The secrets of successful retirement savers

[RetireBy90]

Happened upon an article about "The secrets of successful retirement savers"
at The secrets of successful retirement savers - MarketWatch
It is a synopsis of an interview with Marc Diana who wrote an e-book based on interviews with retirees called: “The Retiree Next Door: Successful Seniors’ Surprising Secrets” and talked about what he learned. Seems that his take was happy retirees have a handle on spending and have learned to live a happy life without tons of $$. I didn't read the e-book, but found it interesting that many who say they are successful found a way to retire on less than $500K and they noted that many worked for large companies and went along with a defined contribution plan where they were pushed into saving.

 

[Andre1969]

"...found it interesting that many who say they are successful found a way to retire on less than $500K and they noted that many worked for large companies and went along with a defined contribution plan where they were pushed into saving."

I can think of a few possibilities for this...

1) These people are, for the most part, on-time retirees, rather than early retirees? I'm sure it's a lot easier to live off of ~$500K when you're 65, than when you're 55 or 45.

2) Many of them have some kind of other income flows, such as pensions, rental property, business profits, etc? Plus, if they're at normal retirement age, they're going to have Social Security.

3) They're still fairly new to retirement, and haven't truly gotten a grasp on what it will truly cost? Plus, things can go awry as the years go by. For instance, I'm sure my grandmother's cousin was positively giddy when she retired in 1980, at the age of 56, with her modest yet adequate government pension, and her paid-in-full house. But now that she's 90, has over $200K in mortgage debt, and three generations of offspring living off of her, the giddiness has subsided.

I'm not trying to sound like a buzz-kill here, though; just trying to play devil's advocate. I'm sure there are plenty of people who do make it on less than $500K.

 

[RetireBy90]

What caught me was the seeming ability of those that survive on what may be considered a small budget. They did say many have paid off the mortgage and they have SS and some have a pension from the large company.


Seems to fit with the reports that a large percentage of baby boomers have $100K or less in retirement savings and the interview pointed out that many had not figured out what it would cost to live in retirement.


Now I want to congratulate those that have a fix on expenses but just as you can sped way too much, I think you can cut too much. I wouldn't be comfortable on a retirement budget of $2K per month. Forgive me if I sound uppity.

 

[2B]

I'm sure my grandmother's cousin was positively giddy when she retired in 1980, at the age of 56, with her modest yet adequate government pension, and her paid-in-full house. But now that she's 90, has over $200K in mortgage debt, and three generations of offspring living off of her, the giddiness has subsided.

She may have had plenty to retire on but she failed to control her spending. It's been my experience that there are plenty of people willing to live off someone else. With her at 90, they may come in for a rude shock in a couple of years.

Now I want to congratulate those that have a fix on expenses but just as you can sped way too much, I think you can cut too much. I wouldn't be comfortable on a retirement budget of $2K per month. Forgive me if I sound uppity.

My initial retirement budget is well over $2k/mo. As long as SS survives, I won't ever have to cut that much but you never can be too sure. I think I could easily retire on $2k/mo but it certainly wouldn't be of my choosing. I just think back to how little I really needed to get by when I was in college. I saw the same thing when my kids were in college. You can live a pretty good life but your life has to be in the right place to make it work. You certainly aren't going to be living in suburbia with 2 cars and vacationing in Europe.

 

[RetireBy90]

I guess my point on the $2K per month is that I would probably go back to work at that point if I could. Or I wouldn't FIRE if I only had retirement income of $2K. I am amazed that many can live well on less that we do today. However, DW and I didn't work and save all these years so I could get by. We want to be able to enjoy some things we put off till later, like travel and that boat for fishing


One more note, life is full of surprises. I've been trying to plan so that we will have funding and other needs 30 years from now. However, we have spent a life adjusting to good news and bad news. We have normally done well with adjusting. What makes me think the next 30 years will be any different? That made the plan for FIRE in 2 years a lot more comforting and less stressful once I figured that one out.

