Early Retirement & Financial Independence Community

Early Retirement & Financial Independence Community (https://www.early-retirement.org/forums/)
-   FIRE and Money (https://www.early-retirement.org/forums/f28/)
-   -   Very small networth when ER ? (https://www.early-retirement.org/forums/f28/very-small-networth-when-er-84557.html)

COcheesehead 12-14-2016 10:49 AM

My Dad retired with a net worth of about $50,000, but he had a union pension and SS and lived for nearly 28 years without touching the nest egg. His net worth all but disappeared in the last few months of his life once he had to be put into a care facility.

skipro33 12-14-2016 11:03 AM

Hmmm... net worth... retired 4 years ago;
Well, my pension is a bit over $5,000 a month with a 5% COLA based on the usual tables.
Health care is covered. I pay about $50 a month plus the usual co-pays for visits and prescriptions.
My 401K, 457, IRA's, checking, savings and wallet all adds up to $400,000 of which I have been withdrawing 4% ($1,300 monthly) for the past 4 years when it only added up to $375,000.
I start drawing Social Security at age 62 in 2 years for what will be a total of $2,500 a month for DW and I. At which time I probably won't withdraw the $1,300 from my savings/investments. That pot of money will be for long term health care needs, emergencies, grand kids college, etc.

I own my own home worth approx $800,000 and other personal property worth maybe $300,000.

jkern 12-14-2016 11:25 AM

Quote:

Originally Posted by scrabbler1 (Post 1811826)


Before I ERed, I had about 2/3 of my $840k portfolio in pretax accounts and 1/3 in after-tax accounts, I had to reverse that ratio so I'd have enough to live on for 15 years until the reinforcements arrive. Half of that pretax portfolio (or 1/3 of the overall portfolio) was in company stock which I was able to liquidate relatively cheaply by using the NUA option to reduce the tax bite. Thanks to the crashing markets in late 2008, I was able to buy 25% more shares of a big bond fund at bargain-basement prices which has helped my monthly dividend income.


Despite pulling nearly $25k from the portfolio every year, it has still grown from $840k in late 2008 to $1.4M today.


I am just more than half way to getting to age ~60 intact since I ERed so things are looking good!

My situation was very similar. Retired 6/09 age 51 with $900k portfolio, about 2/3 after tax. Spent $100k remodeling/upgrading home. Spent $300k on rental properties. Now worth about $1.6M (IRA, Cash, Rentals). I have less than 6 months before I have access to the IRA.

marko 12-14-2016 11:28 AM

Let's remember that a guaranteed $60K COLA'd pension is equivalent to $1.5 million portfolio.

NW-Bound 12-14-2016 11:49 AM

Quote:

Originally Posted by marko (Post 1811910)
Let's remember that a guaranteed $60K COLA'd pension is equivalent to $1.5 million portfolio.

... in terms of cash flow. When you and your spouse die, the pension stops, but the portfolio lives on for your heirs.

exnavynuke 12-14-2016 11:57 AM

Quote:

Originally Posted by NW-Bound (Post 1811920)
... in terms of cash flow. When you and your spouse die, the pension stops, but the portfolio lives on for your heirs.

Which is nice, for people that have heirs they want to leave their money to. If that's not a priority/desire, then the difference is fairly immaterial imo.

NW-Bound 12-14-2016 12:06 PM

Very true.

Another difference between having your own stash and a steady income is that the former gives you more flexibility. For example, you can spend a lot one year, then make up for it later. With a steady income, you have to save first before you can splurge. Of course most people have some savings outside of their pension too.

This freedom in managing your assets of course comes in exchange for the occasional stomach ache when the market turns south. But as I am used to it, it is no longer a problem.

Beardog 12-14-2016 12:16 PM

As a self-employed person, I have no concept of how awesome it must feel to have an approximately $60K per year COLA pension and health care paid for in retirement. In my mind, I have to save/compound $2.5 million of my hard earned money to come close to the same "guaranteed" retirement benefits. I would take a few hundred thousand bucks in my pocket and the defined benefit pension/health insurance in a heartbeat. For current and near retirees, what a great deal! For future retirees, and perhaps very young current retirees with long anticipated lifespans, it looks like the great defined benefits may soon become shaky ground upon which to plan the future.

ExFlyBoy5 12-14-2016 12:17 PM

Quote:

Originally Posted by FUEGO (Post 1811748)
Yeah, I'd probably take that $55k per year police pension plus health/dental, few hundred thousand in the bank, and a paid off home. That would allow us to spend about $10-15k more than right now.

I was fortunate to hang around the Air Force long enough to get a pension; it's a HUGE reason I was able to retire so young. But, there were sacrifices over a period of 22 years to bring this to fruition but those sacrifices (mine, specifically) pale in comparison to what others had to do to earn (as opposed to GET) the monthly "wake up pay".

As far as I am concerned, there is NO way I would want to be in law enforcement for 2 days, let alone 20+ years to "get" that pension. Here in Georgia, there have been 6 officers shot in the line of duty over the last week. That is a risk that is simply too great for me to accept..so that pension is HARD EARNED. Not only to mention, the police pension of today is much different than the pension of 10 years ago.

Quote:

Originally Posted by Beardog (Post 1811938)
As a self-employed person, I have no concept of how awesome it must feel to have an approximately $60K per year COLA pension and health care paid for in retirement.

Not to beat a dead horse, but for a lot of folks (military/police/fire) this comes at a HUGE cost. Missed holidays. Missed birthdays. Missed anniversaries. Missed special occasions. Debilitating injuries at a young age. Shorter life span. Point being, this isn't a "free" benefit...it is a decent return of investment that can have a VERY steep initial cost. Just saying. ;)

Beardog 12-14-2016 12:30 PM

Yeah, I'm with you, ExFlyBoy5. I don't begrudge anything that comes as future reimbursement/payment/benefit to all who put themselves in harm's way for their fellow citizens. I think its great. I just don't see how it can all last indefinitely. Military, police, and firefighter benefits should be untouchable, IMHO.

Mdlerth 12-14-2016 01:35 PM

Quote:

Originally Posted by Walt34 (Post 1811678)
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 12-14-2016 02:21 PM

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. :coolsmiley:

l8_apex 12-14-2016 02:32 PM

Quote:

Originally Posted by Johnora (Post 1812029)
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. :coolsmiley:

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 12-14-2016 02:41 PM

well...
 
Quote:

Originally Posted by l8_apex (Post 1812034)
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 12-14-2016 02:42 PM

Quote:

Originally Posted by l8_apex (Post 1812034)
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 12-14-2016 02:58 PM

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 12-14-2016 03:08 PM

Quote:

Originally Posted by Lucky-Sperm-Club (Post 1811737)
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.

:frown:


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/...tor-data-table
3,156,749

skipro33 12-14-2016 03:20 PM

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 12-14-2016 03:27 PM

Quote:

Originally Posted by Lakedog (Post 1812063)
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 12-14-2016 04:34 PM

Quote:

Originally Posted by NW-Bound (Post 1811933)
With a steady income, you have to save first before you can splurge.

With a steady income you can get a loan.


All times are GMT -6. The time now is 05:51 PM.

Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.