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How much money do you need in order to retire?

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How much money do you need in order to retire?

Old 03-31-2012, 05:54 PM
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Default How much money do you need in order to retire?

I'm curious to see how much money you guys think is enough to allow you to retire. I have about 12 more years to work and save money so I'm not looking to retire any time soon. We met with a retirement planner and he told us we need to significantly increase our savings if I am to retire @ 62. In my opinion I think we would need about $700K to retire.

I have a friend that retired @ 62 and he had $367K in his 401K, still paying house payments and his equity line of credit is around $25K. For me $367K doesn't seem like enough. Another friend is 64 and he said he needs $1 million to feel comfortable enough to retire. I know it depends on how you want to live so for the sake of argument let's just say we will live more conservatively.

For me the sooner I can retire the better, people in my family don't tend to live very long. Mom died @40, dad died @ 62. I don't have the same lifestyle that they did, lots of smoking and drinking. They both were alcoholics and drank every day. My mom was a chain smoker and died of lung cancer.

How much do you guys think you need to retire comfortably?


Russ
Old 03-31-2012, 06:08 PM
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For starters, do you have a pension plan at work? Have you calculated the monthly payment? Have you reviewed your monthly Social Security benefit? What do you expect your monthly spending will be in retirement? Do you have long-term care and life insurance? Do you need to leave something for heirs? You are far enough from retirement, some of these numbers are only estimates, but it's an important start to answering your question.

Just so you know where I'm going with this, subtract your annual income from pension, SS, etc. from your expected annual spending. Your savings need to be 25-33 times that difference, so you can withdraw 3-4%/year to maintain your spending level. Not perfect, but it gives you a decent guess.
Old 03-31-2012, 06:26 PM
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Here are a few wild thoughts on a REAL number of dollars that you need.........

a. If your nest egg is in the bank, you are making 1/10 of one percent on the money.

b. If your egg is in the stock market/ AKA investment account, call it.....2%??

c. If your money is in investment property, it can be up to 20% return


If you have $700,000 in the bank, that would equate to about about $70/month in cash.

If you have a 401K portfolio that's.....average.......then it would become $1400/month

If you have rental property, then it could be $10,000/month......before R&M and other expenses that property rentals have, including lost rent for vacant properties.
Old 03-31-2012, 06:33 PM
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Since 1900 the avg DJIA return was 9% +/-....... and where do you get 20% ROI from real estate?

Come on man :-0 )
Old 03-31-2012, 06:35 PM
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I'm a solid 25-30 years away from that glorious day w/ a little over 60k set aside but those numbers (300-700k) seem a little low to me. Right now we're saving around 18% and I'm not really happy about that number.

I guess in theory we won't spend nearly as much money after retirement but I don't want to sit around and watch the grass grow.

Our dream is to get a Nordhavn 47 (who knows what else will be around in 2040) and ride that beast up and down every coast we can find
Old 03-31-2012, 06:42 PM
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Originally Posted by aiian View Post
I guess in theory we won't spend nearly as much money after retirement but I don't want to sit around and watch the grass grow.
That may be the theory, but don't count on it the first few years of retirement. I'm spending more in retirement than the last few years I worked- I have more time to drive around, time to buy boat/fishing gear, make home and vehicle improvements/upgrades, etc..
Old 03-31-2012, 06:44 PM
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Originally Posted by bamaboy473 View Post
Here are a few wild thoughts on a REAL number of dollars that you need.........

a. If your nest egg is in the bank, you are making 1/10 of one percent on the money.

b. If your egg is in the stock market/ AKA investment account, call it.....2%??

c. If your money is in investment property, it can be up to 20% return


If you have $700,000 in the bank, that would equate to about about $70/month in cash.

If you have a 401K portfolio that's.....average.......then it would become $1400/month

If you have rental property, then it could be $10,000/month......before R&M and other expenses that property rentals have, including lost rent for vacant properties.
I can say that in the market on the right investments up towards 10% but not for newbees
Old 03-31-2012, 06:45 PM
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Originally Posted by aiian View Post

Our dream is to get a Nordhavn 47 (who knows what else will be around in 2040) and ride that beast up and down every coast we can find
The 47 is a bit cramped - you should get the 55

Better save around 4M - you are gonna need it ..
Old 03-31-2012, 06:47 PM
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I'm thinking 2 million in real estate without debt in the house I want and I'll start thinking about retirement. Went to a friends house on Charleston harbor that we feel in love with and my wife has agreed to my plan to get there.

1 mill to play with and 1 to live off of.
Old 03-31-2012, 06:49 PM
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If you want to live the lifestyle you do now then you will need at least the same income you have now. You can deduct mortgages that will be paid off and other misc. expenses. If you want to live a lesser lifestyle than you do now then you may need a little less. 60k a year income may be enough for some 250k income/year may not be enough for others. The important thing is that you are thinking about it and trying to plan for the future.
Believe me, not many do enough planning.
Old 03-31-2012, 06:51 PM
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about 12 yrs ago at age 38 I figured by the time I retired at age 58 I would need 120k per yr and no mortgage to live an active lifestyle.
GOLF fish/boat travel winter in Fla return to Mass for summer. Since then I have had 2 back surgeries
so no golf My wife passed away so now I`m planning for just me. Oil/gas, food and medical has skyrocketed beyond what I could have imagined. Now I`m hoping that 120k will stll allow me to retire
but its going to take alot more work now to get there and it may not happen at 58.
Old 03-31-2012, 06:56 PM
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Too broad of a question.

