How much is enough for certain ages?

[bamboo]

Sorry if this is addressed elsewhere. I looked and didn't see it.

I'm 50, wife is 48, 1st of 2 sons is heading to college next year. 2nd son has another 3 years in high school.

Putting things together for fafsa and CSS financial need forms, I'm realizing a) we're not going to be getting financial aid b) we have a fair amount of money, thanks to inheritances mostly - house worth 600K is paid for, 401Ks and IRAs are about $200K and brokerage accounts (with Charles Schwalb / self managed) of about $2.2 mill. And me playing with margin, wound up losing something like 1 mill in the market with the market collapse (margin calls forced me to sell. Those things bounced back and I would have held on as I did in cash accounts....I am done with margin for sure!)

I remember years ago the WSJ ran an article about different levels of 'rich' - beer & Pretzels, wine and steak, etc.

Nowadays, how much do you need / should you have for certain ages? Wife and I make $110K between us. We live modestly - I have a 5 year old nissan sentra, etc.

Vacations are nothing exotic although I'd like those. so saying I need to replace what I make isn't realistic - I'm not spending like I'd like if I knew I didn't have to worry about money - not gold plated silverware, just not having to debate spending for this or that - just want to loosen the purse strings.

any advice?

 

[Meadbh]

Before you loosen the purse strings, have you learnt anything from losing $1m? What about not investing on margin in the future?

 

[travelover]

It depends. The first step is to figure out how much a year you NEED to spend including health care and taxes. Then you can use a calculator like FIRECalc (at the bottom of the page). If you don't know your expenses, you really need to figure that out - there is no shortcut or rule of thumb that is good enough.

 

[bamboo]

mead - Oh, yes! I've learned. I was running thousands in margin interest, getting good rates because I was borrowing sooo much - over 1 mil routinely. No more! that's the 1 think I can be proud of - kicking the margin habit. I've lost on margin for years. Most all of our money is inheritance and I am not going to lose (more of) it.

travel - if not a specific rule of thumb for my situation, how about in general? Not to sound pompous, but if we have $5 mill in assets, would that be enough? $4 mil? I remember in Barrons years ago there was a winner of something like $300 million. They went on for pages about how to best invest it. And the last paragraph said something like - just put it in treasuries and kick back! That large amount of money would spin off more than enough for most any reasonable middle class person.

 

[Independent]

Nowadays, how much do you need / should you have for certain ages? Wife and I make $110K between us. We live modestly - I have a 5 year old nissan sentra, etc.

I'm not sure what you mean by "need for certain ages". Do you mean "Need, in order to maintain $x of spending indefinitely if we retire today"? Or do you mean "Need today in order to be on track to retire at age R with an annual income of $X"?

For the first question, most posters here used to say to take your desired income and divide by .04. Nowadays, I expect .03 is more popular.

The second is more complicated because if R is around the SS normal retirement age you could factor in SS, and because you need to think about savings and investment returns between now and R. I don't think anyone here would be comfortable with a rule-of-the-thumb for that.

 

[Rich_by_the_Bay]

Bamboo, there are a lot of individual personal factors that determine the best settings for you. You have plenty of money, but the highways are littered with investors who lost it all -- your close call reinforced that for you, I am sure.

Read the archives here. Figure out how much you need to live happily on, including taxes and debts. Multiply that by 20 to 25, and that's a rough target. But so many factors come in to play from that point that personal factors almost always require exceptions.

Nice going on your nest egg.

 

[travelover]

...............
travel - if not a specific rule of thumb for my situation, how about in general? Not to sound pompous, but if we have $5 mill in assets, would that be enough? $4 mil?

In general, I can safely say that $4 million is enough

I remember in Barrons years ago there was a winner of something like $300 million. They went on for pages about how to best invest it. And the last paragraph said something like - just put it in treasuries and kick back! That large amount of money would spin off more than enough for most any reasonable middle class person.

I agree, most here could retire on $300 million.

 

[Meadbh]

Not to sound pompous, but if we have $5 mill in assets, would that be enough? $4 mil?

