"The Number"

[REWahoo]

Newsweek has a piece on a book by Lee Eisenberg titled "The Number". The subject is how much do you need in your portfolio to retire. A couple of quotes:

"...despite all those Web sites telling us how much to save to retire comfortably, most people remain in denial or uncertain about what their number really is."

"...he discovers how loath people are to discuss the details of their number, even with close friends. "[People] would sooner offer personal guided tours through their medicine cabinets [or] provide detailed dossiers on their sessions with psychotherapists," he writes. "The Number, I have come to understand, is the Last Taboo."

Not in the online article but in the print version is Eisenberg's segmentation of future retirees into four categories:

Procrastinators: Reach 50 without a plan, hoping they will be young forever.
Plotters: Left-brain types use Quicken and study actuarial tables.
Pluckers: Pulled a number from thin air.
Probers: Focus on meaning, not money, and plan lower-cost retirement.

I'd guess we have a forum full of Plotters and Probers.

http://www.msnbc.msn.com/id/10663347/site/newsweek/

 

[SteveR]

Maybe we should add another group to the list.

Proctologist--those that pull the number out of their........

 

[SteveR]

No, not an accountant.......not even close. 8)

But I know a few.

I also know a few proctologists...........and sometimes there are way too many similarities.

 

[frayne]

Excellent topic, I have ask this question to many of my retired friends and soon to be retired friends and the number is variable and subjective.  Depends on how long you expect to live, what type of lifestyle you want and what health problems you may have in the future.  I can only answer one out of the three (lifestyle) and take a best guess at life expectency, as far as health problems, it's anyone's best guess.   Anybody do any better ?

 

[SteveR]

Excellent topic, I have ask this question to many of my retired friends and soon to be retired friends and the number is variable and subjective.  Depends on how long you expect to live, what type of lifestyle you want and what health problems you may have in the future.  I can only answer one out of the three (lifestyle) and take a best guess at life expectency, as far as health problems, it's anyone's best guess.   Anybody do any better ?

Plan for the your worse case projections on life expectancy but allow some wiggle room in expenses to account for not only inflation but for changes to spending as you age.

Health insurance, housing issues, medical conditions, life style, inheritance wishes and fear of running out of money before you die are all major factors in your number.

Many people don't understand what it takes to live for 30, 40, or 50 years without a paycheck. I believe it is ignorance and fear of the true number that makes people procrastinate in finding their number. As a result, they never acquire enough to get to what would be their unique number so they are embarassed to discuss it with anyone. Failure to plan assures failure. No one likes to talk about failures in their lives.

I like to call this the ostrich syndrome. When an ostrich is afraid or threatened, they put their head is in the ground to protect themselves. However, in this position, the ostrich has their their @ss is in the air. Anyone thing wishing to take advantage of that situation is free to do so while the ostrich thinks it is safe.

 

[califdreamer]

I glanced through the book at a Barnes & Noble recently and was disappointed. Most of it seemed aimed at the very well-off and how they could have a retirement with second homes and other luxuries. It struck me as a bit of yuppie indulgence.

 

[RockMiner]

Most people I know fall into two broad categories:

1) Nowhere near enough $ to ER so it's not even on the radar and never will be.

2) Significant savings and income but there is no "number" because they are obsessed with getting more.

Those that have thought about it are rarely well informed and have only a fuzzy idea of "the number".

In any case, it's a major Taboo subject at work which is why this board is so great!

 

[preben]

Most people I have chatted with have no clue what the/their number is. I don't advertise that I am FIREd (and anyway always have a few potential money earners I plug away with and can mention as work) but when it does come out everybody WONDERS how can it be done? I explain a bit - but at the 25 x expenses-part they fall down the chair, shake their head, and then we instead discuss their new car  . Cheers!

