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80% rule? 4% Rule? What is it really?
09-27-2018, 04:17 PM
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#1
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Dryer sheet aficionado
Join Date: Sep 2018
Posts: 34
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80% rule? 4% Rule? What is it really?
Hello, Retirement planning came all of a sudden for us. Own my own business for many years and never really thought about retirement. Thought I would work until I drop in a business I love. But guess what I got burned out, seems like it happened over night. So then we got the retirement bug. You know as soon as you start looking into it and realizing it could happen, you get consumed with it. Researching, checking, over thinking, under thinking...... We have saved what we think is a fair amount and plan to sell the business to help reach our goal.
We need help with planning what we need for a monthly draw.
What does it cost to live?
No house payment
No car payment
Would like to travel the US in our motor-home some
Would like to go on a trip once a year
Is it 5k, 6k, 7k, 8k,.......?
Oh ya, 55 years old today. The plan is MAy 2020
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09-27-2018, 04:22 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2016
Posts: 8,968
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I have no idea, don't track expenses.
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There is more than one right answer
09-27-2018, 04:25 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Oct 2016
Location: The Shire
Posts: 1,504
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There is more than one right answer
Quote:
Originally Posted by Talkjk
What does it cost to live?
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How long is a rope?
Seriously, it's all over the map here. Some folk do fine on <20k per year, others lifestyles spend three times that in a month.
It's probably a good idea to start by gathering data on your own specific needs.
__________________
Paying it forward is the best investment.
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09-27-2018, 04:29 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Posts: 2,232
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Quote:
Originally Posted by Talkjk
Hello, Retirement planning came all of a sudden for us. Own my own business for many years and never really thought about retirement. Thought I would work until I drop in a business I love. But guess what I got burned out, seems like it happened over night. So then we got the retirement bug. You know as soon as you start looking into it and realizing it could happen, you get consumed with it. Researching, checking, over thinking, under thinking...... We have saved what we think is a fair amount and plan to sell the business to help reach our goal.
We need help with planning what we need for a monthly draw.
What does it cost to live?
No house payment
No car payment
Would like to travel the US in our motor-home some
Would like to go on a trip once a year
Is it 5k, 6k, 7k, 8k,.......?
Oh ya, 55 years old today. The plan is MAy 2020
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No truer words were ever spoken.
What I would suggest is looking at what you've spent over the last few years. Anything in there you want to give up? If you ran your own business you probably are used to running a few expenses through the biz that you won't be able to run through after you retire, like maybe a car, medical insurance etc.
I like the 4% rule, but I really am more comfortable myself at 3 to 3.2 %, and I'm 10 years older than you.
Add the new expenses like travel...
Good luck.
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09-27-2018, 04:31 PM
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#5
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,340
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Quote:
Originally Posted by Mdlerth
Seriously, it's all over the map here. Some folk do fine on <20k per year, others lifestyles spend three times that in a month.
It's probably a good idea to start by gathering data on your own specific needs.
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+1.
Track YOUR expenses for at least a year, preferably two. Everyone else's expenses will be meaningless to you.
Here is a list of questions that you'll want to have solid answers for:
http://www.early-retirement.org/foru...ml#post1399715
__________________
When I was a kid I wanted to be older. This is not what I expected.
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09-27-2018, 04:33 PM
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#6
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Dryer sheet aficionado
Join Date: Sep 2018
Posts: 34
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Quote:
Originally Posted by RobbieB
I have no idea, don't track expenses.
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Thank you Robbie for the response. But just not comfortable with that. YET
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09-27-2018, 04:34 PM
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#7
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Dryer sheet aficionado
Join Date: Sep 2018
Posts: 34
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Quote:
Originally Posted by Mdlerth
How long is a rope?
Seriously, it's all over the map here. Some folk do fine on <20k per year, others lifestyles spend three times that in a month.
It's probably a good idea to start by gathering data on your own specific needs.
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Yep, just wanted to see how it compared.
And Love your sign off.
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09-27-2018, 04:37 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Apr 2011
Location: Madison
Posts: 1,337
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I don't really track expenses either, but I make sure they are less than what I bring in every month on average. Make it easy on yourself by just taking 3.5% of your assets (at 55 that is about right) and comparing that to your normal expenses. Surely you must have an idea of utilities, insurance, food, etc. Then figure out how much you can spend on travel.
__________________
Wild Bill shoulda taken more out of his IRA when he could have. . . .
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09-27-2018, 04:41 PM
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#9
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Dryer sheet aficionado
Join Date: Sep 2018
Posts: 34
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Quote:
Originally Posted by HadEnuff
No truer words were ever spoken.
What I would suggest is looking at what you've spent over the last few years. Anything in there you want to give up? If you ran your own business you probably are used to running a few expenses through the biz that you won't be able to run through after you retire, like maybe a car, medical insurance etc.
I like the 4% rule, but I really am more comfortable myself at 3 to 3.2 %, and I'm 10 years older than you.
Add the new expenses like travel...
Good luck.
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Yes, we are working on that three times a week at least. Seems to change a bit. We are now tracking it better than we did
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09-27-2018, 04:42 PM
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#10
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Dryer sheet aficionado
Join Date: Sep 2018
Posts: 34
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Quote:
Originally Posted by Walt34
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Thanks for the link.
I don't like #12. Does someone really have to die?
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09-27-2018, 04:47 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,298
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What are your plans for medical coverage? Can you manage your income for ACA tax subsidies?
