# How much should you save for retirement ?



## Brett (Apr 5, 2021)

How much should you save for retirement ?

*https://www.wsj.com/articles/how-to-know-if-your-retirement-savings-are-on-track-11617311712*

Fidelity says workers should aim to save at least six times their annual income by age 50; T. Rowe Price and J.P. Morgan put the figure for a 50-year-old, depending on household income, at about five times annual earnings. Yes, these ballpark figures can be helpful. But they address only one part of planning for later life. Ideally, you want to find out: Are my finances as a whole heading in the right direction? Put another way, you don’t want to reach the year 2033—assuming you do, in fact, retire in 12 years—and discover that in the early 2020s you could have or should have been more aggressive or conservative




 
I’ll conclude with a sobering thought: Fully 50% of all households in the U.S. are at risk of not having enough to maintain their living standards in retirement, says the Center for Retirement Research at Boston College. Again, a comprehensive financial checkup at least 10 to 15 years before retiring can help put you in the better half of that mix.


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## bogey21 (Apr 5, 2021)

Most will not have the income or discipline to save enough for basic retirement.  Why not just gradually triple or quadruple Social Security withholding and gradually increase the benefits beginning say 20 years from now...

George


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## HitchHiker71 (Apr 5, 2021)

bogey21 said:


> Most will not have the income or discipline to save enough for basic retirement. Why not just gradually triple or quadruple Social Security withholding and gradually increase the benefits beginning say 20 years from now...
> 
> George



No thanks - unless we convert to individual SS retirement accounts that are willable and actually owned by the individual as opposed to the bankrupt ponzi scheme system we have today. 


Sent from my iPhone using Tapatalk


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## easyrider (Apr 5, 2021)

I know a handful of Fidelity managed investors who lost too much money in 2007 - 2008 making it hard to retire when they wanted. I wonder why it would be any different in the next market downturn ?

Inflation seems to be very high in some sectors so if a person had retired and was living off their investments only the new deck would cost 6 times as much for materials and 2 times as much for labor. Looking a car prices and they are way higher than in the past. 

Even the best portfolios do not really keep up with the recent inflation in some sectors, imo. 

Bill


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## Conan (Apr 5, 2021)

There was a good thread on this subject in 2012(!)








						Retirement Dissected
					

When 'Eight' Isn't Enough   What's Your 'Magic' Retirement-Savings Number?  By KAREN BLUMENTHAL-WSJ  You are working hard to save for a decent retirement. So wouldn't it be nice to have a simple rule of thumb to measure whether you are saving enough?  Last month, Fidelity Investments...




					tugbbs.com


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## bbodb1 (Apr 5, 2021)

As much as you can!


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## elaine (Apr 5, 2021)

easyrider said:


> I know a handful of Fidelity managed investors who lost too much money in 2007 - 2008


hmmm. I believe that those who rode it out for even 2 years recouped much/most of that. I assume they instructed F to sell out low? IMHO, even 5X gross by 50 is not a likely amount for most to attain, esp. if they had student loans and/or childcare or lived in a high cost area. I had 3 kids. DH and I luckily had the ability to both go PT and cobble together some ad hoc childcare. If we've put kids in daycare, I'd have had to clear almost $50K to pay daycare (after taxes) with zero funds coming into our household, much less any retirement savings.


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## easyrider (Apr 5, 2021)

elaine said:


> hmmm. I believe that those who rode it out for even 2 years recouped much/most of that. I assume they instructed F to sell out low? IMHO, even 5X gross by 50 is not a likely amount for most to attain, esp. if they had student loans and/or childcare or lived in a high cost area. I had 3 kids. DH and I luckily had the ability to both go PT and cobble together some ad hoc childcare. If we've put kids in daycare, I'd have had to clear almost $50K to pay daycare (after taxes) with zero funds coming into our household, much less any retirement savings.



Yes, they did ride it out but some had to go back to work, some took their ss and others managed. 

Bill


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## Rolltydr (Apr 5, 2021)

HitchHiker71 said:


> No thanks - unless we convert to individual SS retirement accounts that are willable and actually owned by the individual as opposed to the bankrupt ponzi scheme system we have today.
> 
> 
> Sent from my iPhone using Tapatalk


I usually agree with you, HitchHiker71, but not this time. Social Security is one of the best pieces of legislation ever enacted in the U.S. and is responsible for providing tens of millions of senior citizens with the opportunity to live a life of dignity in retirement.


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## JeffC (Apr 5, 2021)

You have to start with what your expenses will be in retirement. Are you planning on relocating to a lower cost area? Do you want to maintain 2 homes (snowbird)? Will you take all your bucket list trips early in retirement?
Once you have an idea on expenses you can calculate your income needs . Will you have a pension? When do you plan on taking Social Security? Once you have an idea on expenses and you add in pension/SS income you can calculate what your needs will be.
With all that done calculate the rate you want to draw down your savings. The old rule of thumb was 4% adjusted annually for inflation . Given longer life spans and lower interest rates 3-3.5% is a more realistic rate. The sad reality is most people are woefully unprepared for retirement.


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## PigsDad (Apr 5, 2021)

Rolltydr said:


> I usually agree with you, HitchHiker71, but not this time. Social Security is one of the best pieces of legislation ever enacted in the U.S. and is responsible for providing tens of millions of senior citizens with the opportunity to live a life of dignity in retirement.


While I am ok w/ SS as it stands now as a safety net, I agree with @HitchHiker71 in opposing the expansion of SS (_quadrupling_ it) as @bogey21 was suggesting above.  The government gets enough of my money as it stands -- I would much prefer that it just provides a safety net and not try to replace personal responsibility in saving for your retirement above that level.

Kurt


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## HitchHiker71 (Apr 5, 2021)

elaine said:


> hmmm. I believe that those who rode it out for even 2 years recouped much/most of that. I assume they instructed F to sell out low? IMHO, even 5X gross by 50 is not a likely amount for most to attain, esp. if they had student loans and/or childcare or lived in a high cost area. I had 3 kids. DH and I luckily had the ability to both go PT and cobble together some ad hoc childcare. If we've put kids in daycare, I'd have had to clear almost $50K to pay daycare (after taxes) with zero funds coming into our household, much less any retirement savings.



Actually it took about four years for the markets to recover to the pre-Great Recession levels, which was much shorter than the 25 years it took after the Great Depression in comparison.  Still, four years is a long time for those who were either retired or were on the cusp of retirement.  

6x by age 50 is a pretty tall order.  I consider myself pretty financially savvy, having gone to school for arbitrage, finance with a focus on securities analysis.  We've saved as much as we could over the years since I understand all too well the concepts of compound interest and the time value of money.  That said, we also had three children, starting at the tender age of 23, so it was difficult to balance retirement savings with home ownership, having my wife be a stay at home mom for several years, college savings, and all of life's other curve balls.  We should be at right around 5x gross income by the time we are both 50 years old - in Feb 2022 timeframe - if all goes well.  6x is a bit of a pipe dream unless Tesla stock doubles over the next year - in which case we would actually come close to meeting the 6x recommendation, all other things being equal (which they rarely are IME).


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## Talent312 (Apr 5, 2021)

To those who worry about saving for retirement...
As a retired person, I can say: Spending in retirement is more fun.
.


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## HitchHiker71 (Apr 5, 2021)

Rolltydr said:


> I usually agree with you, HitchHiker71, but not this time. Social Security is one of the best pieces of legislation ever enacted in the U.S. and is responsible for providing tens of millions of senior citizens with the opportunity to live a life of dignity in retirement.



It was when it was put into place roughly 80 years ago now, but it no longer meets modern day requirements.  When SS was started, we had 15 paying into the system for every one person in retirement, and the average lifespan was considerably lower than it is today.  People are living _much _longer in modern times, and we only have 3 people paying into the system for every one person in retirement, and that number will fall to two people within the next 10-15 years since demographically the US is no longer maintaining the birth ratios necessary to sustain our population. 2.1 is the required birth ratio, and the US is now at 1.9 and it's falling every year. The way the system is set up is unsustainable in other words. We need to modernize our entire approach to government, including the SS program. Endlessly raising taxes is not the solution either. We can do more with the same.

I'm not talking about program changes that would impact seniors today, I'm talking about program changes that would gradually phase in that would keep the program for everyone over a certain age today, and then gradually move away from the current redistribution program, given the demographics no longer support any such program, and toward a program that actually encourages long term wealth creation for _every _US citizen.  We can keep the essentials of the current program - which is really an annuity program at heart - without much effort - while also guaranteeing that those that pay into the current system - who may die unexpectedly early in their retirement - can will their accounts to their children and/or grandchildren (or whomever else they wish to give the money they worked their entire lives away to).  

Taking this approach would also remove the employer based burden of having to support retirement plans  - employers could simply compete for employees based upon how much the employer is willing to contribute to the employee's individual retirement account. Employees could also make voluntary contributions to their own individual retirement account - to accelerate retirement timelines if so desired.   A portion of the retirement account balance could be controlled by the employee - meaning the employee would be able to invest how they see fit - while another portion would be preserved - to limit market risk - and to guarantee a minimum annuity amount worst case.  There's lots of possible options - but the idea here is we have to do something sooner rather than later - and I'd prefer to create real retirement/wealth accounts for everyone - as opposed to the vast redistribution system that SS is today - with no trust fund since the politicians have robbed almost every cent from the trust fund and put worthless IOUs in place of the actual monies that were supposed to be there all along.


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## Rolltydr (Apr 5, 2021)

I think we’re pretty much in agreement on the politicians and the decisions they make. And your long term plan will probably work for the middle and upper class. My concern is for the poor. The following chart shows how Social Security lifts so many people out of poverty. These are people who can’t afford to save for retirement, especially at the 5-6x level discussed for most retirement plans. How do we, as a society, take care of the people who most need help?

TABLE 1 Effect of Social Security on Poverty (Official Poverty Measure), 2018  Percent in Poverty  Age GroupExcluding Social SecurityIncluding Social SecurityNumber Lifted Above the Poverty Line by Social Security*Children Under 18*17.8%16.2%1,197,000*Adults Ages 18-64*13.5%10.7%5,653,000*Elderly Age 65 and Over*37.8%9.7%14,810,000*Total, All Ages**18.5%**11.8%**21,661,000*
Source: CBPP analysis of data from the U.S. Census Bureau’s March 2019 Current Population Survey


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## am1 (Apr 5, 2021)

I will probably work forever or as long as I am able to.  Hopefully my sons will want to take over.  Any retirement program a government controls will be full of waste.  It not right that people who pay in early do not get more credit then those paying in later in life.  With inflation a lot of seniors will suffer. Others with assets to sell will profit.  That what a quick increase in minimum wage among other things cause.  Hopefully I can avoid that.


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## VacationForever (Apr 5, 2021)

HitchHiker71 said:


> Taking this approach would also remove the employer based burden of having to support retirement plans  - employers could simply compete for employees based upon how much the employer is willing to contribute to the employee's individual retirement account. Employees could also make voluntary contributions to their own individual retirement account - to accelerate retirement timelines if so desired.   A portion of the retirement account balance could be controlled by the employee - meaning the employee would be able to invest how they see fit - while another portion would be preserved - to limit market risk - and to guarantee a minimum annuity amount worst case.  There's lots of possible options - but the idea here is we have to do something sooner rather than later - and I'd prefer to create real retirement/wealth accounts for everyone - as opposed to the vast redistribution system that SS is today - with no trust fund since the politicians have robbed almost every cent from the trust fund and put worthless IOUs in place of the actual monies that were supposed to be there all along.



Singapore has one of the best retirement programs in the world.  A couple of prior administrations have looked into Singapore's retirement program.  What you have described has some similarities to their program.

When one starts working, 20% of the paycheck is automatically deducted and put into their individual Central Provident Fund (CPF) account.  The employer matches 20%.  Essentially, if you make $10K a month, you see $8K in your bank and $4K in your CPF account.  CPF guarantees a growth rate of 4% annually.  There is a list of conservative investment options you can elect if you choose to invest your money differently.  You can buy a home with the CPF funds or pay hospital bills.  There is no other way to withdraw until you reach 55.  Even then, there is a minimum sum that must be maintained in the account or approved investments, to ensure that you don't blow off your CPF savings.  Within the account, there are 3 sub-accounts, one for medical, one for "regular" and one for "final funeral expenses".  Singapore's home ownership is well over 90% because people use CPF to fund the down payment and on-going mortgage payments.


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## geist1223 (Apr 5, 2021)

It all depends. Patti and I both have good State Retirements. Whom ever dies first continues to collect the other person's retirement pay. We both are drawing Social Security. I also have Reserve Military Retirement. Our Medical is covered by Medicare and Military Retiree Medical.


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## joestein (Apr 5, 2021)

HitchHiker71 said:


> Actually it took about four years for the markets to recover to the pre-Great Recession levels, which was much shorter than the 25 years it took after the Great Depression in comparison.  Still, four years is a long time for those who were either retired or were on the cusp of retirement.
> 
> 6x by age 50 is a pretty tall order.  I consider myself pretty financially savvy, having gone to school for arbitrage, finance with a focus on securities analysis.  We've saved as much as we could over the years since I understand all too well the concepts of compound interest and the time value of money.  That said, we also had three children, starting at the tender age of 23, so it was difficult to balance retirement savings with home ownership, having my wife be a stay at home mom for several years, college savings, and all of life's other curve balls.  We should be at right around 5x gross income by the time we are both 50 years old - in Feb 2022 timeframe - if all goes well.  6x is a bit of a pipe dream unless Tesla stock doubles over the next year - in which case we would actually come close to meeting the 6x recommendation, all other things being equal (which they rarely are IME).



Absolutely.  6X by age 50 is ridiculous.    This is our '51' year and we are around 3.5X  maybe 5X if we include the equity of our home.


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## joestein (Apr 5, 2021)

JeffC said:


> You have to start with what your expenses will be in retirement. Are you planning on relocating to a lower cost area? Do you want to maintain 2 homes (snowbird)? Will you take all your bucket list trips early in retirement?
> Once you have an idea on expenses you can calculate your income needs . Will you have a pension? When do you plan on taking Social Security? Once you have an idea on expenses and you add in pension/SS income you can calculate what your needs will be.
> With all that done calculate the rate you want to draw down your savings. The old rule of thumb was 4% adjusted annually for inflation . Given longer life spans and lower interest rates 3-3.5% is a more realistic rate. The sad reality is most people are woefully unprepared for retirement.



I agree.  Very important.  When they talk about multiples of salary, you have to take into account what you actually live on.   My wife and I max out our 401Ks and we still save around 50% of our take home pay.     Once retired, I dont need to fund my 401Ks or save all that cash.

Plus I assure you that I will probably live in area that are more affordable that Marlboro, NJ.   No $20K real estate tax or obscene auto insurance.   However, we will probably spend more on socializing and entertainment.


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## joestein (Apr 5, 2021)

So, what does everyone think you can generate in income for your retirement on say $1MM.       Can you generate 4% to withdraw each year?  Or if you generate 4% can you withdraw 6%?


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## am1 (Apr 5, 2021)

joestein said:


> So, what does everyone think you can generate in income for your retirement on say $1MM.       Can you generate 4% to withdraw each year?  Or if you generate 4% can you withdraw 6%?



You could start 6% but then its seven and eight and so on.


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## HitchHiker71 (Apr 5, 2021)

Rolltydr said:


> I think we’re pretty much in agreement on the politicians and the decisions they make. And your long term plan will probably work for the middle and upper class. My concern is for the poor. The following chart shows how Social Security lifts so many people out of poverty. These are people who can’t afford to save for retirement, especially at the 5-6x level discussed for most retirement plans. How do we, as a society, take care of the people who most need help?
> 
> Age GroupExcluding Social SecurityIncluding Social SecurityNumber Lifted Above the Poverty Line by Social SecurityPercent in PovertyEffect of Social Security on Poverty (Official Poverty Measure), 2018TABLE 1*Children Under 18*17.8%16.2%1,197,000*Adults Ages 18-64*13.5%10.7%5,653,000*Elderly Age 65 and Over*37.8%9.7%14,810,000*Total, All Ages**18.5%**11.8%**21,661,000*
> Source: CBPP analysis of data from the U.S. Census Bureau’s March 2019 Current Population Survey



Lots of possibilities here really.  Long term - there's no better way to lift people out of poverty than to create real wealth - willable wealth via individual retirement accounts.  But, that won't start happening for decades - so we need to think long term when it comes to transitioning, and the sooner we get started the better.  For one, a substantial portion of what we pay out from social security - actually has nothing to do with retirement plans.  Here's the data on disability and survivorship benefits paid out:





Link to document:  https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

So, over 25% of social security that is collected - pays out to disability and survivorship today.  These programs need to be completely separate from any retirement program IMHO.  The disability and survivorship programs were subsequently added to SS in 1956 - more than a decade after SS came into existence in other words.  If we want to fund disability insurance for those that need it - that's just fine - but let's not conflate retirement savings with disability programs like we've been doing for the past almost 70 years now.  

