Notices

SIMPLE financial Question

Old 08-17-2020, 07:41 PM
  #1  
Senior MemberCaptains Club Member
Thread Starter
 
Join Date: Dec 2007
Posts: 15,745
Likes: 0
Received 653 Likes on 359 Posts
Default SIMPLE financial Question

Let's say you're 45 years old and would like to retire at 60. We don't know what you've saved so far, but what does your 401K need to have in it to allow you to spend $10,000/month for the rest of your life?

Yes, the $10,000 needs to be in 2035 dollars....
Old 08-17-2020, 07:47 PM
  #2  
Senior MemberCaptains Club Member
 
Join Date: Feb 2006
Posts: 1,298
Received 424 Likes on 186 Posts
Default

How long are you going to live?
2mm is a fair guess, more if your withdrawal rate is more conservative, look at firecalc
Old 08-17-2020, 07:50 PM
  #3  
Junior Member
 
Join Date: Jun 2016
Posts: 19
Received 47 Likes on 8 Posts
Default

Probably some calculators online that can provide some guidance, but your going to have to quantify “rest of your life”.
Old 08-17-2020, 07:50 PM
  #4  
Admirals Club Admiral's Club Member
 
Join Date: Jun 2012
Posts: 69
Received 5 Likes on 5 Posts
Default

Who knows what inflation will be the next 15 years, but you’d need a minimum of $3 million to withdraw $10,000 per month today. That’s based on a 4% withdrawal rate, which is probably overstated given that future returns may be lower than historical returns. I’d say 3% - 3.5% is a safer withdrawal rate, which would mean a 401k balance of $3.5 - $4 million.
Old 08-17-2020, 07:50 PM
  #5  
Admirals Club Admiral's Club Member
 
Join Date: Jul 2017
Location: South Carolina
Posts: 515
Received 1,432 Likes on 690 Posts
Default

I really hate to be that guy, but don’t you think how much you have saved matters?

12= b+c ?
Never mind . Didn’t see the don’t know what you’ve saved so far.
Old 08-17-2020, 07:52 PM
  #6  
Senior Member
 
Join Date: May 2014
Location: Wendell, NC
Posts: 2,868
Received 5,889 Likes on 2,759 Posts
Default

Also, do you care about preserving principle?
Old 08-17-2020, 07:56 PM
  #7  
Senior MemberCaptains Club MemberPLEDGER
 
Join Date: Jan 2005
Location: Suburb of Sugar Tit SC
Posts: 14,336
Received 9,219 Likes on 4,976 Posts
Default

How soon do you plan to croak?
Old 08-17-2020, 07:56 PM
  #8  
Senior Member
 
Join Date: Sep 2014
Posts: 448
Received 83 Likes on 38 Posts
Default

Originally Posted by bamaboy473 View Post
Let's say you're 45 years old and would like to retire at 60. We don't know what you've saved so far, but what does your 401K need to have in it to allow you to spend $10,000/month for the rest of your life?

Yes, the $10,000 needs to be in 2035 dollars....
Really depends on your tolerance for market risk in retirement? Next, you need to determine age to plan until. At your current age and considering you're in good health, you should plan to age 95. Is the money tax-deferred or after-tax savings? You would also want to determine the taxation for that level of income and diversify to create efficiencies. Once that's determined you can figure out the amount of money needed to sustain that level of income throughout retirement.

By the way, it's not that simple...

Last edited by KongerUp; 08-17-2020 at 08:36 PM.
Old 08-17-2020, 07:57 PM
  #9  
Senior MemberCaptains Club Member
 
Join Date: Feb 2006
Posts: 1,298
Received 424 Likes on 186 Posts
Default

When I said 2mm, I meant that you would already need that by 45 and let it grow untouched until 60, I may be underestimating but you need around 5 by 60.
Old 08-17-2020, 08:01 PM
  #10  
Senior MemberCaptains Club Member
Thread Starter
 
Join Date: Dec 2007
Posts: 15,745
Likes: 0
Received 653 Likes on 359 Posts
Default

Originally Posted by houtxfisher View Post
When I said 2mm, I meant that you would already need that by 45 and let it grow untouched until 60, I may be underestimating but you need around 5 by 60.
My non-professional calcs saw it as about $8MM, being nasty-cautious, but between $5-8MM seems to be about right for a monthly income of $10,000 in 15 years?

We should start a poll about who here will have that....it's a daunting number for the kids.
Old 08-17-2020, 08:01 PM
  #11  
mbb
Senior Member
 
Join Date: Jan 2002
Location: State of confusion
Posts: 3,213
Received 1,017 Likes on 547 Posts
Default

Originally Posted by bamaboy473 View Post
Let's say you're 45 years old and would like to retire at 60. We don't know what you've saved so far, but what does your 401K need to have in it to allow you to spend $10,000/month for the rest of your life?

