100 years in retirement...)
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Not loony, just cautious. The studies on which the 4% SWR rate is based used a portfolio of, IIRC, 75% equities. If your portfolio has a lower percentage in stocks, your expected returns and hence SWR will be lower too. The same goes for using an "income only" approach rather than "total return".
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