When a Million Dollars was serious wealth

[2177V]

A good retirement is having a retirement income equal or greater than your income while working. If your income while working is $100K per year than a nest egg of $1M will only get you $40K per year based on the 4% rule. Hence you need a nest egg of $2.5M to earn $100K a year. Yes $1M is not what it used to be.

 

[scrabbler1]

A good retirement is having a retirement income equal or greater than your income while working. If your income while working is $100K per year than a nest egg of $1M will only get you $40K per year based on the 4% rule. Hence you need a nest egg of $2.5M to earn $100K a year. Yes $1M is not what it used to be.

There is no way I could ever agree with this. Aren't you assuming that someone spends all or nearly all of their income?

During my career, I lived on about $25k per year, yet my income varied between $30k and $75k in the last 10 years of it. I didn't automatically spend more when I earned more, nor did I spend less when I earned less. I saved whatever I didn't spend. I never, ever targeted $75k in retirement income. I retired with about $800k in my total portfolio, 2/3 of it in taxable (which is what I have been living off since I ERed in late 2008 at age 45).

 

[rwdflynavy]

A good retirement is having a retirement [-]income[/-] expenses equal or greater than your [-]income[/-] expenses while working. If your income while working is $100K per year than a nest egg of $1M will only get you $40K per year based on the 4% rule. Hence you need a nest egg of $2.5M to earn $100K a year. Yes $1M is not what it used to be.

Fixed it for you.

 

[TheWizard]

A good retirement is having a retirement income equal or greater than your income while working. If your income while working is $100K per year than a nest egg of $1M will only get you $40K per year based on the 4% rule. Hence you need a nest egg of $2.5M to earn $100K a year. Yes $1M is not what it used to be.

Yes, I tend to agree with your target retirement income concept and I'm there myself. Having an excess of retirement income gives one a lot of flexibility and options.

But that income can come from a combination of pension/annuities, SS, and portfolio withdrawals, not all from the latter.

Of course, if you delay SS until age 70, as I did, then you'll likely need bigger portfolio withdrawals in the years preceding.
Having gotten through that span of years, I'm now investing excess retirement income into my portfolio rather than withdrawing money from it, so that's good...

 

[teetee]

There is no way I could ever agree with this. Aren't you assuming that someone spends all or nearly all of their income?



During my career, I lived on about $25k per year, yet my income varied between $30k and $75k in the last 10 years of it. I didn't automatically spend more when I earned more, nor did I spend less when I earned less. I saved whatever I didn't spend. I never, ever targeted $75k in retirement income. I retired with about $800k in my total portfolio, 2/3 of it in taxable (which is what I have been living off since I ERed in late 2008 at age 45).

I think the assumption was that you need equal amount of money during your working life to live on after retirement so you don't feel 'uncomfortable'.

If your spending during retirement is far less than you earn while working (a frugal saver), then use that amount as your basis to calculate how much you need in retirement.

My disagreement on this assumption is different: some retirees spend significantly more than their income from traveling or shopping while others can downsize and spend only half of what they used to spend.

With taxes (from RMD or passive income) and inflation, one would have to really know the math to do the estimate on the magic number they need for the nw to retire with.

 

[ShokWaveRider]

$1m may not be what it used to be but it is still a heck of a lot of dosh. At least in my books.

 

[street]

$1m may not be what it used to be but it is still a heck of a lot of dosh. At least in my books.

I think so too!! I have posted a few time on this thread but a million bucks is more then most have.

With some help from SS or some other small cash flow, that 1 million bucks could compound.

 

[2177V]

There is no way I could ever agree with this. Aren't you assuming that someone spends all or nearly all of their income?

During my career, I lived on about $25k per year, yet my income varied between $30k and $75k in the last 10 years of it. I didn't automatically spend more when I earned more, nor did I spend less when I earned less. I saved whatever I didn't spend. I never, ever targeted $75k in retirement income. I retired with about $800k in my total portfolio, 2/3 of it in taxable (which is what I have been living off since I ERed in late 2008 at age 45).

