Jump to content
NKA

THE NEW REALITY OF OLD AGE IN AMERICA

Recommended Posts

4 hours ago, 4x4ord said:

I think of middle class income is in the range of 40,000 to 120,000 per year. As has been mentioned at a 3% withdraw rate a person wanting to fully retire at 55 is going to need a minimum of 1,300,000 just to have a 40k annual salary. That is certainly going to put them at an income level far lower than "high on the hog" in my mind. Now that person living on 40k per year might be happier than someone else living on 200k but "high on the hog" definitely requires some cash.

Um, OK say 3% annual withdrawal rate, in the meantime, what is the rate at which the $1,300,000 is earning interest?

Linda

Share this post


Link to post
Share on other sites
1 hour ago, sandsys said:

Um, OK say 3% annual withdrawal rate, in the meantime, what is the rate at which the $1,300,000 is earning interest?

Linda

But you have to take into account inflation. Especially if you are planning on retiring at 55 years old. Someone retiring today and pulling out $40,000 in year 1 is going to have to pull out $86,000 in year 30 to have the same 40k buying power that he had in year 1. (based on only a 2.6% inflation rate).

Share this post


Link to post
Share on other sites
4 hours ago, sandsys said:

Um, OK say 3% annual withdrawal rate, in the meantime, what is the rate at which the $1,300,000 is earning interest?

Linda

Here is a Link to an online calculator that you can play with to try to pick a withdrawal rate that you would be comfortable with based on on the numbers you pick for some variables. If you think you can earn 6% interest with an inflation rate of 3.0% and you're planning on being dead and broke by the time you're 80 years old you could retire at 55 and plan on withdrawing about $72000 in your first year with the intent of adjusting your withdrawal rate every year to keep up with inflation.  On the other hand if you want a guaranteed income on your investment you might only be able to get a 3% return with inflation at 2%  and if you want to prepare to live to be 90 and leave $300,000 to your kids you would have to be happy with a $40,000 per year withdrawal rate. 

Share this post


Link to post
Share on other sites

You are also assuming that the goal is to keep the $1.3million intact so that the heirs get it when the owners die. I don't really have that concern. That amount of money would pay the owners $40/year for 32.5 years if it were kept in a shoebox with no return of any kind. Most people do not have that much concern about leaving money when they die. 

Share this post


Link to post
Share on other sites
15 minutes ago, Kirk W said:

You are also assuming that the goal is to keep the $1.3million intact so that the heirs get it when the owners die. I don't really have that concern. That amount of money would pay the owners $40/year for 32.5 years if it were kept in a shoebox with no return of any kind. Most people do not have that much concern about leaving money when they die. 

You're not taking into account inflation. $40k in 32.5 years is not going to buy you much. Back in 1973 when I was just a kid I witnessed a relatively young man retiring with $250,000. In 1973 a pretty decent house could be bought for $35000. Anyway inflation hit and he thought he was richer than he actually was. He ended up broke, divorced, back to work and bitter in no time. Or was it divorced, broke, back to work and bitter .... I don't remember the exact order.

Share this post


Link to post
Share on other sites
16 hours ago, Roadtrek 1 said:

Everyone's perception of living "high" is quite different.

 

16 hours ago, Roadtrek 1 said:

NO...this is not true...you don't need $1,300,000 to have a $40,000 return.  

OK.  So just what are the details to provide information to the people following this forum?  Vague statements provide NO useful information. 

Prime example:  how much money does one need to have to have a 90% assurance that you will not run out of money in 30 years of retirement, by taking out $40,000 (and adjusting for inflation) each year?   

Most financial planners give numbers like 3% to 5% withdrawal rates.  These withdrawal rates many times means you will die with zero money in the account at exactly the year you planned for. 

Share this post


Link to post
Share on other sites
8 hours ago, 4x4ord said:

You're not taking into account inflation. $40k in 32.5 years is not going to buy you much. Back in 1973 when I was just a kid I witnessed a relatively young man retiring with $250,000. In 1973 a pretty decent house could be bought for $35000. Anyway inflation hit and he thought he was richer than he actually was. He ended up broke, divorced, back to work and bitter in no time. Or was it divorced, broke, back to work and bitter .... I don't remember the exact order.

I have to go back to the old adage:  "It is not how much money you have, it is what you do with the money you have that leads to success!"

Taking $250K in 1973 and just spending it, not continuing earn some sort of income is a good example of what not to do. 

On the other hand, the couple who have the RV-Dreams website and blog quit the corporate world in 2005 with around $200K and started fulltimeing.  Through hard work and dedication they have made a successful business out of the RV world.  That includes their nest egg taking a nose dive in the great recession of 2008/2009.   While they didn't provide their annual income from the corporate world, I would guess their combined income was well above $100K/year before going fulltime in an RV.

Blog:  https://rv-dreams.typepad.com/

Website: https://www.rv-dreams.com/

 

 

Share this post


Link to post
Share on other sites
9 hours ago, 4x4ord said:

You're not taking into account inflation.

