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How to Retire on $1M
Old 05-25-2012, 11:37 AM   #1
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How to Retire on $1M

I love the way that they manipulate the various income sources in this piece from Yahoo. My feeling is that if you have to do all of this manipulation in order to get to your "number," you are probably a bit short already. Should a person with only $70k or $150k in their IRA really be thinking about retiring?

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So how do you get $1 million? You pull together a portfolio of resources that altogether make you a millionaire. Here's how to retire with $1 million:
Social Security. The average monthly Social Security benefit at the beginning of 2012 was $1,230 a month, or $14,760 a year. At a 4 percent return, that's like having $370,000 in your personal portfolio. Right there, that's more than a third of what you need to retire.
A pension. Do you have a pension? If you're entitled to a $20,000-a-year pension, that's the equivalent of having another half million dollars in your portfolio.
An IRA. The average person with an IRA account currently carries a balance of about $70,000. But that includes a lot of young people. The average balance for those nearing retirement is closer to $150,000.
So if you add together a typical Social Security benefit, a modest pension, and an average IRA benefit, you come up with a total of a little over $1 million.
Only you can decide if $1 million--or $40,000 a year--is enough for you to live on in retirement. It probably is, if you live in a low-cost region of the country, no longer have any dependents, and if you're a frugal person with your own home and a paid-off mortgage.
How to Retire with $1 Million - Yahoo! Finance
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Old 05-25-2012, 12:10 PM   #2
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This is another one of those feel-good articles, IMO, that make people feel better about not having much in personal savings. Is your net worth almost zero? Never fear -- if you have SS and a pension coming, you're almost a millionaire!

There's certainly some truth that you don't need *as much* in personal savings with SS and a pension coming (especially if the pension has a COLA), but I've never been a fan of including them in one's net worth calculations.

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Should a person with only $70k or $150k in their IRA really be thinking about retiring?
Sure, if they have retiree health insurance (particularly if under 65) as well as a COLA'd pension and SS which significantly exceed their lifestyle needs in retirement. I know plenty of folks who have very little in savings or net worth but live pretty well because SS + pension > their annual expenses.
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Old 05-25-2012, 12:18 PM   #3
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Wait, who needs $150K in their IRA when one can unlock the equity in one's largest asset - a home - with a reverse mortgage?
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Old 05-25-2012, 12:20 PM   #4
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I know plenty of folks who have very little in savings or net worth but live pretty well because SS + pension > their annual expenses.
I don't know of any, so I guess that averages out OK somehow.
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Old 05-25-2012, 12:30 PM   #5
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Pretty low percentage (20%?)of today's workers will have a defined benefit pension so it a bit of target for most.

The comments that follow the article on Yahoo are what I find comical and maddening at the same time. It is filled with people who are convinced it is impossible to retire, let alone "retire early" like those on this site aspire to do. I tried posting comments on the original Yahoo article about how it really is not that hard to save a $1 million with some financial discipline and a plan but it is pointless to try convince them. So glan we have a forum like this one to share intelligent advice and opinions rather than deal with the uneducated masses (uneducated when it comes to personal finance) like those on a more open board like Yahoo Finance.
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Old 05-25-2012, 12:32 PM   #6
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Should a person with only $70k or $150k in their IRA really be thinking about retiring?
If their expenses are low enough then yea, why not? If they're 65 or older then they get SS and medicare so a lot of people would be happy with that amount of money. If the alternative is to continue working then i'd gladly retire with $70K or $150K in my IRA. I know plenty of people who have retired on less.
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Old 05-25-2012, 12:47 PM   #7
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Which would you rather have, an $80,000 COLA government pension, or $1mm?

"Super entitlements" are better than money, since they cannot be inflated away and they cannot be subjected to laughable interest rates far below actual inflation for years running.

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Old 05-25-2012, 01:02 PM   #8
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And if you are a "couple", you can be multi-millionaires! (I feel good! )...
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Old 05-25-2012, 01:03 PM   #9
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I don't know of any, so I guess that averages out OK somehow.
There are a lot of "boomer" retired union workers who are living very well on just their pensions and social security. People who worked in the UAW, Teamsters, Steel Workers Union, etc....are able to retire with very little of their own money set aside in 401k's or other accounts.