Yes, the $10,000 needs to be in 2035 dollars....
How long will you live
Whats rate of return
whats inflation rate
Whats savings rate until then
How much savings outside
What about kids college





Old 08-17-2020, 08:05 PM
  #12  
Admirals Club Admiral's Club Member
 
Join Date: Feb 2010
Location: Somewhere NC
Posts: 8,831
Received 694 Likes on 390 Posts
Default

$10k/mon net after taxes? So like $15k gross?
Old 08-17-2020, 08:07 PM
  #13  
Senior MemberCaptains Club Member
Thread Starter
 
Join Date: Dec 2007
Posts: 15,745
Likes: 0
Received 653 Likes on 359 Posts
Default

Originally Posted by cfarmd View Post
$10k/mon net after taxes? So like $15k gross?
The way I am seeing things now, that would be $10,000 net to spend. Don't ask!!

To the questions of age and longevity, it shouldn't matter if monthly is monthly is monthly....should it?
Old 08-17-2020, 08:10 PM
  #14  
Admirals Club Admiral's Club Member
 
Join Date: Feb 2010
Location: Somewhere NC
Posts: 8,831
Received 694 Likes on 390 Posts
Default

My personal plan for that stage of life is to have all dwellings paid for, and probably only 1 primary dwelling at that. That should take a good chunk out of month to month expenses

perhaps the biggest unknown is health insurance cost until you qualify for Medicare, assuming that still exists

now...are you planning on getting SS? I’m not...
Old 08-17-2020, 08:17 PM
  #15  
Member
 
Join Date: Oct 2019
Location: NC
Posts: 54
Received 16 Likes on 10 Posts
Default

Tomorrow is never promised. Don't save your whole life to retire rich if you aren't rich to begin with
Old 08-17-2020, 08:24 PM
  #16  
Senior Member
 
Join Date: Feb 2002
Location: NJ & MV
Posts: 4,181
Likes: 0
Received 2,107 Likes on 1,141 Posts
Default

~$4,050,000..based on using 4%/year withdrawals.

$10,000 w/2% inflation would be ~$13,500 in 15 years.


But if you understand and pursue future yield thru dividends.....
Old 08-17-2020, 08:26 PM
  #17  
Senior MemberCaptains Club Member
Thread Starter
 
Join Date: Dec 2007
Posts: 15,745
Likes: 0
Received 653 Likes on 359 Posts
Default

Originally Posted by CalypsoNotch93 View Post
Tomorrow is never promised. Don't save your whole life to retire rich if you aren't rich to begin with
the question isn't personal, so modifiers aren't important to the response...and note that responses are not answers; they are just responses. If you had a kid that was in their 40s and they asked you this question, what would you tell them?
Old 08-17-2020, 08:26 PM
  #18  
Senior Member
 
Join Date: Oct 2018
Location: Southern NJ
Posts: 399
Received 616 Likes on 262 Posts
Default

45, retiring at 60 = 15 years. inflation is about 3 -3.5% per year, we'll assume the worst, 3.5%. Rule of 72 says 72/3.5= 20 years for the cost of living to double. You're at 15 years, not quite 20 so I'll make a quick and dirty estimate that the cost of living will increase by 75% in 15 years.

Since a "safe" investment that's appropriate for retirement would bring in about 8% per year, and inflation is about 3.5% per year, that leaves you with roughly (rounding) 4% of your money that you can spend each year and your money will still grow to keep up with inflation.

If you need $10,000 per month now x 1.75 in future money = $17,500 per month = $210,000 per year. If that 210,0000 represents 4% of your savings, you will need $5.25 million. That's if you have no other income and don't want to spend your savings down.

If you are okay with spending your savings down to zero and can predict how long you'll live, you will need less. You need to figure out how long you'll live to do that math. I knew a woman who lived to 104 so estimate conservatively.
Old 08-17-2020, 08:37 PM
  #19  
Senior MemberCaptains Club Member
Thread Starter
 
Join Date: Dec 2007
Posts: 15,745
Likes: 0
Received 653 Likes on 359 Posts
Default

Originally Posted by maintenanceguy View Post
I knew a woman who lived to 104 so estimate conservatively.
Their lifelines should be a long one, so reaching 100 is not out of the question, hence the family "question".


Old 08-17-2020, 08:50 PM
  #20  
mbb
Senior Member
 
Join Date: Jan 2002
Location: State of confusion
Posts: 3,213
Received 1,017 Likes on 547 Posts
Default

Over 90 you likely on medicare, in a nursing facility, a ward of the state....penniless

Thread Tools
Search this Thread

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information -

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.