Enough for what? To run five homes and a yacht, like the FIRED entrepreneur I recently met on a plane (economy class)? Or to live frugally?

You really have to define your needs and wants first. Next you need to estimate how long you will need an income. Only then can you do the math to get an estimate of what principal and interest rate you need.

 

[LARS]

How much is enough you ask. Easy, 50% MORE than you have.

The only way to answer that question is to understand your "expectations" for a life in retirement... and compare that to your resources.

 

[scrinch]

If you are willing to die penniless when you turn 100, and you invest your wad conservatively at 4%, and you don't worry about inflation, then your $4M will allow you to spend $15K/mo and your $5M will allow you to spend $19K/mo. But if you worry about inflation, health care, kids' college, and getting a better return than 4%, then you had better work out the details yourself.

But going out on a limb...$300M would probably do.

 

[MasterBlaster]

I remember years ago the WSJ ran an article about different levels of 'rich' - beer & Pretzels, wine and steak, etc.

Here's the Article, suggesting that you need much more than to just be FI to be rich by their definition...

Their 2008 definition of "beer and Pretzels" rich is $25M. The top rung "Champagne and Caviar" rich starts at $500M

Are You Rich? How Much of a Nest Egg Do You Need to Join the True Elite - Barrons.com

 

[FIREd]

Even someone with $300M might have to watch their spending. The G V alone will set you back $60M+ and the carrying costs are upward of $1M a year...

 

[LARS]

Here's the Article, suggesting that you need much more than to just be FI to be rich by their definition...

Their 2008 definition of "beer and Pretzels" rich is $25M. The top rung "Champagne and Caviar" rich starts at $500M

Are You Rich? How Much of a Nest Egg Do You Need to Join the True Elite - Barrons.com

Gimme a break. Beer and pretzel rich is $25 million. That just shows the person writing the story is still clearly working for a living. Total crap.

 

[MasterBlaster]

Gimme a break. Beer and pretzel rich is $25 million. That just shows the person writing the story is still clearly working for a living. Total crap.

I think you missed the point of the article. Did you actually read it ?

The article wasn't trying to decide how much nestegg you need to live on beer and pretzels. The article was trying to distinguish between levels of rich. The "beer and pretzels" lable was just one of the clever little names they gave to the bottom rung on the rich scale that they defined.

 

[MichaelB]

Yes, it takes more than $10 million to be seen as rich these days. It takes more like $25 million. Not only is that the minimum for the red-carpet treatment at a growing number of banks, it is also, in the view of many experts, the sum needed for a truly cushy retirement, one free of financial worry.
"With $25 million, you can fund college and grad school for the kids, take care of your own parents, travel, start a backyard vineyard and, well, "do whatever you want," says Maria Elena Lagomasino, of GenSpring, which helps some 600 wealthy families manage their money.

Well, I don't meet their definition of rich ($10M) - not even close - but I paid for college for 3 children, bought a house for my folks and traveled a bunch. No vineyard, though I am thinking of brewing some beer. Actually, I can't think of much I would do with $25M that I'm not doing now. Probably just stick it in the portfolio.

Bamboo, you already have all the advice you need right here. Figure out what you need, then what you want, then build a plan. Sounds like you're doing all right so far.

 

[Jay_Gatsby]

Many folks here have asked the question "how much is enough," but that wasn't what they truly wanted to know. They had to ask a deeper, more fundamental question. Why did they want to loosen the purse strings after living a frugal life for 20+ years? If you have a deferred dream, such as seeing the 7 wonders of the world, sailing the South Pacific, etc... focus on what it will take to achieve that dream, instead of on the more nebulous idea of having "enough." If you focus on the latter, the answer will be that you'll never have enough, and you'll defer your dream once more.

 

[Texas Proud]

Well, I don't meet their definition of rich ($10M) - not even close - but I paid for college for 3 children, bought a house for my folks and traveled a bunch. No vineyard, though I am thinking of brewing some beer. Actually, I can't think of much I would do with $25M that I'm not doing now. Probably just stick it in the portfolio.

Bamboo, you already have all the advice you need right here. Figure out what you need, then what you want, then build a plan. Sounds like you're doing all right so far.

