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Old 06-09-2013, 01:59 PM   #21
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In most cases, I believe that without a pension a person needs a $1M+ portfolio AND Social Security to sustain a middle class standard of living.

Several friends and I have a saying: I am a typical, everyday, middle class multi-millionaire.
A person or a couple?

The median earnings for a full-time, year-round worker in the US is around $40k. I would consider that "middle class" by definition.

The SS PIA on that income is about $16k. It may take $32k in retirement to maintain a lifestyle. That means $16k from investments. Most people here think a 3% withdrawal rate is sustainable. So a portfolio of less than $600k should be enough.
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Old 06-09-2013, 02:01 PM   #22
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The main alternative to working until you drop is to adjust your lifestyle to the money you have available.

If your house is paid for, you either live in or move to a small town where home prices are cheaper, cook from scratch, and have a low energy usage household, limit buying disposable / single use items and have an energy efficient car how much money do you really need to have all of your basic needs met? If you follow a zero waste or green lifestyle you can live quite well without needing a huge retirement income.
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Old 06-09-2013, 02:19 PM   #23
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....Maybe he annuitized?
That could be. My former employer's (non-contributory) DC plan included an annuitization option (and a quite favorable one at that).

I was unaware of it until after I retired. i had planned to convert both my 401k and this DC plan to my tIRA but when I became aware of the attractive annuitization option I decided to leave the DC plan with the employer even though I'm not so keen on the investment options available to me through the plan.
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Old 06-09-2013, 04:42 PM   #24
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It should be quite easy to live on SS and the income from a million bucks, unless a person feels obliged to spend more than most people, while enjoying a retired lifestyle and not working at all.

The most recent median U.S. household income is $50,502. If SS is $20K, then just $30,502 needs to come from the portfolio. This is less than 3.1%. I can't see this person running out of money any time soon.
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Old 06-09-2013, 06:10 PM   #25
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It should be quite easy to live on SS and the income from a million bucks, unless a person feels obliged to spend more than most people, while enjoying a retired lifestyle and not working at all.

The most recent median U.S. household income is $50,502. If SS is $20K, then just $30,502 needs to come from the portfolio. This is less than 3.1%. I can't see this person running out of money any time soon.
In Tom Wolfe's book, the Bonfire of the Vanities, there is a great scene where the main character, a bond trader, explains that despite making a couple of million a year (the novel is 25 years old) he is just barely keeping his head above a water.

The maid, butler, chauffeur, nanny, caterer, yoga instructor, hair stylist, interior designer all need raises. The 2nd Mercedes is getting old, his wife has found a new clothes designer who she just must have her latest design, and the head master at the school is suggesting a special tutor for the kids. Not to mention the mortgage, summer house in the Hamptons, and the rental of the Chateau in France.

Eventhough NY Times reporters don't make great money, they seem to believe that the rest of the world lives this way.

Making it on $50K--- inconceivable
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Old 06-09-2013, 07:11 PM   #26
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Eventhough NY Times reporters don't make great money, they seem to believe that the rest of the world lives this way.

Making it on $50K--- inconceivable
50K puts you in the top .28% in income world wide according to the Global Rich List -

Global Rich List

I kind of tuned out any financial advice from the New York Time after the guy who was an economics reporter wrote the book about his financial meltdown -

"The only problem was money. Having separated from my wife of 21 years, who had physical custody of our sons, I was handing over $4,000 a month in alimony and child-support payments. That left me with take-home pay of $2,777, barely enough to make ends meet in a one-bedroom rental apartment. Patty had yet to even look for a job. At any other time in history, the idea of someone like me borrowing more than $400,000 would have seemed insane."

http://www.nytimes.com/2009/05/17/ma...wanted=all&_r=

Now I really wonder who is writing any of these types of financial advice articles in major publications and what their qualifications are.
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Old 06-09-2013, 07:16 PM   #27
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50K puts you in the top .28% in income world wide according to the Global Rich List -
And that should help immensely living in Manhattan or Oyster Bay.

What a fantastic non sequiter.

Ha
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Old 06-09-2013, 07:34 PM   #28
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And that should help immensely living in Manhattan or Oyster Bay.

What a fantastic non sequiter.

Ha
Well that is part of the problem. In size, Oyster Bay and Manhattan combined are .0005% of the US (obviously population percentage is higher).

Now if the NY Times was a regional paper no problem, but it is allegedly the paper of record. I did notice that the, mostly critical, comments on the article came from the rest of the country. So on national issues the reporters and editors might want to keep the remaining 99.9995% of the country in mind.
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Old 06-09-2013, 07:53 PM   #29
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And that should help immensely living in Manhattan or Oyster Bay.

What a fantastic non sequiter.

Ha
If I was worried about my retirement funds running out, personally I would move some place less expensive than Manhattan. There are many parts of the U.S. and especially the world where Social Security and $1M in iinvestments can provide quite a nice retirement.

