Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 02-23-2013, 08:27 AM   #1
Thinks s/he gets paid by the post
obgyn65's Avatar
 
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
"Take a couple, both age 60, with a combined salary of $100,000 and a $500,000 nest egg. If they saved 15% of their annual income until age 62 and then retired—, the cliff-diver approach—, their retirement income from savings and Social Security would be $52,000 per year, and their cumulative total income from age 60 through 69 (net of retirement-plan contributions) would be $586,000 pretax, assuming various investment, inflation and withdrawal rates.

If instead they saved 15% from age 60 through 69 and retired at age 70—, worker bees— they'd have $96,000 a year in retirement income, plus total income in their 60s of $850,000.

And what if they stopped saving at age 60 and retired at 70— retirees in training? They'd have $88,000 a year in retirement income— $8,000 less than the worker bees— but $1 million in total income through age 69 because they stopped making contributions to a (401)k— $150,000 more than the worker bees and nearly twice as much as the cliff divers."

How to Get to Retirement? Practice! - WSJ.com

The maths make sense, but what is missing, in my view, is the life expectancy factor.
__________________

__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
obgyn65 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-23-2013, 08:45 AM   #2
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
I'm not sure I understand the point the WSJ is trying to make. If you delay SS until 70, you get a large income bump? or if you don't contribute to 401K you can use that money to pay your mortgage/other expenses instead?
__________________

__________________
photoguy is offline   Reply With Quote
Old 02-23-2013, 08:54 AM   #3
Thinks s/he gets paid by the post
 
Join Date: Feb 2011
Posts: 1,629
This article didn't make much sense to me either. However the author words it, the 62 yo "cliff diver" has enjoyed 8 more yrs of retirement vs the "retiree in training". Just a combo of OMY Syndrome (x8!!) + higher SS payments from w@rking 'til 70.
__________________
ERhoosier is offline   Reply With Quote
Old 02-23-2013, 09:18 AM   #4
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
The article starts out by stating that more than half of us won't have enough money to maintain our lifestyles in retirement. It adds that +/- 33% of 65-69 year olds are actively working/looking for work (and 62% of 45-60 year olds plan to delay retirement). It throws in a little later, how we've lost value in our homes, depleted our investments, etc. (doom and gloom).

Then it uses a gainfully employed couple earning $100k annually (about 50% above the average US household income), with $500k in savings and plans out their retirement scenarios. They suggest they stop saving for retirement, but work until 70 and practice retirement with the "extra money" from not saving.

Quite the retirement planning article - if you ask me..
__________________
fritz is offline   Reply With Quote
Old 02-23-2013, 09:30 AM   #5
Recycles dryer sheets
Stanley's Avatar
 
Join Date: Jan 2013
Posts: 194
Quote:
Originally Posted by fritz View Post
The article starts out by stating that more than half of us won't have enough money to maintain our lifestyles in retirement. It adds that +/- 33% of 65-69 year olds are actively working/looking for work (and 62% of 45-60 year olds plan to delay retirement). It throws in a little later, how we've lost value in our homes, depleted our investments, etc. (doom and gloom).

Then it uses a gainfully employed couple earning $100k annually (about 50% above the average US household income), with $500k in savings and plans out their retirement scenarios.
Given the demographics of WSJ subscribers, a couple earning 100K annually and with a pathetic half million in savings are probably considered low income wage slaves. The poor slobs can probably only afford one, maybe two, weekend trips a year to Paris for a good dinner. Life is tough.

But, I think the point of the article is that there are alternatives to retiring early or working until 70, and that is working longer while starting to do many of the things you plan to do in retirement. My only question is "will your employer allow you time off to do these things?" That is the fly in the ointment. I could have worked part time, but at about 1/4 my previous hourly earnings and no benefits.
__________________
Stanley is offline   Reply With Quote
Old 02-23-2013, 10:04 AM   #6
Recycles dryer sheets
WestLake's Avatar
 
Join Date: Jun 2011
Posts: 239
I have 4 weeks of vacation and 2 of PTO. Most of that seems to go for errands, doctor appointments, home and car repairs et al. Not enough time!
__________________
WestLake is offline   Reply With Quote
Old 02-23-2013, 10:28 AM   #7
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by Stanley View Post
Given the demographics of WSJ subscribers, a couple earning 100K annually and with a pathetic half million in savings are probably considered low income wage slaves. The poor slobs can probably only afford one, maybe two, weekend trips a year to Paris for a good dinner. Life is tough.

But, I think the point of the article is that there are alternatives to retiring early or working until 70, and that is working longer while starting to do many of the things you plan to do in retirement. My only question is "will your employer allow you time off to do these things?" That is the fly in the ointment. I could have worked part time, but at about 1/4 my previous hourly earnings and no benefits.
We retired early (late 50's), and I considered early retirement as buying my time for personal use. Buying time isn't cheap, and it actually scales that cost to your present income/lifestyle - even if you anticipate a lower cost lifestyle in retirement. I work part-time as an consultant, but it's at my convenience. Don't see how you can really practice retirement in your 60's and try out free-time pleasures with your employer looking over your shoulder.
__________________
fritz is offline   Reply With Quote
Old 02-23-2013, 12:10 PM   #8
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,887
This is my fourth year of retirement, and I would not trade these retirement years for any amount of money.

