How much is more than enough?

[TonyClifton]

Hi, everyone! I'm 55 and in the Seattle area. I'm pleased to find this forum.

I could write a new post book, but will try to refrain. My plan has always been to retire at 56 like my dad. As a local government employee, though, and therefore part of the state retirement system, the magic numbers are 30 and 62, in that if you have 30 years in you can retire at 62 with no pension reduction. So my sights are set on 61, at which point I will have 30 years, and only a 2% reduction. This will result in a lifetime pension of $70k/yr.

Except: I was very impressed with the power of compound interest when I started my working career, and have put aside strong money in tax-free retirement accounts since the beginning. Currently those accounts are worth $1.4 million. Combined with cash and liquid investments, total in the bank is $2 million. I expect at retirement I will conservatively have well over $3 million. We own two houses free and clear, paid off ten years ago, current value about $1 million.

I don't want to work an additional five years only to find out I didn't need to and regret not retiring earlier.

Also I'm interested in the topic of how folks think their lifestyle is going to change from being frugal to allowing oneself to be quite extravagant in retirement because they can afford to, only to find that it's not that easy to change one's personality and the result is a lot of money left over, and that is not the goal.

Discuss!

 

[Blue Collar Guy]

my friend went to hang a mirror for his daughter at her mini mansion the week before Christmas, they were holding the ladder, he fell off and cracked his head on the floor , he was brain dead, he died a few days before the holiday, if you have the means to leave now i would go, what good is a full pension if you dont live to enjoy it, ill continue im full of good news, my other friend was a school bus driver, they had an early buy out for the old timers, i told him to take it, he didnt he got a infection and died at 59, the mirror guy was 66, the bus driver didnt have millions as you described but he had enough to live comfortably, dont be the richest guy in the cemetery you can not get your youth back, now that cast that black cloud , i wish you all the best in what ever you chose and many congratulations of your accumulated wealth, oh i missed the part about being frugal to now lavish spending, i was pocketing after all taxes and deductions of about 50,000 a year when i was working, , my pension is about 83,000 after taxes, im out now about 9 years we spent about 55,000 last year, so our spending didnt change much, we too are in the mid 7 figures without the paid off home also valued in excess of 7 figures, after 35 years of doing things one way we didnt change much, we now go to the private butcher for our meats and buy real caviar and champagne for holidays, but all that doesnt add up too very much , few thousand a year, i was planning to leave it to my only child so he could retire earlier than i did, but he makes more than i ever dreamed of , and said he is looking to pack it in at 35,2 years from now. so onc
e again if you have the means to live the good life now take it , i did a post that i was sorry i didnt retire 5 years earlier, short recap pension would have been 61k take home instead of 83k, still too much, wasted 5 years of 41-46, in my next life i go as soon as i have enough to maintain my lifestyle

 

[RobbieB]

I was able to "shift gears" easily. First class airfare, hotel rooms with a view and a jacuzzi, fear no restaurants and order whatever I want.

Only you can determine how much dough you need (or want) but more is always better than less.

So what happens to the pension if you don't get the 30 years in and retire now?

 

[Gotadimple]

Welcome to the forum Tony.

I found my way here several years ago with the same question: how will I know when I have enough. You need to consider what budget you and DW will have in the future. In addition, the pension income and other income streams. Use one or both of these calculators - then ask questions!

On this website, at the bottom of this page: Firecalc
The i-orp calculator at iorp.com

There are many others, but I find these two helpful.

- Rita

 

[MBAustin]

Welcome Tony! If you haven't found them already, we have a helpful list of things to think about regarding retirement:

Some Important Questions to Answer

Have you run Firecalc or any other calculators? If you get 100% success rates on several scenarios, you are more likely to have a lot left over than not.

It took me several years to finally get comfortable with relaxing my frugality a little. For example, when I buy the kids' plane tickets to come home for Christmas, I don't always put them on the cheapest flights but consider things like non-stop flights and not making them get up at 4am. But they (and I) still fly coach - there is a limit to my relaxation!

 

[TonyClifton]

So what happens to the pension if you don't get the 30 years in and retire now?

There's a reduction factor, you get 40% of the benefit amount at age 56 retirement up to 100% at age 65. The magic is 30 yrs at which the reduction is chopped way down.

For example, if I retired at 60 and started claiming a benefit, the multiplier is 0.594 and a gross pension of ~$40k. Wait one year and the multiplier is 0.98 and it's $70k.

Also, one can forego a reduction by waiting until 65 to start. I could retire this year at 56 and get $22k, or retire and wait nine years and start getting $55k.

It takes a cool head to pragmatically compare $ to time, I suppose understanding the experience of others is why I'm here.

 

[Fedup]

No problem in spending money in retirement here.

 

[Nature Lover]

Hi Tony,

Congratulations on what you've achieved! You'll find quite a bit of discussion on the forum that focuses on happiness and what's enough. Given that each of us finds happiness differently, the answer to your question really comes back to you, and what you see yourself one day "retiring to".

Would you be comfortable, secure and happy with what you have today---or would you have to deny yourself substantially because of the pension offset? Your question about lifestyle change from frugal to "quite extravagant" suggests you either want to spend more freely than you currently do...or feel that like many of us, you won't change (much), and therefore have enough today.

If you've used some of the calculators (firecalc, i-orp, others) to get an understanding of what spending your pension/assets will likely support in retirement, that...and considering what you anticipate "retiring to"... might be a good start to determining whether you're in the ballpark today, or if your original plan would be preferable.

Welcome! NL

 

[unclemick]

Hmmm. Layed off before age 50. Jobshopper(contract engineer) for a year after a year of unemployment. Determined work sucked, moving to stay employed was not fun. So I ER'd.

