Very small networth when ER ?

[Mdlerth]

I also wonder if the retirement as we know it now (at least in the U.S.) will become a historical anomaly...

I suspect you are right. Change is the only constant. Retirement was already different for the two prior generations in my own lineage.

Both my grandfathers passed on at about age 50. One grandmother made it to about 70, but from my earliest recollection she was always frail, and was mostly bedridden the last ~5 years of her life. A lifelong smoker, it was an accomplishment to make it as far as she did. Neither pensions nor savings did any of them much good.

OTOH, my parents are still rockin' it in their 80s, enjoying the fruits of both DB and DC vehicles. My father rode the peak of the pension era, enjoying a COLAd federal check for the past 25 years, while my mom collects SS and also gets RMDs from an IRA still worth more now than when she retired.

So, what will retirement look like when I enter it? Considering my family history, whether I end up rich or poor should be of only minor concern. Much more important will be whether I replicate the robust health of my immediate predecessors.

To the OP: It's too early for me to tell what my net worth will be when I RE, since it's still a ways off. Somewhere between 1M and 2M, so probably doesn't qualify for your survey.

 

[Johnora]

More questions than answers....

So an open ended question like this post tends to get lots of differing answers.

It also depends upon ones perspective of what the definition of low NW is. In our case we will have two pensions that should pay for 90-95% of our expenses, our mortgage will be paid off and the current $400K in various retirement accounts seems small but will not be depended on for monthly expenses and will remain invested in a fairly aggressive manner as we can ride out most rough times if and when they occur.

It is all about planning and everyone's situation is just a little bit different than the next persons. Our investment statement was written many years ago with a strict disciplined plan. We have stuck to it, travelled well at the same time and let our neighbors buy all of the expensive toys. I will have my last day of work in 8 days @52 as a Christmas present to myself and officially FIRE 3/1/2017 after being on an end of career vacation until then.

So 400K may be low too many, but it is just fine with us.

 

[l8_apex]

So an open ended question like this post tends to get lots of differing answers.

It also depends upon ones perspective of what the definition of low NW is. In our case we will have two pensions that should pay for 90-95% of our expenses, our mortgage will be paid off and the current $400K in various retirement accounts seems small but will not be depended on for monthly expenses and will remain invested in a fairly aggressive manner as we can ride out most rough times if and when they occur.

It is all about planning and everyone's situation is just a little bit different than the next persons. Our investment statement was written many years ago with a strict disciplined plan. We have stuck to it, travelled well at the same time and let our neighbors buy all of the expensive toys. I will have my last day of work in 8 days @52 as a Christmas present to myself and officially FIRE 3/1/2017 after being on an end of career vacation until then.

So 400K may be low too many, but it is just fine with us.

I read this as saying your net worth is 400k. Why would you say your net worth is 400k? Seems like the pension should have some value and be added to determine net worth.

 

[Johnora]

well...

I read this as saying your net worth is 400k. Why would you say your net worth is 400k? Seems like the pension should have some value and be added to determine net worth.

As I stated there are many different definitions of what makes up a Net Worth. I have heard even professionals say you shouldn't add in your value of your house. When it comes to pensions it can be a struggle to determine what the net worth is even though their are pretty simple formulas that can estimate what your pension value would look like as a net worth.

Personally is our case if you looked at what kind of retirement account balance you would need to get a 4% SWR to equal our pensions, it would be valued at around 2.5 million, but that is not universally agreed upon as a legit value by others.

It works for me and I believe you were correct in what you wrote as well, from my perspective.

 

[razztazz]

I read this as saying your net worth is 400k. Why would you say your net worth is 400k? Seems like the pension should have some value and be added to determine net worth.

That's how I've always done it. Impute a cash value for the pension and, years ago when it was worth a great deal more, try to impute a value for the medical insurance I've had. That was harder to do and depending on how I calculated it had a wide assortment of outcomes. All tolled pension, stash, and medical was well under a million 21 yrs ago when I retired.

 

[Lakedog]

As others have said, a pension makes a big difference. I retired in 2008 @ 51 with under $500k, a paid off house, and a federal pension that more than covers my living expenses. My investments have more than doubled in 8+ years of retirement as there has been little need to touch savings except for an occasional high $$ purchase (auto/RV/condo).

 

[Enuff2Eat]

I think everyone is hinting around it, but it still depends.


A person with a $2 million Net worth and no health care is most likely worse off than someone with $0 Net worth but has a $60K govt pension and healthcare coverage.

oops now that I think about it. Base on 2 million dollars, If you withdraw $60k/year and "smart"enough to get 5% return from your money (not including health insurance).... I think you can live comfortably for another 30 years after retirement.