Location is a discretionary lifestyle choice for most people with $1M in investable assets.
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Old 06-10-2013, 12:45 AM   #30
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Well that is part of the problem. In size, Oyster Bay and Manhattan combined are .0005% of the US (obviously population percentage is higher).

Now if the NY Times was a regional paper no problem, but it is allegedly the paper of record. I did notice that the, mostly critical, comments on the article came from the rest of the country. So on national issues the reporters and editors might want to keep the remaining 99.9995% of the country in mind.
You make a very good point. But for the most part we have had good jobs, lived in fairly nice homes in nice communities, and we might well want to continue that lifestyle in retirement. Judging by all the European travel, nice remodels on already very nice homes, plenty members seem to live very well. And of course, SS can be fairly large, so the $35,000 or so that may be fairly safely withdrawn from a $1mm account, added to 2 good SS payments, provided these SS payments stay good should make a reasonable retirement in very many places.

Yet, for a couple in many places, this will not be very luxe, and depending on what happens, it may not even feel very safely sustainable.

My Grandma often said that a lot of crap can be cured by money. Not all of it, but a lot of it.

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If I was worried about my retirement funds running out, personally I would move some place less expensive than Manhattan. There are many parts of the U.S. and especially the world where Social Security and $1M in iinvestments can provide quite a nice retirement.

Location is a discretionary lifestyle choice for most people with $1M in investable assets.
You are certainly correct. I don't live in either of these places, but I have seen enough of them that I know they beat hell out of most places. I couldn't afford to live there, besides I am happy where I am. But only some of us got pushed out before we could afford the lifestyle of our choice (within reason of course). These people need to deal with their reality, and most do.

And some of use seem to have no strong feelings about where they are, or who they leave behind when they move to cheap somewhere in US or world. But I'd guess more of us do have strong feelings about place and people, and for many of us we may still have the opportunity to make our desired outcomes more likely, by working a bit longer at our relatively high paying jobs. So to me, it is better to seek funding such that our desired lifestyle is not one that would lead us to be worried about our retirement funds running out.

Ha
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Old 06-10-2013, 07:09 AM   #31
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"Still, the expectation of working longer seems to be the trend. An annual survey for the Employee Benefit Research Institute found that in 1991, only 11 percent of workers expected to retire after age 65, while this year, 36 percent said they would retire after 65 ó and 7 percent said they didnít plan to retire at all."

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I didn't read thru all of the above comments but right off the bat I question the validity of the above statement since back in 1991 a lot of people that could have been in the survey qualified for full SS benefits at age 65, now most if not all people not yet drawing SS do not qualify for full SS benefits until age 66 or later. I think the majority of not yet retired people think of retirement in terms of the age they reach full SS benefit age, thus now many people think in terms of expected retirement after age 65. I think the survey is stating the obvious.
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Old 06-10-2013, 09:35 AM   #32
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In Tom Wolfe's book, the Bonfire of the Vanities, there is a great scene where the main character, a bond trader, explains that despite making a couple of million a year (the novel is 25 years old) he is just barely keeping his head above a water.

The maid, butler, chauffeur, nanny, caterer, yoga instructor, hair stylist, interior designer all need raises. The 2nd Mercedes is getting old, his wife has found a new clothes designer who she just must have her latest design, and the head master at the school is suggesting a special tutor for the kids. Not to mention the mortgage, summer house in the Hamptons, and the rental of the Chateau in France.

Eventhough NY Times reporters don't make great money, they seem to believe that the rest of the world lives this way.

Making it on $50K--- inconceivable
Interesting story by a law professor who got access to F. Scott Fitzgerald's income tax returns:
The American Scholar: Living on $500,000 a Year - William J. Quirk

... for most of his working life, he earned about $24,000 a year, which put him in the top 1 percent of those filing returns. Despite his high income, he was not able to save or, as he said, "amass capital." When he died in December 1940, his estate was solvent but modest-- around $35,000 (about 1M today)

Lots of interesting details about his money in and out over time. A couple of culprits seem familiar to the modern day (high living and medical expenses), but income taxes worked a bit differently back then. His nest egg at the time of his death would not have lasted long in retirement (or in his case pursuing his passion).
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Old 06-10-2013, 10:39 AM   #33
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It should be quite easy to live on SS and the income from a million bucks, unless a person feels obliged to spend more than most people, while enjoying a retired lifestyle and not working at all.

The most recent median U.S. household income is $50,502. If SS is $20K, then just $30,502 needs to come from the portfolio. This is less than 3.1%. I can't see this person running out of money any time soon.
I certainly hope so. Our combined SS will be more but it is balanced out by our less than $1MM portfolio.

Speaking of 'our combined SS', W2R, I hope you are aware that a divorced or widowed person who was married over 10 years can receive benefits based on the former spouse's record. Does that do you any good?
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Old 06-10-2013, 10:48 AM   #34
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Speaking of 'our combined SS', W2R, I hope you are aware that a divorced or widowed person who was married over 10 years can receive benefits based on the former spouse's record. Does that do you any good?
Yes, hopefully it will do me some good. Half the benefits, anyway, but every little bit helps. It will work out best if I wait until I am 66 (my full retirement age), so I can take 50% of his benefits from 66 to 70, then go back to 100% of my own benefits at 70. Here's the link that someone gave me in that thread, that I believe substantiates that this can be done.