__________________
TGIM
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09-27-2018, 04:52 PM
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#12
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,340
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Quote:
Originally Posted by Talkjk
Thanks for the link.
I don't like #12. Does someone really have to die?
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I'm pretty sure they do eventually. So far the human mortality rate is 100%. No fractions, no decimals.
__________________
When I was a kid I wanted to be older. This is not what I expected.
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09-27-2018, 04:53 PM
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#13
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Recycles dryer sheets
Join Date: May 2014
Posts: 412
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Quote:
Originally Posted by Talkjk
Thanks for the link.
I don't like #12. Does someone really have to die?
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I think the salient point of #12 is to think a bit about what can go awry with your plan and make sure you are not painting yourself into a corner. For instance, my big worry in our plan (we are retired) is long term care - can we afford it? Also DW has a pension with no survivor benefits. I will be OK if something happens to her, but mostly because it is built into our plan.
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09-27-2018, 07:00 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Dec 2017
Posts: 2,551
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Quote:
Originally Posted by Talkjk
We need help with planning what we need for a monthly draw. What does it cost to live?
No house payment
No car payment
Would like to travel the US in our motor-home some
Would like to go on a trip once a year
Is it 5k, 6k, 7k, 8k,.......?
Oh ya, 55 years old today. The plan is MAy 2020
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There are lots of budget spreadsheets out there. What it costs to live depends on your wants, needs, and activities in retirement. A couple can live on $1500 month, or in my case, $3K, but some here need $21K+/month. If you really don't want to track expenses, try using an account aggregator like Mint.
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09-28-2018, 07:03 AM
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#15
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gone traveling
Join Date: Mar 2015
Posts: 3,508
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Quote:
Originally Posted by Talkjk
We need help with planning what we need for a monthly draw.
What does it cost to live?
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You need help. But random strangers on the internet aren't going to be able to provide that help.
Quote:
Would like to travel the US in our motor-home some
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Great. What will that cost you?
Quote:
Would like to go on a trip once a year
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Let's see. Going on a trip costs between $20 and $25,000. Maybe you've taken a trip before and have some idea what that one cost?
Quote:
Is it 5k, 6k, 7k, 8k,.......?
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Maybe, maybe, maybe, maybe, ........?
Quote:
Oh ya, 55 years old today. The plan is MAy 2020
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So you have a few months to figure it out.
If you aren't able to sit down and figure out the answers, you might want to spend a few dollars and a few hours with a fee-only fiduciary financial adviser.
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09-28-2018, 08:02 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,361
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Your best bet is to go through and do some analysis of what you spend now. What you need can range from $1k to $10k per month of more depending on your lifestyle.
The 80% that you hear mentions is principally for people who live paycheck-to-paycheck since about 20% is taken out for payroll and income taxes... but that can vary and many people's net pay also includes hefty deductions for retirement contributions and once you are retired you no longer need to save for retirement.
Go through your bank and/or credit card statement for 2017 and 2016.
The adjust that for changes that you expect to make in retirement.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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09-28-2018, 08:09 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,298
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Quote:
Originally Posted by pb4uski
Your best bet is to go through and do some analysis of what you spend now. What you need can range from $1k to $10k per month of more depending on your lifestyle.
The 80% that you hear mentions is principally for people who live paycheck-to-paycheck since about 20% is taken out for payroll and income taxes... but that can vary and many people's net pay also includes hefty deductions for retirement contributions and once you are retired you no longer need to save for retirement.
Go through your bank and/or credit card statement for 2017 and 2016.
The adjust that for changes that you expect to make in retirement.
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Bolded - As all the veteran readers on this site know, using a percentage of income for a calculation of potential spending needs in retirement is an outdated mode of thinking vs. calculating one's estimated expenses in retirement in conjunction with keeping track of current expenses.
__________________
TGIM
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09-29-2018, 07:50 AM
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#18
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Thinks s/he gets paid by the post
Join Date: Jan 2005
Location: northern Michigan
Posts: 2,215
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Quote:
Originally Posted by dtbach
I don't really track expenses either, but I make sure they are less than what I bring in every month on average.
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+1, same here. After doing this for quite a few years now, I have a pretty good idea what I should be spending on an annual basis.
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09-29-2018, 08:24 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Dec 2016
Location: DC area
Posts: 2,493
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Quote:
Originally Posted by pb4uski
The 80% that you hear mentions is principally for people who live paycheck-to-paycheck since about 20% is taken out for payroll and income taxes... but that can vary and many people's net pay also includes hefty deductions for retirement contributions and once you are retired you no longer need to save for retirement.
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True. Years ago, as a first approximation, I used my working take-home salary (neglecting bonus) as my monthly retirement budget. I've since done a real budget and have tracked it, but my old take-home pay seems to be a pretty accurate estimate.
__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged
"All models are wrong, some are useful." - George Box
“There is always a well-known solution to every human problem: neat, plausible, and wrong.” - H.L. Mencken
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09-29-2018, 08:50 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by pb4uski
Go through your bank and/or credit card statement for 2017 and 2016.
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+1
If you are a business owner, somebody is keeping track of finances fairly carefully. It is probably you, your wife, or an accountant. That person can figure out your total personal spending. It could be as simple as the amount of money that you've transferred from the business account to your personal account.
Then, look at the checking and credit card statements for the big outliers. Maybe you paid for a new roof, or a wedding, or took a trip to Europe. Put them on you "think about how to plan for the occaisional big ticket item" list. The rest is a good start at your "normal" spending.
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