After 30 years your balance will be $3,146,749.00

In that case, If the calcualtion correct. You should take the 2 million...hheheheeh JK

https://www.calcxml.com/calculators/how-long-will-my-money-last?skn=#calculator-data-table
3,156,749

 

[skipro33]

Something to keep in mind about pensions;
That money is lieu-of, not on-top-of a salary that is comparable to a salary that doesn't have a pension plan. I funded 50% of my pension directly from my salary, which the company matched and I didn't have the option to opt out of the plan either.

Way back when, I had the choice to either be self employed (I owned a Radio Shack franchise) or go to work for the municipal electric company. With 2 young kids, one with health/medical needs, the prudent and conservative plan was to go for the steady pay check and medical. I realized I would give up the dream of wealth and opportunity for unlimited growth, but as a father, I did what I needed to ensure my kids well being.

I sold the franchise and that was a good deal considering where Radio Shack is today. I do wonder about where I'd be financially if I had remained a business owner, but hey; I have enough to do anything I want to do and not enough to do EVERYTHING I want to do. Ha!

 

[Johnora]

As others have said, a pension makes a big difference. I retired in 2008 @ 51 with under $500k, a paid off house, and a federal pension that more than covers my living expenses. My investments have more than doubled in 8+ years of retirement as there has been little need to touch savings except for an occasional high $$ purchase (auto/RV/condo).

Probably the biggest argument about including a pension in your net worth, and mind you I include mine, is this:

Today:
$2 million in Retirement accounts
or $2 million value in your pension

If you die tomorrow??
You still have $2 million in your retirement accounts... (heirs)
Most pensions will be at zero unless you have a reduced value with a contingent annuitant and they didn't suffer the same fate.

So it goes back to how new worth is defined....

 

[Totoro]

With a steady income, you have to save first before you can splurge.

With a steady income you can get a loan.

 

[Major Tom]

My investments have more than doubled in 8+ years of retirement as there has been little need to touch savings except for an occasional high $$ purchase (auto/RV/condo).

If only every 8 year period could be the same!

 

[NW-Bound]

With a steady income you can get a loan.

... and pay what interest? Why don't you mention charging up credit cards too?

Gah! Those forbidden thoughts could get you expelled from this board.

 

[FreeBear]

I sold the franchise and that was a good deal considering where Radio Shack is today. I do wonder about where I'd be financially if I had remained a business owner, but hey; I have enough to do anything I want to do and not enough to do EVERYTHING I want to do. Ha!

Nicely done! I'm in a similar situation in my FIRE and this is what really matters to me. Can't do everything, but neither do I have to do stuff I don't like...

 

[COcheesehead]

This thread reminds me of winning the lottery. Do you take the lump sum or the 20 year annuity? Your answer says a lot about who you are.

 

[Onward]

Seven years ago I did it very bare-bones, by most people's standards here.

Age 46 with around $250k in taxable accounts and $250k in retirements accounts. Also two residential rental properties with very little net equity (then) and slightly negative cash flow. No pension. No company health ins. Very modest Social Security available at 62 or later.

What allowed me to do it was:

- I'm single with no kids
- I have no debt, other than the mortgages
- I'm healthy. No prescriptions or conditions
- I'm flexible and can live simply
- I was/am very open to living in low-cost countries like Ecuador or Thailand, if necessary
- I was open to medical tourism, if necessary to save $$
- I had skills that would allow me to go back to work easily (in the initial yrs, anyway), if necessary

But what made the decision easy is that corporate life (and I worked at home!) had become a torture. The inevitable politics were making me miserable, and I could feel it eating away at my soul and shortening my life. Changing corporations made no difference. I was done.

Fast forward seven years ... Taxable is around $220k, retirement around $425k and equity in properties around $150k. Strong markets have helped. Another factor is the one-man company I started five yrs ago when I got bored. It nets around $25k/yr, allows me to spend & travel more freely, and even lets me relive that old thrill of investing new $$.

 

[skipro33]

Seven years ago I did it very bare-bones, by most people's standards here.

Age 46 with around $250k in taxable accounts and $250k in retirements accounts. Also two residential rental properties with very little net equity (then) and slightly negative cash flow. No pension. No company health ins. Very modest Social Security available at 62 or later.

What allowed me to do it was:

- I'm single with no kids
- I have no debt, other than the mortgages
- I'm healthy. No prescriptions or conditions
- I'm flexible and can live simply
- I was/am very open to living in low-cost countries like Ecuador or Thailand, if necessary
- I was open to medical tourism, if necessary to save $$
- I had skills that would allow me to go back to work easily (in the initial yrs, anyway), if necessary

But what made the decision easy is that corporate life (and I worked at home!) had become a torture. The inevitable politics were making me miserable, and I could feel it eating away at my soul and shortening my life. Changing corporations made no difference. I was done.