For the people who cannot save for retirement - that's exactly where an actual wealth building program comes out way ahead.  Right now we all contribute 12.6% of our monies to SSI.  That includes poor people BTW.  Noone gets a break on paying SSI.  Let's say someone makes 40k per year in today's dollars and pays into the system until the current retirement age of 67.  45 working years from today.  In today's dollars, retiring at age 67 - SSI would pay this person $1644/month - or $19,728 annually.  This was calculated using the SSI quick calculator here:  https://www.ssa.gov/OACT/quickcalc/

Now let's assume the person had an individual retirement account, making the same 12.6% contributions, using a simple calculator here:  https://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx 

This means a monthly contribution of $420/month for the same 45 years.   Their retirement account, assuming 7% annual returns (not exactly aggressive here), would add up to almost exactly 1.5MM dollars.  The person hasn't saved a dime of there own money in this scenario.  Stick that 1.5MM into any number of different low risk investments making 3% per annum - that's $45,000 per year - without touching the principle even.  That's more than double the retirement income.  That's real wealth creation - as opposed to a tax redistribution system.  If this person dies unexpectedly at any point - that money is willed to their estate and/or beneficiaries.  That's life changing sums of money for everyone involved.  Money we currently entrust to politicians who have squandered and wasted it away over the past 50 years, and left us with a bankrupt retirement redistribution program today.  Fool me once, shame on you, fool me twice...

Now - let's deal with the disability and survivorship aspects.  Since we're paying out about 25% of SSI today for elements that have nothing to do with retirement savings - we could simply create a flat 10% forced retirement contribution program per above, as opposed to 12.6% today - and then redirect the other 2.6% to programs designed to do nothing but fund disability and survivorship programs.  Though survivorship programs would become much less necessary if we were to adopt a real wealth creating retirement program - since a surviving spouse would inherent the entire individual retirement account from the spouse that passed away, largely if not completely negating the need for any survivorship program in the first place.  

This was just one of many examples out there on how to modernize social security to create real wealth over the long term - life changing wealth for every American.  How do we get from point A to point B?  Many someones much smarter than me have already thought up solutions.  It's definitively possible - we just lack the political will to do it.


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## HitchHiker71 (Apr 5, 2021)

VacationForever said:


> Singapore has one of the best retirement programs in the world.  A couple of prior administrations have looked into Singapore's retirement program.  What you have described has some similarities to their program.
> 
> When one starts working, 20% of the paycheck is automatically deducted and put into their individual Central Provident Fund (CPF) account.  The employer matches 20%.  Essentially, if you make $10K a month, you see $8K in your bank and $4K in your CPF account.  CPF guarantees a growth rate of 4% annually.  There is a list of conservative investment options you can elect if you choose to invest your money differently.  You can buy a home with the CPF funds or pay hospital bills.  There is no other way to withdraw until you reach 55.  Even then, there is a minimum sum that must be maintained in the account or approved investments, to ensure that you don't blow off your CPF savings.  Within the account, there are 3 sub-accounts, one for medical, one for "regular" and one for "final funeral expenses".  Singapore's home ownership is well over 90% because people use CPF to fund the down payment and on-going mortgage payments.



The Chilean government has had a similar program for decades now.  Anyone can read about it here:  https://www.ssa.gov/policy/docs/ssb/v68n2/v68n2p69.html

Note that link is right off of our very own SSA website - who also has endorsed the very same system I'm a proponent for as far back as 2006.  The article above was published in 2008.  Many other nations have since adopted the Chilean model of wealth creation via forced individual retirement accounts.  Seriously, read the article, and see why this is the _right _answer to creating real wealth for all Americans over the long term.


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## HitchHiker71 (Apr 5, 2021)

joestein said:


> Absolutely.  6X by age 50 is ridiculous.    This is our '51' year and we are around 3.5X  maybe 5X if we include the equity of our home.



That's a good point on the home equity item.  If I include home equity, or really if we're talking about net worth as the measure, we are actually well over 5x already, and prior to the drop in growth stocks over the past two months, I was knocking on the door of 6x.  This includes equity in our two rental properties as well.


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## HitchHiker71 (Apr 5, 2021)

joestein said:


> So, what does everyone think you can generate in income for your retirement on say $1MM.       Can you generate 4% to withdraw each year?  Or if you generate 4% can you withdraw 6%?



I believe the general rule is 3-4% withdrawals per annum.  There are aristocratic dividend income funds that typically generate between 4-6% per annum from stock dividends.  There's some risk to principal with stock funds obviously - but if income is the primary concern - you may not care as much about the principal balance as long as the stock fund continues to pay out like dividends.


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## PigsDad (Apr 5, 2021)

VacationForever said:


> Singapore has one of the best retirement programs in the world.


I agree.  Back in '99, my wife and I had the opportunity to live in Singapore for four months through our employer.  I remember my co-workers there telling me about the CPF and how it could be used to purchase a home.  And as I recall, they received extra "credits" for buying a home that was within a certain proximity of their parents (the government liked to keep families close).  Everyone there really seemed to like the system.

Kurt


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## Passepartout (Apr 5, 2021)

As one gets close to retirement (assuming they've put SOMETHING appropriate toward financing it), they'll do some back-of-the-envelope math and see approximately how much income they will have. Then they can decide (a) IF they can afford to stop collecting a paycheck or (b) what level of expenditure their lifestyle can support. Folded into this are additional considerations, like, how long is your (and your progenitors' average) lifespan? How much and to whom of your offspring do you want to pass 'stuff', and in what quantities? Charities? It may be continuing living with little difference from one's 'working life', other than more free time, to downsizing, minimizing expenditures or even the extreme of moving in with the kids or into subsidized communal housing.

Having more options is preferable to having less. And those decisions- some deliberate, and some not- are made fairly early in a person's working life.

Jim


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## slip (Apr 6, 2021)

Good timing for this thread for me. I have been looking closely at where I am and I have been going over all the recommended totals. I have run all my numbers through Fidelity’s retirement calculators and expense calculators. A few months ago I started really seriously considering this to be my last year working. My wife retired almost 2 years ago when we moved to Hawaii but has not drawn anything from retirement yet. 

I turn 58 in June and I have over 9 times my salary in my 401k. That’s what most recommend to have at 60 or 62 depending on which one you look at. We have already downsized and we own our condo we will retire to. We will drop one vehicle when we move to Molokai and our expenses will be minimal.

Our big pickup expense will be a large monthly healthcare premium. I originally planned to work until 60 or 62 so I am adding 2 to 4 more years on for that but my wife turns 62 this year so that premium will drop in three years when see takes Medicare at 65. 

For me the key was starting early. I started fully funding my 401k to get the company match right away at 20 years old. As I got older I was able to increase my contributions past the company match and that is what adds up over time. I will have 37 years with the company next week and after going over everything I have decided to call it quits in January 2022. I’ll be a few months short of 38 years in then. 

We each got our Social Security estimates. My wife will take hers at 63 and I will take mine at 62. We both have pensions also and we will both start taking those at 65.

It’s a hard decision to make because you always wonder if you have enough. To me having extra years in retirement is worth the extra couple years of Healthcare premiums. I actually just made my final decision a few weeks before this thread started, good timing.


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## VacationForever (Apr 6, 2021)

slip said:


> Good timing for this thread for me. I have been looking closely at where I am and I have been going over all the recommended totals. I have run all my numbers through Fidelity’s retirement calculators and expense calculators. A few months ago I started really seriously considering this to be my last year working. My wife retired almost 2 years ago when we moved to Hawaii but has not drawn anything from retirement yet.
> 
> I turn 58 in June and I have over 9 times my salary in my 401k. That’s what most recommend to have at 60 or 62 depending on which one you look at. We have already downsized and we own our condo we will retire to. We will drop one vehicle when we move to Molokai and our expenses will be minimal.
> 
> ...


Congratulations on the decision to retire early next year! As you have pointed out, the key is to run those numbers over and over again.  If the numbers look good, then go on and enjoy retirement as soon as you can.

I retired at 53 when my plan was to work until I turn 62.  I am a worrier and the way I keep sane is to bucketize our savings.  One huge chunk was/is very liquid which would partially fund us for about 10 years until all income streams would fund our retirement in full.   I turned my IRA into deferred income annuities.  We are paying for my private individual health insurance for 12 years until Medicare kicks in.  We both do not have pension.  I will draw on SS starting at 62 while my husband drew at 70.  The rest of our savings are managed by a large wealth management firm.  We would every now and again ask them to send us a small sum to make up for a shortfall for the year, when we did silly things like we bought a new car and hated it and then bought another new car a year later and ditched the first car.  When I turn 65 which is 7 years away, the only planned annual withdrawal then should be my husband's RMD. 

Along the way, we have done a few things that were not in our plan when we retired.  One big ticket item is that we sold our condo and bought a single family home in January this year.  Between the slightly higher cost of the "new" home, and the need to renovate the home, it sets us back about $300K.  We decided to make use of the low interest rate and took on a 30-year mortgage instead of paying cash.  Our goal is to make a full repayment in 5 years' time.  I know that you own your condo in Molokai but at some point you both may decide on a bigger home.  Curve balls do happen but as long as you have saved enough, curve balls should not throw you off your retirement lifestyle.


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## slip (Apr 6, 2021)

VacationForever said:


> Congratulations on the decision to retire early next year! As you have pointed out, the key is to run those numbers over and over again.  If the numbers look good, then go on and enjoy retirement as soon as you can.
> 
> I retired at 53 when my plan was to work until I turn 62.  I am a worrier and the way I keep sane is to bucketize our savings.  One huge chunk was/is very liquid which would partially fund us for about 10 years until all income streams would fund our retirement in full.   I turned my IRA into deferred income annuities.  We are paying for my private individual health insurance for 12 years until Medicare kicks in.  We both do not have pension.  I will draw on SS starting at 62 while my husband drew at 70.  The rest of our savings are managed by a large wealth management firm.  We would every now and again ask them to send us a small sum to make up for a shortfall for the year, when we did silly things like we bought a new car and hated it and then bought another new car a year later and ditched the first car.  When I turn 65 which is 7 years away, the only planned annual withdrawal then should be my husband's RMD.
> 
> Along the way, we have done a few things that were not in our plan when we retired.  One big ticket item is that we sold our condo and bought a single family home in January this year.  Between the slightly higher cost of the "new" home, and the need to renovate the home, it sets us back about $300K.  We decided to make use of the low interest rate and took on a 30-year mortgage instead of paying cash.  Our goal is to make a full repayment in 5 years' time.  I know that you own your condo in Molokai but at some point you both may decide on a bigger home.  Curve balls do happen but as long as you have saved enough, curve balls should not throw you off your retirement lifestyle.



Mahalo

Yes, you can never say never. I don’t see us in anything larger. Except we are going from our 450sq/ft apartment on Oahu to our 750sq/ft condo on Molokai.  But who knows what the future holds.

We will be withdrawing more our first few years but after I turn 62 we will be down to withdrawing 4 to 5% a year which still leaves us a big chunk into our 90’s.


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## CanuckTravlr (Apr 6, 2021)

As a retired CFP and CPA, CA, I obviously have some biases.  "Rules-of-thumb", when dealing with something as important as your retirement income, are not particularly useful, and can be downright dangerous, IMO.

Savings based on multiples of current gross or net income at a particular age are somewhat irrelevant.  It just isn't that simple!  What you really need to figure out is what (in current dollars) you will need, in order to maintain your desired after-tax income in retirement, to support the lifestyle you need or desire.  That is a very individual analysis.  There is no cookie-cutter answer.

You then need to make conservative estimates of your investment yields and the inflation rates between now and retirement and the rate of inflation during retirement.  Also keep in mind that the rate of inflation impact for seniors tends to be higher than for the general population.

Finally, the impact of taxes during your accumulation years and in retirement needs to be factored in.  That is why I strongly recommend you find a good, knowledgeable, financial planner you can trust, to help do the calculations and provide guidance along the way.


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## easyrider (Apr 6, 2021)

joestein said:


> So, what does everyone think you can generate in income for your retirement on say $1MM.       Can you generate 4% to withdraw each year?  Or if you generate 4% can you withdraw 6%?



It would depend on many things but if you are starting with $1,000,000 to draw off off, a paid off home and have a decent SS check you are way ahead of most Americans. The average median worth of Americans at age 65 is about $250,000 which is mainly the equity in their home. It sounds like you will be able to pay alot of MF's, lol.

Bill


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## slip (Apr 6, 2021)

CanuckTravlr said:


> As a retired CFP and CPA, CA, I obviously have some biases.  "Rules-of-thumb", when dealing with something as important as your retirement income, are not particularly useful, and can be downright dangerous, IMO.
> 
> Savings based on multiples of current gross or net income at a particular age are somewhat irrelevant.  It just isn't that simple!  What you really need to figure out is what (in current dollars) you will need, in order to maintain your desired after-tax income in retirement, to support the lifestyle you need or desire.  That is a very individual analysis.  There is no cookie-cutter answer.
> 
> ...



This decision was definitely a strange decision to make. Those rules of thumb are just that and are not meant to be the basis of a final decision but they did help me to start thinking about when enough is enough. So maybe irrelevant in that sense but not useless.

I talked with everyone in my family that retired which is everyone but my one older sister, who actually has more saved that all the rest but she still doesn’t feel comfortable retiring. I also use Fidelity and after a while it comes down to how many people and professionals tell you it works before you make the decision.

Everyone’s situation is different for what they want from retirement so all you can do is collect as much info as you can and weigh all the advice but the final decision is going to come down to you.


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## Big Matt (Apr 6, 2021)

6x25k = 150k (not enough)
6x1mi = 6mi (plenty)

It's a bad rule of thumb.  

Save in retirement accounts (roth and tax deferred), post tax investments, and if you can swing it...rental properties.  Don't buy a second home.  Don't put anything on long term financing unless is it below 2%.  Buy cars that cost no more than 25k new.  Understand how to stop spending on things you don't really need.  Both parents should be working if possible.  This will put most people on a decent success path.


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## joestein (Apr 6, 2021)

HitchHiker71 said:


> Lots of possibilities here really.  Long term - there's no better way to lift people out of poverty than to create real wealth - willable wealth via individual retirement accounts.  But, that won't start happening for decades - so we need to think long term when it comes to transitioning, and the sooner we get started the better.  For one, a substantial portion of what we pay out from social security - actually has nothing to do with retirement plans.  Here's the data on disability and survivorship benefits paid out:
> 
> View attachment 34318
> 
> ...




I just want to point out that SS is progressive.  The first 12K of salary gets a 90% payout.   It drops to 32% from 12K through 72K then it drops to 15% after that.

So, if we had separate accounts as you describe, the system would lose it's progressive nature.


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## joestein (Apr 6, 2021)

geist1223 said:


> It all depends. Patti and I both have good State Retirements. Whom ever dies first continues to collect the other person's retirement pay. We both are drawing Social Security. I also have Reserve Military Retirement. Our Medical is covered by Medicare and Military Retiree Medical.



I think that is great, however, most people today have no pension or retirement benefits.

The only thing that my wife and I get are 401K matches.   My wife's firm is generous.  My firm has a miserly maximum of $1K.


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## joestein (Apr 6, 2021)

Big Matt said:


> 6x25k = 150k (not enough)
> 6x1mi = 6mi (plenty)
> 
> It's a bad rule of thumb.
> ...



