Is Everyone a Multi-Millionaire?

[daylatedollarshort]

Where do you get that quote for an immediate annuity. That's better than 5% and i dont think the annuity pays out that much for a 50 year old.

I was responding to a previous post in this thread. I did not fact check the $108K as my forum posting fact checker assistant is on vacation this week.

The full post was:

"I went to a popular annuity calculator on the web and a male at 62yo today could buy a 15k/year annuity for about 235k today. Since you have many years to go to get to 62 this amount should be discounted for net present value from your age now to age 62.

I am puzzling about the 2 mil plus group, why they didn't retire sooner?? I guess they have a high expense life style or something. Since I am in the "frugal" category 2 mill plus seems gigantic.

A 50yo male with 2 million could buy an immediate annuity and get $108,720 a year until they die. Who needs 108k/year for a retirement."

Added -

I did just check it using immediateannuities.com and the $108K annual amount is valid according to that site.

 

[papadad111]

Your budget is $37k for health insurance premiums and total out-of-pocket costs per year? Is that what the ACA insurance will cost you? Crazy to think that the median household income is $53k or so in the U.S. and your health insurance in retirement will cost you $28k-$37k per year.

The OOP cost is a maximum per year. I challenge the likelihood of needing to spend the maximum OOP cost in every year over the course of retirement is very very low.

In my opinion, this is an extremely conservative estimate of health care costs.... It's kinda like saying you will need major repairs on your house very single year. Just not gonna happen that way. Possible..yes.. Probable...not so much.

 

[GTFan]

Agreed, but some people can't handle the planning without covering worst case expenses for every category. I think it's kind of silly personally because you can always adjust other stuff year to year if you have an unanticipated event, but it is what it is.

This is no different than adjusting down after a bad stock market year, IMO.

 

[nuke_diver]

The OOP cost is a maximum per year. I challenge the likelihood of needing to spend the maximum OOP cost in every year over the course of retirement is very very low.

This is true but if you do plan for this you will set the upper bound and IMO it's better to plan for the upper bound than not. And a couple of illness/injuries could easily approach that upper bound for a few years in a row. That would be the worse case...of course if you need that much medical care chances are you aren't going to live till you are 105. I don't do my planning that way personally I plan for the most expensive plan that is reasonable for me (with much lower OOP expenses) as a way to estimate an average spending and an unknown health future

 

[audreyh1]

The OOP cost is a maximum per year. I challenge the likelihood of needing to spend the maximum OOP cost in every year over the course of retirement is very very low.

In my opinion, this is an extremely conservative estimate of health care costs.... It's kinda like saying you will need major repairs on your house very single year. Just not gonna happen that way. Possible..yes.. Probable...not so much.

If you are maxing out your OOP every year, you are dealing with a major health issue, and not traveling, etc. I think you can assign your travel budget to help offset the OOP in this scenario.

We just have sufficient funds set aside to cover one year max OOP, assuming the more likely occasional event. So something less than max OOP is part of our annual budget based on past years.

 

[Mulligan]

If you are maxing out your OOP every year, you are dealing with a major health issue, and not traveling, etc. I think you can assign your travel budget to help offset the OOP in this scenario.

We just have sufficient funds set aside to cover one year max OOP, assuming the more likely occasional event. So something less than max OOP is part of our annual budget based on past years.

Haven't had a health issue yet, but I worry I will have something happen to me right at the end of the calendar year, then get slammed with two years of out of pocket expenses on one issue.


Sent from my iPad using Tapatalk

 

[dvalley]

I'm not even close to being a millionaire let alone a multi. However, I do resist the urge to post often times. It's hard without feeling outclassed and I suspect there are others in the same boat who are below the $500k mark and usually are in the lurk-mode.

Of course, I do read and learn a lot from here especially when the smart people speak and drop nuggets of wisdom here and there.

 

[Mulligan]

I'm not even close to being a millionaire let alone a multi. However, I do resist the urge to post often times. It's hard without feeling outclassed and I suspect there are others in the same boat who are below the $500k mark and usually are in the lurk-mode.

Of course, I do read and learn a lot from here especially when the smart people speak and drop nuggets of wisdom here and there.