For example father is drawing pensions from two different unions who he worked for over the years and my mother is drawing one from being a subtitute teacher. When you add those up, plus each of their Social Security checks, they are cash flow positive on a monthly basis. They have not had to tap the IRA's or other investments. They are still saving money every month even though they are not working. Together they never made more than $65K in their life but don't really have any financial concerns at all.
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Old 05-25-2012, 01:13 PM   #10
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I know plenty of folks who have very little in savings or net worth but live pretty well because SS + pension > their annual expenses.
Yeah me too. Mostly dink couples who retired either from public sector employment or from the MegaCorp I toiled at. But DBP pensions are going extinct and it seems that a higher and higher percentage of folks will require some significant net worth in order to pull the plug on working.
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Old 05-25-2012, 01:44 PM   #11
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So, are these some of the 'millionaires' who our government says are not paying their fair share? They'd better be careful...

A retirement income of $40K makes you a millionaire, eh? More doublespeak. Amazing!
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Old 05-25-2012, 01:55 PM   #12
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I sometimes feel like people don't really understand that some people -- who are not "poor" -- just live a modest lifestyle which is not expensive. My mom lives a very modest lifestyle. Her house was paid off 50 years ago. She doesn't have cable TV or internet. Her utility bills are very low. Her property taxes are very low. She drives only short distances. Even when she was "young" in her 60s she didn't travel much and when she did wouldn't spend a lot of money. Now many of us want to spend more in retirement but I know plenty of people in her generation who actually have IRAs and don't spend any of the money because their base expenses are so low. My mom doesn't think she has an awful life by the way, it is just that she doesn't have a desire to buy a lot of "stuff".
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Old 05-25-2012, 02:06 PM   #13
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I sometimes feel like people don't really understand that some people -- who are not "poor" -- just live a modest lifestyle which is not expensive........ My mom doesn't think she has an awful life by the way, it is just that she doesn't have a desire to buy a lot of "stuff".
We don't have a desire to buy a lot of "stuff" either, but darn, enjoying live entertainment and sporting events, travel, a couple pricey hobbies and mostly being a part of the "sandwich generation" can combine to run up a considerable tab, even without accumulating "stuff." A quick glance at our modest home in a blue collar neighborhood, older cars and lack of amenities around the place would probably lead the casual observer to think our budget is half of what it is.

But I understand what you're saying. My dad had similar habits to your mom with the exception that as a widower he enjoyed dining out rather than cooking and eating alone.
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Old 05-25-2012, 02:09 PM   #14
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I don't know of any, so I guess that averages out OK somehow.
My father was banking over half of his pension & SS for nearly a quarter century. He lived a very simple life and didn't need a lot of money for it.

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A retirement income of $40K makes you a millionaire, eh? More doublespeak. Amazing!
Well, that was back when a million was considered to be real money...
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Old 05-25-2012, 02:17 PM   #15
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Interesting thought. Most people don't have complete legs for retirement stool. So the theory will not hold.
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Old 05-25-2012, 02:22 PM   #16
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I think there are a lot of thousandaires who are going to be shocked.
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Old 05-25-2012, 02:34 PM   #17
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Which would you rather have, an $80,000 COLA government pension, or $1mm?

"Super entitlements" are better than money, since they cannot be inflated away and they cannot be subjected to laughable interest rates far below actual inflation for years running.

Ha
My view as well. People I know with both pensions and portfolios are still afraid of losing the investments but do not fear pensions ending. It's easier to spend pension money.
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Old 05-25-2012, 03:06 PM   #18
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I have a 83 year old neighbor who retired with a utility company union pension and he has been retired for 25 years. He said he didn't begin to even save money until he retired and has more $ now than he ever had in his life.
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Old 05-25-2012, 03:08 PM   #19
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According to the BLS, the mean spending for single people in the 65-74 age group is almost $28k per year. That includes about $1,300 for mortgage payments.

So a 65 year-old with $15k from SS and a $20k non-COLA'd pension, who owns an house and is out of debt, should be able to save some of that pension to offset future inflation and still live like the average person in that age group.

ftp://ftp.bls.gov/pub/special.reques...byage/aone.TXT
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Old 05-25-2012, 03:09 PM   #20
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Things like a pension and SS are phantom assets that contribute to our income, but don't show up as part of our net worth. Yet, without them, many of us would see our networth drop quickly. They are real in the sense that they affect our decisions, yet they are unreal in the sense that we can't get our hands on them. Sounds like another problem for those who understand quantum physics.

"Everything we call real is made of things that cannot be regarded as real." - Niels Bohr
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