It all depends on your definition of a “good” retirement. Your $800K portfolio translate to $32K. But your highest income was $75K. I get it about expenses so if your expenses is $32K, then that is an “OK” retirement. However a “Good” retirements income would $75K. A “good” retirement is better than a “OK” retirement. An excellent retirement income is more than $75K. Hence I rate retirements as excellent, good, ok, and bad. Most FIRE aim for an Ok retirement which is fine since they retired early. I retired at 65 but my retirement income is greater than my income while working so my retirement is excellent. It is subjective and people have different definitions of excellent, good, ok and poor retirement incomes. I let other people express their own opinions of excellent, good, ok, and bad retirement incomes. My excellent retirement income means my standard of living is better than my standard of living when I was working. I used this extra income to buy houses for my children so they can retire early.

 

[Andre1969]

Basically, ask yourself one simple question. Are you happy in retirement? If the answer is "Yes", then it's a good retirement!

 

[RetiredHappy]

Our retirement income is definitely far less than our working income. However, our expenses are now far higher after retirement. While we were working, we ate lunch and dinner out every day in nice restaurants and vacationed about 6 weeks a year. Now we vacation 2 to 3 months a year, cook more while home and spend a tidy sum on golfing.

What it means is that we saved enough while working so that we have income to meet our expenses in retirement.

 

[2177V]

Fixed it for you.

You are confusing me. Having retirement expenses greater than income expenses imply a negative cash flow.

In any case. Your disposable income (income minus expenses) is what drive your standard of living. If your expenses are $3000 per month and your retirement income is is 10% more or $3300 month then your disposal income is $300 a month. 10% is OK. 25% is good. 50% is excellent. 100% is difficult to do. Most FIRE has low disposal income while a traditional retiree has much more. This is because your nest egg in the stock market generally double in 10 years. Triple if you continues to contribute. Wealth increases exponentially and not linearly due to the compounding effect.

 

[2177V]

Basically, ask yourself one simple question. Are you happy in retirement? If the answer is "Yes", then it's a good retirement!

I agree but this thread is about the relative value of $1M. I know some homeless people who go to the bathroom at the City recreational center. They are really happy because they have no bills to pay and they live on SS. They just need someplace to go to the bathroom. I kinda wished the City recreational city also includes a shower because Their BO is so strong, I can only talk to them for only a minute.

 

[scrabbler1]

In any case. Your disposable income (income minus expenses) is what drive your standard of living. If your expenses are $3000 per month and your retirement income is is 10% more or $3300 month then your disposal income is $300 a month. 10% is OK. 25% is good. 50% is excellent. 100% is difficult to do. Most FIRE has low disposal income while a traditional retiree has much more. This is because your nest egg in the stock market generally double in 10 years. Triple if you continues to contribute. Wealth increases exponentially and not linearly due to the compounding effect.

I have to disagree again. My disposable income, as you define it, has risen and fallen in my retirement years, even though my expenses have been rather stable. But my standard of living has not changed as my disposable income has risen and fallen. I have had expenses of about $2,000 a month with retirement income of sometimes $2,500 or $3,000 or $3,500 a month. With my expenses stable, the added disposable income had zero effect on my standard of living. All I did was to plow any excess income back into my portfolio.

Having that cushion in my budget allows me to go on small spending sprees now and then without having to worry about busting my budget. That's a good thing, of course, and it allows me to maintain the standard of living I had before I retired. But that cushion ranging from a decent size to a huge size makes no difference to my day-to-day lifestyle.

 

[2177V]

Yes, I tend to agree with your target retirement income concept and I'm there myself. Having an excess of retirement income gives one a lot of flexibility and options.

But that income can come from a combination of pension/annuities, SS, and portfolio withdrawals, not all from the latter.

Of course, if you delay SS until age 70, as I did, then you'll likely need bigger portfolio withdrawals in the years preceding.
Having gotten through that span of years, I'm now investing excess retirement income into my portfolio rather than withdrawing money from it, so that's good...

Good for you. I took a similar path in having excess income in retirement and delaying SS a year or two. I decided to buy houses in cash with one California house for my daughter. If my daughter took out a mortgage from a bank, this will mean 30% of her income will go into a mortgage payment. With no mortgage payment, her standard of living is much higher than her peers. Like you stated: Having excess retirement income provides a lot of options and flexibility.

 

[2177V]

I have to disagree again. My disposable income, as you define it, has risen and fallen in my retirement years, even though my expenses have been rather stable. But my standard of living has not changed as my disposable income has risen and fallen. I have had expenses of about $2,000 a month with retirement income of sometimes $2,500 or $3,000 or $3,500 a month. With my expenses stable, the added disposable income had zero effect on my standard of living. All I did was to plow any excess income back into my portfolio.