That


PigsDad said:


> I agree.  Back in '99, my wife and I had the opportunity to live in Singapore for four months through our employer.  I remember my co-workers there telling me about the CPF and how it could be used to purchase a home.  And as I recall, they received extra "credits" for buying a home that was within a certain proximity of their parents (the government liked to keep families close).  Everyone there really seemed to like the system.
> 
> Kurt



I am trying to get farther away from my MIL.  Not closer.


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## HitchHiker71 (Apr 6, 2021)

joestein said:


> I just want to point out that SS is progressive.  The first 12K of salary gets a 90% payout.   It drops to 32% from 12K through 72K then it drops to 15% after that.
> 
> So, if we had separate accounts as you describe, the system would lose it's progressive nature.



I'm not understanding what you're referring to here.  Can you provide links to source material?


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## joestein (Apr 6, 2021)

easyrider said:


> It would depend on many things but if you are starting with $1,000,000 to draw off off, a paid off home and have a decent SS check you are way ahead of most Americans. The average median worth of Americans at age 65 is about $250,000 which is mainly the equity in their home. It sounds like you will be able to pay alot of MF's, lol.
> 
> Bill


True.   However, most Americans live far beyond their means.    We do earn very good money, but we have always lived below our means.  

Just a point:

Some of the staff who work for me were talking about buying expensive Air Jordan sneakers (well over $150).  I buy my sneakers at Costco ($20 or so).   I told them I wear Air Kirklands.
All kidding aside, I know they make 1/3 of what I make.  But they are also buying Canadian Goose coats, leasing BMWs, etc.


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## joestein (Apr 6, 2021)

HitchHiker71 said:


> I'm not understanding what you're referring to here.  Can you provide links to source material?



Look at the steps on top of page 2.


Your Retirement Benefit: How It Is Figured (ssa.gov)


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## HitchHiker71 (Apr 6, 2021)

joestein said:


> Look at the steps on top of page 2.
> 
> 
> Your Retirement Benefit: How It Is Figured (ssa.gov)



I don't see how that matters though.  The example I posted, shows that an actual individual retirement account, dwarfs whatever SS pays out via the current wealth redistribution program.  Progression is only necessary when using a redistribution program - it's not needed when we're actually creating real long term willable retirement accounts using the same tax dollars collected - the only difference between the two programs is - the politicians cannot get their hands on monies put into individual retirement accounts (essentially stealing our hard earned money in the process).  In my example, I chose to use someone only making 40k in today's dollars since there was an earlier concern regarding how we would help prop up the working poor over time.  The numbers only get better the more you actually earn - favoring the individual retirement account program.  The example I used was calculated right off the SSA website - which uses the same data in the link above to calculate the estimated future benefit in today's dollars.


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## pedro47 (Apr 6, 2021)

Save as much as you can. Just start early in savings for your retirement. Finally, Invest wisely.

The money you will need in retirement will depend on how you spend your dollars; while you  are employ full time.

An another key point, start taking care of your body and mind early in your life. To avoid health issues in your retirement years.

You will never spend all of your retirement dollars. IMHO.


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## joestein (Apr 6, 2021)

HitchHiker71 said:


> I don't see how that matters though.  The example I posted, shows that an actual individual retirement account, dwarfs whatever SS pays out via the current wealth redistribution program.  Progression is only necessary when using a redistribution program - it's not needed when we're actually creating real long term willable retirement accounts using the same tax dollars collected - the only difference between the two programs is - the politicians cannot get their hands on monies put into individual retirement accounts (essentially stealing our hard earned money in the process).  In my example, I chose to use someone only making 40k in today's dollars since there was an earlier concern regarding how we would help prop up the working poor over time.  The numbers only get better the more you actually earn - favoring the individual retirement account program.  The example I used was calculated right off the SSA website - which uses the same data in the link above to calculate the estimated future benefit in today's dollars.


My point is that the system is currently progressive.  To keep it that way, part of higher salaried persons money would have to go into lower salary accounts person.  

I understand that you want to eliminate the progressiveness, but I think that everything the gov't has that progressiveness in mind.


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## VacationForever (Apr 6, 2021)

Big Matt said:


> 6x25k = 150k (not enough)
> 6x1mi = 6mi (plenty)
> 
> It's a bad rule of thumb.
> ...


It is not about buying a $25K or $50K car, but rather whether one is spending within her/his means while still being able to save enough for retirement.  It is not even whether one has saved $1m or $6m in retirement.  The person who has $1m may be frugal or have a nice pension and does not need to tap into savings.  The other person who has saved $6m may be used to living a luxurious lifestyle and blows through the $6m quickly.  As long as expenditure is less than retirement income, the retiree is in good shape.


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## bogey21 (Apr 6, 2021)

HitchHiker71 said:


> I'm not talking about program changes that would impact seniors today, I'm talking about program changes that would gradually phase in that would keep the program for everyone over a certain age today, and then gradually move away from the current redistribution program, given the demographics no longer support any such program, and toward a program that actually encourages long term wealth creation for _every _US citizen.  We can keep the essentials of the current program - which is really an annuity program at heart - without much effort - while also guaranteeing that those that pay into the current system - who may die unexpectedly early in their retirement - can will their accounts to their children and/or grandchildren (or whomever else they wish to give the money they worked their entire lives away to).



Back to modernizing Social Security.  I can agree with something like this...

George


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## am1 (Apr 6, 2021)

joestein said:


> My point is that the system is currently progressive.  To keep it that way, part of higher salaried persons money would have to go into lower salary accounts person.
> 
> I understand that want to eliminate the progressiveness, but I think that everything the gov't has that progressiveness in mind.


Maybe it is the progressiveness that causes people not to save and spend beyond their means which leaves them worse off financially as well as other ways?


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## easyrider (Apr 6, 2021)

I viewed a youtube clip that said about 81% of Americans at 60 years old have less than $5000 of savings. I started watching this guys channel back when we were deciding how and when we as a couple would take SS. 

Bill


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## joestein (Apr 6, 2021)

am1 said:


> Maybe it is the progressiveness that causes people not to save and spend beyond their means which leaves them worse off financially as well as other ways?



I would think that is jealousy or need to keep up with the Jones.   Probably the non stop facebook/twitter/etc.  that is filled with so-called celebrity endorsements is also a big factor.

I can't imagine the gov't is the reason they live beyond their means.


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## Big Matt (Apr 6, 2021)

VacationForever said:


> It is not about buying a $25K or $50K car, but rather whether one is spending within her/his means while still being able to save enough for retirement.  It is not even whether one has saved $1m or $6m in retirement.  The person who has $1m may be frugal or have a nice pension and does not need to tap into savings.  The other person who has saved $6m may be used to living a luxurious lifestyle and blows away the $6m quickly.  As long as expenditure is less than retirement income, the retiree is in good shape.


I've been frugal my entire life and have saved wisely.  The car thing is just something I've always adhered to.  I'm not aware of many companies offering pensions any longer, so I substituted the retirement accounts in lieu of them.  Completely agree on responsible spending and lifestyle.  Most people who spend irresponsibly never get to 6 million in savings.  They've blown it along the way.  I live in an area where people drive Maseratis and don't have furniture in their homes.  Image is everything as shallow as it may be.


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## am1 (Apr 6, 2021)

joestein said:


> I would think that is jealousy or need to keep up with the Jones.   Probably the non stop facebook/twitter/etc.  that is filled with so-called celebrity endorsements is also a big factor.
> 
> I can't imagine the gov't is the reason they live beyond their means.



Some not all could use a reality check and spend within their means and save for retirement.  Question would be is more money saved overall with government intervention or do citizens as a whole save more for retirement when they know it will be 100% for their benefit?  I have no problem with people who spend beyond their means have limited income during retirement.  Everyone makes choices.  Just need a safety net a few feet above the ground so no one is homeless or goes without medical care.


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## rapmarks (Apr 6, 2021)

joestein said:


> I would think that is jealousy or need to keep up with the Jones.   Probably the non stop facebook/twitter/etc.  that is filled with so-called celebrity endorsements is also a big factor.
> 
> I can't imagine the gov't is the reason they live beyond their means.


Totally correct. There are savers and spenders. I have one child of each type.  Plus I sincerely doubt that someone really based their saving patterns on social security expectations


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## am1 (Apr 6, 2021)

rapmarks said:


> Totally correct. There are savers and spenders. I have one child of each type.  Plus I sincerely doubt that someone really based their saving patterns on social security expectations



Social Security amounts would not make a difference as the spenders and savers both have to pay into it based on incomes.  Possibly a spender pays in more as they need more money for their fix.  While a saver retires early or works less and pays less social security.  But if a spender wants to spend and fore retirement only has social security then that is their choice.  It is a shame that savers have to pay into social security as well because spenders do not save on their own.


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## mdurette (Apr 6, 2021)

The title to this thread "how much should I save for retirement"

My answer, every single penny you can and as soon as you can.   Start young too!


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## VacationForever (Apr 6, 2021)

mdurette said:


> The title to this thread "how much should I save for retirement"
> 
> My answer, every single penny you can and as soon as you can.   Start young too!


Life before retirement would be pretty boring... No vacation, no timeshare...


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## CanuckTravlr (Apr 6, 2021)

mdurette said:


> The title to this thread "how much should I save for retirement"
> 
> My answer, every single penny you can and as soon as you can.   Start young too!





VacationForever said:


> Life before retirement would be pretty boring... No vacation, no timeshare...



When it's suggested to save every penny you can, as early as you can, it doesn't have to mean not living for today.  IME, too many use that as the excuse for not saving.  There are no guarantees there will be any tomorrows, so no competent planner I have ever met suggests putting off everything today for tomorrow.   As with most things in life, the key is finding a balance.

The instructor at a course I attended years ago put it very nicely.  He said there were always two hands (for some of us, more than two...LOL!) on your wallet.  The hand of you today looking to buy something, and the hand of you in the future saying, "Hey, leave some for me!!"

After more than 40 years advising clients, I have noticed a sense of freedom comes from knowing what your "number" is, even though it may change over time.  If you are on track for your retirement objective, then you know you can spend everything else anyway you want, including vacations and even timeshares!


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## heathpack (Apr 7, 2021)

easyrider said:


> I viewed a youtube clip that said about 81% of Americans at 60 years old have less than $5000 of savings. I started watching this guys channel back when we were deciding how and when we as a couple would take SS.
> 
> Bill



This dude is very calming. I am 55yrs old. We have 4x in cash and retirement accounts. Plus another 2x ish in equity in our house. Ive always been handicapped by an inability to fully fund my 401k (due to IRS rules). We got bought by a big Corp and we were supposed to be able to finally fully fund this past year. Nope. Just got a $5500 check back from Fidelity due to over-contributing to my 401k (I put in the max amount for a person my age).

Boy it would be nice to retire in another 5 years...


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## Big Matt (Apr 7, 2021)

mdurette said:


> The title to this thread "how much should I save for retirement"
> 
> My answer, every single penny you can and as soon as you can.   Start young too!


This is a great post.  I have a friend who is 47.  He and his wife have both worked since marriage in their early 20s.  They bought a house early and waited to have kids.  They can retire now given their wealth even though the kids are only 7 and 2, and college is already paid for.  They make about $350k combined and live off of the spouse's $150k income.  The entire take home pay for the husband goes to savings.  In our area, the $350k income isn't crazy high.


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## bogey21 (Apr 7, 2021)

The problem today is that many are not saving either by design or necessity.  This is why I advocate changing Social Security from a safety net into forced retirement savings by increasing the amount withheld from earnings and the accompanying  employer match.  Withdrawals and loans from 401ks and IRAs become too tempting for those  who started contributing but don't have the discipline not to tap for whatever reason.  Thus I say we need to protect these people from themselves now rather than wait until they are old and destitute...

George


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## joestein (Apr 7, 2021)

heathpack said:


> This dude is very calming. I am 55yrs old. We have 4x in cash and retirement accounts. Plus another 2x ish in equity in our house. Ive always been handicapped by an inability to fully fund my 401k (due to IRS rules). We got bought by a big Corp and we were supposed to be able to finally fully fund this past year. Nope. Just got a $5500 check back from Fidelity due to over-contributing to my 401k (I put in the max amount for a person my age).
> 
> Boy it would be nice to retire in another 5 years...


I feel your pain.   HCE rules are the worst.   At least now that am 50, I can add an extra $6K that is not subject to the rules.   I was actually able to contribute the under 50 max and so far - no refund.  PLUS we get a miserly $1K max match.


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## heathpack (Apr 7, 2021)

bogey21 said:


> The problem today is that many are not saving either by design or necessity.  This is why I advocate changing Social Security from a safety net into forced retirement savings by increasing the amount withheld from earnings and the accompanying  employer match.  Withdrawals and loans from 401ks and IRAs become too tempting for those  who started contributing but don't have the discipline not to tap for whatever reason.  Thus I say we need to protect these people from themselves now rather than wait until they are old and destitute...
> 
> George



We also have high deductible health insurance.  Our max OOP per year is $7500. 

I can have an HSA and that is a pretty useful retirement vehicle.  Since I can't maximally contribute to my 401K, I contribute the most I can- around $15000 + $6500 catch up, or around $21,500.  But I can also put $7000 into an HSA, plus another $1000 catch up.  The HSA can be used for medical expenses pre-retirement, but after retirement can be used for medical expenses (these withdrawals are not taxed) or for any other expenses (a la a 401K, in which case they are taxed). 

The HSA is such a sweet deal that I've decided that I'm always just going to pay the $7500 OOP each year if it comes to that.  I crashed my bike 2 years ago and was about to write my check for $7500 for my medical expenses- when my Mom was forced to take some end-of-year money out of her 401k and offered to pay my $7500 medical bill.  (Lucky me.)

I also qualify for some kind of salary deferment plan, which I have not availed myself of, since we were supposed to be able to max out the 401K.  But I'm going to need to look into that I think.  Its riskier than a 401K because if the company goes bankrupt, you are SOL as I understand it.  But otherwise, the $ is invested and it behaves similarly to a 401K.


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## easyrider (Apr 7, 2021)

I ended up suddenly retiring from my main business when I was 57. When this happened I was totally disabled for 6 months and after a couple of years kind of recovered. We were living on our investments way before I had planned. It seemed to work out pretty good. We had been rid of all stocks for the most part since 2008 and had concentrated on income producing real estate. 

I guess my point is often things do not go as planned and having a plan for the un-planed is a good plan.  

Bill


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## am1 (Apr 7, 2021)

bogey21 said:


> The problem today is that many are not saving either by design or necessity.  This is why I advocate changing Social Security from a safety net into forced retirement savings by increasing the amount withheld from earnings and the accompanying  employer match.  Withdrawals and loans from 401ks and IRAs become too tempting for those  who started contributing but don't have the discipline not to tap for whatever reason.  Thus I say we need to protect these people from themselves now rather than wait until they are old and destitute...
> 
> George


But why have everyone have to do that because some choose not to save.  Let people sink or swim.


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## joestein (Apr 7, 2021)

am1 said:


> But why have everyone have to do that because some choose not to save.  Let people sink or swim.



We never let anybody sink in this country.  Not that I want people sinking either.    However, we always bail everyone out and then tell them it's not their fault - your the victim.


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## easyrider (Apr 7, 2021)

am1 said:


> But why have everyone have to do that because some choose not to save.  Let people sink or swim.



I think the main reason people don't save is because no one teaches kids in school about money and investments. Most kids leave high school financially iliterate. Compound that with the government not really wanting a financially literate population and the problem becomes 81% of 60 year olds have less than $5000 that will live on a reduced ss check taken at 62.

Who ever teaches us about money and investments is usually the reason people retire well, imo. For me it was a real estate investor that I had worked for in the 80's. He taught me about using "other peoples money" via loans. He claimed that the debt I had by 35 would increase my net worth to be able to retire at 50. He taught me about using the real professionals and how to sift the wheat from the chaff to tell the difference. He made me self reliant and aware. I was lucky to have known this guy.