Fast forward seven years ... Taxable is around $220k, retirement around $425k and equity in properties around $150k. Strong markets have helped. Another factor is the one-man company I started five yrs ago when I got bored. It nets around $25k/yr, allows me to spend & travel more freely, and even lets me relive that old thrill of investing new $$.

Way to go! Taking control of your fate instead of staying stuck miserable. You got it figured out.

 

[Lakedog]

If only every 8 year period could be the same!

Sure would be nice, huh? Although my investments have more than doubled from the day I retired through today, there was a drop of almost 40% within my first year of retirement.

 

[Danmar]

Funny how this discussion has evolved into mostly pensions. Agree these are very good to have. My non cola pension represents almost half our available cash flow but when I was working really didn't give the pension much thought. Now after 10 years of retirement that monthly deposit is really nice. Also allows me to take a little more risk in the portfolio.

 

[Enuff2Eat]

Seven years ago I did it very bare-bones, by most people's standards here.

Age 46 with around $250k in taxable accounts and $250k in retirements accounts. Also two residential rental properties with very little net equity (then) and slightly negative cash flow. No pension. No company health ins. Very modest Social Security available at 62 or later.

What allowed me to do it was:

- I'm single with no kids
- I have no debt, other than the mortgages
- I'm healthy. No prescriptions or conditions
- I'm flexible and can live simply
- I was/am very open to living in low-cost countries like Ecuador or Thailand, if necessary
- I was open to medical tourism, if necessary to save $$
- I had skills that would allow me to go back to work easily (in the initial yrs, anyway), if necessary

But what made the decision easy is that corporate life (and I worked at home!) had become a torture. The inevitable politics were making me miserable, and I could feel it eating away at my soul and shortening my life. Changing corporations made no difference. I was done.

Fast forward seven years ... Taxable is around $220k, retirement around $425k and equity in properties around $150k. Strong markets have helped. Another factor is the one-man company I started five yrs ago when I got bored. It nets around $25k/yr, allows me to spend & travel more freely, and even lets me relive that old thrill of investing new $$.

Great story. Sometime it's not the size of your net worth but the size of your guts that decide when you get to retire. Congrats

 

[NW-Bound]

Size of one's guts? I thought it's some other organs.

 

[dallas27]

The answer to this question means nothing when pensions are not taken into account.

The "rules" need to state to convert annuity at a certain rate, and explain the math for those who don't know how. Also need to have differing formulas for cola/nocola and maybe also old v young.

 

[foxfirev5]

In the overall context of the is forum this thread is meaningless. Just say'in. Figure it out for yourself.

 

[TNBound]

Retiring next month at 57. WooHoo! DH retired at 55 but works PT. Agree cash flow is king. I think we're ok but can't help but be a little nervous about pulling the plug. Our situation is this; only about $150k in savings, 30k in IRAs, but state and federal pensions totaling $78k and gross rental income of $38k. My state retirement includes a COLA of 3% compounded annually, so after 30 years, just my payments alone will have totaled over 2.5M. It's a sweet deal and I feel very blessed to have gotten my 25 years in. I'll also have a decent SS, DH won't because of the federal offset and I'll probably begin drawing between 62-65. Wish we had more of a cushion in cash, but any real reason to be nervous?

 

[2017ish]

Retiring next month at 57. WooHoo! ... Our situation is this; only about $150k in savings, 30k in IRAs, but state and federal pensions totaling $78k and gross rental income of $38k. My state retirement includes a COLA of 3% compounded annually, so after 30 years, just my payments alone will have totaled over 2.5M. .... I'll also have a decent SS, DH won't because of the federal offset and I'll probably begin drawing between 62-65. Wish we had more of a cushion in cash, but any real reason to be nervous?

Congrats, from someone already in TN.

Unless you have some seriously large nondiscretionary spending, you are sitting pretty--assuming that your state's pension situation is not bad. (I.e., big difference between IL and TN in this regard.) Don't forget your safety net of rentals--if push came to shove (or if you just get tired of handling them), that gross rental income can be converted into liquid assets. What is your spend rate, and will it be when the two of you are both retired? That is the key question.

We have a much larger pot of liquid assets than you, but only pension is the [-]possibility[/-] probability of Social, which we'll draw at 70 if things don't change compellingly. If you had reason to be nervous, I'd hate to think of what we should be feeling! (And, to be clear, we aren't nervous about cutting the cord this coming summer at 57/56.)

E.T.A.

 

[Youngster]

Maybe I missed it; however, is there a simple formula to calculate the value of a cola'ed pension?