No, but neither was I taking into account any return on the money and I don't really advocate keeping your savings in a shoe box. The point is that as you get older most planners do advise beginning to spend down the total principle at least to some degree. Since I am now 76 years old, I don't expect to need an income 30 years from today so there is nothing unreasonable about beginning the process of spending down. We worked hard to add to our savings in our working years in order to retire early. We then did what was necessary to keep our budget low enough to avoid taking anything out of our invested funds in retirement until at 71 I started to be required by the IRS to take a portion out each year. Even then our fund has continued to grow but at a slower rate. We are currently looking at a lifestyle change in our near future that may cost all of the annual growth of our investments, or even a little more than that growth, but we didn't save that money to be able to leave it to our kids so if most of it is gone when we depart life, the fund has served its purpose. Both of my parents lived past the age of 90 but I feel quite comfortable in planning a process that would leave us broke by 110.

Share this post


Link to post
Share on other sites
1 hour ago, Al F said:

 

OK.  So just what are the details to provide information to the people following this forum?  Vague statements provide NO useful information. 

Prime example:  how much money does one need to have to have a 90% assurance that you will not run out of money in 30 years of retirement, by taking out $40,000 (and adjusting for inflation) each year?   

Most financial planners give numbers like 3% to 5% withdrawal rates.  These withdrawal rates many times means you will die with zero money in the account at exactly the year you planned for. 

For my own planning, I assume a 6% interest rate and a 3.5% withdrawal rate. While my withdrawal rate probably won't change much, I expect to beat 6% (Vanguard easy 3 fund portfolio) quite regularly so that's my worst case scenario. I've found a wonderful tool called Firecalc (there's other variations out there) that run a simulated retirement strategy as if you would need to withstand the worst ravages of inflation, the Great Depression, and every other financial calamity the US has seen since 1871. I figure that if my numbers can withstand that, then it is likely to withstand whatever might happen between now and the day I no longer have any need for your retirement funds.

https://www.firecalc.com/

Edited by Black

Share this post


Link to post
Share on other sites

Not to take the subject matter into a different direction, but.....

Our union negotiated a different looking pension for us about 10 or 12 years prior to my retirement.  Some of us were happy with it and some were not.  It increased what we had to contribute to 12.75% each pay check.  However, it also ensured us a 3% increase each year (compounded) on our pension check for life.  So after almost 9 years of retirement my pension has increased $29,000 annually.  That may sound like a lot of increase but it just keeps us even with the cost of living actually, or at least seems that way.

Share this post


Link to post
Share on other sites
1 hour ago, Kirk W said:

No, but neither was I taking into account any return on the money and I don't really advocate keeping your savings in a shoe box. The point is that as you get older most planners do advise beginning to spend down the total principle at least to some degree. Since I am now 76 years old, I don't expect to need an income 30 years from today so there is nothing unreasonable about beginning the process of spending down. We worked hard to add to our savings in our working years in order to retire early. We then did what was necessary to keep our budget low enough to avoid taking anything out of our invested funds in retirement until at 71 I started to be required by the IRS to take a portion out each year. Even then our fund has continued to grow but at a slower rate. We are currently looking at a lifestyle change in our near future that may cost all of the annual growth of our investments, or even a little more than that growth, but we didn't save that money to be able to leave it to our kids so if most of it is gone when we depart life, the fund has served its purpose. Both of my parents lived past the age of 90 but I feel quite comfortable in planning a process that would leave us broke by 110.

It sounds like you've got things figured out. I'm just about 56 and Ialthough we have ample saved up to retire on we have much to get figured out before I think about retiring.

Share this post


Link to post
Share on other sites
On ‎3‎/‎12‎/‎2019 at 11:11 AM, Kirk W said:

I think that you may be over-optimistic about SS payments. I retired in 2000 at the age of 57 with a salary of about $22/hour. I began to draw SS at age 62 and get just about what she does reports.

Those retiring before their full retirement age need to realize that Social Security payments are based on 35 years of work. I believe if you have less than 35 years paying into the system that zeros are included in the calculation. In many cases, the wages earned in later years are greater than those earned at the beginning of ones entry into the work force. I believe the annual estimate of benefits projects the latest years earnings to retirement age so it may over estimate the benefits to be payed if one retires early. There is also a reduction in benefits for each month that one retires before their full retirement age. This calculator from the Social Security Administration can be used to get a more realistic estimate of ones benefits if planning to retire early.

Share this post


Link to post
Share on other sites
4 hours ago, Al F said:

 

OK.  So just what are the details to provide information to the people following this forum?  Vague statements provide NO useful information. 

Prime example:  how much money does one need to have to have a 90% assurance that you will not run out of money in 30 years of retirement, by taking out $40,000 (and adjusting for inflation) each year?   