 

[mb]

I think that this is hilarious  but also unfortunately it also says something about our values 

but at the 25 x expenses-part they fall down the chair, shakes their head, and then we instead discuss their new car

 

[califdreamer]

I'm always amazed at the money people are willing to spend on cars. I bought my previous car new in 1990 (90 Honda Civic), drove it for 12 years and put on 250,000 miles. Sure I could've driven something bigger, nicer and newer. But for what? I invested the money I saved in real estate. Sold the Civic to a college kid and bought a 99 Acura in 2002 and will probably still be driving it in 2009.

 

[WhodaThunkit]

I haven't met many people who reach the 25-times mark through education and willpower. In my limited experience, either you're the kind of person who naturally saves a lot from a young age and makes it no-sweat, or you're not ever going to make it.

 

[Nords]

I haven't met many people who reach the 25-times mark through education and willpower. 

In defense of "it's not too late", I've seen people experience life-changing epiphanies.

But you're right, starting your IRA with your high-school job is a lot better.

 

[SteveR]

I haven't met many people who reach the 25-times mark through education and willpower.  In my limited experience, either you're the kind of person who naturally saves a lot from a young age and makes it no-sweat, or you're not ever going to make it.   

Well they are out there; me included. I did not start my path to FI until 1991. I have not won the lottery, I did not inherit wealth from my family, I did not have a high 6 figure income, I did not get massive stock options from my employer and I am not the greatest stock picker in the world. In fact, I lost more than 30% of my 401(k) in 2000 and some other after tax losses that are still in the crapper. I was not a dumpster diver and I spend a lot compared to what I have seen on this board but I also save about 30 % of my gross income each year. Both my late wife and I were able to more than double our net worth in a 10 year period despite the big losses. It is not rocket science, it is just basic saving, investing, debt control, and holding down expenses.

I can only imagine where I would be today if I had been willing and able to start this at 25!!!

 

[unclemick]

SteveR

Alas - if I only knew at 25? - I have 7 Aloha Jimmy Buffett shirts gathering dust in my now MO closet.

They never made the Bahamas next to Sir John either.

But I have some new bib overalls from Tractor Supply and some latitude in spending. Will post my attitude on latitude come February - perhaps a mini trip to get the dust off the shirts.

 

[HFWR]

Being 51, and with a port slightly north of $300k, I can say that I've missed ER, per se... As far a a magic number, at this point, it's 60, as in age. Unless all hell breaks loose, whatever I have then will be the magic number.

Roll your own!!

 

[Jay_Gatsby]

Being 51, and with a port slightly north of $300k, I can say that I've missed ER, per se... As far a a magic number, at this point, it's 60, as in age. Unless all hell breaks loose, whatever I have then will be the magic number.

Roll your own!!

Actually, I'd say that 60 is still ER because Social Security doesn't kick in until 62 at the earliest, and many people don't retire until they've been collecting it for a few years (e.g., 65+) so that they can get the maximum benefit at 67 to offset the loss of income from retiring. Besides, if the markets have a decent return over the next 3-4 years, you might find that your portfolio will be north of $600k by that time.

 

[Andre1969]

I have a feeling that even at the age of 51, having $300,000 probably still puts you ahead of the majority of people.

 

[Sasquatch]

I have a feeling that even at the age of 51, having $300,000 probably still puts you ahead of the majority of people.

Having $300K at *61* would put you ahead of many people.

 

[slepyhed]

I haven't met many people who reach the 25-times mark through education and willpower.  In my limited experience, either you're the kind of person who naturally saves a lot from a young age and makes it no-sweat, or you're not ever going to make it.   

Maybe someday I'll fit the "education and willpower" description.

It all started in September, 2001. That's when my daughter was born. Up until that point, I'd just been plugging along saving 6% in my 401k to get the match, and that's it. I was 29, we had just bought our house earlier that year, and I think my wife and I made $70k per year combined.

The stock market indices were low, and then with 9/11, it went lower still. I increased our 401k savings to 12%, because it seemed like the buying opportunity I'd been wishing for all through the 1990's.

A year later, sept 2002, I looked around and told my wife, "We've gone one year in this house with this child, and we have $1000 more in the checking account now than a year ago. That's not too bad, right?" Then she reminded me that I had inherited $10,000 that year. Clearly we were spending too much money.