Don't worry D. I'm there with you and they are quite nice to us poor people in the open forum. But just don't read the private messages as all of them will send you hate messages telling you to leave the forum. I am just kidding.


Sent from my iPad using Tapatalk

 

[steelyman]

Don't worry D. I'm there with you and they are quite nice to us poor people in the open forum. But just don't read the private messages as all of them will send you hate messages telling you to leave the forum. I am just kidding.


Sent from my iPad using Tapatalk

That's right - this is not "multi-millionaires.org".

 

[dvalley]

Haha, thanks. Don't get me wrong, everyone's been nice and I feel finding this forum a yr ago or so has been the best thing happened to me from the financial stand point in a long time. I was just responding with my answer to the original question of this thread

 

[steelyman]

Haha, thanks. Don't get me wrong, everyone's been nice and I feel finding this forum a yr ago or so has been the best thing happened to me from the financial stand point in a long time. I was just was responding with my answer to the original question of this thread

Contribute when you feel like it! This place (to me) is like when you had to walk out to the mound to pitch and the other kids guided you by the elbows and patted your butt for confidence.

 

[eta2020]

I'm not even close to being a millionaire let alone a multi. However, I do resist the urge to post often times. It's hard without feeling outclassed and I suspect there are others in the same boat who are below the $500k mark and usually are in the lurk-mode.

Of course, I do read and learn a lot from here especially when the smart people speak and drop nuggets of wisdom here and there.

I don't think people are snobs. Now I do think many of the people here are done working by 50. To do that you will belong into one of the following categories:

1) You have government pension. If you tried to buy this pension on open market you will need million or millions.

2) You have you own million plus.

3) You live extremely frugal life. Like Montana cabin stile since retiring at age younger than 50 means you have to withdraw at very low rate. 3% would be aggressive IMO.

Bear in mind those people will be effected when they get SS because they most likely did not work for 35 years.

Hence forum will have ton of people in group 1 and 2.

 

[Fermion]

3) You live extremely frugal life. Like Montana cabin stile since retiring at age younger than 50 means you have to withdraw at very low rate. 3% would be aggressive IMO.

I don't get this statement. If 3% in aggressive, that means you are throwing past history out the door (4% has a 85% chance of lasting 40 years or more).

If 3% ends up failing in the future, how secure do you really think the 1) Government pensions are going to be?

 

[eta2020]

I don't get this statement. If 3% in aggressive, that means you are throwing past history out the door (4% has a 85% chance of lasting 40 years or more).

If 3% ends up failing in the future, how secure do you really think the 1) Government pensions are going to be?

I don't how well would work 4% withdrawal work for 49 your guy who retired in 2000 will lets say 800k.

Federal government pension of lets say O4 or GS-13 is very secure. Police officers pension less so but still quite secure. In worst case they will end up like in Detroit (get 1/2 of COLA). But yes such pension has some risks.

 

[eta2020]

I don't how well would work 4% withdrawal work for 49 your guy who retired in 2000 will lets say 800k.

Federal government pension of lets say O4 or GS-13 is very secure. Police officers pension less so but still quite secure. In worst case they will end up like in Detroit (get 1/2 of COLA). But yes such pension has some risks.

I don't have my plus 2 glasses and it shows

 

[Fermion]

I don't how well would work 4% withdrawal work for 49 your guy who retired in 2000 will lets say 800k.

Federal government pension of lets say O4 or GS-13 is very secure. Police officers pension less so but still quite secure. In worst case they will end up like in Detroit (get 1/2 of COLA). But yes such pension has some risks.

4% might have been rough but 3% certainly was not aggressive.

Guy retires in 2000 with $800k and 3% withdrawal rate.

Say he sets things up 60% stocks 40% bonds.

He buys $320k of 30 year T bills paying 6.5% with the bonds and he buys the S&P 500 index with the stocks (he buys $480k of SPY for $140 a share)

During 2000 he gets $5160 in dividends from SPY and he gets $20,800 from interest on his 30 year treasuries for a total of $25,960. This happens to be $1,960 more than he needs for his 3% withdrawal rate.