Most financial planners give numbers like 3% to 5% withdrawal rates.  These withdrawal rates many times means you will die with zero money in the account at exactly the year you planned for. 

You are assuming that the investments are not capable of generating greater than 3-5% return?   I have to tell you that in todays world, if you aren't diversified with at least a small portion in something like small cap growth funds you will miss out on good returns.   

As for pulling SS early - best decision we ever made.   That meant we didn't have to touch our IRAs until we reached 70 1/2, and those funds grew and grew.  Our yearly RMD now exceeds the 'loss' by taking early retirement, and the funds just keep on growing.  

Share this post


Link to post
Share on other sites
4 hours ago, Barbaraok said:

As for pulling SS early - best decision we ever made.   That meant we didn't have to touch our IRAs until we reached 70 1/2, and those funds grew and grew.  Our yearly RMD now exceeds the 'loss' by taking early retirement, and the funds just keep on growing.  

X2. 

Linda

Share this post


Link to post
Share on other sites
6 hours ago, Barbaraok said:

As for pulling SS early - best decision we ever made.   That meant we didn't have to touch our IRAs until we reached 70 1/2, and those funds grew and grew.  Our yearly RMD now exceeds the 'loss' by taking early retirement, and the funds just keep on growing.   

The intent of my post was not to discuss the merits or issues in taking SS early, but rather to explain why the benefit of someone who retired early may not be much more than someone who had lower wages. If I remember from other posts, you both had pensions and employer paid health insurance after retirement. Many who depend on SS as a major part of their retirement income do not have those benefits. Everyone's circumstances are different and if one does not fully understand all the rules and the implications of them, the results can be less than desired.    

Edited by trailertraveler

Share this post


Link to post
Share on other sites
11 hours ago, 4x4ord said:

It sounds like you've got things figured out. I'm just about 56 and Ialthough we have ample saved up to retire on we have much to get figured out before I think about retiring.

I hope so but life has no guarantees. I believe that the key is to remain flexible in all long-term plans. No question that there is some degree of luck involved in most aspects of life planning but those who plan tend to be better off. To me the most difficult part of early retirement planning today s health care, which we were fortunate to have been covered by my previous employer as part of my retirement package. Recent changes in the laws have made that a far bigger challenge. Ii retired at 57.

10 hours ago, Barbaraok said:

As for pulling SS early - best decision we ever made.   That meant we didn't have to touch our IRAs until we reached 70 1/2, and those funds grew and grew.  Our yearly RMD now exceeds the 'loss' by taking early retirement, and the funds just keep on growing.

X3+!

 

Share this post


Link to post
Share on other sites
32 minutes ago, Kirk W said:

I hope so but life has no guarantees. I believe that the key is to remain flexible in all long-term plans. No question that there is some degree of luck involved in most aspects of life planning but those who plan tend to be better off. To me the most difficult part of early retirement planning today s health care, which we were fortunate to have been covered by my previous employer as part of my retirement package. Recent changes in the laws have made that a far bigger challenge. Ii retired at 57.

X3+!

I'm from Canada so our health care is covered. I've got two things keeping me from retiring: 1st I still enjoy working and don't want to retire..... I guess I need to develop more interests outside of work. The second is that I have a business that some of my kids think they are interested in. In order to get them involved in the business I will likely want to work with them for at least a few years before retiring. 

 

Share this post


Link to post
Share on other sites
53 minutes ago, 4x4ord said:

The second is that I have a business that some of my kids think they are interested in. In order to get them involved in the business I will likely want to work with them for at least a few years before retiring. 

Excellent! I hope that works out for you. My experience is if they are saying, "yes but not yet", they are really saying, "No", but I don't want to hurt your feelings so I'll say, "yes." I hope that's not true for you and your kids.

Linda

Share this post


Link to post
Share on other sites
14 hours ago, Black said:

For my own planning, I assume a 6% interest rate and a 3.5% withdrawal rate. While my withdrawal rate probably won't change much, I expect to beat 6% (Vanguard easy 3 fund portfolio) quite regularly so that's my worst case scenario. I've found a wonderful tool called Firecalc (there's other variations out there) that run a simulated retirement strategy as if you would need to withstand the worst ravages of inflation, the Great Depression, and every other financial calamity the US has seen since 1871. I figure that if my numbers can withstand that, then it is likely to withstand whatever might happen between now and the day I no longer have any need for your retirement funds.

https://www.firecalc.com/

Thanks for the link.  I had never seen this retirement calculator before.  It is quite interesting.  I’m having some fun playing with different scenarios and seeing how they would perform based on history.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

RVers Online University

campgroundviews.com

Our program provides accurate individual wheel weights for your RV, toad, and tow vehicle, and will help you trim the pounds if you need to.

Rv Share

Dish For My RV.

Find out more or sign up for Escapees RV'ers Bootcamp.

Advertise your product or service here.

AGS Now Hiring

RV Pet Safety

Cummins Home Generators

RVTravel.com Logo



×
×
  • Create New...