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The Five Stages of Retirement Planning Angst
Old 02-12-2013, 12:11 PM   #1
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The Five Stages of Retirement Planning Angst

from the NY Times:

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I HAVEN’T a clue what kind of psychiatrist Elisabeth Kübler-Ross was. But I do know she was a terrific financial planner.

Dr. Kübler-Ross, who died in 2004, is best known for identifying the five stages of grief that people go through once they understand they are dying. And those stages — denial, anger, bargaining, depression and acceptance — describe perfectly my reactions when I read recently that, according to Fidelity Investments, my wife, Alison, and I will need to save eight times our current annual income to come even close to having the kind of retirement we want.
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Old 02-12-2013, 12:47 PM   #2
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Only eight times, I wonder what average annual return and income level that number was once good for. ....if they were to look at the numbers with the lower SWRs being thrown about now they'd probably be going to that psychiatrist because of suicidal thoughts.

The final stage of accepting that you'll never get to eight times and not doing anything about is is really depressing.
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Old 02-12-2013, 12:59 PM   #3
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Sort of a "fluff" piece - with some truth thrown in. I'm sure most folks get stuck clear back at "denial" or else, as the author, move quickly to "acceptance" without sitting down to realize what that truly means. Several close friends have lived in "denial" for 30+ years of their w*rking lives. When they finally retire, they are forced to move quickly to "acceptance" (of a meager retirement - basically SS and/or PT w*rK) or else they are permanently stuck in "depression". Depressed retirees are a sad lot indeed. YMMV
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Old 02-12-2013, 01:15 PM   #4
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The eight times current income isn't their target number - it's their target savings rate to reach their number.

I have several friends who've had that ah-ha moment.... too late. They either downsized their retirement plans, or kept working much longer than they planned.
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Old 02-12-2013, 01:18 PM   #5
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The eight times current income isn't their target number - it's their target savings rate to reach their number.

I have several friends who've had that ah-ha moment.... too late. They either downsized their retirement plans, or kept working much longer than they planned.
Never mind- I was making an assumption - reading the article closer it was saying you needed 8 x current income to retire.

That seems really low. And the focus of the article is that this is unattainable and too hard to get.

Yikes.
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Old 02-12-2013, 01:46 PM   #6
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I'll pile on. Did you catch this gem:

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And there are some advantages in the fact that we are going to fall short. For one thing, I don’t have to agonize every day whether our retirement accounts closed up or down.
Hey, if you don't have any money you don't have to worry about what the DOW's doing! That's gotta be the thinnest silver lining I've ever seen.
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Old 02-12-2013, 02:22 PM   #7
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Originally Posted by rodi View Post
Never mind- I was making an assumption - reading the article closer it was saying you needed 8 x current income to retire.

That seems really low. And the focus of the article is that this is unattainable and too hard to get.

Yikes.
I kind of wondered about that "8 times" figure myself. Wondered if that assumed the other two legs of the retirement stool (SS and pension). For ER, those may be invalid assumptions. Even for full retirement age folks - especially the relatively high earners, SS may not be as big a contributor and we all know about pensions and the passenger pigeon. YMMV
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Old 02-12-2013, 02:36 PM   #8
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I object to any calculator that expresses retirement need as a function of pre-retirement income.
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Old 02-12-2013, 02:47 PM   #9
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Didn't read the article, but the 8x suggestion probably assumes you're going to retire at 70 or some other really old age Not quite the point of this website.
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Old 02-12-2013, 03:01 PM   #10
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I object to any calculator that expresses retirement need as a function of pre-retirement income.
+1
My current income has NOTHING to do with my current expenses. I am living on less than 15% of my pretax income and living well. So I see no reason why I need to use my current income to calculate my ER savings.
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Old 02-12-2013, 03:36 PM   #11
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The advice supposedly given to the writer of the article (and accepted - I think they should have stopped at denial) is based upon the idea that how much you need in retirement is based upon current income.

As I think most here would agree .... how much you need in retirement depends upon expected spending in retirement not the amount of your current income.

Another point in the article is the idea of current income. Imagine that if you made say, $100,000, on year and supposedly needed $800,000 to retire. But, imagine the next year you made $150,000 (something similar happened to my DH late in his career when his employer changed the bonus structure).... does that mean you now need $1.2 million. Or - worse - assume you lost your job and found a new job at $50,000 the next year. Do you now need $400,000?
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Old 02-12-2013, 04:04 PM   #12
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I retired with 12 times my (gross) expenses or 10 times my working income.
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Old 02-12-2013, 04:20 PM   #13
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I retired with 12 times my (gross) expenses or 10 times my working income.
My networth is 10 times my gross income, and 30 times my annual expenses. Earn as much as you can and spend a little as you can.
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Old 02-12-2013, 05:28 PM   #14
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Couldn't agree more, jon-nyc and katsmeow. Realizing that my pre-retirement income had nothing to do with what I needed for retirement (focusing on expenses rather than income) was the eye-opener that led me to ER.
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Old 02-13-2013, 09:06 AM   #15
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I'm in the mindset of calculating retirement against expenses. My income was all over the place.
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Old 02-13-2013, 09:41 AM   #16
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Angst? What does that accomplish?
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Old 02-13-2013, 10:04 AM   #17
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My guess is that ER isn't for folks who are on the income paradigm because that implies expenses have to scale with income. It took me awhile to realize that the target variable here is in units of time, not dollars, and that this time variable is roughly the ratio of net worth to expense rate. The larger this value becomes, the more certain one can be of a financially sustainable retirement (assuming no debt, diversified income-producing assets, yada, yada).

This is when my Dad's advice clicked in-- he was always big on consistent low expenses as being very important. In my youth I viewed his attitude as a strictly moral imperative, but eventually I realized how the math supports this. A high savings rate both increases the numerator and decreases the denominator. By contrast someone with a low savings percentage and lifestyle creep will likely see very slow progress on this front even with a steady job and good raises. They don't realize how savings is something that shouldn't be deferred. I think this is probably a fair characterization of the upper-middle class American household, which may be why the alarm bells on boomer retirement readiness.
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Old 02-13-2013, 11:28 AM   #18
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This is when my Dad's advice clicked in-- he was always big on consistent low expenses as being very important. In my youth I viewed his attitude as a strictly moral imperative, but eventually I realized how the math supports this.
For me thrift has always been the foundation of investing. Without thrift I'd have no money to invest.
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Old 02-13-2013, 11:42 AM   #19
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These are the five stages of retirement planning I think apply (not that I am very good at this, I won't get there until 60)

Understanding - Looking way down the line and understanding that one needs to save now for the golden years. I reached this at around 30.
Effort - Starting and maintaining the long slog of saving for that far away day. Adjusting spending to allow for adequate saving levels. Rolling raises and bonuses into savings. This followed shortly after understanding for me.
Planning - This is where I am now, although I am still 11 years out. Working to position savings, and add to savings, to get myself lined well in front of the wave.
Preparation - Plan to start in 9 years. Looking for a place to retire to, planning a few trips, developing a strategy for retirement income from my savings and pension income
Enjoyment - Wife and I plan to do a month long trip to the far east right after I hang it up. Can't wait.
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Old 02-13-2013, 11:43 AM   #20
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Quote:
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For me thrift has always been the foundation of investing. Without thrift I'd have no money to invest.
My wife's mantra. It's not how much you make...it's how much you save.
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