Bill


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## Icc5 (Apr 7, 2021)

Saved my entire life hoping to be able to retire at some point.  Worked for Safeway for 43 years and my wife put in 42 years there.  Didn't get married until age 37 and my wife had been divorced and had a 3 year old daughter.  We each owned a house and mine was paid off already.  We live in Santa Clara Valley.  I had some money in the stock market in conservative companies.  Two years later we had a son,sold both houses and bought up to a larger house in a more expensive city.  We each made about 37,000 back then and when we retired 25 years later were making about $42,000 each at that time.
Moving into retirement between pensions and social security we each now make about $50,000.  Took my early retirement at 62 and my wife at 61.  Already had bigger house paid off.  We get about $15,000 in dividends and another $30,000 in tax free bonds.
We were both leary of retiring.  Today, we are living the easy good life.  We have more money and time then ever.  We own 4 different timeshares and try going on about 6-7 weeks a year in them along with a few cruises each year.  Started going overseas until the pandemic hit but will start that up again when things are safer.
My best advice is to somehow get income coming in on a regular basis (haven't touched our 401k's but have to by law in 2 more years).  Roth's will go to the kids along with the house and money left.    Forgot to mention we have long term insurance we started buying 15 years ago and have a union medical plan that is very reasonable in cost.
We worried about having enough in retirement and now along with enjoying life are able to give our kids each $15,000 a year to help them out.  For them,living in California is not easy and we are glad to have them and my grandaughter able to live close by.
Run the numbers to see what you will need to live on.  Expenses so far have been much less then when we worked and our income is much higher.  Medicare also helps to keep the medical down.  We pay dental out of pocket and because we always had a dental plan and used it regurly that too has stayed under control.
If we can do it so easily as grocery clerks I would think others can too.
Bart


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## bbodb1 (Apr 7, 2021)

joestein said:


> We never let anybody sink in this country.  Not that I want people sinking either.    However, we always bail everyone out and then tell them it's not their fault - your the victim.



This - desperately - needs to change.


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## bogey21 (Apr 7, 2021)

am1 said:


> But why have everyone have to do that because some choose not to save.  Let people sink or swim.



It is simple.  If we don't force them to put money aside themselves, the Government will come to their aid when they are old and broke.  And guess where the Government will get the money?  You guessed it, from you and I.  So I say get it from them now rather than you and I later...

George


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## am1 (Apr 7, 2021)

bogey21 said:


> It is simple.  If we don't force them to put money aside themselves, the Government will come to their aid when they are old and broke.  And guess where the Government will get the money?  You guessed it, from you and I.  So I say get it from them now rather than you and I later...
> 
> George


I understand but if people are not given a chance to swim they never will learn.  If given the chance some will and no matter what a few never will.


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## rapmarks (Apr 7, 2021)

easyrider said:


> I think the main reason people don't save is because no one teaches kids in school about money and investments. Most kids leave high school financially literate. Compound that with the government not really wanting a financially literate population and the problem becomes 81% of 60 year olds have less than $5000 that will live on a reduced ss check taken at 62.
> 
> Who ever teaches us about money and investments is usually the reason people retire well, imo. For me it was a real estate investor that I had worked for in the 80's. He taught me about using "other peoples money" via loans. He claimed that the debt I had by 35 would increase my net worth to be able to retire at 50. He taught me about using the real professionals and how to sift the wheat from the chaff to tell the difference. He made me self reliant and aware. I was lucky to have known this guy.
> 
> Bill


I think it is because they don’t want to delay gratification. I know a couple with a huge retirement income (200000) they cannot live within.  Not only do they eat every meal out, but it is always the pricier items with an appetizer and dessert,no scrimping for them.   they are in debt.  Everyone always watched on garbage day to see the empty boxes out at the road to see what they bought that week.


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## Brett (Apr 7, 2021)

joestein said:


> We never let anybody sink in this country.  Not that I want people sinking either.    However, we always bail everyone out and then tell them it's not their fault - your the victim.





bbodb1 said:


> This - desperately - needs to change.



sure, absolutely   ----   if one believes the federal government "bails everyone out" and tells them they are not at fault and they are victims
I've even heard of an (unmentionable)  individual that's been bankrupt six times and pays no federal individual taxes ...............  that's a big government (and bank) bail out !


...


----------



## joestein (Apr 7, 2021)

Brett said:


> sure, absolutely   ----   if one believes the federal government "bails everyone out" and tells them they are not at fault and they are victims
> I've even heard of an (unmentionable)  individual that's been bankrupt six times and pays no federal individual taxes ...............  that's a big government (and bank) bail out !
> 
> 
> ...


I am not a fan of Trump.  He is a repugnant individual.  However, none of us know what is going on with his taxes.   Many individuals, especially in RE, have their business set up to minimize taxes.  His taxes might be 100% legit.   Maybe not.   However, Mazars is a tier II firm.  I deal with them often.  They are not some backwater setup.  They would take a serious hit to their reputation if they were committing tax fraud on behalf of Trump - possibly go under.

Not really sure why this is the counter argument for the discussion.


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## rapmarks (Apr 7, 2021)

Icc5 said:


> Saved my entire life hoping to be able to retire at some point.  Worked for Safeway for 43 years and my wife put in 42 years there.  Didn't get married until age 37 and my wife had been divorced and had a 3 year old daughter.  We each owned a house and mine was paid off already.  We live in Santa Clara Valley.  I had some money in the stock market in conservative companies.  Two years later we had a son,sold both houses and bought up to a larger house in a more expensive city.  We each made about 37,000 back then and when we retired 25 years later were making about $42,000 each at that time.
> Moving into retirement between pensions and social security we each now make about $50,000.  Took my early retirement at 62 and my wife at 61.  Already had bigger house paid off.  We get about $15,000 in dividends and another $30,000 in tax free bonds.
> We were both leary of retiring.  Today, we are living the easy good life.  We have more money and time then ever.  We own 4 different timeshares and try going on about 6-7 weeks a year in them along with a few cruises each year.  Started going overseas until the pandemic hit but will start that up again when things are safer.
> My best advice is to somehow get income coming in on a regular basis (haven't touched our 401k's but have to by law in 2 more years).  Roth's will go to the kids along with the house and money left.    Forgot to mention we have long term insurance we started buying 15 years ago and have a union medical plan that is very reasonable in cost.
> ...


You did things the right way, congratulations


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## Icc5 (Apr 7, 2021)

rapmarks said:


> You did things the right way, congratulations


Thank you.  I always watched friends after high school that had to have the best or fastest car,ate out all the time and at the best restaurants,partied a lot,and spent their money freely to have everything.  At the same time I scrimped,went to the local JC then college.  Lived in my fraternity to save money,drove a VW for about 10 years and worked full time while going to school full time.  
Those friends really enjoyed themselves while younger.  When I see them now in person or on Facebok a few have been successful but many still live in apartments or rental housing and complain about everything costing so much.  Many moved to what they felt were cheaper states for affordable living.  My best friend from high school started a small business with his parents help.  He now is an achohic living in a married friends house and they control his finances.  He inherited 1/2 of his parents 2 million house and ran quickly thru his share.  Most that have done well came from parents that did well.  I came from parents that struggled raising 5 kids on my father's low income first job and his other part time job which meant he put in about 85 hours a week.  He invested small amounts in the stock market and when he passed my Mom played a little in the market.  About 10 years later the market moved and she ended up well off.
What I learned from watching my parents is save,save,save and invest some.  Luckily for me it has paid off.


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## Sugarcubesea (Apr 7, 2021)

joestein said:


> So, what does everyone think you can generate in income for your retirement on say $1MM.       Can you generate 4% to withdraw each year?  Or if you generate 4% can you withdraw 6%?



I'm going to have a cash cushion when I retire and will take out 4% the first year and see how the market goes, if its a bad year, I will take nothing out and use my cash reserves. I will adjust each year based on market conditions...


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## Sugarcubesea (Apr 7, 2021)

joestein said:


> True.   However, most Americans live far beyond their means.    We do earn very good money, but we have always lived below our means.
> 
> Just a point:
> 
> ...



My employees all think I'm so poor, I always bring my lunch to work, they always eat out, like you I buy my shoes and clothes at Costco, they buy all designer clothes and lease cars with $500 and $600 payments. I max out my 401K, I max out our Roth IRA's, I Max out my HSA and I put money in my FSA ( I have really bad gum disease, so I deep cleanings 4 times a year, so this allows me to use pre tax money)...


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## Brett (Apr 7, 2021)

joestein said:


> I am not a fan of Trump.  He is a repugnant individual.  However, none of us know what is going on with his taxes.   Many individuals, especially in RE, have their business set up to minimize taxes.  His taxes might be 100% legit.   Maybe not.   However, Mazars is a tier II firm.  I deal with them often.  They are not some backwater setup.  They would take a serious hit to their reputation if they were committing tax fraud on behalf of Trump - possibly go under.
> 
> Not really sure why this is the counter argument for the discussion.



nothing to do with "Mazars".   I have never heard of that firm.   But I have read about NY city ( Manhattan district) prosecutors

You said in a previous post that the federal government bails out everyone.   If that's true maybe we don't have to save for retirement  
but (just in case)  I have saved enough for retirement without federal government assistance.



.


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## HitchHiker71 (Apr 7, 2021)

heathpack said:


> This dude is very calming. I am 55yrs old. We have 4x in cash and retirement accounts. Plus another 2x ish in equity in our house. Ive always been handicapped by an inability to fully fund my 401k (due to IRS rules). We got bought by a big Corp and we were supposed to be able to finally fully fund this past year. Nope. Just got a $5500 check back from Fidelity due to over-contributing to my 401k (I put in the max amount for a person my age).
> 
> Boy it would be nice to retire in another 5 years...



What prevents you from contributing the maximum to your 401k? I’ve never heard about this issue before. I contribute the maximum of $19,500 and just started the $6,500 catch-up contributions this year. 


Sent from my iPhone using Tapatalk


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## Icc5 (Apr 7, 2021)

bogey21 said:


> The problem today is that many are not saving either by design or necessity.  This is why I advocate changing Social Security from a safety net into forced retirement savings by increasing the amount withheld from earnings and the accompanying  employer match.  Withdrawals and loans from 401ks and IRAs become too tempting for those  who started contributing but don't have the discipline not to tap for whatever reason.  Thus I say we need to protect these people from themselves now rather than wait until they are old and destitute...
> 
> George


Only problem with this idea is 95 % of people I worked with don't make enough to survive if you even took $10 more out of their paycheck.  Rent is so high here that many of these workers live with 4-5 families in the same unit.


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## joestein (Apr 7, 2021)

HitchHiker71 said:


> What prevents you from contributing the maximum to your 401k? I’ve never heard about this issue before. I contribute the maximum of $19,500 and just started the $6,500 catch-up contributions this year.
> 
> 
> Sent from my iPhone using Tapatalk



HCE or Highly Compensated Employee - which is defined by either a salary great than $130K or a minimum 5% owner.  The average 401K contribution for the HCEs can't be more than 2% higher than the average 401K contribution for the non-HCE.      So, for example - if the average non-HCE employee contributes 2% than the average HCE employee can't contribute more than 4%.

I have always thought this is very unfair.  If you make $150K - you are limited to $6K in the above example.  But if you make $500K - you can contribute up to $20K (more than the $19K 401K limit).  It really doesn't affect the very large earners- but it hurts the upper middle/lower upper people.

I work in NYC where $130K is not a big salary, but my company has property maintenance & staff all over the country that dont make anyway near NYC money.   Most of those people dont contribute much to their 401K, bringing down the average.

Most years I have been able to contribute $11K - $13K.  I usually get a check back for excess contributions.   I was able to put in 19K (due to 50 YO catch up) and haven't gotten a check yet.  Crossing my fingers.


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## heathpack (Apr 7, 2021)

@joestein you stated it better than I can

I work for a big veterinary corporation.  There‘s lots of lower paid entry level non-career type jobs- like kennel attendants.  Many employees do not contribute at all to their 401k.  This prevents me from maximally contributing to my 401k.


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## Brett (Apr 8, 2021)

heathpack said:


> @joestein you stated it better than I can
> 
> I work for a big veterinary corporation.  There‘s lots of lower paid entry level non-career type jobs- like kennel attendants.  Many employees do not contribute at all to their 401k.  This prevents me from maximally contributing to my 401k.



An unfortunate financial downside of being a "highly compensated employee". 
I was in that category a long time ago but I put extra retirement money in a taxable brokerage account, it's now far larger than any of my tax deferred accounts


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## bogey21 (Apr 8, 2021)

Icc5 said:


> Only problem with this idea is 95 % of people I worked with don't make enough to survive if you even took $10 more out of their paycheck.  Rent is so high here that many of these workers live with 4-5 families in the same unit.


The change I suggest would be phased in slowly.  The alternative is that if nothing is done, the people you are talking about will have to survive on less than adequate Social Security when they get old.  Of course another alternative is for the Government to take care of them by taxing those who acted responsibly...

George


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## Conan (Apr 8, 2021)

Overall, taxable accounts are not a bad alternative to IRA and employer plan employee contributions.
(Except to the extent the employer matches contributions.)


Taxable Brokerage AccountTax deduction for contributions?NoInterest earned from municipal bond-type investments is tax-free?YesInterest earned from U.S. government debt is free from State tax?YesOther interest earned is free from federal and State tax?NoFederal and State tax on capital gains and qualified dividends?Yes and at capital gains ratesFederal and State tax on non-qualified dividends?YesFederal and State tax on distributions of principal?NoPenalty tax on early withdrawals?NoRequired minimum distributions starting at age 70 1/2 or age 72?NoRequired distribution rules continue for beneficiaries after your death?NoFederal and State tax on distributions of principal to beneficiaries?No



Roth IRATax deduction for contributions?NoInterest earned from municipal bond-type investments is tax-free?YesInterest earned from U.S. government debt is free from State tax?YesOther interest earned is free from federal and State tax?YesFederal and State tax on capital gains and qualified dividends?NoFederal and State tax on non-qualified dividends?NoFederal and State tax on distributions?Yes before age 59 1/2, then No unless 5-year rule violatedPenalty tax on pre-age 59 1/2 withdrawals?Yes unless hardship rules apply, also yes if 5-year rule violatedRequired minimum distributions starting at age 70 1/2 or age 72?NoRequired distribution rules continue for beneficiaries after your death?Special rules applyFederal and State tax on distributions of principal to beneficiaries?Special rules apply



Employer Plan or regular IRATax deduction for contributions?Yes but no deduction + penalty tax on over-contributionsInterest earned from municipal bond-type investments is tax-free?Yes but ordinary tax on withdrawalsInterest earned from U.S. government debt is free from State tax?Yes but ordinary tax on withdrawalsOther interest earned is free from federal and State tax?Yes but ordinary tax on withdrawalsFederal and State tax on capital gains and qualified dividends?No but ordinary tax on withdrawalsFederal and State tax on non-qualified dividends?No but ordinary tax on withdrawalsFederal and State tax on distributions of principal?Yes and ordinary tax rates applyPenalty tax on pre-age 59 1/2 withdrawals?Yes unless hardship rules applyRequired minimum distributions starting at age 70 1/2 or age 72?YesRequired distribution rules continue for beneficiaries after your death?YesFederal and State tax on distributions of principal to beneficiaries?Yes


Hopefully I got all this right -- it wasn't easy!!


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## rapmarks (Apr 8, 2021)

bogey21 said:


> The change I suggest would be phased in slowly.  The alternative is that if nothing is done, the people you are talking about will have to survive on less than adequate Social Security when they get old.  Of course another alternative is for the Government to take care of them by taxing those who acted responsibly...
> 
> George


yeah, the government is doing this already


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## Rolltydr (Apr 8, 2021)

bogey21 said:


> The change I suggest would be phased in slowly.  The alternative is that if nothing is done, the people you are talking about will have to survive on less than adequate Social Security when they get old.  Of course another alternative is for the Government to take care of them by taxing those who acted responsibly...
> 
> George


So, either people have good paying jobs that afford them the opportunity to save enough for their elder years, or they’re irresponsible? Real life isn’t that simple. There are many, many people, including my single divorced mother, who work all their lives at low paying jobs that only allow them to feed their families and pay for the necessities. There is nothing left to save! She wasn’t irresponsible, she was poor. She lived her later years on a minimal SS check of between $700-800 a month, Medicare, Medicaid, and whatever her proud self would allow her 2 sons to provide her. Irresponsible? I don’t think so. Unlucky? Maybe, but through no fault of her own. She was from a rural area where there were very few jobs of any kind. She did what she could, including taking care of her own mother, who had Alzheimer’s for the last few years of her life. There are millions of people like her. Why do some of us find it so bad that our tax money helps to provide for people like this?


