OT: How much $ do you need to retire?

[Kingfisher]

I pondered this same question 2 years ago at at 60.

Financial planner said I needed way above what we had in IRA's, savings, etc. so i assumed I'd be working through my 60's.

Then, a revelation!! If you have a steady income stream from pension's, good healthcare coverage (we pay same price in retirement as if I was working, ex Federal employee), house paid off, no huge debt, why not retire now.

So I did at age 60 in 2015. With our pensions, healthcare and social security, we are doing fine and haven't touched our savings, IRA's etc. Actually when I start collecting Social Security in March, we will be bringing in MORE than when we were working.

I'm starting to be convinced that the whole financial services industry is geared toward you working as long as you can, placing your money into their hands for as long as possible. Not a knock on planners, because I like our financial planner, but my wife and I came to this decision two years ago on our own and we are fine.

But as luck would have it, my wife has developed early onset alzheimers and needs my care full time, so my retirement fits into the grand scheme of things.

[Llewellyn]

Originally Posted by Kingfisher

I pondered this same question 2 years ago at at 60.

Financial planner said I needed way above what we had in IRA's, savings, etc. so i assumed I'd be working through my 60's.

Then, a revelation!! If you have a steady income stream from pension's, good healthcare coverage (we pay same price in retirement as if I was working, ex Federal employee), house paid off, no huge debt, why not retire now.

So I did at age 60 in 2015. With our pensions, healthcare and social security, we are doing fine and haven't touched our savings, IRA's etc. Actually when I start collecting Social Security in March, we will be bringing in MORE than when we were working.

I'm starting to be convinced that the whole financial services industry is geared toward you working as long as you can, placing your money into their hands for as long as possible. Not a knock on planners, because I like our financial planner, but my wife and I came to this decision two years ago on our own and we are fine.

But as luck would have it, my wife has developed early onset alzheimers and needs my care full time, so my retirement fits into the grand scheme of things.

And there seems to be an assumption that you should only live on the income without dipping into your capital. Why the hell not??

I'm convinced that if you go into retirement with your house paid off, no significant debt and have realistic expectations about what you want to spend then you don't need anything like the figures that financial planners throw around. FWIW, we gave ours the flick a few years ago - the value just wasn't there for what they were charging. I'm sorry to hear about your wife - good luck.

[Ralph]

I'm currently 75....and retired in 1998. Thought I had enough money for maybe two lifetimes.

Made some (non fatal) investment mistakes. Main one was.....I didn't fully comprehend that how you make your money before retirement is usually concentrating on some big idea.....real estate, great stocks, building a business, etc......where you take risks, put up with a lot of volatility.....and await the day when you can cash out. That's how most people make their money. Investing slowly and being super diversified doesn't get most people what they need for retirement.....I have observed. How you make big bucks is one thing.....how you keep it is another.

In retirement....you have to invest differently. Now the objective is to keep what you have. Be diversified, invest for income as well as some growth. Maybe keep some at no risk at all. This requires a lot of patience, and isn't as exciting as what you do to grow the money. But if you live a long time in retirement, and maybe with no part time job.....your money has to last.....you can't take as many chances, because you have no way to make it back. However....for me personally.....I do this by keeping enough liquid investments for 3-5 years of spending, so don't have to liquidate when markets are down, and still own mostly boring low volatility dividend paying stocks for future.

IMHO one of the best income ideas in retirement.....is to keep working in some fashion doing the work you like in your field....just maybe fewer hours with less responsibility. Make sure you have no debt, and you will need as much income in retirement as you need when working. Will spend less on work related things (clothes, vehicles, gasoline, etc) , but more on others, especially health related including vision, teeth, dermatology, etc...as you age.

I understand this is not exactly what most advisors preach. And it's probably not the advice the rules would require me to give if I was still advising clients. But it's how I think investing in retirement works.

BTW.....I'm retired from Merrill Lynch and this is what I did for a living. And even I didn't get it all right. It's hard for someone who doesn't think about this all the time. I'm no longer registered and licensed to give financial advice....so ignore this.

[OtayBW]

Any advice for how to select a financial planner for an occasional check-up, diagnosis, prognosis?

[Ralph]

Originally Posted by OtayBW

Any advice for how to select a financial planner for an occasional check-up, diagnosis, prognosis?

Not really. So few financial advisors have any money themselves, how can you take their advice? It's basic math. Don't spend more than 3-4% of your financial assets and stay invested.....I think. Keep some cash or near cash so you aren't liquidating investments when prices are low. With the recent big rally....I may sell some stocks to gather up more cash than I really need.....just because I like to sell at highs. I'm not so smart really....but have learned to take money out at tops, and try to have some money around to invest at lows.

EDIT addition.....if you find a young er advisor....who is living his advice......maybe saving 30-40% of his income, has his goals written down, and who is smart about investing, where we are in the business cycle, what kinds of investments (or funds) are likely to do well in this time of the business cycle, hang on to him. He can get you to your goals.

