Interesting study by northwestern mutual

[Al18]

Boomers need less money to retire.

I’m quoting the whole paragraph from the WSJ article

“Millennials, those born between the early 1980s and late 1990s, sharply raised their estimates compared with before the pandemic. When they retire, millennials now expect to need $1.65 million. That is up from just under $1 million in 2020.*Baby boomers, born between 1946 and 1964, said they would need $990,000, up from $830,000 in 2020, according to the poll, the latest installment of which was conducted in January.”

FYI the WSJ article is available on Apple News

 

[mystang52]

the age old question of how much is enough is like asking how long is a rope .

the answer is people make whatever they have work .

it may be in a location or a lifestyle they don’t like , but they make it work .

some may even have to golden girl it

+1 Having a nest egg is quasi-meaningless without knowing an individual's lifestyle, expenses, and any other sources of income.

 

[mathjak107]

we never go by just expenses … we go by spending goal posts .

being we use 95/5 each year we get to spend 4% of the actual balance , plus we add to that ss , pension and my part time work .

as goal posts go we can spend about 250k a year being 9 years in to retirement.

but we don’t have expenses that run anywhere near that ..

so we don’t go by expenses …. so what we will do when we are so far ahead is find things we want to do or buy

last year we bought a new 80k lexus for cash .

as of this morning we booked some trips for 2024 ….we may want to spend about three months renting in sun city hilton head with friends .

so we see what we have to work with , then back in to our expenses and build around them with things we want to do that maybe aren’t in the general life we live daily

 

[Winemaker]

My kid DSister, while I managed her investments, is single, owns her own home in a great neighborhood, has been retired now for 2 years. Her annual expenses are ~$13,000! While she has been living off her money market so we can convert her 403b into a Roth, she has decided that she will accept her $66,000/yr pension. She said she didn't care if paid 24% taxes.

 

[TheWizard]

My kid DSister, while I managed her investments, is single, owns her own home in a great neighborhood, has been retired now for 2 years. Her annual expenses are ~$13,000! While she has been living off her money market so we can convert her 403b into a Roth, she has decided that she will accept her $66,000/yr pension. She said she didn't care if paid 24% taxes.

The 24% Federal tax bracket is a fine, fine bracket to be in. That's the bracket I'm in.

If she delays SS to age 70, then she'll be able to do good-sized Roth conversions on top of that pension income.
Note that it's probably not necessary nor desirable to convert all of her tax-deferred money...

 

[old medic]

As I said, from my POV. Of course the big factor is desired lifestyle.

And if I DID have that .... my car collection would look like yours.... LOL...

 

[Rianne]

My kid DSister, while I managed her investments, is single, owns her own home in a great neighborhood, has been retired now for 2 years. Her annual expenses are ~$13,000! While she has been living off her money market so we can convert her 403b into a Roth, she has decided that she will accept her $66,000/yr pension. She said she didn't care if paid 24% taxes.

OMG, what are her property taxes? Our property taxes alone are 1/2 that yearly spend.

 

[braumeister]

This is my favorite line from the article:

Retirees with little financial background have to figure out how to make their nest eggs last for as long as several decades, a task BlackRock Chief Executive Larry Fink called “an impossible math problem” in an annual letter to shareholders last week that raised alarms about a retirement crisis.

So I guess we're all doomed.

OTOH, I sense the smarter readers may start heading over here to see how it's done.

 

[Time2]

“Millennials, those born between the early 1980s and late 1990s, sharply raised their estimates compared with before the pandemic. When they retire, millennials now expect to need $1.65 million.

I doubt these millennials are computing inflation in their $1.65M number.
Picking a 34 yr old millennial born in 1990, retiring at 64.
With 3% inflation, in 30 years, $1.65M will have the buying power of $676,500. To have the buying power that $1.65M has today, in 30 years, you will need $4,004,983.
Don't tell them, it is too discouraging!

 

[Andre1969]

I doubt these millennials are computing inflation in their $1.65M number.
Picking a 34 yr old millennial born in 1990, retiring at 64.
With 3% inflation, in 30 years, $1.65M will have the buying power of $676,500. To have the buying power that $1.65M has today, in 30 years, you will need $4,004,983.
Don't tell them, it is too discouraging!

