OT: Retirement Total Amount: How Much Do You Think You'll Need?

[saab2000]

Originally Posted by SlackMan

Hope this doesn't get me hated , but I thought it might be useful to help some people think about trading off buying something now for how much money it might be worth in the future.

Suppose that you could spend $3,000 today on bike stuff, or invest it at 8% instead. At 10 years, the investment would be worth $6,477, at 20 years it would be worth $13,983, and at 30 years it would be worth $30,188.

At a 10% return (which is about average stock market return over last several decade): At 10 years, the investment would be worth $7,781, at 20 years it would be worth $20,182, and at 30 years it would be worth $52,348.

One can see from these figures how much larger the 30 year value is than the 20 year value, and then the 20 compared to the 10. This illustrates the importance of staring early!

We can always spend less. I read an article just the other day on how if we spent $5/day less on coffee (many people easily exceed this) we could work a year less of our lives. I believe this.

It never occurred to me that I might want a budget bike. I've always wanted the fanciest stuff. But lately I've been more and more satisfied with the stuff I have and less lustful towards new stuff, in part because the 'new' stuff is 'old' in about 2 years.

I'm not kidding when I say that my next bike might be a Giant TCR Advanced with a 105 groupset and reasonable hand built wheels and be done with it. Or just get nothing and keep the old 10-speed stuff going.

I'm older than 33 but younger than some of the other folks here.

As for the 33-year old with the debt and baby coming, at least you're contributing to your 401(k) to receive maximum matching. Many don't do that. Again, if able, try to increase that at regular intervals, even if it's just a few dollars or 1% every year. The compounding effect will make you happy.

Same with your loans. If you can swing extra payments of even $100 here or there it makes a huge difference over time.

But pay down that mortgage to get out from under the PMI.... that's your biggest waste right there. Your PMI is probably a few hundred a month, right? Think of what you can do with that money towards your other debt.

Oh, and never carry a balance on a high-interest credit card. That is deadly.

I'm going for a ride on my 10-year old 10-speed stuff.

[54ny77]

I have enough bike crap to last me till I'm worm food. I am, literally, done with acquiring. I can certainly lust after something and admire it, but I don't see myself buying something new anytime soon. And there's no way I'm converting to 11 speed, no need or desire to.

Oh wait....I'm still waiting on a custom frame to arrive, eventually (no hurry). But it'll be built with existing 10 speed stuff.

Originally Posted by saab2000

It never occurred to me that I might want a budget bike. I've always wanted the fanciest stuff. But lately I've been more and more satisfied with the stuff I have and less lustful towards new stuff, in part because the 'new' stuff is 'old' in about 2 years.

I'm not kidding when I say that my next bike might be a Giant TCR Advanced with a 105 groupset and reasonable hand built wheels and be done with it. Or just get nothing and keep the old 10-speed stuff going.

[bfd]

Hmm, if I *retire* in 10 years or say 2025, would 5 pairs of Campy Record silver hubsets be enough? Maybe I should try to get 6 pairs....

Good Luck!

[biker72]

How much money required to retire????
Tough question.
when I was 50 I thought Social Security would disappear by the time I retired.
Started drawing SS at 62. I'll be 76 in June and the money still gets deposited in my account every month.

I don't think you can ever have too much money so save what you can.
Invest the max in your company 401k.
Don't take out any retirement money early. I can't emphasize this enough.
The big moneymaker for me through the years has been low cost index mutual funds. (Vanguard) There are others out there.

With S.S., company retirement and a part time job my retirement fund is steadily increasing.

Back to the original question. How much???
I personally know people that are doing just fine on $300k-$500k in savings.
Buy some custom made bicycles??? You'll need a little more.

[druptight]

Originally Posted by saab2000

As for the 33-year old with the debt and baby coming, at least you're contributing to your 401(k) to receive maximum matching. Many don't do that. Again, if able, try to increase that at regular intervals, even if it's just a few dollars or 1% every year. The compounding effect will make you happy.

Same with your loans. If you can swing extra payments of even $100 here or there it makes a huge difference over time.

But pay down that mortgage to get out from under the PMI.... that's your biggest waste right there. Your PMI is probably a few hundred a month, right? Think of what you can do with that money towards your other debt.

Oh, and never carry a balance on a high-interest credit card. That is deadly.

I'm going for a ride on my 10-year old 10-speed stuff.