[Schmed]

Originally Posted by Louis

I'd bet my 401K that nearly all financial planning advisors will tell you that this is most likely too conservative, and that the vast majority of Americans nearing retirement wouldn't be able to achieve it. Heck, I wonder what % of them have even 1 year's income saved - over 50%? I don't think so.

There was a stat recently that a large majority of people don't have $1000 in the bank.

It's interesting (and concerning) to me, that I've done everything "right" - always put $ into 401k, never carried debt, good income, yet it's still a stretch to reach some of the retirement nest egg goals.

I'm afraid that many (MANY) people will be living in poverty during their retirement years.

In our company, only 25% of employees put their own money into their 401k. We even went to a discretionary lump sum distribution to people's 401k, so at least they have something in there.

[Mr. Pink]

Originally Posted by Schmed

There was a stat recently that a large majority of people don't have $1000 in the bank.

It's interesting (and concerning) to me, that I've done everything "right" - always put $ into 401k, never carried debt, good income, yet it's still a stretch to reach some of the retirement nest egg goals.

I'm afraid that many (MANY) people will be living in poverty during their retirement years.

In our company, only 25% of employees put their own money into their 401k. We even went to a discretionary lump sum distribution to people's 401k, so at least they have something in there.

True. Half of Boomers have zero savings. Nothing. Of the other half, maybe 25% of them have over six figures, and then ten percent have 500,000 or more, which is the minimum to start thinking about retiring with, if pairing up with Social Security. Pensions are rare, but, if that third component is there for the few, it will be much more comfortable, but, then we're talking about maybe 5% of all Boomers, if that. And public pensions are looking really really shaky these days, so don't gloat if you're a teacher or cop in Illinois or New Jersey or South Carolina. I predict that Chicago may very well follow Detroit sooner than you think.

If you think our political system has been turned upside down and disrupted big time by economic trends, you ain't seen nothing yet. Tens of millions of old, hungry, and angry Boomers are going to be with us for a few decades as they enter the end zone with no money and in poor physical shape, and the generations following them will have even less as they stare at an old age with much more debt than savings and assets. It's not going to be pretty. I'm 64 (cue the Beatles), and I'm more than happy I won the birth lottery and spent my time on the planet when and where I did. Maybe the best time in human history for the average schmoe like me, the way things are going.

[drewellison]

I'm in the camp of hiring a licensed fiduciary, not a "financial planner". With a fiduciary, they are paid usually a fee or a percentage of the assets they manage (not paid for transactions or to sell you stuff), and they are required by law to represent your interests.

A good fiduciary will look at your complete financial picture: investments (stocks, bonds, cash), real estate, social security, insurance, mortgages, other debt, risk tolerance and financial goals. Then they will craft a plan specifically for you to get to where you want to be.

I started with a local fiduciary (who was also a CPA for umpteen years and knew quite a bit about real estate before becoming licensed to advise) a couple of years ago. I wish I'd done this years earlier. It was a bit unnerving to open up your complete financial picture to someone else, but it was a good move.

[fuzzalow]

Originally Posted by drewellison

It was a bit unnerving to open up your complete financial picture to someone else, but it was a good move.

Try getting approved by a co-op board in order to buy an apartment. It is the same thing.

It is actually less invasive than it might seem at first. If you have actually grappled with the reality of what your true financial picture looks like and truly is, it is no big deal. It all just becomes numbers on a page.

Depending on the building, in going for a rental apartment the co-op board made us make a full financial disclosure as if we were buying. But we knew the bar was different for prospective renters versus owner so we didn't tell them everything. Just because.

My point being, the numbers never lie and never sugarcoat your own finances. Look the harsh or sunny reality square in the eye. Do not be afraid of what you might find because finance is the harshest environment when it crosses with real lives and living. If you do not deal with it, it will cut your throat.

When I post to these threads, I keep it simple to only basic principles or warnings. I caution every reader to not take too much "advice" from posters, most of whom oversimplify what they know down from personal anecdote or bravado. [Added P.S.: I do not wish to single anyone out by this remark. Read what was posted and make your own conclusion. I will note however that Ralph made a correct emphasis when discussing the importance of preservation of capital.] This stuff is far more complex that defies actually learning from a thread discussion - so use it as moral support and the incentive to deal with it on a real basis going forwards if you have not yet done so.

Best of luck. I am outta here, see you at the next stop.

[livingminimal]

I'm putting money into a retirement fund as I am able to, but quite frankly, I will likely always work in some capacity. My main goal is to make sure my house is paid off well before standard retirement age, and that I continue to at least do adjunct teaching work and consulting to have some income.

I am 40 years old. During the Bush years I wrote off the idea that I would ever have some golden perfect retirement full of travel and riding bikes in Belgium or Italy a couple of times per year or a vacation house somewhere else. btw I am a well-educated professional whose career continues to ascend, and I still have zero optimism about retirement with the way the world is headed, and with having 7 and 4 year old kids. In some capacity, I'll work until I literally cant.