During 2001 he gets $4,882 in dividends from SPY and $20,800 from interest on his 30 year treasuries for a total of $25,682. With 3% inflation he needs $24,720 for living expenses, leaving him with a buffer of $962 plus his previous year buffer $1960, giving him a cash buffer of $2922.

During 2002 he gets $5136 in dividends and $20,800 in interest, giving him $25,936. He needs 25,462 for expenses, leaving him with a total cash buffer of $3,396.

So on and so forth. In 2005 he is getting $7,368 in dividends, $20,800 in interest and still only needs $27,823 for expenses, leaving him with $345 to add to his growing cash pile.

2008 hits. Uh oh. He gets $9329 in dividends that year and $20,800 in interest. He needs $30403 for expenses leaving him with $274 to add to his cash pile. He thinks, hey, that wasn't too bad.

2009 is a bit harsh with the dividend cuts. He only gets $28,264 from dividends and interest and has to use a couple thousand from his cash pile to meet expenses.

By 2011 things are starting to look up. He gets $29632 from dividends and interest and inflation has been really low. He still needs a couple thousand from his cash pile.

In 2013 he gets $11,489 in dividends and $20,800 on his 30 year bonds (which still have 17 years left at 6.5% yield). He is back to meeting his expenses and adding a little to his cash pile. He is 13 years into his retirement and his SPY shares have increased from $480,000 to $627,000.

 

[eta2020]

4% might have been rough but 3% certainly was not aggressive.

Guy retires in 2000 with $800k and 3% withdrawal rate.

Say he sets things up 60% stocks 40% bonds.

He buys $320k of 30 year T bills paying 6.5% with the bonds and he buys the S&P 500 index with the stocks (he buys $480k of SPY for $140 a share)

During 2000 he gets $5160 in dividends from SPY and he gets $20,800 from interest on his 30 year treasuries for a total of $25,960. This happens to be $1,960 more than he needs for his 3% withdrawal rate.

During 2001 he gets $4,882 in dividends from SPY and $20,800 from interest on his 30 year treasuries for a total of $25,682. With 3% inflation he needs $24,720 for living expenses, leaving him with a buffer of $962 plus his previous year buffer $1960, giving him a cash buffer of $2922.

During 2002 he gets $5136 in dividends and $20,800 in interest, giving him $25,936. He needs 25,462 for expenses, leaving him with a total cash buffer of $3,396.

So on and so forth. In 2005 he is getting $7,368 in dividends, $20,800 in interest and still only needs $27,823 for expenses, leaving him with $345 to add to his growing cash pile.

2008 hits. Uh oh. He gets $9329 in dividends that year and $20,800 in interest. He needs $30403 for expenses leaving him with $274 to add to his cash pile. He thinks, hey, that wasn't too bad.

2009 is a bit harsh with the dividend cuts. He only gets $28,264 from dividends and interest and has to use a couple thousand from his cash pile to meet expenses.

By 2011 things are starting to look up. He gets $29632 from dividends and interest and inflation has been really low. He still needs a couple thousand from his cash pile.

In 2013 he gets $11,489 in dividends and $20,800 on his 30 year bonds (which still have 17 years left at 6.5% yield). He is back to meeting his expenses and adding a little to his cash pile. He is 13 years into his retirement and his SPY shares have increased from $480,000 to $627,000.

But living on 25-30k a year is Spartan. When I write I think about a married couple. But even for single guy who needs to buy medical insurance 25-30k is not splurging by any way.

I think reasonable money start at 60k a year as a minimum. This not far from average US Family income. I am not talking life style of rich and famous here. I am talking about decent living.....

For that you would need 1.6 Million in your computations. And that puts you into my numbers

 

[Senator]

But living on 25-30k a year is Spartan.

No problem. Use water on your cereal, and buy two-ply toilet paper and split it.

I see many people that think they can live on $30K, and retire early. The trouble it is way risky. No pension, limited SS, no good way to increase income other than work minimum wage, etc. Its not impossible, but a lot of sacrifices.

But to each their own...