The first thing I did was reign in my spending on my hobbies. Finding myself bored, I figured I'd go to the library and read some of those personal finance books to see if maybe I could find a way to get money to spend on sportscars or motorcycles or boats or whatever.

Now, three years later, I have seen the light. With every raise, my wife and I have increased our savings. The only debt we have is a 20-year fixed rate mortgage. We pay cash for things like vacations, home repairs, etc. We're each putting 21% into our 401ks, and we plan to bump that up more over the next few years.

I know what my expenses are. I know what my "number" is. I don't know exactly when I'll reach that number, but it won't be long.

I learned it all at the library, and I put the wheels in motion because I wanted to.

 

[rmark]

My number is a million dollars and a mobile home - I'm halfway there, I have the mobile home.

People think I'm joking, but I'm not.

 

[alphabet soup]

I received this book aa a birthday present this week. I've read about 100 pages so far, and frankly, I don't see much value in a book by someone who seems to have the attitude that a net worth of $1-2 million means you're just scraping by.

Give me a break! We don't all live in the Northeast and I don't need a net worth of $10 million + to feel my life is worthwhile.

 

[haha]

My number is a million dollars and a mobile home - I'm halfway there, I have the mobile home.

People think I'm joking, but I'm not.

Mark,
Depending on how many dependents you have, $1M and a mobile on your own lot should be plenty. One of the things I really like about a mobile (I don't have one myself, but I consider it) is that a new, super insulated mobile can be so much cheaper to heat and cool than a typical older home.

I am not crazy about a rural lifestyle, but I would think that there are probably lots of nice university towns where a mobile could be conveniently sited quite close-in fairly cheaply. Some of them you can almost heat just with the refrigerator and the freezer!

Other attractions are that if you install well, you have small exposure of pipes etc to freezing, and you have a low slope roof where you will not likely fall off and break your back trying to do a bit of maintenance.

All in all, sounds good to me. I would like to hear some of your observations about your setup.

Ha

 

[Yipee-Ki-O]

While there's nothing wrong with a mobile home (I lived in one many years ago), do be sure to keep fresh batteries in the smoke detectors. And make sure you can bail out of a window should you not be able to reach a door in the event of a fire. A good friend of mine lost his younger brother in a mobile home fire last year . . . they can burn to the ground incredibly quickly.

 

[TargaDave]

Well they are out there; me included. I did not start my path to FI until 1991. I have not won the lottery, I did not inherit wealth from my family, I did not have a high 6 figure income, I did not get massive stock options from my employer and I am not the greatest stock picker in the world. In fact, I lost more than 30% of my 401(k) in 2000 and some other after tax losses that are still in the crapper. I was not a dumpster diver and I spend a lot compared to what I have seen on this board but I also save about 30 % of my gross income each year. Both my late wife and I were able to more than double our net worth in a 10 year period despite the big losses. It is not rocket science, it is just basic saving, investing, debt control, and holding down expenses.

I can only imagine where I would be today if I had been willing and able to start this at 25!!!

I agree. Many people get "religion" at later stages in life and for many different reasons. I would add that sometimes late windfalls (inheritence, option payouts, RE appreciation) actually provide the motivation. "I've gotten a lucky break and maybe I ought to save-invest rather than spend as I have been". Noticed a few recent posters here like that. Never ever too late to get religion. It's the main theme of this site.

 

[rmark]

"I am not crazy about a rural lifestyle, but I would think that there are probably lots of nice university towns where a mobile could be conveniently sited quite close-in fairly cheaply."

Actually my wife and I are university staff. When houses were cheap we didn't have any money. By the time we had any money, houses were too high. So the mobile home on 2.5 acres became the next best choice, only 15 minutes into town. We enjoy sports and theatre so it works for us. My father in law is next door in a newer mobile home - R25 attic insulation, R-20 floor. I tell my wife its our retirement home when hes gone. Now if we could just get some rain to stop all the grass fires.