Perhaps I would if I was starving and homeless, but I am not. I am not rich, but I have the essentials and a few extra dollars seem less precious to me than my free time.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 02-23-2013, 01:15 PM   #9
Recycles dryer sheets
 
Join Date: Dec 2010
Location: Tequesta
Posts: 279
I tried that last year. Didn't work well. I took a cut in compensation for more time off aka retiree practice time. Most of the time, work heated up right when I wanted to go play practice retirement. So I'm really quitting as of April 1 this year. Practice? We're talking about practice? Don't need no practice!
__________________
67walkon is offline   Reply With Quote
Old 02-23-2013, 03:13 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 2,056
I wonder if that article was trying to make another point, but ended up missing it? I've seen other articles that give similar scenarios, but the point they go after seems to be that the money you sock away for retirement in later years isn't as significant as the money you squirrel away earlier in your life, thanks to compounding.

I ran a couple scenarios with Firecalc. For both, I assumed I currently had $800,000, wanted $50K per year, and plotted it out to the year 2070, which is when I'll be 100. I also assumed SS of $15,000 per year starting in 2032 (age 62) and a Non-cola'd pension of $4000 per year, starting at age 65.

Well, if I work until I'm 50, sock away $25,000 per year (reasonable; if I max out my 401k and Roth, I'd actually put away a bit more), I have a 100% chance of making it.

But, if I work just two years longer, to age 52, but don't save any more towards retirement, I still have a 97.6% chance of making it. Going out at age 51 still yields a 92.9% success rate, although going out at 50 is a bit more iffy, at 88.1%

Or, if I still contribute, but cut back to $10,000 per year, I still have a 98.8% chance of making it at age 51, and a 96.4% chance of making it at age 50.


So, in the overall scheme of things, using the scenarios above, I'm almost there, regardless of whether I keep adding to my retirement or not. That money I had been putting into retirement could be used for splurging a bit in pre-retirement, without really affecting things too much.
__________________
Andre1969 is offline   Reply With Quote
Old 02-23-2013, 03:23 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,619
I thought the point was that these folks didn't gain anything by continuing to work. All those extra work years just increased their tax payments and nothing else.
__________________
LOL! is offline   Reply With Quote
Old 02-23-2013, 07:28 PM   #12
Recycles dryer sheets
nvestysly's Avatar
 
Join Date: Feb 2007
Posts: 417
Quote:
Originally Posted by photoguy View Post
I'm not sure I understand the point the WSJ is trying to make.
+1 - there is some interesting information here and it may be helpful to somebody - I hope it is helpful - but I gotta say... after 18+ months of retirement I hope I never go to work again! Earlier is definitely better than later.

However, (and maybe this is one point of the article) $500k in savings/investments may not be enough so you may need to work longer to bolster the nest egg.
__________________
Dreamin' of Streamin'
FIRE'd at 52 on 7/8/11
nvestysly is offline   Reply With Quote
Old 02-23-2013, 09:19 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jan 2011
Posts: 1,207
A while back I read an article (sorry, don't remember where or specifics). But IIRC it had an interesting approach for those who have a nest egg but not enough to retire. The suggestion was to stop 401K contributions, take the vacations etc one would want to take but keep working.
Presumably, the work income supported the lifestyle. Not contributing to 401K gave extra money without (i.e., for those 60 years old and up) having a major impact on overall nest egg. Yet, the original nest egg is preserved. I think that's what this article is echoing.
__________________
mystang52 is offline   Reply With Quote
Old 02-24-2013, 09:37 AM   #14
Recycles dryer sheets
 
Join Date: Aug 2011
Location: Atlanta
Posts: 420
Quote:
Originally Posted by W2R View Post
This is my fourth year of retirement, and I would not trade these retirement years for any amount of money. ...
+1

I hit the 1yr mark in 4 days!
__________________
SJ1_ is offline   Reply With Quote
Old 02-24-2013, 09:55 AM   #15
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
Quote:
Originally Posted by obgyn65 View Post
The maths make sense, but what is missing, in my view, is the life expectancy factor.
One thing that I found interesting was that author felt it was "better" to work ten more years instead of trying to cut expenses to live on 50K a year.
__________________
photoguy is offline   Reply With Quote
Old 02-24-2013, 10:37 AM   #16
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 609
Quote:
Originally Posted by W2R View Post
This is my fourth year of retirement, and I would not trade these retirement years for any amount of money.

Perhaps I would if I was starving and homeless, but I am not. I am not rich, but I have the essentials and a few extra dollars seem less precious to me than my free time.
You are, and have been, an inspiration
__________________
NanoSour is offline   Reply With Quote
Old 02-24-2013, 10:41 AM   #17
Full time employment: Posting here.
martyp's Avatar
 
Join Date: Sep 2010
Location: Bangkok
Posts: 963
If you want to practice for retirement then practice by LBYM. Put together a retirement plan. Figure out how much money you will have to spend for your estimated years to live and the type of lifestyle you can afford to live on that income. Then live that lifestyle. At some point you will realize you are FI and then you know you can retire.
__________________

__________________
Happy, Wild, and Free
martyp is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 10:41 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.