Yeah, we do what we can. I work in financial services, so I've got an idea what I'm up against. Thankfully with when I graduated my 60% of our debt is at about 2.5% average. The PMI really is killer. $200 a month that goes right down the crapper. The good news is that house values have skyrocketed in my area, but unfortunately for the first few years (we're only at about 18 months in the home), they don't let rising market alone qualify you for a revaluation that gets rid of the PMI. So unfortunately I'm stuck with it for now (unless I can find a 2nd loan to get me to 20%).

Pay my credit card in full every month (and rack up about $1000 a year in TAX FREE cash back from it).

[saab2000]

Originally Posted by druptight

Yeah, we do what we can. I work in financial services, so I've got an idea what I'm up against. Thankfully with when I graduated my 60% of our debt is at about 2.5% average. The PMI really is killer. $200 a month that goes right down the crapper. The good news is that house values have skyrocketed in my area, but unfortunately for the first few years (we're only at about 18 months in the home), they don't let rising market alone qualify you for a revaluation that gets rid of the PMI. So unfortunately I'm stuck with it for now (unless I can find a 2nd loan to get me to 20%).

Pay my credit card in full every month (and rack up about $1000 a year in TAX FREE cash back from it).

Cool. You're ahead of where I was at your age. I've been playing catch up the past few years and thankfully have been in a position to contribute more than would seem needed, but when you start with little you have to add a lot in your 40s. That's why I always tell the 20 something people I work with that they'll thank me later if they do what they can now.

As for assets? I have only my savings....

And two pair of silver Record 10/11 speed hubs in the highly desirable 28/32 combination! These will fund my retirement!

[Ralph]

I'm 72 now, but I can trace the beginnings of my drive to be able to retire early to just two things. First.....I remember when I was in my early 40's, talking to an old guy in the office, and we were all making good money in those days, and I mentioned to him that I wanted to eventually buy a big expensive house and a 5 series BMW. Just to kinda show I achieved something from all my years of going to school and years of hard work. And I'll never forget what that (rich) old guy said to me. He said "for the most part, those big houses and fancy cars are a sign of debt, not wealth, so don't pattern your life after them". "They are a few exceptions, but not many".

Second major event was reading a book by Tom Stanley entitled "The Millionaire Next Door". About who were America's millionaires. Hint......it wasn't those who looked like they were millionaires. BTW....I had a good client who commuted by bike to work a good ways, and he was a multi millionaire. He had a nice car, but didn't drive it much. I remember one time he bought a new Toyota Supra from a dealership about 40 miles from his home. He just rode his bike down to the dealership, wrote out his check for the car, threw his bike in the back of car, and drove it home. That was just normal for him.

[Mr. Pink]

Originally Posted by Ralph

Second major event was reading a book by Tom Stanley entitled "The Millionaire Next Door".

I too was changed by that book. But, it would have a bad piece of advice today, because one cornerstone of his "program" is to own real estate, which did quite well for most people post war, until 2007, as we all know. One can question that investment today and for a few decades, I'm pretty sure, as the Boomers sell of their houses, to, well, a poorer generation.

I'm pretty sure that one piece of advice that would still be valid is not to buy 13,000 dollar bicycles. He'd probably freak out at my 5000 dollar bikes.

[Climb01742]

Another way to retire sooner? Don't get divorced. Divorce is quite a monkey wrench in one's financial life.

Everyone on the day they graduate from college should get two things tattooed on their bodies somewhere:

Keep your monthly nut low.

Pre-nup.

[bfd]

Originally Posted by Mr. Pink

I too was changed by that book. But, it would have a bad piece of advice today, because one cornerstone of his "program" is to own real estate,

I'm pretty sure that one piece of advice that would still be valid is not to buy 13,000 dollar bicycles. He's probably freak out at my 5000 dollar bikes.

Huh?! Where do you live?! In the SF Bay Area, real estate is booming! In certain parts of SF, developers are getting like $1,000/sq ft?!! Even the old "junior 5" (2 bedrooms, 1 bath, 1 kitchen and living room) go for $700K+. You basically have to make a minimum of $100K/yr to buy a house in SF or closely surrounding area and then there's things like property taxes (1.188% of selling price)...

Note, I do agree that a $13K bike is a bit extreme, especially when the "average" $5k carbon production bike weighs in at around 15-16lb....Good Luck!