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## easyrider (Apr 8, 2021)

Rolltydr said:


> So, either people have good paying jobs that afford them the opportunity to save enough for their elder years, or they’re irresponsible? Real life isn’t that simple. There are many, many people, including my single divorced mother, who work all their lives at low paying jobs that only allow them to feed their families and pay for the necessities. There is nothing left to save! She wasn’t irresponsible, she was poor. She lived her later years on a minimal SS check of between $700-800 a month, Medicare, Medicaid, and whatever her proud self would allow her 2 sons to provide her. Irresponsible? I don’t think so. Unlucky? Maybe, but through no fault of her own. She was from a rural area where there were very few jobs of any kind. She did what she could, including taking care of her own mother, who had Alzheimer’s for the last few years of her life. There are millions of people like her. Why do some of us find it so bad that our tax money helps to provide for people like this?



Exactly this above. 

I'm in the opinion that most of the tax load should be paid by entities that earn the most. These are the corporations that make billions but pay no income tax because they can afford to payoff the system legally. Not only do these companies not pay taxes, very often they receive Federal and State assistance. This type of issue is why I think there are very few decent politicians at the higher levels. It's the same game with different players no matter who is in office. Please excuse my morning rant, lol.

Bill


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## heathpack (Apr 8, 2021)

Brett said:


> An unfortunate financial downside of being a "highly compensated employee".
> I was in that category a long time ago but I put extra retirement money in a taxable brokerage account, it's now far larger than any of my tax deferred accounts



Ive decided to do exactly that with my check I got back this time.

Although I’m in a field which is in uber high demand and I could get a new job very readily, it’s likely if I lost my job that I’d get the sweetest deal by relocating.  And that process takes time- flying multiple places to interview, negotiating out multiple contracts, selling a house, buying a new house.  So Im someone who has always felt the need to have a big bucket of cash- 10-12 months of living expenses- sitting in the bank getting essentially no return.

But in this housing market, the house is now so liquid that I am starting to feel ok with sitting on less cash.  It’s time to get a better return on my bucket of cash.  I’m going to park some of it in an ETF for the immediate future.


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## grupp (Apr 8, 2021)

joestein said:


> HCE or Highly Compensated Employee - which is defined by either a salary great than $130K or a minimum 5% owner.  The average 401K contribution for the HCEs can't be more than 2% higher than the average 401K contribution for the non-HCE.      So, for example - if the average non-HCE employee contributes 2% than the average HCE employee can't contribute more than 4%.
> 
> I have always thought this is very unfair.  If you make $150K - you are limited to $6K in the above example.  But if you make $500K - you can contribute up to $20K (more than the $19K 401K limit).  It really doesn't affect the very large earners- but it hurts the upper middle/lower upper people.
> 
> ...



Your employer may want to consider setting up a Safe Harbor  401K


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## rapmarks (Apr 8, 2021)

easyrider said:


> Exactly this above.
> 
> I'm in the opinion that most of the tax load should be paid by entities that earn the most. These are the corporations that make billions but pay no income tax because they can afford to payoff the system legally. Not only do these companies not pay taxes, very often they receive Federal and State assistance. This type of issue is why I think there are very few decent politicians at the higher levels. It's the same game with different players no matter who is in office. Please excuse my morning rant, lol.
> 
> Bill


Corporate welfare


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## am1 (Apr 8, 2021)

Rolltydr said:


> So, either people have good paying jobs that afford them the opportunity to save enough for their elder years, or they’re irresponsible? Real life isn’t that simple. There are many, many people, including my single divorced mother, who work all their lives at low paying jobs that only allow them to feed their families and pay for the necessities. There is nothing left to save! She wasn’t irresponsible, she was poor. She lived her later years on a minimal SS check of between $700-800 a month, Medicare, Medicaid, and whatever her proud self would allow her 2 sons to provide her. Irresponsible? I don’t think so. Unlucky? Maybe, but through no fault of her own. She was from a rural area where there were very few jobs of any kind. She did what she could, including taking care of her own mother, who had Alzheimer’s for the last few years of her life. There are millions of people like her. Why do some of us find it so bad that our tax money helps to provide for people like this?



Governments give a lot of support to people as it is.  How much does one want?  I feel family should step up more when needed.  That being said people can always save a few dollars more but I guess do not see the point and want instant gratification. I see it all the time.


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## bogey21 (Apr 8, 2021)

easyrider said:


> These are the corporations that make billions but pay no income tax because they can afford to payoff the system legally. Not only do these companies not pay taxes, very often they receive Federal and State assistance.



I'm going to open another can of worms here.  IMO there is no need to change the way publicly Corporations calculate their Federal Income Tax.  I would make one change in the tax code.  It would require corporations to make one simple calculation when they file there taxes.  Set a percentage, let's for example say 15%, and apply it to earnings they report to their shareholders.  If this results in a number higher than their taxes as determined by the Tax Code, that would be their tax.  It would be the higher of...Thus companies who currently make a lot of money but pay no Federal Income Tax would now pay something...

George


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## am1 (Apr 8, 2021)

bogey21 said:


> I'm going to open another can of worms here.  IMO there is no need to change the way publicly Corporations calculate their Federal Income Tax.  I would make one change in the tax code.  It would require corporations to make one simple calculation when they file there taxes.  Set a percentage, let's for example say 15%, and apply it to earnings they report to their shareholders.  If this results in a number higher than their taxes as determined by the Tax Code, that would be their tax.  It would be the higher of...Thus companies who currently make a lot of money but pay no Federal Income Tax would now pay something...
> 
> George


No doubt they would find a work around.  I would lower taxes and deductions all around.  Let people and companies control their money.


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## HitchHiker71 (Apr 8, 2021)

grupp said:


> Your employer may want to consider setting up a Safe Harbor 401K



This is what the company I work for has. We have a 5% safe harbor match. This explains why I’ve never run into the HCE issue before - given I fall into the HCE category. 


Sent from my iPhone using Tapatalk


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## easyrider (Apr 9, 2021)

bogey21 said:


> I'm going to open another can of worms here.  IMO there is no need to change the way publicly Corporations calculate their Federal Income Tax.  I would make one change in the tax code.  It would require corporations to make one simple calculation when they file there taxes.  Set a percentage, let's for example say 15%, and apply it to earnings they report to their shareholders.  If this results in a number higher than their taxes as determined by the Tax Code, that would be their tax.  It would be the higher of...Thus companies who currently make a lot of money but pay no Federal Income Tax would now pay something...
> 
> George



I bet corporations would pay lobbyists 15% to quash any tax if asked to pay a 15% tax. If they were required to pay they would send their earnings elsewhere to avoid the tax. Currently, the tax payers pay the corporate tax.

I get that they need to make money but they do whatever it takes to do so. Many people I know that worked for bid companies had their jobs eliminated as they aged into their 50's. It's pretty common.   

Bill

https://publicintegrity.org/inequal...cuts/you-paid-taxes-these-corporations-didnt/


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## rapmarks (Apr 9, 2021)

In October I pulled a lot of money from the market,  later today, I will be speaking with financial advisor about reinvestment. Don’t need income.  Bond rates too low and won’t buy into bond fund.  
I know I lost on a lot of growth over past six months, but what do I do now


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## klpca (Apr 9, 2021)

easyrider said:


> Many people I know that worked for bid companies had their jobs eliminated as they aged into their 50's. It's pretty common.
> 
> Bill


My goodness - this in a nutshell. (And I assume that you meant "big" companies). And they get away with it despite laws on the books about age discrimination. When my husband was in his early 50's I started to notice that he was the oldest person - by far - in the room when we went to any company events. I kept asking him "where are the older folks"? Of course when he was 57 we found out - gone. Until then he had survived many rounds of layoffs (software engineering seems to have layoffs on an annual basis) but he lost his job when they closed the local facility. He was in the middle of cancer treatment so we did not move to the company headquarters in another state. Over the years I noticed that a lot of the people who got laid off in their 50's just "retired". Here I thought that they retired because they had a great nest egg, but now I understand that often, "retiring" in your 50's is another name for being unable to find another job because you are too old. My husband did find another job but it took almost 6 months and a 25% pay cut. But just because you are older does not mean that you suddenly contribute less. Being forced to retire in your 50's will do quite a number on your nest egg no matter how much you have. You not only lose up to 15 years of savings/company matches/earnings, you start making withdrawals. It's definitely less than ideal.


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## Patri (Apr 9, 2021)

When the bosses hit their 50s, the tune will change.


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## joestein (Apr 9, 2021)

bogey21 said:


> I'm going to open another can of worms here.  IMO there is no need to change the way publicly Corporations calculate their Federal Income Tax.  I would make one change in the tax code.  It would require corporations to make one simple calculation when they file there taxes.  Set a percentage, let's for example say 15%, and apply it to earnings they report to their shareholders.  If this results in a number higher than their taxes as determined by the Tax Code, that would be their tax.  It would be the higher of...Thus companies who currently make a lot of money but pay no Federal Income Tax would now pay something...
> 
> George


The problem is the way that taxable income vs financial statement income is calculated.   You might depreciation an asset on you books for many years for FS purposes, but you might be able to appreciate all at once or quicker on a taxable income basis.   An asset might be FV on a financial statement basis, but not on a taxable basis.

The better way might be for a minimum tax based upon revenue.


HitchHiker71 said:


> This is what the company I work for has. We have a 5% safe harbor match. This explains why I’ve never run into the HCE issue before - given I fall into the HCE category.
> 
> 
> Sent from my iPhone using Tapatalk



I don't think this works for my company as we have such a low match that maxes out at $1k.


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## joestein (Apr 9, 2021)

klpca said:


> My goodness - this in a nutshell. (And I assume that you meant "big" companies). And they get away with it despite laws on the books about age discrimination. When my husband was in his early 50's I started to notice that he was the oldest person - by far - in the room when we went to any company events. I kept asking him "where are the older folks"? Of course when he was 57 we found out - gone. Until then he had survived many rounds of layoffs (software engineering seems to have layoffs on an annual basis) but he lost his job when they closed the local facility. He was in the middle of cancer treatment so we did not move to the company headquarters in another state. Ove the years I noticed that a lot of the people who got laid off in their 50's just "retired". Here I thought that they retired because they had a great nest egg, but now I understand that often, "retiring" in your 50's is another name for being unable to find another job because you are too old. My husband did find another job but it took almost 6 months and a 25% pay cut. But just because you are older does not mean that you suddenly contribute less. Being forced to retire in your 50's will do quite a number on your nest egg no matter how much you have. You not only lose up to 15 years of savings/company matches/earnings, you start making withdrawals. It's definitely less than ideal.



That is horrible.  Many companies simply want to replace higher salaries with lower ones.


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## bogey21 (Apr 9, 2021)

joestein said:


> The better way might be for a minimum tax based upon revenue.



I'm OK with that.  The reason I chose Reported Earnings as opposed to Taxable Earnings is that it is a number that Management wants to maximize because (1) it is reported to Shareholders and (2) often Management's bonuses are based on it.  The benefit of using revenue is that the percentage would (should?) be a very low number...

George


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## bluehende (Apr 9, 2021)

easyrider said:


> I get that they need to make money but they do whatever it takes to do so. Many people I know that worked for bid companies had their jobs eliminated as they aged into their 50's. It's pretty common.


I worked for a major company and was officially laid off at 51.  I volunteered as my mother was sick and my brother and I were trying to give 24/7 care from 2 hrs away.  The severance of 1 yr and being able to collect a reduced pension made it possible.  Most of the others from that layoff and the 3 we had in the years before were the older crowd  ( I will add all the deciders were of that age also).  Our group was a barbell with half being older and half being younger due to product dynamics over the decades.  A few of the younger crowd were useless.  They got laid off and the rest always came from the older crowd.  We always heard this was to save money due to pension reasons and health care reasons.  The company was self insured.
   This conversation always fascinates me.  I retired with about 6 fold my income away.  That was in 2007.  Yep it quickly became 3 fold.  6x is a little low by my calculation for 51 but doable with our lifestyle.  No mortgage and not big spenders.  Luckily we did not ignore other rules of thumb.  We had 5 yrs of cash on hand.  We waited it out and even put more into the market as we could.  The thought was if the market continued down I was screwed so why not go all in. With the market going up around 6 fold we are quite comfortable now.  

Now if we could only get back to those 5% money markets with out crashing the market......good luck with that.


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## HitchHiker71 (Apr 9, 2021)

joestein said:


> That is horrible.  Many companies simply want to replace higher salaries with lower ones.



Yes, what most companies do is lay off the older folks - giving them some kind of minimum exit package - and then relabel the rehire position with a different title with different responsibilities, at least on paper, to avoid the regs, and hire in someone else at 50% of the salary of the older person that they laid off.  My current firm also does not perform annual reviews any longer, and does not give out cost of living increases any longer, only merit increases tied to promotion and/or performance at the sole discretion of the manager/director.  This is a great way to keep costs under control for sure.


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## stmartinfan (Apr 9, 2021)

We've been careful savers and both have corporate pensions plus maximum SS (delayed collecting until 70). We can live a comfortable life without needing to spend down our savings much.  But one of our two daughters has a disability which will never allow her to work enough to make a real income and her SS disability payments will barely cover rent when she moves out of our house.  We planned ahead by buying a long term care policy to help protect our inheritance for her, but are now facing a hugh premium increase and threats of increases to come.  (The long term care companies are in big trouble and clearly trying to ditch enrollees.). With our savings we can cover extended care without the insurance but that means we're gambling with her future. It's a tough decision to make.


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## am1 (Apr 9, 2021)

When it comes down to it what is wrong with laying off the higher paid and they only a few years left to work (usefulness) to the company?  Other then for the individual being laid off.


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## Conan (Apr 9, 2021)

rapmarks said:


> In October I pulled a lot of money from the market,  later today, I will be speaking with financial advisor about reinvestment. Don’t need income.  Bond rates too low and won’t buy into bond fund.
> I know I lost on a lot of growth over past six months, but what do I do now


I’ve accepted the popular wisdom and limit my buying and selling to whatever it takes to stay within a half percent of domestic equity 51% and non-US equity 12%. The remaining 37% is supposed to be 32% bonds and 5% cash but I lost my nerve and got stuck at 25% bonds and 12% cash.

My biggest concentrations are in low-fee Fidelity FSKAX and FSMAX domestic, Vanguard VFIAX domestic, Vanguard VWILX international, and Vanguard VWENX balanced.

Frankly I would have done better putting 99% into VWENX which charges a .16% annual fee (16 cents per $1,000) and currently allocates 57% US equity, 9% non-US equity, 30% fixed income, and 4% cash. Its total annual returns through April 8, 2021 are 8.72% in 15 years, 10.08% in 10 years, 11.75% in 5 years, and 6.09% year-to-date.

VWENX's worst year this century was 2008 (-22.3%) which it recovered in 2009 (+22.2%) and 2010 (+10.9%).
My allocation did a little better in 2008 (-17.3%) but I didn't recover as well in 2009 (+13.5%) and did about the same (+11.2%) as VWENX in 2010.

I’ll add the Morningstar links to VWENX’s portfolio and past performance.




__





						VWENX – Portfolio – Vanguard Wellington™ Admiral™ | Morningstar
					

VWENX Portfolio - Learn more about the Vanguard Wellington™ Admiral™ investment portfolio including asset allocation, stock style, stock holdings and more.




					www.morningstar.com
				







__





						VWENX – Performance – Vanguard Wellington™ Admiral™ | Morningstar
					

VWENX Performance - Review the performance history of the Vanguard Wellington™ Admiral™ fund to see it's current status, yearly returns, and dividend history.




					www.morningstar.com


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## easyrider (Apr 9, 2021)

am1 said:


> When it comes down to it what is wrong with laying off the higher paid and they only a few years left to work (usefulness) to the company?  Other then for the individual being laid off.



Nothing if it voluntary. Everything if its not voluntary. 