Retirement Planner: Benefits For You As A Spouse

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If you have reached full retirement age, and you are:
  • eligible for a spouse's benefit and your own retirement benefit, you may choose to receive only spouse's benefits.
  • eligible for an ex-spouse's benefit and your own retirement, you may choose to receive only the ex-spouse's benefit. Your ex-spouse needs to be 62 but he or she does not have to have filed for benefits.
If you do that, you can delay applying for your own retirement benefits until a later date to take advantage of delayed retirement credits.
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Old 06-10-2013, 11:09 AM   #35
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A person or a couple?

The median earnings for a full-time, year-round worker in the US is around $40k. I would consider that "middle class" by definition.

The SS PIA on that income is about $16k. It may take $32k in retirement to maintain a lifestyle. That means $16k from investments. Most people here think a 3% withdrawal rate is sustainable. So a portfolio of less than $600k should be enough.
While I understand that $40K is statistically average, it's not necessarily fully funding a middle class standard of living. There are low cost areas and certain situations (health insurance paid by former employer) that a person could sustain a middle class lifestyle on $32K, bit not many.

For example, my essentials (property tax, property insurance, utilities, food, medical and dental insurance, auto insurance, auto maintenance and repairs, gas) equal almost $28k. That's just room and board, transportation and insurance. House and car are paid in full. I would not be able to live a relatively normal life on $32k per year.
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Old 06-10-2013, 12:16 PM   #36
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For example, my essentials (property tax, property insurance, utilities, food, medical and dental insurance, auto insurance, auto maintenance and repairs, gas) equal almost $28k. That's just room and board, transportation and insurance. House and car are paid in full. I would not be able to live a relatively normal life on $32k per year.
What I have found with my mother (and DH found with his parents) is that in very old age much of that goes down. She has a cap on property tax due to age, she has Medicare which does have premiums but aren't that great. She still drives (she is 89) but very little and so her car is very old but still very low mileage. She doesn't like to go out all that much. Occasionally goes out to dinner with someone. Goes shopping when necessary. Talks on the phone. Watches TV, reads the paper, does stuff around her house. Her expenses are just not that high.
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Old 06-10-2013, 12:23 PM   #37
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You make a very good point. But for the most part we have had good jobs, lived in fairly nice homes in nice communities, and we might well want to continue that lifestyle in retirement. Judging by all the European travel, nice remodels on already very nice homes, plenty members seem to live very well. And of course, SS can be fairly large, so the $35,000 or so that may be fairly safely withdrawn from a $1mm account, added to 2 good SS payments, provided these SS payments stay good should make a reasonable retirement in very many places.

Yet, for a couple in many places, this will not be very luxe, and depending on what happens, it may not even feel very safely sustainable
I don't disagree with this. However, the NYT article wasn't talking about retiring with a million dollars in Manhattan or even the greater NYC area. Rather, the article was written more generally as if it applied everywhere.

The notion that - as a general rule - people with SS and a million dollars need to work until 70 because otherwise they can't afford to retire is ludicrous. This may indeed be a choice that some people who live in high cost areas will choose to make. However, for the vast majority of people who don't like in those high cost areas, it is absurd to suggest that they need to work until 70. I'm not at all saying that a million dollars is enough for everyone. Plenty of people do want more and choose to save more and that is fine. If someone really wants to have spend $120,000 a year then, yes, a million (unless you have a nice pension) won't cut it.

However, the part that the article seems to be missing (among many parts) is that for the vast majority of people they could live just fine on SS and a portfolio which would collectively allow spending of around $70k a year. The author just can't seem to fathom this and seems to assume that anyone who has $1 million would automatically be dissatisfied with retirement spending of $70k a year.
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Old 06-10-2013, 01:09 PM   #38
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Average annual expenditures in the U.S. for households 65 and older in 2011 was $39K.

http://www.bls.gov/cex/2011/Standard/sage.pdf

The NY Times article author should read The Millionaire Next Door or Your Money or Your Life for a reality checked follow up article. Many people who have acquired $1M plus nest eggs have also figured out how not to deplete it in retirement.
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Old 06-10-2013, 01:34 PM   #39
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I didn't read the article because I hoard my 10 free articles each month for things I know I want to read.

Ha
ooh! i used to do this too, then discovered you could read as many articles as you want by finding the article through google, which I guess works by bypassing some security portal. Which means when I am bored at work I can stuff myself on op ed pieces. I found you can also do this for WSJ subscriber only articles.

Please don't spread this around to much, lest it get "fixed" by them.
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Old 06-10-2013, 02:08 PM   #40
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Why on earth is the article solely using as examples ridiculous retirement allocations - all bonds or 80% equities?

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