[Mr. Pink]

Originally Posted by bfd

Huh?! Where do you live?! In the SF Bay Area, real estate is booming! In certain parts of SF, developers are getting like $1,000/sq ft?!! Even the old "junior 5" (2 bedrooms, 1 bath, 1 kitchen and living room) go for $700K+. You basically have to make a minimum of $100K/yr to buy a house in SF or closely surrounding area and then there's things like property taxes (1.188% of selling price)...Good Luck!

SF doesn't count. Seriously. That's a second bubble waiting to pop at any time. It is a total outlier in the nation's RE market (well, besides Manhattan, Aspen, and wealthy neighborhoods in most healthy cities. Don't get me going about DC). Sometimes I think SF is populated by aliens.
Let's see now that the second tech stock crash seems to be under way. There's something wrong when somebody makes a game app and is suddenly worth a few billion dollars.

[JLNK]

"The Millionaire Next Door" by Stanley and Danko reflects values my parents have, probably because they grew up in the depression of the 1920's to 1930's. Although the book was orginally published in 1996 most of it still seems relevant based on information about the mean or median amounts many Americans have put aside for retirement published in the media.

[redir]

Originally Posted by notsew

This is pretty interesting stuff. I really enjoy the insights from people who have thought about this a lot more than me.

I am 32, just had a kid, and a year and a half ago started my first 'real' job. I feel like I got a late start on the whole retirement savings thing.

I work for a municipal government with a a real, honest-to-goodness pension system. When I started, I had trouble deciding if I wanted to join the pension, but in the end I went with it, at the least it reduces some uncertainty. If I stay here until retirement it definitely changes the "number." (I also throw some money every month into a 401(k)). On the other hand it really reduces my return if I end up leaving government service (or this place specifically) and don't retire in the system.

Anyways, this is all interesting to me because I need to really think about all this in a more serious way, so thanks for planting the seed, paceline.

One nugget of information that a friend recently pointed out is that your children can borrow for college, but no one is going to give you a loan for retirement. Obviously its ideal to plan for both, but if your getting a late start, most children would rather have student loans than their parents living above their garage.

Tuition inflation is pretty maddening. I had the experience of going to undergrad for what felt like next to nothing in the early 2000s (I think it was around $3000 a year), and then grad school a decade later for 150% of that a a quarter (granted, grad school, but still). Both were at state schools in the same system. I did some math that put the cost of my 8-month-old's future in-state tuition at $100k over four years - or about $500 /mo for 18 years. We are buying into the state guaranteed tuition plan for our kid, but even the cost of that is pretty disheartening. Anyyyyyways, that's probably a digression for a different post.

You sound a lot like me except I don't have and don't plan on having kids.

My question to those who do is why would you think you need to pay for their college? I went two years to a community college to get rid of the useless classes before attending a University for another 3 years. My debt after graduation was $8,000 which I paid off in the following two years. As for grad school I wouldn't go to grad school if I wasn't paid with grants, funding, and working as a TA or something like that.

I don't think employers care what school you graduate from in most cases. All you need is the piece of paper. Worked for me anyway.

[54ny77]

Interesting comment on this article. Harsh, yes, but perhaps the only way many of a younger generation will be able to afford re-entering markets once viewed as completely unaffordable (assuming estate planning arrangements are made).

http://www.bloomberg.com/news/2014-0...ding-boom.html

" All About Housing • 39 minutes ago

Regardless of where they go, they'll die and leave 35 million excess empty houses. In fact the process has already started."

[druptight]

Originally Posted by redir

You sound a lot like me except I don't have and don't plan on having kids.

My question to those who do is why would you think you need to pay for their college? I went two years to a community college to get rid of the useless classes before attending a University for another 3 years. My debt after graduation was $8,000 which I paid off in the following two years. As for grad school I wouldn't go to grad school if I wasn't paid with grants, funding, and working as a TA or something like that.

I don't think employers care what school you graduate from in most cases. All you need is the piece of paper. Worked for me anyway.

Not everyone has that level of frugality upon high school graduation. I went to a (public) HS where everyone went to 4 year schools and probably 75% of those private. If you didn't you were an outlier. Unfortunately no one was ramming home the reality of what putting yourself $100K into debt would do to your financial situation upon graduation. Hopefully with rising costs, more of that is happening today. I certainly would have gladly taken your approach had I realized the pickle I was putting myself in.

I'm going to do my best to try to help pay for some portion of my kid's school, being that I paid for all of my own and know what that burden has been like. I think it'll be more like, here's $X dollars, use it for school as you see fit. Any amount you spend over $X is on you.