Planned Age at Retirement

[ronocnikral]

At 80 replies, the median looks like 55 - exactly the same as the "When did you retire?" poll.

That surprises me. I expected the planners to have a lower expected age than the actuals.

what's interesting (and i think i did this correctly as the polls were written in the opposite directions and it's the end of the day) is the median age. while i don't know exactly what it is...the "planning" poll has a median age higher or near the average. while the "actual" poll's median is below the average.

 

[chinaco]

55 is not a surprising age for ER. If companies offer ER... 55 seem to be the earliest age one can retire with certain benefits. 55 is also the age where 401ks can be accessed without penalty (if one retires at 55).

 

[Milton]

48 if all goes well. However, as an early poster mentioned, with the lack of bull markets in the near future it may get alot tougher.

If one is currently in the accumulation stage, I would think that the lack of a bull market would accelerate the path to ER.

Cheaper stock prices = a higher dividend yield for your investment dollar.

 

[FUEGO]

If one is currently in the accumulation stage, I would think that the lack of a bull market would accelerate the path to ER.

Cheaper stock prices = a higher dividend yield for your investment dollar.

That is my thinking. If I had my target portfolio value and a 3-3.5% dividend yield, I'd be all over FIRE and feeling good about it. To reach those yields with a well diversified portfolio would require either a stagnant to down market (but with slowly increasing dividends), or a complete change in the dividend environment where companies pay out a much higher share of their earnings.

How I would love just another 5-7 years of flat to slightly down markets...

 

[militaryman]

As soon as I am eligible -- which is 56 and 8 months (FERS)

 

[ziggy29]

If one is currently in the accumulation stage, I would think that the lack of a bull market would accelerate the path to ER.

Depends on whether you are "accumulating" for two more years or for twenty more years.

If I'm only going to accumulate for a couple more years (i.e. I plan to retire in two years) I'd rather see my current holdings start rising more than I want to keep buying cheap stocks.

If I'm expecting to be accumulating for 20 more years, I'd rather that equities stay cheap for a while.

 

[martyb]

55 is not a surprising age for ER. If companies offer ER... 55 seem to be the earliest age one can retire with certain benefits. 55 is also the age where 401ks can be accessed without penalty (if one retires at 55).

Is this correct? I thought standard 401k's still required you to wait till 59 1/2 to avoid the tax penalty. I know than my federal employee TSP does have the age 55 provision. I hope it's the same for my wife's 401k....anybody got the right answer on this? If it's true, then that changes our situation some.

 

[martyb]

Shoulda looked it up...

Never mind...I found the answer. I got this directly from the IRS.gov website:



Tax on early distributions. If a distribution is made to a participant before he or she reaches age 59½, the participant may be liable for a 10% additional tax on the distribution. This tax applies to the amount received that the employee must include in income.

Exceptions. The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances:

• Made to a beneficiary (or to the estate of the participant) on or after the death of the participant.
• Made because the participant has a qualifying disability.
• Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the participant or the joint lives or life expectancies of the participant and his or her designated beneficiary. (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period.)
• Made to a participant after separation from service if the separation occurred during or after the calendar year in which the participant reached age 55.
• Made to an alternate payee under a qualified domestic relations order (QDRO).
• Made to a participant for medical care up to the amount allowable as a medical expense deduction (determined without regard to whether the participant itemizes deductions).
• Timely made to reduce excess contributions.
• Timely made to reduce excess employee or matching employer contributions.
• Timely made to reduce excess elective deferrals.
• Made because of an IRS levy on the plan., or
• Made on account of certain disasters for which IRS relief has been granted.

So..that's a very good thing! It means she can plan to retire at 55 and take her 401k money without the additional penalty. She's 3 yrs older than I am, so will be working that 3 years beyond my retirement. We'll be putting the IRS max into her 401k for those 3 years, and then she can retire, minus the penalty. All that's left is to try & decide what form of withdrawal to use.

 

[Milton]

If I'm only going to accumulate for a couple more years (i.e. I plan to retire in two years) I'd rather see my current holdings start rising more than I want to keep buying cheap stocks.

Why? The market price is essentially irrelevant to retirees. All that matters are the dividends (and the earnings that support them).

 

[ziggy29]

Why? The market price is essentially irrelevant to retirees. All that matters are the dividends (and the earnings that support them).

This assumes that retirees never need to sell any of their stocks for income, that all of their portfolio income comes from dividends and bond interest.

 

[Milton]

Indeed, that is my assumption.

 

[FUEGO]

Crap, the market goes up a few percent, Dow closes over 10,000, soon all the pundits will be talking about 2010 being the best year for stocks in decades. I'm still trying to buy stuff cheap, but the market apparently didn't get the memo.

 

[DblDoc]

Indeed, that is my assumption.

But many here are in the Total Return camp (https://institutional.vanguard.com/iip/pdf/WP_TotalRet.pdf) in which case a rising market as we approach retirement is good as our portfolio increases in value and we can rebalance that increase into bonds.

DD

 

[DblDoc]

Crap, the market goes up a few percent, Dow closes over 10,000, soon all the pundits will be talking about 2010 being the best year for stocks in decades. I'm still trying to buy stuff cheap, but the market apparently didn't get the memo.

Nor mine. Oh well off to Japan for 10 days to try and stimulate their economy .

DD

 

[Milton]

Thanks for the link.

I will read the article with interest, and if I have any comments will then post them on this thread.

 

[Milton]

I took a look at the article. It may be helpful to Americans, but I don't think that it has much, if any, application to Canadians.

Specifically, the article suggests that "the tax rate on qualified dividends is now equal to the tax rate on net long-term capital gains". That is not generally correct in Canada, where the marginal tax rate for dividends eligible for the enhanced dividend tax credit is almost always lower than the marginal tax rate for capital gains.

 

[DblDoc]

I took a look at the article. It may be helpful to Americans, but I don't think that it has much, if any, application to Canadians.

Specifically, the article suggests that "the tax rate on qualified dividends is now equal to the tax rate on net long-term capital gains". That is not generally correct in Canada, where the marginal tax rate for dividends eligible for the enhanced dividend tax credit is almost always lower than the marginal tax rate for capital gains.

Sorry. Didn't realize you were a fellow Canuck. All my eggs are in a US basket...

Tax treatment could definitely affect favouring one strategy over another, still the issues of increasing risk when chasing high yield bonds and high dividend paying stocks still apply.

DD