 

[Fermion]

I used 800k because that is what the person above me suggested for a person retiring in 2000. It works just fine with $1,600,000 and just double the numbers. So he starts with about $48,000 a year expenses in 2000 and ends with $60k a year expenses in 2013 and has a $2,000,000+ portfolio in 2013 after 13 years of retirement.

Makes retiring in 2000 at the stock market peak not seem so bad after all.

 

[scrabbler1]

I don't think people are snobs. Now I do think many of the people here are done working by 50. To do that you will belong into one of the following categories:

1) You have government pension. If you tried to buy this pension on open market you will need million or millions.

2) You have you own million plus.

3) You live extremely frugal life. Like Montana cabin stile since retiring at age younger than 50 means you have to withdraw at very low rate. 3% would be aggressive IMO.

Bear in mind those people will be effected when they get SS because they most likely did not work for 35 years.

Hence forum will have ton of people in group 1 and 2.

Eta020, I can't say I fell into any of those 3 categories when I first ERed back i 2008. While I am over $1M now, I wasn't back in 2008. I live in a high COL area (Long Island, NY) although I do live a rather frugal life.

I would add one more thing to your list, though. Being childfree surely helps being able to retire at a young age (45 for me) and many people here in the forum are also childfee. No kids, no debts.

 

[scrabbler1]

But living on 25-30k a year is Spartan. When I write I think about a married couple. But even for single guy who needs to buy medical insurance 25-30k is not splurging by any way.

I think reasonable money start at 60k a year as a minimum. This not far from average US Family income. I am not talking life style of rich and famous here. I am talking about decent living.....

For that you would need 1.6 Million in your computations. And that puts you into my numbers

I live on $20k-$25k a year and I am a single guy (51) with health insurance. If I spent more than $25k I would be splurging LOL! My total portfolio is $1.3M but 1/3 of it is untouchable for the next 8 years because it is in an IRA.

 

[eta2020]

I used 800k because that is what the person above me suggested for a person retiring in 2000. It works just fine with $1,600,000 and just double the numbers. So he starts with about $48,000 a year expenses in 2000 and ends with $60k a year expenses in 2013 and has a $2,000,000+ portfolio in 2013 after 13 years of retirement.

Makes retiring in 2000 at the stock market peak not seem so bad after all.

Well since you mentioned it can be done easily with less than 1 Million for someone under 50.... I suggested 800k.

It appears to me one needs at least 1.6 million by your computation. Now I am not single and I have one kid. If you are single and have no kids you may need less.....

 

[Mulligan]

Eta020, I can't say I fell into any of those 3 categories when I first ERed back i 2008. While I am over $1M now, I wasn't back in 2008. I live in a high COL area (Long Island, NY) although I do live a rather frugal life.

I would add one more thing to your list, though. Being childfree surely helps being able to retire at a young age (45 for me) and many people here in the forum are also childfee. No kids, no debts.

The interesting part to me (anyways) about many forum members isn't their wealth they created but the relative frugal or conservative nature in which they spend from it.


Sent from my iPad using Tapatalk

 

[aaronc879]

I live on $20k-$25k a year and I am a single guy (51) with health insurance. If I spent more than $25k I would be splurging LOL! My total portfolio is $1.3M but 1/3 of it is untouchable for the next 8 years because it is in an IRA.

IRA money isn't untouchable before age 59 1/2. Most everyone knows about 72t but I never hear anyone talk about taking the penalty. Say your portfolio is worth $1.3M all in an IRA. Take withdrawals early and take a 10% penalty, it's still worth $1.17M. 3% of that is $35,100. If you can live on $35,100 pre-tax then you can start withdrawing anytime.

 

[scrabbler1]

IRA money isn't untouchable before age 59 1/2. Most everyone knows about 72t but I never hear anyone talk about taking the penalty. Say your portfolio is worth $1.3M all in an IRA. Take withdrawals early and take a 10% penalty, it's still worth $1.17M. 3% of that is $35,100. If you can live on $35,100 pre-tax then you can start withdrawing anytime.

I've heard of that 72t rule, too. But the penalty and other rules about it are why I often refer to turning 59.5 as having "unfettered access" to it. So I call it untouchable as far a I am concerned. Perhaps the 72t rule is my Plan B or Plan C.