 

[Rustic23]

If surveyed, we would skew the numbers. We retired at 62 with $400,000 in the bank. However, we actually have between two and three times our annual expenses in income. SS, multiple pensions, and IRA withdrawals make up those numbers.

As one once said 'Statistics never lie.........Statisticians do!' It's all in how the numbers are put forth and what you are trying to prove.

 

[rodi]

I just downloaded the free e-book by Marc Diana.... It's interesting in that the $500k mentioned in the interviewis 'net worth' - so theoretically includes any homes. But 44% of the retirees had 500k or less (including 6% that had negative net worth.)

But - most of the retirees are older than the group here - 54% were 70 or older... and only 8% were under 60... I think this forum skews to a younger retirement age.

Having a smaller income in later years fits the bernicke model - where you spend more in the early years of retirement and spending slows down as you age. That's been true for most of my older relatives... Traveling more in their 60's... and less in their 70's and 80's for example. So if you're in your mid-late 70's the smaller budget is probably just fine.

I look at my MIL for example. She's living very comfortably on about $2k/month. She has a paid for house so her bills are utilities, insurance, food, and cell phone. She doesn't travel anymore (has developed a severe phobia of planes and even trains are starting to freak her out.) Her fixed income (SS, TSP, pension) more than cover her expenses. She has a networth well under $500k - but that's fine - she's 88 years old and doesn't need a huge networth.

 

[Andre1969]

She may have had plenty to retire on but she failed to control her spending. It's been my experience that there are plenty of people willing to live off someone else. With her at 90, they may come in for a rude shock in a couple of years.

My initial retirement budget is well over $2k/mo. As long as SS survives, I won't ever have to cut that much but you never can be too sure. I think I could easily retire on $2k/mo but it certainly wouldn't be of my choosing. I just think back to how little I really needed to get by when I was in college. I saw the same thing when my kids were in college. You can live a pretty good life but your life has to be in the right place to make it work. You certainly aren't going to be living in suburbia with 2 cars and vacationing in Europe.

Yeah, the rest of our family is waiting for that crash and burn to happen. Not that we're wishing it on them, but we know it's probably not going to turn out any other way. She started getting a little tight on funds back in 2010, so her granddaughter, boyfriend, and three small kids moved in, ostensibly to help out and take over the bills. Well, the truth came out that they lost the house they had been living in, so they would've been homeless otherwise...they weren't moving in to help her out, but the other way around! Her son lives there as well, but he's around 70-71 now, and not in good health, so I'm pretty sure his working days are long since over.

As for my own budget, the number I had been shooting for, for years, was $40K per year, which comes out to $3333 per month. But, I have to confess that my tastes have been getting a bit more extravagant in more recent years. I want to be able to travel when I'm retired, and not just sit around the house. And I want to upgrade to a nicer house within the next 5-6 years...and with a nicer house will come a bigger mortgage.

 

[RonBoyd]

And I want to upgrade to a nicer house within the next 5-6 years...and with a nicer house will come a bigger mortgage.

So you plan to retire in your current location?

 

[Andre1969]

So you plan to retire in your current location?

Yeah, that's the current plan, at least. I do want to move out a bit, to a less crowded area, but figure probably not more than 20-30 miles from where I'm at now.

But, I can be a bit flighty, and things may change as that time gets closer. I've also been hearing people say "Nobody retires to Maryland", because of taxes. But, I like it here. Four real seasons, so there's some variety, and the area I'm thinking about is fairly rural, but still close enough to DC, Baltimore, and Annapolis, so I can get a taste of the city if I want it.

 

[W2R]

Seems that his take was happy retirees have a handle on spending and have learned to live a happy life without tons of $$.

Most people don't have tons of $$ and never will have tons of $$, so if they are going to be a happy retiree they'd better learn to live a happy life without it.

 

[W2R]

I wouldn't be comfortable on a retirement budget of $2K per month. Forgive me if I sound uppity.

I would still be happy on $2K/month, but I wouldn't be living like I am living right now, that's for sure. I'd have to cut back on almost everything.