Frugal was polite for living really, I mean really cheap. The 1990's.

heh heh heh - History and time in the market means I will leave a stash on the table even though we are living well having left my 'cheap' days in the past.

 

[exnavynuke]

There's a reduction factor, you get 40% of the benefit amount at age 56 retirement up to 100% at age 65. The magic is 30 yrs at which the reduction is chopped way down.

For example, if I retired at 60 and started claiming a benefit, the multiplier is 0.594 and a gross pension of ~$40k. Wait one year and the multiplier is 0.98 and it's $70k.

Also, one can forego a reduction by waiting until 65 to start. I could retire this year at 56 and get $22k, or retire and wait nine years and start getting $55k.

It takes a cool head to pragmatically compare $ to time, I suppose understanding the experience of others is why I'm here.

You said you have $2 million currently. Working until 61 gets you $15k/year more in pension than quitting today and not starting the pension until 65, right?

If that's correct, you'd need a $375k investment portfolio to make up that $15k/year at a 4% withdrawal rate. Keeping that off to the side, you still have $1.625 million currently available at 55. You could fund $70k/year for the next 10 years out of that and have $925k left over without having any earnings above inflation. (that gets us to you having $70k/year starting now until the end of retirement theoretically).

So, you could retire today it seems and live off of $70k/year while having $925k in untouched investments. If you invest that and use a 3% withdrawal rate now, that would bring your total income to almost $100k (70k pension + above calculations plus $27,750/year on the 3% withdrawal = $97,750/year coming in).

Are you spending more than that per year now or planning to? If so, you need more money before you can retire. If not, what are you waiting for to retire?

 

[euro]

You said you have $2 million currently. Working until 61 gets you $15k/year more in pension than quitting today and not starting the pension until 65, right?

If that's correct, you'd need a $375k investment portfolio to make up that $15k/year at a 4% withdrawal rate. Keeping that off to the side, you still have $1.625 million currently available at 55. You could fund $70k/year for the next 10 years out of that and have $925k left over without having any earnings above inflation. (that gets us to you having $70k/year starting now until the end of retirement theoretically).

So, you could retire today it seems and live off of $70k/year while having $925k in untouched investments. If you invest that and use a 3% withdrawal rate now, that would bring your total income to almost $100k (70k pension + above calculations plus $27,750/year on the 3% withdrawal = $97,750/year coming in).

Are you spending more than that per year now or planning to? If so, you need more money before you can retire. If not, what are you waiting for to retire?

As exnavynuke points out, it really comes down to how much you expect to spend - I agree with him that from what your posts imply, you are ptobaby ready to go tomorrow!

 

[ownyourfuture]

Welcome to the forum

Regardless of whether you retire now, or at age 61, it certainly looks like you would have more than enough to live comfortably.

I'm sure you've already covered this, but the only advice I could give, is to make absolutely certain you have a good healthcare policy that would protect you in case of a catastrophic illness.

 

[street]

Well I would say you have enough! Lol Like some have already stated you can't buy back time and if you can go I see no need to keep filing the wallet.

You can be wealthier if you continue to work but what is your purpose to do so? Most people if they watch what they spend will have more in the end then what they started with. If they want too.

 

[stepford]

Tony,

You've already amassed handily more than I had by 55 - the age at which I retired. As others have pointed out, whether you have enough depends to a large extent on your projected spending and whether you intend to support and/or leave a large inheritance to kids.

If you intend to spend down your savings during your retirement then it's hard to imagine you don't already have enough to fund a comfortable middle class lifestyle - even in Seattle. Of course, comfortable for some might mean $50K/yr and $250K+ for others (both end of this range represented among members of this forum) so run your numbers carefully before letting anyone here influence your decision too much.

A final word. I probably have at best mid-range assets among the posters here, and I still now wish I'd retired a few years sooner. You'll never be younger than you are today.

 

[TonyClifton]

Wow, great comments

My parents were solid middle class, not wealthy, frugal like you are when you have five kids, that sort of thing.

The anecdotal story my dad liked to tell was that he knew it was time for retirement when he fell asleep at his desk and slept right through his coffee break.

That's about as sensible a take on it as I've heard.

He lived to be just shy of 83, so he was retired 26 years. And he really didn't start investing until his last years of employment, but he was an amateur investor throughout retirement. Just by being in the market all those years, he accumulated an astonishing amount of money. So my mom (91) has no financial worries. She has zero interest in financial matters anyway, so she's quite fortunate.

And so now here I am within a few months of Dad's age when he retired, and I am totally feeling that "this stuff is just a drag anymore" vibe. I think a lot of folks that work in government at any level can agree that federal (especially) and state regulations make everyone's job range from burdensome to miserable. Non-gov people too, probably (heh).

I have a lot of hobbies and interests, and work satisfies no social or identity needs. I won't be conflicted in that way lol!

 

[nativenewenglander]

Tony,

You've already amassed handily more than I had by 55 - the age at which I retired. As others have pointed out, whether you have enough depends to a large extent on your projected spending and whether you intend to support and/or leave a large inheritance to kids.

If you intend to spend down your savings during your retirement then it's hard to imagine you don't already have enough to fund a comfortable middle class lifestyle - even in Seattle. Of course, comfortable for some might mean $50K/yr and $250K+ for others (both end of this range represented among members of this forum) so run your numbers carefully before letting anyone here influence your decision too much.

A final word. I probably have at best mid-range assets among the posters here, and I still now wish I'd retired a few years sooner. You'll never be younger than you are today.

"You'll never be younger than you are today."
I need to have that quote made into a sign, then hang on the wall where I see first each morning.