I've always wondered about that, if they think about inflation. Years ago, when I started getting serious about retirement, I figured if I got to $1M and no mortgage, I'd be happy. BUT, I always took inflation into account. I think I first settled on that $1M figure around 1999-2000. I didn't hit $1M until 2015. BUT, I also knew it wasn't really my original idea of $1M, thanks to inflation. Having $1M saved up in 2015 was like having about $702K in 1999. And to have the 2015 equivalent of that $1M in 1999, I needed something like $1.4M.

And, the second part of my equation made it all a moot point, anyway, as I had a mortgage of around $173K!

 

[Winemaker]

OMG, what are her property taxes? Our property taxes alone are 1/2 that yearly spend.

For her 3 bedroom house in a great suburb outside of the city of Pittsburgh is about $4000. I live 20 miles south and have a much bigger home and they run about $7,000.

 

[Sunset]

I doubt these millennials are computing inflation in their $1.65M number.
Picking a 34 yr old millennial born in 1990, retiring at 64.
With 3% inflation, in 30 years, $1.65M will have the buying power of $676,500. To have the buying power that $1.65M has today, in 30 years, you will need $4,004,983.
Don't tell them, it is too discouraging!

I'm sure most folks think in today's dollars. As inflation is a vast unknown, and simply introduces too many errors.

If $1.65M works today, then the inflation raised amount of that will work tomorrow. Like everyone, I'm sure they will adjust their view as cell phone monthly charges rise from $50/mo to $500/mo ...

 

[pb4uski]

$1.46M would give you somewhere between $43-58K per year, assuming you pick a SWR 3-4%. The last time I checked, my SS is around $20K/yr, if I take it at 62.

I could probably feel comfortable on $1.46M, if I was already 62 and drawing SS. But, at the age of 54, I'd definitely be cutting it close. If I had the house paid free and clear, maybe.

Something to think about.

If your SS is around $20k/year at 62, that suggests a PIA of ~$27k and an age 70 benefit of $33k.

Take $33k a year for age 54-70... $528k and put it off to the side. Using a 4% WR you can withdraw $37k annually inflation adjusted from the remaining $932k. $37k withdrawals and $33k of SS starting at age 70 would be $70k of spending power starting at 54 (for 54-70 the $33k comes out of the side fund and income from the side fund).

 

[Andre1969]

Something to think about.

If your SS is around $20k/year at 62, that suggests a PIA of ~$27k and an age 70 benefit of $33k.

Take $33k a year for age 54-70... $528k and put it off to the side. Using a 4% WR you can withdraw $37k annually inflation adjusted from the remaining $932k. $37k withdrawals and $33k of SS starting at age 70 would be $70k of spending power starting at 54 (for 54-70 the $33k comes out of the side fund and income from the side fund).

Wow, pretty creative way of getting around it, by breaking the $1.6M into two separate piles like that. I like it!

Just out of curiosity, I pulled up my latest SS statement online. It's showing an even more optimistic ~$26K at 62, !$38K at 67, and ~$47K at 70. I was about to go WHEEEE, until it hit me. That assumes I actually WORK until 62, 67, or 70, rather than retire at 54 and claim it at 62, 67, or 70. So yeah, $27-28K at 67 and $33K at 70 is still a lot more realistic.

 

[pb4uski]

There is a tool on the SSA website to show you what your values would be if you retired now and had no future earnings.

 

[USGrant1962]

The 24% Federal tax bracket is a fine, fine bracket to be in. That's the bracket I'm in.

...

I have a weird love/hate relationship with the 24% Federal tax bracket. I strive for it, and hate myself for it

 

[LateToFIRE]

LMAO - so who's right?

I was, of course, being a bit facetious in my question. I fundamentally agree with the responses - Most will make do with what they have banked when they are forced (or highly motivated) to give up earned income. Most will have saved nowhere remotely close to the NML ideal figure. Most will be just fine. And for those unfortunate enough to run short of funds, their adult children and/or extended family and/or govt safety net will pick up the slack in their final years. THIS is why social security (as well as other govt safety nets) are so important to vast majority of the population.