When you say "few years" to me that means about 3 years. When a person is let go in their 50's it is probably closer to 10 years than 3 years regarding a time to exit to retirement. Usually this type of job elimination happens in times of economic downturn which compounds the financial stress of the older person whose job has been eliminated.

The best income years are used to calculate SS benefits. When those years are eliminated the SS benefit usually decreases.

Bill


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## am1 (Apr 9, 2021)

easyrider said:


> Nothing if it voluntary. Everything if its not voluntary.
> 
> When you say "few years" to me that means about 3 years. When a person is let go in their 50's it is probably closer to 10 years than 3 years regarding a time to exit to retirement. Usually this type of job elimination happens in times of economic downturn which compounds the financial stress of the older person whose job has been eliminated.
> 
> ...



But if a company is in an economic downturn then they should do all they can to stay afloat.  Voluntary or not.  Governments may not like it as then someone else (possibly them) has to support the older worker going forward.  3 years or 10 years makes no difference compared to someone who still may be around in 20-25 years.


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## PigsDad (Apr 9, 2021)

rapmarks said:


> In October I pulled a lot of money from the market,  later today, I will be speaking with financial advisor about reinvestment. Don’t need income.  Bond rates too low and won’t buy into bond fund.
> I know I lost on a lot of growth over past six months, but what do I do now


I would first talk to your financial advisor about the reasons you exited the market in October in the first place.  Was it because you thought the market had topped out (market timing), or because you were getting nervous about your exposure (risk level), or because you needed the cash (investment mix), etc.  That would help them determine what your goals are going forward with your investments and build a plan that you can feel comfortable with and not feel the need to pull the plug on it on a whim.  Just my thoughts.

Kurt


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## easyrider (Apr 9, 2021)

am1 said:


> But if a company is in an economic downturn then they should do all they can to stay afloat.  Voluntary or not.  Governments may not like it as then someone else (possibly them) has to support the older worker going forward.  3 years or 10 years makes no difference compared to someone who still may be around in 20-25 years.



I'm certain those affected will not agree with you on this. I know I don't. 

Bill


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## Conan (Apr 9, 2021)

am1 said:


> [Someone] has to support the older worker....


In the U.S. we call it socialism for the rich and free enterprise for the poor.





						Socialism for the rich and capitalism for the poor - Wikipedia
					






					en.wikipedia.org
				



.


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## SmithOp (Apr 9, 2021)

HitchHiker71 said:


> Yes, what most companies do is lay off the older folks - giving them some kind of minimum exit package - and then relabel the rehire position with a different title with different responsibilities, at least on paper, to avoid the regs, and hire in someone else at 50% of the salary of the older person that they laid off. My current firm also does not perform annual reviews any longer, and does not give out cost of living increases any longer, only merit increases tied to promotion and/or performance at the sole discretion of the manager/director. This is a great way to keep costs under control for sure.



I was lucky, I made it to 57-1/2 before the axe came down. My exit package included 6 months salary. I was planning on retiring at 58 anyway, so I wasn’t too broken up about being replaced with an H-1B Visa hire from India.


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## am1 (Apr 9, 2021)

easyrider said:


> I'm certain those affected will not agree with you on this. I know I don't.
> 
> Bill


Obviously them aside as I mentioned earlier.  But the big picture it is what is best for the company, young employees and the economy.


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## joestein (Apr 9, 2021)

HitchHiker71 said:


> Yes, what most companies do is lay off the older folks - giving them some kind of minimum exit package - and then relabel the rehire position with a different title with different responsibilities, at least on paper, to avoid the regs, and hire in someone else at 50% of the salary of the older person that they laid off.  My current firm also does not perform annual reviews any longer, and does not give out cost of living increases any longer, only merit increases tied to promotion and/or performance at the sole discretion of the manager/director.  This is a great way to keep costs under control for sure.



My firm always gave out cost of living increases.  This past year, they were greatly reduced.   Somehow, I see this as the new normal.


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## klpca (Apr 9, 2021)

SmithOp said:


> I was lucky, I made it to 57-1/2 before the axe came down. My exit package included 6 months salary. I was planning on retiring at 58 anyway, so I wasn’t too broken up about being replaced with an H-1B Visa hire from India.


Exactly this. It's just ridiculous.


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## MrockStar (Apr 9, 2021)

I know that being 61 and having 39 years of Maint/military experience in Electronics/customer support, I am at the top of my game and a huge asset to my company and the customers we support. Also we are experiencing a huge brain drain with all the current retirements. So this my not be the case with all businesses, but i support and defend all older workers as long as they bring valuable skills and value to the company.


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## CalGalTraveler (Apr 9, 2021)

What will exacerbate the age trend will be when corps start to lay off younger white collar workers in entry and mid-level jobs. AI and RPA (Robotic Process Automation) will take away jobs. The next 10 - 20 years will look very different as these technologies are adopted. 









						The Robots Are Coming for Phil in Accounting (Published 2021)
					

Workers with college degrees and specialized training once felt relatively safe from automation. They aren’t.




					www.nytimes.com


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## Brett (Apr 9, 2021)

CalGalTraveler said:


> What will exacerbate the age trend will be when corps start to lay off younger white collar workers in entry and mid-level jobs. AI and RPA (Robotic Process Automation) will take away jobs. The next 10 - 20 years will look very different as these technologies are adopted.
> 
> 
> 
> ...



I read that article, - white collar automation has been around for decades, it's now accelerating.
In banking and finance positions were eliminated by automated processes and the ability to perform online transactions.
I'm glad I got out years ago


.


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## Goldi (Apr 9, 2021)

CalGalTraveler said:


> What will exacerbate the age trend will be when corps start to lay off younger white collar workers in entry and mid-level jobs. AI and RPA (Robotic Process Automation) will take away jobs. The next 10 - 20 years will look very different as these technologies are adopted.
> 
> 
> 
> ...


Yep this is happening at Big Pharma where I worked. First they shipped 115 accounting jobs to the Ireland affiliate and all US 115 financial employees had to either quit, retire or find another job within the company. Big Pharma accounting employees in Ireland will loose their jobs once the robotic accounting automation project is completed.
I was fortune because at the same time my job was moved to the Ireland affiliate, the company offered an early retirement package. I jumped on that offer. I have no regrets and feel very fortunate.


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## Conan (Apr 12, 2021)

Excerpt from Thursday's NY Times
*----------
Investing Made Simple for Beginners and Everyone Else*

"I know you may not believe me, but managing your money can be simple.”

That’s the way I began the conversation I had with each of my children when they got their first real jobs and had questions about retirement plans and how they were going to prepare for their financial futures.

Boiled down, it amounted to this:

Start with the essentials. Make sure you have three to six months of living expenses saved in case of an emergency, as well as the best insurance you can afford for your health and important possessions. Only then should you turn to investing.

Because stocks have outperformed bonds, cash equivalents (like certificates of deposit) and real estate over the long term, equities are where you want to have most of your money while you are young.

What percentage of your assets should be in stocks? Well, years ago, a common rule of thumb was: Subtract your age from 100 and that will give you the right number. So 30-year-olds were told to have 70 percent of their money in stocks. That figure was fairly conservative, and eventually some experts began saying subtract your age from 110, which would have made the number 80 percent in stocks at age 30.

But people are living longer, and I think that 110 figure is still low. So my suggestion is to subtract your age from 120, which means if you are 30 now, 90 percent of your money should be in stocks.

Which stocks? To keep things simple, don’t even ask that question: Only invest in index funds....
----------
Link to entire article (Paywall)








						Investing Made Simple for Beginners and Everyone Else (Published 2021)
					

Managing your money for the long run can be easier than you might imagine.




					www.nytimes.com


----------



## PigsDad (Apr 12, 2021)

Conan said:


> What percentage of your assets should be in stocks? Well, years ago, a common rule of thumb was: Subtract your age from 100 and that will give you the right number. So 30-year-olds were told to have 70 percent of their money in stocks. That figure was fairly conservative, and eventually some experts began saying subtract your age from 110, which would have made the number 80 percent in stocks at age 30.
> 
> But people are living longer, and I think that 110 figure is still low. So my suggestion is to subtract your age from 120, which means if you are 30 now, 90 percent of your money should be in stocks.


Just my opinion, but I don't like the "subtract your age" formulas when talking about retirement investment mixes.  Given that one will not be touching retirements funds until they are retired, and given the historical fact that equity investments have outperformed bonds in any 10 (or is it 15?) year period, why would one need to start adding bonds to one's investment mix to reduce risk until they are 10-15 years away from retirement?

Personally, our retirement assets were 100% equities until we were about 53, and that is a huge reason why we are way ahead of the game in our retirement numbers.  We probably should have started shifting our mix a bit earlier than that, and I admit we got a bit lucky waiting, but I never saw a need to be so heavily invested in bonds as these common rule of thumb formulas suggested when we were in our 20's, 30's or 40's.  I wanted as much of my retirement money invested in the highest growth possible (without trying to time the market, which I firmly believe is a fool's game in the long run).

Anyone agree with me, or was I completely foolish and just lucky?

Kurt


----------



## Brett (Apr 12, 2021)

PigsDad said:


> Just my opinion, but I don't like the "subtract your age" formulas when talking about retirement investment mixes.  Given that one will not be touching retirements funds until they are retired, and given the historical fact that equity investments have outperformed bonds in any 10 (or is t 15?) year period, why would one need to start adding bonds to one's investment mix to reduce risk until they are 10-15 years away from retirement?
> 
> Personally, our retirement assets were 100% equities until we were about 53, and that is a huge reason why we are way ahead of the game in our retirement numbers.  We probably should have started shifting our mix a bit earlier than that, and I admit we got a bit lucky waiting, but I never saw a need to be so heavily invested in bonds as these common rule of thumb formulas gave when we were in our 20's, 30's or 40's.  I wanted as much of my retirement money invested in the highest growth possible (without trying to time the market, which I firmly believe is a fool's game in the long run).
> 
> ...



I agree with you
I was 80% - 90% in equities until retirement then each year switched some tax deferred equity investments to bonds and CDs
I also switched some taxable mutual funds to short term bond funds


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## Conan (Apr 12, 2021)

PigsDad said:


> Anyone agree with me, or was I completely foolish and just lucky?
> 
> Kurt


Not foolish, but you did have some good luck.

A person who was 100% in an S&P 500 portfolio lost 40 to 50% of their savings in 2008.
Yes, if they held on for 2009-2010 they broke even for the three years 2008-2009-2010. 

After which they had zero return for 2011, assuming they held on for the 2-day 10% drop of August 4-5, 2011.

If you were in the market in 2008, did you buy, sell, or hold?
How about in 2011?

Anyway, that NY Times article per the rule of 120 allows 100% stock at age 20, 90% at age 30, and 80% at age 40.


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## PigsDad (Apr 12, 2021)

Conan said:


> Not foolish, but you did have some good luck.
> 
> A person who was 100% in an S&P 500 portfolio lost 40 to 50% of their savings in 2008.
> Yes, if they held on for 2009-2010 they broke even for the three years 2008-2009-2010.
> If you were in the market in 2008, did you buy, sell, or hold?


So I was 100% in the market (and continuing to contribute to retirement funds) in 2008 and for the following 11 years (when I turned 53), then I started to shift some to more conservative investments.  The equities market out-performed the bond market in the 10-year period including the 2008 crash, which just strengthens my point of questioning the need to have bonds in one's mix if you are not close to retirement.

Kurt


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## amycurl (Apr 12, 2021)

Poverty is not a character flaw; it's a structural aspect of capitalism. 

I appreciate those of you who have been (gently) trying to point this out in this thread.


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## Icc5 (Apr 12, 2021)

klpca said:


> My goodness - this in a nutshell. (And I assume that you meant "big" companies). And they get away with it despite laws on the books about age discrimination. When my husband was in his early 50's I started to notice that he was the oldest person - by far - in the room when we went to any company events. I kept asking him "where are the older folks"? Of course when he was 57 we found out - gone. Until then he had survived many rounds of layoffs (software engineering seems to have layoffs on an annual basis) but he lost his job when they closed the local facility. He was in the middle of cancer treatment so we did not move to the company headquarters in another state. Over the years I noticed that a lot of the people who got laid off in their 50's just "retired". Here I thought that they retired because they had a great nest egg, but now I understand that often, "retiring" in your 50's is another name for being unable to find another job because you are too old. My husband did find another job but it took almost 6 months and a 25% pay cut. But just because you are older does not mean that you suddenly contribute less. Being forced to retire in your 50's will do quite a number on your nest egg no matter how much you have. You not only lose up to 15 years of savings/company matches/earnings, you start making withdrawals. It's definitely less than ideal.



When this happened to my younger 57 year old brother he got depressed then committed suicide.  He had plenty of money (several million) house paid off etc. but felt he was then worthless.  This was after working his way up in a company where he was considered the go to person and at the time was one level below the company VP'S.


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## bbodb1 (Apr 12, 2021)

amycurl said:


> Poverty is not a character flaw; it's a structural aspect of capitalism.



While I will have to go back and reread this thread to see what this is referring to, I could not disagree more.  Capitalism does not mean someone has to live in poverty (which is what this seems to be suggesting)...  

In some cases, poverty is a character flaw because the person made poor choices.  
Is some cases, poverty is result of being in the wrong place at right time (example: factory shut down)....
At any rate, can you elaborate on this?


----------



## Big Matt (Apr 12, 2021)

amycurl said:


> Poverty is not a character flaw; it's a structural aspect of capitalism.
> 
> I appreciate those of you who have been (gently) trying to point this out in this thread.


Agree that it isn't a character flaw, but other character flaws can lead to poverty without a doubt.  I will go further to say that those character flaws lead to poverty in all econonomic models that I'm aware of.


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## klpca (Apr 12, 2021)

I've told our story before and I am not going to go into it again in detail but when I was 10 with two younger siblings, my father left our family. About a year later my mom was laid off from her job. My grandparents literally said to my mom "you made your bed so now you can lay in it" (they never liked my dad and opposed the marriage) and refused all financial support. One person in this story had character flaws (my father) everyone else was an innocent victim of his failings. We survived, barely, on welfare for about a year until my mom was hired by AllState Insurance under a court order to hire women.

Some people really do pay the price for others shortcomings.


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## Rolltydr (Apr 12, 2021)

Big Matt said:


> Agree that it isn't a character flaw, but other character flaws can lead to poverty without a doubt.  I will go further to say that those character flaws lead to poverty in all econonomic models that I'm aware of.


And what character flaws do children have that lead approximately 10.5 million of them to live in poverty? Did they choose the wrong parents? Stupid kids.

I have an idea. Maybe some of you can teach a class in how embryos can choose the right wombs.


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## am1 (Apr 12, 2021)

klpca said:


> I've told our story before and I am not going to go into it again in detail but when I was 10 with two younger siblings, my father left our family. About a year later my mom was laid off from her job. My grandparents literally said to my mom "you made your bed so now you can lay in it" (they never liked my dad and opposed the marriage) and refused all financial support. One person in this story had character flaws (my father) everyone else was an innocent victim of his failings. We survived, barely, on welfare for about a year until my mom was hired by AllState Insurance under a court order to hire women.
> 
> Some people really do pay the price for others shortcomings.



Your grandparents as well could be questioned.


For some character flaws do not lead to poverty but good character traits do.  Unselfishness, choosing to live differently etc.


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## HitchHiker71 (Apr 12, 2021)

PigsDad said:


> So I was 100% in the market (and continuing to contribute to retirement funds) in 2008 and for the following 11 years (when I turned 53), then I started to shift some to more conservative investments. The equities market out-performed the bond market in the 10-year period including the 2008 crash, which just strengthens my point of questioning the need to have bonds in one's mix if you are not close to retirement.
> 
> Kurt



I think it’s a question of risk tolerance. We are effectively at the end of a 30+ year bond bull market that started in the early 80’s when rates were up near 20% until the last 12+ years of net zero or very low rates. We are likely entering a bear market for bonds with inflationary pressures on the rise and rates likely to rise. Perhaps a balanced fund may be in order as a compromise for those with low risk tolerance. 

That said, we are likely entering a period in the markets where passive investing isn’t going to cut it (meaning index funds or any other passively managed funds), and where actively managed funds may have advantages given the markets are near all time highs, including historically higher P/E ratios, both of which point to a major correction and a corresponding secular bear market with high volatility, as we see market P/E ratios fall back below the historic averages. This will likely be brought on by a series of shocks to include geopolitical destabilizing factors and global debt defaults. 