 

[RonBoyd]

I've also been hearing people say "Nobody retires to Maryland", because of taxes. But, I like it here. Four real seasons, so there's some variety, and the area I'm thinking about is fairly rural, but still close enough to DC, Baltimore, and Annapolis, so I can get a taste of the city if I want it.

We have friends who, upon retiring, moved from a fairly large, very nice house in Annapolis to a (to me) huge, REALLY nice house in Ormond Beach, Florida (just north of Daytona Beach). They are not the kind of folks who, although they were both high income, are inclined to spend big... in fact, they are by any standard quite frugal. (FWIW, that they even lived in such a big house was more job related than personal choice... my guess.) I don't know what they bought (or sold) at but I'm pretty sure it was to their financial advantage.

 

[robnplunder]

Most people don't have tons of $$ and never will have tons of $$, so if they are going to be a happy retiree they'd better learn to live a happy life without it.

I think many of them do exactly that. Only in this forum, I see many who build a wall around them with money to last way beyond their life expectancy. Nothing wrong with that. It's a prudent thing to do. I will see what I end up doing. I hope to spend down (not save more) my assets as DW and I go deeper into retirement.

 

[ChicagoGal]

As one once said 'Statistics never lie.........Statisticians do!' It's all in how the numbers are put forth and what you are trying to prove.

Also.... 'Statistics are like a bikini. What they reveal is suggestive, but what they conceal is vital.'

 

[Teacher Terry]

My mom's expenses went down as she aged. She loved to travel but by 80's did it once in a while. Loved clothes but not so much when she was older. She said traveling got to be a hassle. I expect it will be this way for many. We want to travel now-we are 60 while we both can.

 

[flyingaway]

In the article: "And 67% live on less than a $100,000 a year;"

In other words, about 33% live on $100,000 or more a year. That expenses ($100K per year) is more than the money that many of us have in our plans.

 

[Options]

Reading that was 5 minutes of my life that I'll never get back.

Was having a financial adviser useful for them?

Without a doubt. Engaging an adviser made them more likely to have a budget and to live within it.

This is why I never waste time reading "financial news" in the mainstream media. I should have known a plug would be in there somewhere. An "advisor" is going to help one have a budget and live within it? Really?

 

[Walt34]

An "advisor" is going to help one have a budget and live within it? Really?

For some people that is exactly what they need to actually do it since they are clueless otherwise. Sure there are lots more efficient ways but if it wouldn't happen otherwise then I'd have to say for that person the adviser's fee is worth it. At least they'll save something rather than nothing.

Almost all of the folks here on the forum are the financial DIY types so it is a bit of a foreign concept to us.

 

[RonBoyd]

Reading that was 5 minutes of my life that I'll never get back.

Although I currently work in personal finance, I got my start as an educator, and I love making complex financial information relatable to the layperson.

Come on, Options, don't be such a Killjoy. You're gonna take all the fun out of her life.

​

 

[bumtrader]

Here are some more interesting statistics from a report by the Government Accounting Office dated Sept 16, 2014 on IRAs:

- For tax year 2011 (the most recent year available), an estimated 43 million taxpayers had IRAs with total reported FMV of $5.2 trillion.

- About 42.4 million (99 percent) of those taxpayers had aggregate IRA balances of $1 million or less, with a median accumulated IRA balance around $34,000

-Around 600,000 taxpayers had aggregate IRA balances exceeding $1 million, with a median of around $1.4 million

-an individual who achieves investment returns equal to historical interest rates reported by the Social Security trustees for special issue government bonds would accumulate a balance of $303,420. This is about $426,000 less than if the individual had invested in the S&P 500 over the same period, as shown in table 2.

http://www.gao.gov/assets/670/665806.pdf

 

[RonBoyd]

Okay, I have, now, read the whole of "The Retiree Next Door" and found it to be quite interesting, actually, with lots of useful information. It did not, as I suspected (expected), have an agenda (well, not an in-your-face one, anyway). Therefore, I can recommend it (for whatever that is worth).