[Llewellyn]

Over here the default advice from a financial adviser (sounds like what was described as a fiduciary above) is to put money into superannuation. The only financial advice anyone with a home loan has needed since the GFC struck is to pay as much as possible off of their home loan, because with interest rates at the generational-low rates we have at the moment, there's never been a better time to do it. Clearing what is arguably most people's biggest debt as quickly as possible gives you a great foundation to build on for retirement.

Great post by Ralph above.

[smontanaro]

Aren't a lot of retirement targets heavily influenced by the expected rate of return on investments? That's one reason so many people want interest rates to rise. If you retired a few years ago and were projecting a 5% rate of return, a 2% rate is going to make things difficult. Similarly, if you set your retirement goals ten years ago expecting that 5% return and have been dutifully plunking down what you thought you needed, year in, year out, you're going to look at your nest egg today and wonder what happened if all you got was that measly 2% return.

[Ralph]

Originally Posted by smontanaro

Aren't a lot of retirement targets heavily influenced by the expected rate of return on investments? That's one reason so many people want interest rates to rise. If you retired a few years ago and were projecting a 5% rate of return, a 2% rate is going to make things difficult. Similarly, if you set your retirement goals ten years ago expecting that 5% return and have been dutifully plunking down what you thought you needed, year in, year out, you're going to look at your nest egg today and wonder what happened if all you got was that measly 2% return.

Things that pay good interest....bonds, and things that pay big dividends.....stocks....usually lose principal value as interest rates rise. Not good in a rising interest rate environment. CD's OK, but don't help with inflation. A 5% CD rate after income taxes, and 2-3 % inflation.....not so good.

Generally you need investments that can gain value after considering inflation.....stocks and investment real estate. It's good to pay your home off soon so you have more for other things....but I don't think of a home as much of an investment. You gonna sell it and live in a tent when you retire? And taxes, insurance, and maintenance (fixing things....like roofs, AC, heat, driveways, plumbing, etc) will usually (over time) average about 3% or so. But hey....you gotta live somewhere.

[echappist]

Originally Posted by Ralph

I'm currently 75....and retired in 1998. Thought I had enough money for maybe two lifetimes.

Made some (non fatal) investment mistakes. Main one was.....I didn't fully comprehend that how you make your money before retirement is usually concentrating on some big idea.....real estate, great stocks, building a business, etc......where you take risks, put up with a lot of volatility.....and await the day when you can cash out. That's how most people make their money. Investing slowly and being super diversified doesn't get most people what they need for retirement.....I have observed. How you make big bucks is one thing.....how you keep it is another.

What you are suggesting is a venture that may go south but may also make one independently wealthy, and i don't think this would apply to the vast majority of us.

Originally Posted by drewellison

I'm in the camp of hiring a licensed fiduciary, not a "financial planner". With a fiduciary, they are paid usually a fee or a percentage of the assets they manage (not paid for transactions or to sell you stuff), and they are required by law to represent your interests.

A good fiduciary will look at your complete financial picture: investments (stocks, bonds, cash), real estate, social security, insurance, mortgages, other debt, risk tolerance and financial goals. Then they will craft a plan specifically for you to get to where you want to be.

I started with a local fiduciary (who was also a CPA for umpteen years and knew quite a bit about real estate before becoming licensed to advise) a couple of years ago. I wish I'd done this years earlier. It was a bit unnerving to open up your complete financial picture to someone else, but it was a good move.

out of curiosity, how much does a fee-only adviser cost per hour? How often do one re-consult?

Originally Posted by Schmed

There was a stat recently that a large majority of people don't have $1000 in the bank.

It's interesting (and concerning) to me, that I've done everything "right" - always put $ into 401k, never carried debt, good income, yet it's still a stretch to reach some of the retirement nest egg goals.

I'm afraid that many (MANY) people will be living in poverty during their retirement years.

In our company, only 25% of employees put their own money into their 401k. We even went to a discretionary lump sum distribution to people's 401k, so at least they have something in there.

Back in 2012, the stat was that 50% of 401k accounts of people at retirement age have balance < $150,000. Not a lot to live on.

[jds108]

Another issue in this general discussion - I couldn't find a financial planner that could deal with my investing plan: all of my money is split between real estate (rentals and my own home) and notes receivable. The only money I have left in the stock market is a minuscule amount from my last employer.

I retired at 47 with a lower savings/net worth than anybody said was OK, but I'm making plenty of money each month and didn't see any need to work further as it would just add buffer on top of the buffer that's already there.

I'm also breaking the so-called rule about having a mortgage in retirement - I have 5 of them. Rates were so low the last few years that I had no worries about maximizing all of my mortgages and immediately investing the proceeds elsewhere.