Sent from my iPhone using Tapatalk


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## klpca (Apr 12, 2021)

am1 said:


> Your grandparents as well could be questioned.
> 
> 
> For some character flaws do not lead to poverty but good character traits do.  Unselfishness, choosing to live differently etc.


For the post part most of the family came out of it quite well. My mom was a battle-axe and became a successful business owner after about 5 years of hell. Tough times can build character and for that I have always been grateful. But the other lesson that it taught me is to try not to judge too harshly others who are going through difficult times. I have to work on having compassion - obviously that was not modeled at home and it feels like I am excusing poor choices, for example, but I need to remember that some people are just caught up in a mess that they didn't create.


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## Big Matt (Apr 13, 2021)

Rolltydr said:


> And what character flaws do children have that lead approximately 10.5 million of them to live in poverty? Did they choose the wrong parents? Stupid kids.
> 
> I have an idea. Maybe some of you can teach a class in how embryos can choose the right wombs.



Your comment to me is way out of line, and I take offense to it.  You know nothing about me.  Please don't assume that I'm talking about children.  They are the victims.  I'm talking about adults and how character flaws can lead to poverty.

Character flaws that I'm thinking of include: dishonesty, willingness to steal, bullying, dealing drugs, etc.  These all tend to keep people out of jobs and probably put them in prison.  That leads to low/no income.  It can destroy a family unit.  This happens in all economic models.


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## Sugarcubesea (Apr 13, 2021)

HitchHiker71 said:


> Yes, what most companies do is lay off the older folks - giving them some kind of minimum exit package - and then relabel the rehire position with a different title with different responsibilities, at least on paper, to avoid the regs, and hire in someone else at 50% of the salary of the older person that they laid off.  My current firm also does not perform annual reviews any longer, and does not give out cost of living increases any longer, only merit increases tied to promotion and/or performance at the sole discretion of the manager/director.  This is a great way to keep costs under control for sure.



The company that I worked at prior to the company I am at now did that, after being there for only three years, I could see that every year, those over 50 were shown the door, position was relabelled, a fresh out of college employee was brought in and assigned to a senior employee who trained him / her  for two years and then that employee was let go and the cycle started again...I started looking for a new opportunity once I saw that was that this was their modus operandi and landed at the Japanese automotive company I'm at now and hope to stay at till I retire.


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## Sugarcubesea (Apr 13, 2021)

am1 said:


> But if a company is in an economic downturn then they should do all they can to stay afloat.  Voluntary or not.  Governments may not like it as then someone else (possibly them) has to support the older worker going forward.  3 years or 10 years makes no difference compared to someone who still may be around in 20-25 years.


My company was in an economic downturn last year, we had no sales for the months of March, April, May and June. In Michigan our Governor started to allow the factories to start running again in June but it took awhile to get everthing back up to full speed. My company did not lay one person off, we kept everyone on payroll, we held a town hall meeting, explained that we had no sales for months but we were committed to keeping our team together. We explained that we would not be able to give any raises out but we did give small bonus out to each employee. My company runs lean in good times so that in bad times we can still survive and we did.


----------



## bogey21 (Apr 13, 2021)

Back when I ran a large Bank and  had to downsize and lay off a large number of employees, I set up a meeting of all my employees at a local Marriott after work (we didn't have enough space internally) so everyone could attend.  I told those who were to be terminated they would be given 60 days pay, that we would pay for one year of their health insurance, one year of education (if they wanted it) and provide outplacement counseling.  It cost us a lot of money but was fair to those we terminated and sent a signal to those not terminated that we were a good place to work.  As far as the impact on my Bank financially, I figured it was a better alternative than keeping employees we would untimately have to terminate on the payroll for 6  months or so then cut them loose...

George


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## Rolltydr (Apr 13, 2021)

Big Matt said:


> Your comment to me is way out of line, and I take offense to it.  You know nothing about me.  Please don't assume that I'm talking about children.  They are the victims.  I'm talking about adults and how character flaws can lead to poverty.
> 
> Character flaws that I'm thinking of include: dishonesty, willingness to steal, bullying, dealing drugs, etc.  These all tend to keep people out of jobs and probably put them in prison.  That leads to low/no income.  It can destroy a family unit.  This happens in all economic models.


You said in reply to Amys’ comment that poverty isn’t a character flaw, “Agree that it isn't a character flaw, *but* other character flaws can lead to poverty without a doubt. I will go further to say that those character flaws lead to poverty in all econonomic models that I'm aware of.”

Now, in the context of the discussion, I read that as you believe a person is in poverty because of their character flaws. I was always taught the word “but” negates whatever you have said preceding it.

Myself and a few others continue to try and point out that there are millions of people, especially  children, in poverty through no fault of their own. Yes, there are also many, millions perhaps, in poverty because of character flaws such as those you list. That doesn’t mean we should label all those in poverty as having bad character. There are good and bad people in poverty. There are good and bad people who are wealthy. And, there are good and bad people in all economic situations in all economic models. We should take care of those who are there through no fault of there own and not make assumptions their poverty is a result of character flaws.

If I misunderstood the intent of your statement, I humbly apologize.


----------



## jevanswslife (Apr 13, 2021)

JeffC said:


> You have to start with what your expenses will be in retirement. Are you planning on relocating to a lower cost area? Do you want to maintain 2 homes (snowbird)? Will you take all your bucket list trips early in retirement?
> Once you have an idea on expenses you can calculate your income needs . Will you have a pension? When do you plan on taking Social Security? Once you have an idea on expenses and you add in pension/SS income you can calculate what your needs will be.
> With all that done calculate the rate you want to draw down your savings. The old rule of thumb was 4% adjusted annually for inflation . Given longer life spans and lower interest rates 3-3.5% is a more realistic rate. The sad reality is most people are woefully unprepared for retirement.



Jeff, I did a few of my own calculations and I am seeking a sanity check. $1M in a retirement account with a drawdown of .04% would net a person $40,000 a year in annual income. Yet, that is the number many financial advisors advocate for clients to achieve. It doesn't seem to me like $40K would provide for a comfortable retirement. Unless you wanted to crawl into a box and sweat the rest of your life away. A close, personal friend of mine will net the following monthly figures: $1,588 (Military retirement), $1,132 (VA disability), $2,600 (Federal government) ($2,003) Social security. This person also has about $560,000 in his TSP, will work for another three to five years (that's when these figure materialize) plus about $120K in home equity, which he will pull out when he sells his house. He and his family intends to relocate to Florida. They also have a few other assets, not to mention his wife's retirement, which she will draw 12 years later (he is 12 years older than his wife). They do not have long term care, but they are debt free. He projects his TSP will grow by about another $300K by the time he is 62. He believe that if he works until he is 65, he will definitely crack the $1M mark in his TSP. He is 59 now. By my calculations, with what he has included, if he were drawing down .04% from a retirement account, in order to net $87,876 (the sum of his monthly checks), he would have the equivalent of $2,197,000 x .04% = $87,880 which far exceeds the pundits' amount of $1M. Do these calculations hold water and would you say this person is on the right track? By the way, he just got rid of his Wyndham Timeshare through the Certified Exit Program. There is no cost and it is completely through Wyndham.


----------



## Brett (Apr 13, 2021)

jevanswslife said:


> Jeff, I did a few of my own calculations and I am seeking a sanity check. $1M in a retirement account with a drawdown of .04% would net a person $40,000 a year in annual income. Yet, that is the number many financial advisors advocate for clients to achieve. It doesn't seem to me like $40K would provide for a comfortable retirement. Unless you wanted to crawl into a box and sweat the rest of your life away. A close, personal friend of mine will net the following monthly figures: $1,588 (Military retirement), $1,132 (VA disability), $2,600 (Federal government) ($2,003) Social security. This person also has about $560,000 in his TSP, will work for another three to five years (that's when these figure materialize) plus about $120K in home equity, which he will pull out when he sells his house. He and his family intends to relocate to Florida. They also have a few other assets, not to mention his wife's retirement, which she will draw 12 years later (he is 12 years older than his wife). They do not have long term care, but they are debt free. He projects his TSP will grow by about another $300K by the time he is 62. He believe that if he works until he is 65, he will definitely crack the $1M mark in his TSP. He is 59 now. By my calculations, with what he has included, if he were drawing down .04% from a retirement account, in order to net $87,876 (the sum of his monthly checks), he would have the equivalent of $2,197,000 x .04% = $87,880 which far exceeds the pundits' amount of $1M. Do these calculations hold water and would you say this person is on the right track? By the way, he just got rid of his Wyndham Timeshare through the Certified Exit Program. There is no cost and it is completely through Wyndham.



I think $1 million is a nice round number for illustration purposes.   Two or three million in investments is better for retirement,
especially if one doesn't have pensions or annuities.  I would say in your person's example they are on the right track.


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## ccwu (Apr 13, 2021)

If one do not have too much financial background, put 80% 401K in growth mutual fund, and 20% in fixed income. What I did is 95% in growth mutual fund. I do check every year to realign snd move them around to the ‘average 35% return mutual fund for the past 3-5 years.’ We have separate investment account. One (our 401K) is all on mutual fund and a few stocks (such as Apple, Amazon, Google). Another one is on margin. It is a little more riskier. We each had one so we can compare and compete. We started with $100K in 2014. Now we had them grow to $800k. (So it is from $200k to $1.6 millions in 7 years.). Yes, we know it was risky. We did dropped to $400k last year (March 2021) but it all came back. Did we sweat. A little heart broken inMarch 2021. But we figure that was our play $ and we took the risk for growth. It went up 230% between 3/21-3/22. Most of the surge is after November 2021. We put 30% in REIT and annual REIT dividend distribution is about $90k. REIT stocks went up 150% during the year and it is still below pre pandemic. We treat it as annuity by just collect the dividend. Pre pandemic the dividend was $120k annually. We did more buy between 3/2021-6/2021 for the bottom market. 

My personal opinion is that make your moneys work for you. Focus on how to earn more and not on cutting expense if you can. I always invest in high growth mutual fund or stocks. Never look the charges of the mutual fund. If the return is 35-80% who cares about 2% fund charges Vs 5% return with 0% charges. In the Long run is a large gap. 


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## VacationForever (Apr 13, 2021)

jevanswslife said:


> Jeff, I did a few of my own calculations and I am seeking a sanity check. $1M in a retirement account with a drawdown of .04% would net a person $40,000 a year in annual income. Yet, that is the number many financial advisors advocate for clients to achieve. It doesn't seem to me like $40K would provide for a comfortable retirement. Unless you wanted to crawl into a box and sweat the rest of your life away. A close, personal friend of mine will net the following monthly figures: $1,588 (Military retirement), $1,132 (VA disability), $2,600 (Federal government) ($2,003) Social security. This person also has about $560,000 in his TSP, will work for another three to five years (that's when these figure materialize) plus about $120K in home equity, which he will pull out when he sells his house. He and his family intends to relocate to Florida. They also have a few other assets, not to mention his wife's retirement, which she will draw 12 years later (he is 12 years older than his wife). They do not have long term care, but they are debt free. He projects his TSP will grow by about another $300K by the time he is 62. He believe that if he works until he is 65, he will definitely crack the $1M mark in his TSP. He is 59 now. By my calculations, with what he has included, if he were drawing down .04% from a retirement account, in order to net $87,876 (the sum of his monthly checks), he would have the equivalent of $2,197,000 x .04% = $87,880 which far exceeds the pundits' amount of $1M. Do these calculations hold water and would you say this person is on the right track? By the way, he just got rid of his Wyndham Timeshare through the Certified Exit Program. There is no cost and it is completely through Wyndham.


With all the other sources of income, your friend is in superb shape.


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## HitchHiker71 (Apr 13, 2021)

Brett said:


> I think $1 million is a nice round number for illustration purposes. Two or three million in investments is better for retirement,
> especially if one doesn't have pensions or annuities. I would say in your person's example they are on the right track.



I’ve seen the latest magic number is 1.9MM for retirement on average given the loss of pensions and other involuntary retirement programs for the vast majority of my generation.

DW and I are both 49, have over 1.2MM in retirement savings, and are aiming for somewhere between 2.5-4mm total by age 65. We hope to be able to use an aristocratic dividend retirement funding approach as we near that time period, combined with real estate rental income and social security. Here’s to hoping...


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## bogey21 (Apr 13, 2021)

I've never put the pencil to this but if I were in my 30s, 40s and 50s I would conside picking times when interest rates were reasonably high (let's say between 6% and 8%) and slowly investing  in Deferred Annuities (with only AAA+ Counterparties), with some starting to pay at age 65, some at age 75 and some at age 85.  Of course at age 86 I'm way past this and living on a very nice Pension (really and annuity) and Social Security (really another annuity).  I see this as a reasonable alternative to managing a portfolio of stocks and bonds.  Any thoughts...

George


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## Big Matt (Apr 13, 2021)

Rolltydr said:


> You said in reply to Amys’ comment that poverty isn’t a character flaw, “Agree that it isn't a character flaw, *but* other character flaws can lead to poverty without a doubt. I will go further to say that those character flaws lead to poverty in all econonomic models that I'm aware of.”
> 
> Now, in the context of the discussion, I read that as you believe a person is in poverty because of their character flaws. I was always taught the word “but” negates whatever you have said preceding it.
> 
> ...


I appreciate your apology, and we are on the same page.  Character flaws can lead to poverty for some (not all) people.  My point was simply that poverty is not a character flaw, but character flaws can lead people to dark places including being impoverished, homeless, etc.  Some may even say that they deserved it, but I find it more sad than anything.


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## joestein (Apr 13, 2021)

am1 said:


> But if a company is in an economic downturn then they should do all they can to stay afloat.  Voluntary or not.  Governments may not like it as then someone else (possibly them) has to support the older worker going forward.  3 years or 10 years makes no difference compared to someone who still may be around in 20-25 years.



Economic downturn has nothing to do with it.     It is about squeezing extra profits.   When my wife was with Merrill Lynch they had record profits every quarter.  The first quarter the profit slide a bit (they still had a $1BB profit for the quarter) they laid people off.

They (HR?) walked around the offices and would tap someone on the shoulder.   Then you would immediately have to grab your personal belongings and were given an exit interview and escorted from the building.    My wife said it was one of the most unsettling days of her career.  Just sitting there and not knowing if your shoulder would be the next one to be tapped.


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## joestein (Apr 13, 2021)

VacationForever said:


> With all the other sources of income, your friend is in superb shape.



Yes and No.  It really depends on what someone wants from retirement.  Stay at home most of the time, yes - great shape.    Want to travel the world - not so great shape.


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## joestein (Apr 13, 2021)

HitchHiker71 said:


> I’ve seen the latest magic number is 1.9MM for retirement on average given the loss of pensions and other involuntary retirement programs for the vast majority of my generation.
> 
> DW and I are both 49, have over 1.2MM in retirement savings, and are aiming for somewhere between 2.5-4mm total by age 65. We hope to be able to use an aristocratic dividend retirement funding approach as we near that time period, combined with real estate rental income and social security. Here’s to hoping...
> 
> ...



We are close in age and close in retirement funds.   We figure that in 10 years with a 6% average return, if we continue to contribute in the same manner to our 401Ks it will grown to around $3MM.  In 15 years at 6% with same contributions it will grow to $4.5MM


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## VacationForever (Apr 13, 2021)

joestein said:


> Economic downturn has nothing to do with it.     It is about squeezing extra profits.   When my wife was with Merrill Lynch they had record profits every quarter.  The first quarter the profit slide a bit (they still had a $1BB profit for the quarter) they laid people off.
> 
> They (HR?) walked around the offices and would tap someone on the shoulder.   Then you would immediately have to grab your personal belongings and were given an exit interview and escorted from the building.    My wife said it was one of the most unsettling days of her career.  Just sitting there and not knowing if your shoulder would be the next one to be tapped.


Which year was that?


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## VacationForever (Apr 13, 2021)

joestein said:


> Yes and No.  It really depends on what someone wants from retirement.  Stay at home most of the time, yes - great shape.    Want to travel the world - not so great shape.