Having that cushion in my budget allows me to go on small spending sprees now and then without having to worry about busting my budget. That's a good thing, of course, and it allows me to maintain the standard of living I had before I retired. But that cushion ranging from a decent size to a huge size makes no difference to my day-to-day lifestyle.

Good for you. Everyone has a different viewpoint of a good retirement. My portfolio is 25% equities, 25% treasuries, 25% properties (other than my principle) and 25% commodities which includes VCMDX. This portfolio is designed for double digit inflation which is very likely in my opinion. Inflation hurt retired people because their income tends to be fixed while the cost of living will inflate. However, the government tends to benefit because people's wages goes up which means taxes collected on their increased wages goes up too.....without the political backlash of a tax increase. When this happens, $1M will appears small after double digit inflation.

 

[scrabbler1]

Good for you. Everyone has a different viewpoint of a good retirement. My portfolio is 25% equities, 25% treasuries, 25% properties (other than my principle) and 25% commodities which includes VCMDX. This portfolio is designed for double digit inflation which is very likely in my opinion. Inflation hurt retired people because their income tends to be fixed while the cost of living will inflate. However, the government tends to benefit because people's wages goes up which means taxes collected on their increased wages goes up too.....without the political backlash of a tax increase. When this happens, $1M will appears small after double digit inflation.

I was challenging your earlier statement that "Your disposable income (income minus expenses) is what drive your standard of living." I don't dispute that "everyone has a different viewpoint of a good retirement."

 

[2177V]

I was challenging your earlier statement that "Your disposable income (income minus expenses) is what drive your standard of living." I don't dispute that "everyone has a different viewpoint of a good retirement."

OK. We disagree. That is OK too. My disposable income (income minus expenses) is what drives my standard of living. Perhaps this does not apply to you...but it applies to me. Hence I changed the word "your" to "my".

BTW I believe double digit inflation is just around the corner:

https://www.investopedia.com/articles/investing/052913/inflations-impact-stock-returns.asp

Most of my equities are now "value" equities according to the above link to protect myself against inflation. VCMDX is also my hedge against inflection because bonds provide a hedge against a crash or a bear market but not against inflation. VCMDX uses derivative so this is for advanced investors who understand derivative investing. Inflation is a different animal and most investors do not know how to prepare for this event because the last double digit inflation era was 1974.

 

[rodi]

pre-retirement income is very different (at least it was in my case) than pre-retirement expenses. I was funneling the max amount into retirement savings, after tax savings, extra principal on my house to pay it off. So my income was not related to my expenses.
Add in the fact that you no longer pay SS and Medicare taxes. The key number is pre-retirement SPENDING vs post retirement SPENDING.

 

[2177V]

pre-retirement income is very different (at least it was in my case) than pre-retirement expenses. I was funneling the max amount into retirement savings, after tax savings, extra principal on my house to pay it off. So my income was not related to my expenses.
Add in the fact that you no longer pay SS and Medicare taxes. The key number is pre-retirement SPENDING vs post retirement SPENDING.

I agree. There are many factors involved. Example: I no longer have to pay union dues, SS contributions, commute costs. The correct method is developing a "pre-retirement budget" and a "post retirement budget". The post retirement budget has a lot of costs line items that drops out.

On the other hand, there are some cost items that gets added in the post retirement budget such as a sport car, a boat, taking more cruises and vacations, money to help grandkids, more partying since you have more time, etc.

It all depends what type of retirement you want. A better life style or the same life style. I prefer a better life style since this is your final stage of your life. I call it the "finishing kick" during a marathon race.

 

[Dtail]

A good retirement is having a retirement income equal or greater than your income while working. If your income while working is $100K per year than a nest egg of $1M will only get you $40K per year based on the 4% rule. Hence you need a nest egg of $2.5M to earn $100K a year. Yes $1M is not what it used to be.

Will disagree.
In my example, our income before retirement was way higher than it is in retirement.
The type of lifestyle led a few years before retirement came along with a Wall Street type career. There is no need or want for that lifestyle now.
One simple example is our food budget pre retirement was 36k yearly. It is still 16k which is considered high on this forum. This amount suits us fine and we don't feel like we are giving up anything.

 

[Aerides]

Our pre-tax employed income was 4x our post-tax expenses, including discretionary. Our retirement spending has absolutely nothing to do with hour pre-retirement income. Zip. Nada.

