The 80% figure; professionals discover what we already know.

[RunningBum]

When you actually sell funds as part of your annual withdraw, can you choose those shares that were purchased over a year ago so that you get the lower capital gains rate?

For instance, I have VG funds that I've bought over the years.

Of course in a year's time, they would all be over a year old so I guess they'd all be at the long-term capital gains rate.

Yes, you can. But you have to do the accounting yourself, for now. For current shares, Vanguard reports the AVERAGE cost to you. You can go through your records and do FIFO or specified shares. If you've already sold some shares with the average cost method, you can't switch because you've already sold a fraction of all shares.

Starting in 2012, they have to report the cost basis to the IRS, so you have to specify the accounting method to use. You can use a different method with those shares than you used in 2011 and before. You should have received emails from Vanguard asking you to select a method now, and also giving information on the methods.

 

[arebelspy]

If you need 80% of your current income to live on, I don't see how you've ever been able to save enough to build up a nest egg to replace that income. Income tax and payroll tax (Medicare/SS) likely take up the other 20%. That fact alone tells me it's nonsense.

If you assume that taxes are part of your expenditures, so you need 80% to of your current income to "live on" counting all expenses, that means you're saving 20%.

According to the math at Nord's post here it'd take about 29 years: How many years does it take to become financially independent? | Military Retirement & Financial Independence

Putting the following assumptions into the spreadsheet at the bottom: saving 20%, spending 80% at an 8% rate of return (debatable, but not unreasonable given the long-term timeframe) and shooting for a 4% SWR would take 28.5 years.

Easily within a working lifetime. Heck, easily within an early retirement lifetime, if you start early enough. And SS will take care of a little of that.

 

[explanade]

SHouldn't be that hard to figure out the prices you actually paid, because there can't be that many transactions.

It's the cap gains distributions and reinvested dividend transactions that are hard to keep track of.

 

[Gumby]

If you assume that taxes are part of your expenditures, so you need 80% to of your current income to "live on" counting all expenses, that means you're saving 20%.

According to the math at Nord's post here it'd take about 29 years: How many years does it take to become financially independent? | Military Retirement & Financial Independence

Putting the following assumptions into the spreadsheet at the bottom: saving 20%, spending 80% at an 8% rate of return (debatable, but not unreasonable given the long-term timeframe) and shooting for a 4% SWR would take 28.5 years.

Easily within a working lifetime. Heck, easily within an early retirement lifetime, if you start early enough. And SS will take care of a little of that.

I'll grant your math above, but the article that started the thread just says "earnings". I'd guess most people think of "earnings" as gross earnings, not net after taxes.

 

[arebelspy]

I'll grant your math above, but the article that started the thread just says "earnings". I'd guess most people think of "earnings" as gross earnings, not net after taxes.

Fair enough, if that's how most people do think.

I actually don't know my exact gross off the top of my head. I do know how much is deposited into my bank account biweekly.

I wonder what's more common.

 

[nun]

If you assume that taxes are part of your expenditures, so you need 80% to of your current income to "live on" counting all expenses, that means you're saving 20%.

According to the math at Nord's post here it'd take about 29 years: How many years does it take to become financially independent? | Military Retirement & Financial Independence

Putting the following assumptions into the spreadsheet at the bottom: saving 20%, spending 80% at an 8% rate of return (debatable, but not unreasonable given the long-term timeframe) and shooting for a 4% SWR would take 28.5 years.

Easily within a working lifetime. Heck, easily within an early retirement lifetime, if you start early enough. And SS will take care of a little of that.

I posted on this earlier. IMHO 8% is far too optimistic and inflation must be considered. If you put in 3% inflation and 3% annual salary rises and use the numbers you suggest you reach FI after 35 years.

If you use the industry recommended 15% saving, 6% return (still optimistic IMHO), 3% inflation and annual salary increases and take a $100k annual salary after 40 years your 80% income is $253k and your savings with produce $149k using the 4% rule. If you get the max SS payment of $114k you will be ok, but without it you have to work for 54 years before you can retire.

I see some major problems with the assumptions in this calculation; most people do not save 15% for retirement for numerous reasons, 6% return may be optimistic - there will certainly be years of poorer growth and depending on their timing they could cause significant problems, SS will probably replace a smaller %age of our future income in retirement and this is all really stupid as it assumes you just keep spending at the same rate.

The obvious way to solve the retirement income problem is to get away from the 80% rule. For those of us with good salaries who LBYM that is easy, we save at least 20% and pay off the mortgage early so that we can go into ER needing to replace a small %age of our income to live just like we did pre ER. However, for people on low wages our LBYM numbers take 100% of their income and for many in the US they just can't go any lower; 15% of the people in the US are on food stamps.

 

[misanman]

I'm planning on 100%. Sure, there will be some expense categories that will decrease, but that will be made up for with increases to healthcare, travel, hobbies, and various projects.

 

[arebelspy]

and this is all really stupid

lol. No more argument from me.

 

[gerntz]

I'm planning on 100%. Sure, there will be some expense categories that will decrease, but that will be made up for with increases to healthcare, travel, hobbies, and various projects.

Assuming you mean expenses, 100% for me too,. Outside vehicle miles costs, nothing day to day goes down & we'll spend more on travel. Offsetting is that taxes will be lower.