You fit into this category in the article...


While $1 million was once a sign that you had arrived, plenty of people with up to $10 million nowadays don't think of themselves as rich. Many actually consider themselves "middle class," according to survey work by the authors of a new book, The Middle-Class Millionaire. That's increasingly true as the $10 million crowd finds a new intruder in its gated communities: the weakening economy

 

[Texas Proud]

For me... I am hoping to get to $2 to $2.5 mill... but even then I can see my wife wanting to travel more and we might need $3mill.... but we are not even close to that and I do not want to work that long to get there...

If I had $4 or $5 mill... I would be retired...


As for margin... I have played with it in a small account... and also got creamed with the market downturn.... but only about $30K... but I had built up the account from about $6K using the margin.... currently have $2K in the account and working on trying to build it back up again...

 

[LARS]

I think you missed the point of the article. Did you actually read it ?

The article wasn't trying to decide how much nestegg you need to live on beer and pretzels. The article was trying to distinguish between levels of rich. The "beer and pretzels" lable was just one of the clever little names they gave to the bottom rung on the rich scale that they defined.

I read the article and it's nuts to suggest that $25 million is the "minimum" to be considered rich, even in the US.

 

[MasterBlaster]

Nowadays, how much do you need / should you have for certain ages?

Well to achieve the oft-maligned 80% retirement income replacement ratio the following chart works well as a general guide. Note the caveats below though.

I believe that the chart assumes you'll retire at 65 and get SS covering around 20% of your income and the draw from 12X savings at a 5% SWR brings you up to 80% of your pre-retirement income.

Others on this forum like to aim much lower than an 80% income replacement ratio and to retire way before 65. If your expectations and expenses fit into that category then adjust the savings targets as needed.

Also check out the website www.choosetosave.org and use their "ballpark estimate" calculator to see if your savings are on track to retire.

 

[MichaelB]

You fit into this category in the article...


While $1 million was once a sign that you had arrived, plenty of people with up to $10 million nowadays don't think of themselves as rich. Many actually consider themselves "middle class," according to survey work by the authors of a new book, The Middle-Class Millionaire. That's increasingly true as the $10 million crowd finds a new intruder in its gated communities: the weakening economy

Could be. I'm certainly not Rich - he's a recently semi-retired Doctor and lives in Tampa. We're well off and live below our means. FWIW.

 

[MasterBlaster]

The Answer is $7.5MM to Feel Rich

Fidelity investments has done surveys of high net worth investors for the last 3 years. From the last survey, for someone to "feel" rich you would need at least $7.5MM in investable assets.

Below that you feel well off but not rich.

MILLIONAIRES TAKE BOLD ACTION TO REASSESS AND REBUILD THEIR WEALTH, ACCORDING TO FIDELITY STUDY | With Video

 

[MichaelB]

Fidelity investments has done surveys of high net worth investors for the last 3 years. From the last survey, for someone to "feel" rich you would need at least $7.5MM in investable assets.

Below that you feel well off but not rich.

That's probably why I feel well off then. I feel much better now that I know why.

 

[Sam]

Not to sound pompous, but if we have $5 mill in assets, would that be enough? $4 mil?

Not to sound sarcastic, but if you have that much but are still asking this question, then I doubt that would be enough for you.

 

[chinaco]

Sorry up front for this comment... but I gotta say it: I am sure whoever you inherited the money from would be turning flips if they knew you pissed away that money playing the horses!


You left out a number of important details that may factor into FIRE. Assuming you want to FIRE.

IMO - (Assuming you want to Fire)... If you use traditional approaches and act conservatively with investments (MPT and Asset Allocation), you should be able to replace your income with your current assets. But those other details need to be identified and analyzed.

Read up on prior posts for FIRE planning and read some books.

The fact that you were doing the margin thing says something about your investment decisions and probably lack of understanding in the risk/reward area. Educate yourself further to better understand risk/reward... which also means some soul searching! Invest in things you understand. Balance risk and reward.


What is your goal?? Do you want bigger numbers on an account statement to admire or a reliable income stream to maintain a certain lifestyle for the rest of your life?