That income enabled us to save so we'd have a big enough nut to find our needs/wants expenses for retirement, at a SWR that we were happy with. And that's all that counts.

The back and forth over what defines good vs. great in retirement is silly. Location, COL, hobbies and such vary wildly from person to person.

 

[GenXguy]

A good retirement is having a retirement income equal or greater than your income while working. If your income while working is $100K per year than a nest egg of $1M will only get you $40K per year based on the 4% rule. Hence you need a nest egg of $2.5M to earn $100K a year. Yes $1M is not what it used to be.

$2.5M doesn't mean you will "earn" $100K/yr. Using the 4% rule, that means you can "spend" 4% per year (of initial stash, adjusted for inflation each year) without completely depleting your stash during retirement. Remember, as an example, your principal in non-retirement investments and some other sources of your retirement spending are NOT income, yet they can contribute to your spending.

As an example for myself, I earn 6 figures now while still working, I expect to earn closer to $25K/yr income during early retirement, and I expect to spend much MORE per year during retirement than I do now! So, my discretionary spending will be many times higher in retirement despite MUCH lower income during early retirement. And I consider that a "good" retirement. My actual "income" will go up later in retirement when other defined retirement income kicks in but still well short of my working income while spending much more.

 

[Koolau]

I think so too!! I have posted a few time on this thread but a million bucks is more then most have.

With some help from SS or some other small cash flow, that 1 million bucks could compound.

Very much agree.

I've often mentioned my friend who is $.5mil in debt at age 77. I estimate his two SS's (his and wife) plus his pension come to about $80K. That amount covers his debt service (so far) and leave him enough to spend and get more credit. He is happy, so who am I to say he has to have $1Mil (to the good) to be happy. When he dies, I have no idea what happens to his wife. I hope he has made some kind of arrangement for his debt, but I doubt it. At that point, it might become sad very quickly - yet bankruptcy laws will probably spare her a place to live and she will still have the higher of their two SSs plus half his pension. She should survive. All is well - and they definitely do NOT have $million! YMMV

 

[street]

Koolau, your example you gave are a norm. I know many friends of mine are happy as a lark and will never have a million bucks, never.

 

[Romer]

Our pre-tax employed income was 4x our post-tax expenses, including discretionary. Our retirement spending has absolutely nothing to do with hour pre-retirement income. Zip. Nada.

That income enabled us to save so we'd have a big enough nut to find our needs/wants expenses for retirement, at a SWR that we were happy with. And that's all that counts.

The back and forth over what defines good vs. great in retirement is silly. Location, COL, hobbies and such vary wildly from person to person.

Agree with this completely. I make almost double what my expenses (Taxes included in that value) are and that I continue to plan on spending post retirement next January. About a third of that is taxes mostly at 24% plus 5% state, FICA and medicare. another good portion is my maxed out 401K contributions then another significant portion is what I put into savings so I can retire.

Now I get to eliminate many expenses like eating in the megacorp Cafeteria, 45 miles (roundtrip) of commuting 5 days a week and a few more misc

Since I have essentially 5 weeks of vacation every year due to my years of service my wife and I have made big expensive trips a priority to Australia, Europe in Business class etc. And I am already funding my hobbies just don't get to do them as much as I like. And just to be sure I can enjoy retirement, I planned another $20K of expenses in the "lets just go do stuff" category. so my planned expenses to achieve a better lifestyle are still almost half of my income

Back to the original topic. I always thought $1M was a lot of money and it is. Raising kids and putting them college it took me until 53 (kids then gone) to have a net worth of $1M, 56 $2M and 59 $3M. This does include property for the classic definition. Got to love compounding earnings. If I wanted to work a couple more years I would be at $4M and the path I was on was to work 2 more years. THEN I did the numbers I figured out I could have retired last January and maintained the same lifestyle for the next 45+ years so I decided that increasing wealth wasn't important once you had enough to meet all your goals. Living life was more important once that happened. The main reason I am waiting until 1st week of January 2022 is Health Care and I also want to make a good transition to the person I hired to replace me. I have a lot vested in this company and this current project which I have taken from a powerpoint design to building an actual spacecraft and want it to succeed after I am gone.

If you are trying to guess the 4% calculation for me (I know someone is ) I also have a pension which makes it easier for me or I likely would have worked another few years

On the flip side. My older relatives now gone never had even $500K, some $200K and lived happily but frugally for a long time. Money isnt the end all for retirement happiness. It just makes it easier