If you have no house payment, no car payment, no boat payment, no credit cards.

How much do you need?

That should be the question.

If you have 10,000 a month in bills. you obviously need a crapload more than if you only have the necessary living expenses.

So...... when you retire, in what condition do you see your debt load?
Old 03-31-2012, 06:58 PM
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Originally Posted by triplenet View Post
Since 1900 the avg DJIA return was 9% +/-....... and where do you get 20% ROI from real estate?

Come on man :-0 )
Agreed on your question, because you and I have different approaches, perhaps. Find a great real estate deal that you can improve to rentable condition, and those returns are entirely possible.

My last foreclosure purchase was for $36K, added $8K into the house, and have a lease for $1100/month.

That isn't normal, but it is real life.


Thinking about it, though, a few tri plexes earn around 15%, so for a hands-off type of owner, perhaps 10% would be a more realistic goal? Hands-on types can get north of 15%, IMO.
Old 03-31-2012, 07:01 PM
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My grandfather did well in real estate but I always thought he was a bit of a slumlord.

I don't know where you're from but I can't imaging a $40k property being in the best area with the greatest tenants.

Am I wrong?
Old 03-31-2012, 07:01 PM
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completely debt free w/1Million in the bank/assets(not my own home but real estate investments) would be a starting target for me.
I should be able to collect 2k/mo pension and whatever is left from social security (if any).
If I were single/no kids I would probably do a reverse mortgage as well and try to leave this world penniless.
Old 03-31-2012, 07:08 PM
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leave this world penniless................ not a bad plan my friend
Old 03-31-2012, 07:12 PM
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RussH, I'm about the same age as you and looking to retire in maybe 15 yrs... maybe 20 - depends how I fell when I get there LOL. My goal is ~$2 mil in retirement accts, but I probably won't get quite there. I'm going at it 2 ways. Slamming cash into retirement accts and have probably averaged around 10-12% over the last 20 yrs on that. (made a killing on the rebound off the recession and the market crash in '08) I'm also going the route Bamaboy is talking about. Rental real estate. Have 3 rental properties now, 2 of them paid off in another 3 yrs and will be kicking off ~$2k /month which I will reinvest in more rental houses. Hope to have close to 10 houses paid off or mostly paid off when I do retire. Hopefully they will be kicking in close to $10k a month for retirement and I should be able able to reach ~$1.5 mil in the retirement accts by then too. Cool thing about the rental deal is that it really doesn't take all that much work to keep 'em rented out and if you ever get tired of it, just sell the houses that you paid for with other peoples' money. 10 houses @ $150k each = another $1.5 mil to have a great retirement with.
Old 03-31-2012, 07:15 PM
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Originally Posted by aiian View Post
My grandfather did well in real estate but I always thought he was a bit of a slumlord.

I don't know where you're from but I can't imaging a $40k property being in the best area with the greatest tenants.

Am I wrong?
Yes.

I have a friend that has several houses in the 35-45,000 range. All newer homes, good areas.

I have bought NEW, NEVER LIVED IN, 1600 sq ft 3/2 houses with a pool on 1/2 an acre in a predominantly white area for 55,000.

Also bought 3/2/2 on each side duplexes for 50-55,000.

It is all in how and where you look.
Old 03-31-2012, 07:22 PM
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Originally Posted by aiian View Post
My grandfather did well in real estate but I always thought he was a bit of a slumlord.

I don't know where you're from but I can't imaging a $40k property being in the best area with the greatest tenants.

Am I wrong?
You aren't wrong. The flip side of that question is that people are people, and those that can pay $3500/month might just as well leave a house destroyed when they are finally evicted.

My rentals are lower middle class people. They have to work for a living, and they aren't (all) on some government program that allows people to stiff landlords while they move to other digs.

I keep their properties clean and working, and expect rent before the 5th. It's a job for me, though...I work one day a week in order to maintain my retirement income. It isn't a free ride at all.
Old 03-31-2012, 07:29 PM
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It's all about your expected lifestyle. The calculation really is pretty simple if you can figure out how much income you will need. I've always advised that there are 2 things in this world that make money - People and money. If you currently have earnings and that stops upon retirement, you need to replace a portion of that income, all of the income and depending on the lifestyle you envision possibly more. Since your calculations will be in todays dollars, you need to adjust your income goal for inflation. You may want to base this calculation on 2% or so.

From there, you should divide the amount of desired income by a "reasonable" after tax rate of return. For example, if you are targeting an income of $80,000 and assume a 4% A/T return (you should be conservative in your projections), you would need $2 million saved.

This assumes that you will be living on interest and not touching principal, which gives you an additional financial cushion incase inflation rates go higher than assumed or your investments underperform. Obviously, if you have other sources of income, such as social security, pension, etc., you should make adjustments.

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