I read from the numbers, on regular annuities/pension type income, the person has guaranteed income of $87,876 per year.  His goal is to save $1M, which at 4% will yield another $40,000, giving a total of $127,876 per annum before taxes.  There is also mention that the wife will also draw on her retirement and she is 12 years younger than the husband.  $127,876 per year is certainly very comfortable and not just "stay at home most of the time".


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## am1 (Apr 13, 2021)

joestein said:


> Economic downturn has nothing to do with it.     It is about squeezing extra profits.   When my wife was with Merrill Lynch they had record profits every quarter.  The first quarter the profit slide a bit (they still had a $1BB profit for the quarter) they laid people off.
> 
> They (HR?) walked around the offices and would tap someone on the shoulder.   Then you would immediately have to grab your personal belongings and were given an exit interview and escorted from the building.    My wife said it was one of the most unsettling days of her career.  Just sitting there and not knowing if your shoulder would be the next one to be tapped.


Ok.  Not ideal but anyone against it could have got up and walked out. If it’s maximizing profit no problem there either as that is their guru to shareholders.

  I did a 2 week stint of 5th Avenue and gave my notice.  I wanted to do it after a week but it was Super Bowl Sunday and I thought not coming in Monday would be rude. I felt bad a higher up got me the job after meeting randomly and she was getting an emba where I just graduated with my mba.  Never booked back and as it turned out 2008 was right around the corner.


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## Rolltydr (Apr 13, 2021)

Big Matt said:


> I appreciate your apology, and we are on the same page.  Character flaws can lead to poverty for some (not all) people.  My point was simply that poverty is not a character flaw, but character flaws can lead people to dark places including being impoverished, homeless, etc.  Some may even say that they deserved it, but I find it more sad than anything.


What bothers me is that many people will generalize about people who are poor perhaps due to bad choices, mistakes, laziness, character flaws, etc., but never mention that just as many people or maybe more, are poor due to their life circumstances. Statistics show that someone born into poverty is more likely to be caught in that cycle their entire life than one born into a middle/upper class income family. Do some have opportunities to escape that life? Absolutely, some do. However, some aren’t so lucky and I don’t think we should assume it is because they aren’t trying and, therefore, deserve their station in life. I just get sick of reading comments from people who only want to see one side of the problem.

Have a nice evening.


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## jevanswslife (Apr 14, 2021)

Brett said:


> I think $1 million is a nice round number for illustration purposes.   Two or three million in investments is better for retirement,
> especially if one doesn't have pensions or annuities.  I would say in your person's example they are on the right track.


Also,

The man in the image on your profile icon wrote a fairly entertaining book. It's entitled "Stay Interesting," by Jonathan Goldsmith. It seemed like it was a bunch of short stories about the various adventures of his life. All the while, failure after failure, he continued to persist. He wanted to be an actor, if memory serves me. I read this several years ago. Anyway, late in life, he was discovered and finally achieved the success he was seeking. It was a quick read and very interesting. I did not feel like the time I spent reading the book was a waste of time. If you haven't read it, you might enjoy it. Who wouldn't want to be surrounded by beautiful women while endorsing an adult beverage?


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## joestein (Apr 14, 2021)

HitchHiker71 said:


> I think it’s a question of risk tolerance. We are effectively at the end of a 30+ year bond bull market that started in the early 80’s when rates were up near 20% until the last 12+ years of net zero or very low rates. We are likely entering a bear market for bonds with inflationary pressures on the rise and rates likely to rise. Perhaps a balanced fund may be in order as a compromise for those with low risk tolerance.
> 
> That said, we are likely entering a period in the markets where passive investing isn’t going to cut it (meaning index funds or any other passively managed funds), and where actively managed funds may have advantages given the markets are near all time highs, including historically higher P/E ratios, both of which point to a major correction and a corresponding secular bear market with high volatility, as we see market P/E ratios fall back below the historic averages. This will likely be brought on by a series of shocks to include geopolitical destabilizing factors and global debt defaults.
> 
> ...



I dont know if Managed funds are going to outperform ETFs.   They never do over time.


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## joestein (Apr 14, 2021)

VacationForever said:


> Which year was that?



That had to be around the late 90s or early 2000s.


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## joestein (Apr 14, 2021)

Rolltydr said:


> What bothers me is that many people will generalize about people who are poor perhaps due to bad choices, mistakes, laziness, character flaws, etc., but never mention that just as many people or maybe more, are poor due to their life circumstances. Statistics show that someone born into poverty is more likely to be caught in that cycle their entire life than one born into a middle/upper class income family. Do some have opportunities to escape that life? Absolutely, some do. However, some aren’t so lucky and I don’t think we should assume it is because they aren’t trying and, therefore, deserve their station in life. I just get sick of reading comments from people who only want to see one side of the problem.
> 
> Have a nice evening.



My wife and her sister spent most of their childhood poor.    Their father walked out on the family when they were 12 and 9.  He didn't pay child support and their Mom insisted she was disabled and couldn't work (Though she never got any disability payments).  They didn't have enough food to eat or clothes to wear.  Their grandparents cover the basic costs of the home they lived in, but food was mostly free breakfast and lunch at public school.  

They hated living like this, so my wife started working when she was 13.  Working at the flea market on the weekends - selling clothes, cutting onions at one of the concession stands - any thing to make some money.  Most of which went to their mom.      My wife starting working after school in the AR dept of a local manufacturer when she turned 16.  Got her sister a job there when she turned 16.   They both went to college.    Today, there are both very successful.   My wife is a director and her sister a managing director at large financial firms.

The point is that some people rise to the occasion when life challenges them - My wife and her sister for example.

Some people sit in the corner and cry and blame everybody but themselves for their problems - Their mother for example.


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## Rolltydr (Apr 14, 2021)

My wife and I have similar stories except for the parents. Our parents worked hard and did what they could but they never reached a comfortable middle class existence. Fortunately, we were able to do so. We’re just not blind to the fact that everyone doesn’t make it. And some people don’t care that others aren’t as fortunate as they are.


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## Fried_shrimp (Apr 14, 2021)

There is no set amount anyone needs to save for retirement. One only needs to spend less than what they have coming in to retire successfully.


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## HitchHiker71 (Apr 14, 2021)

joestein said:


> I dont know if Managed funds are going to outperform ETFs.   They never do over time.



They can and do during secular bear markets - which account for roughly 50% of market history.  Buy and hold index funds work wonders during secular bull markets - not so much during secular bear markets.  I can point to many 20 year periods in market history where holding an index fund would have resulted in net zero returns for that entire time period.  If that was your timeline for retirement funding - well - good luck with that approach.  

Hedge funds in particular is one good example - some have wildly outperformed index funds over time.  Of course, only accredited investors have hedge fund access - but many folks that post here are accredited investors - so this point is applicable.


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## PigsDad (Apr 14, 2021)

HitchHiker71 said:


> I can point to many 20 year periods in market history where holding an index fund would have resulted in net zero returns for that entire time period.


Please point to one of those periods.  You can't simply look at the index level at two different times 20 years apart, as index funds reinvest the dividends so the total return is much more than what the index level differential indicates.

This article points out that there hasn't even been a 15 year period where there were negative returns of the S&P 500 index since 1973 (I doubt many of us were investing much before that date).

From the article:


> *If you were a long-term investor, the worst twenty years delivered a return of 6.4% a year. This occurred over the twenty years ending in May 1979.*







Kurt


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## PigsDad (Apr 14, 2021)

HitchHiker71 said:


> They can and do during secular bear markets - which account for roughly 50% of market history.


And you can predict, for certain, when those bear markets begin and end so you can invest perfectly, correct?  For most people, that is not realistic -- I would say for most professional fund managers, that is not realistic.  But if you have a system that works for you, more power to you!

Kurt


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## am1 (Apr 14, 2021)

Fried_shrimp said:


> There is no set amount anyone needs to save for retirement. One only needs to spend less than what they have coming in to retire successfully.


One wants a margin of error as there could be unexpected expenses, drop in return, inflation,  live longer then expected, etc. 

I’ve posted before that safer investments as one ages May not be the best.  It is safe other then inflation but I would rather something else.  An annuity may not be bad but I’d prefer my kids managing my assets and paying me a return. May or may not be better but would offer a higher possible return.  Or just have crazy money and not worry about the risk of return.


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## joestein (Apr 14, 2021)

PigsDad said:


> And you can predict, for certain, when those bear markets begin and end so you can invest perfectly, correct?  For most people, that is not realistic -- I would say for most professional fund managers, that is not realistic.  But if you have a system that works for you, more power to you!
> 
> Kurt



I also think we need to take into account cost averaging.   I will be putting in as much money as legally allowed under our 401K plans until we retire in 10 - 15 years.   When the market decreases, i get more shares for my contribution.  

Joe


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## klpca (Apr 14, 2021)

joestein said:


> My wife and her sister spent most of their childhood poor.    Their father walked out on the family when they were 12 and 9.  He didn't pay child support and their Mom insisted she was disabled and couldn't work (Though she never got any disability payments).  They didn't have enough food to eat or clothes to wear.  Their grandparents cover the basic costs of the home they lived in, but food was mostly free breakfast and lunch at public school.
> 
> They hated living like this, so my wife started working when she was 13.  Working at the flea market on the weekends - selling clothes, cutting onions at one of the concession stands - any thing to make some money.  Most of which went to their mom.      My wife starting working after school in the AR dept of a local manufacturer when she turned 16.  Got her sister a job there when she turned 16.   They both went to college.    Today, there are both very successful.   My wife is a director and her sister a managing director at large financial firms.
> 
> ...


Me too. I have been working since I started babysitting around age 12. I worked fast food, cleaned commercial offices (took a copy of the WSJ from the trash every night and took it home to read). I went to college on government aid and private scholarships as well as work-study and student loans. I did a lot for myself but I'm cognizant of the step up I was given by others,  especially the grants which paid for the lions share of my tuition.

At my first post-college job one of my big clients was a real estate developer and one of the partners at my firm called the president of the company and called in a favor. So my husband and I were first in line when the first phase of houses was released and we still live in that house. It saved us thousands to skip the line and get in the first phase, and ultimately has turned out to be a wonderful family home and a great investment. Again, a debt of gratitude to those folks.

In my opinion no one has been financially successful without the contributions of others.


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## HitchHiker71 (Apr 14, 2021)

PigsDad said:


> Please point to one of those periods. You can't simply look at the index level at two different times 20 years apart, as index funds reinvest the dividends so the total return is much more than what the index level differential indicates.
> 
> This article points out that there hasn't even been a 15 year period where there were negative returns of the S&P 500 index since 1973 (I doubt many of us were investing much before that date).
> 
> ...



Sure thing:






The above chart shows data for both the DOW and the S&P500. This chart does not account for inflationary adjustments to returns however. When we account for inflation, the DOW was negative over the published time periods. The S&P500 was at breakeven. 

Link here: http://www.amateur-investors.com/Secular_Bear_Markets_vs_Secular Bull_Markets.htm

Now the next question that is typically asked is, well that was all a long time ago. Markets are different now right? Are they though? Not really. I would argue the markets over the past 15 years have behaved more like they did from 1900-1940 than any time in between, which if we are paying attention should mean something to all of us. 

Secular market analytics are all about P/E ratio averages over time. In secular bull markets we start out at lower than average PE ratios and go to much higher than average PE ratios. In secular bear markets we see a migration from very high PE ratio averages to lower PE ratio averages. Everyone knows we are very much on the high side right now. Everyone is “waiting for the crash” to come - that in and of itself is worthy of note. 

If your primary investment and earning years happened to have aligned with a secular bear market cycle - and were invested in an index like fund - you would have been one very unhappy customer after those roughly 20 years. The oft used saying that the market historically returns 10% per annum on average is true - but that’s over a more than 100 year period of time. Most people have a twenty year time period for peak earnings and retirement savings in comparison. 


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## HitchHiker71 (Apr 14, 2021)

PigsDad said:


> And you can predict, for certain, when those bear markets begin and end so you can invest perfectly, correct? For most people, that is not realistic -- I would say for most professional fund managers, that is not realistic. But if you have a system that works for you, more power to you!
> 
> Kurt



No, you can’t. First off - we aren’t talking about market timing here in so far as traditional bear/bull markets - we are discussing secular bull and bear markets. Two different concepts. It’s not nearly as difficult to look at PE ratio averages historically and make a judgment call. That said, just look at how well hedge funds have performed over the past 20 years during periods when market volatility was heightened. Hedge funds often made billions upon billions shorting the broader markets when we saw steep market declines where index funds were losing 40-50% of their value. If you could afford to wait another ten years to retire while keeping your earning potential static - then you could whether the storm and eek out some gains after recovering from 50% losses - but what about those folks who couldn’t do so? 

There are two different America’s in the investment world. The haves (accredited investors) and the have nots (the rest of us). There’s a reason the rich get richer - they have access to investments that the rest of the population doesn’t - like hedge funds for example. 


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## PigsDad (Apr 14, 2021)

HitchHiker71 said:


> This chart does not account for inflationary adjustments to returns however.


Oh, now we are accounting for inflationary adjustments?  That is apples to oranges comparison.  Still doesn't change the numbers I posted.  Again, if you know how to time those bear and bull markets, why are you hanging around here?  I would think you would be a multi-billionaire by now!   

Kurt


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## controller1 (Apr 14, 2021)

klpca said:


> In my opinion no one has been financially successful without the contributions of others.



I agree.


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## HitchHiker71 (Apr 14, 2021)

PigsDad said:


> Oh, now we are accounting for inflationary adjustments? That is apples to oranges comparison. Still doesn't change the numbers I posted. Again, if you know how to time those bear and bull markets, why are you hanging around here? I would think you would be a multi-billionaire by now!
> 
> Kurt



Accounting for inflation against returns is important, as doing so tells us how much purchasing power we are actually gaining over a certain time period. Just ask anyone who lived and invested during the stagflation of the 1970’s and the high interest rate periods of the early-mid 1980’s. The numbers I posted are what you asked for. It clearly shows that net market returns were close to zero with inflation taken into account, and even without it - the DOW returned under 2% per annum. Certainly nowhere close to the 10% per annum parroted by most investment advisors.

I went to college for finance and securities analysis. I started out with nothing. My parents live in a trailer park and subside on social security with no savings to speak of to this day. In general I’m a risk averse investor, and we have made some mistakes just like everyone else. I’ve had my share of good and bad stock picks over the past 25 years. We had kids starting at age 23 and struggled to save money in the early part of our lives as a result. I still managed to keep a promise to myself to save 10k per year from age 25-35 to generate a decent base upon which to build. This has served us quite well given the basic precepts of compound interest and the time value of money. I’m certainly no genius with investments. I have timed the markets in the past on occasion based upon what I’ve learned. I was largely successful in timing the Great Recession. I got out in fall 2008 right before Lehman Brothers failed. When most folks lost 50-60%, including my own parents, with the exception of staying in a REIT when I should have exited, I was net positive within eight months, compared to four years before the DOW itself beefing net positive. That one decision alone resulted in us being able to grow our retirement savings by avoiding the huge losses many index investors experienced that ended their retirement dreams at that time. I moved us into Bill Gross’s total return fund back during the Great Recession and then moved back into conservative growth funds as the market bottomed out. My regret is not being more aggressive and going into more aggressive growth funds or index funds as I was not convinced we would see a huge upside due to medium to long term debt problems - which exist to an even larger extent today. I was wrong on the debt issues becoming a problem at that time. We still made decent money but I would have more than doubled what we have in savings today if I had been more aggressive.

I say all that to show that it’s not enough to figure out when to exit the markets - it’s just as important to know when to jump back in - which given my predilection toward investment conservatism - is where I often come up short. Last year I was one mouse click away from dumping 100k into a speculative investment that would have netted us 900k in profits in just two months - but I just couldn’t bring myself to do it. Yet another example of my risk averse nature in action. Perhaps someday I’ll stop second guessing myself. 


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## Luvtoride (Apr 14, 2021)

PigsDad said:


> Please point to one of those periods. You can't simply look at the index level at two different times 20 years apart, as index funds reinvest the dividends so the total return is much more than what the index level differential indicates.
> 
> This article points out that there hasn't even been a 15 year period where there were negative returns of the S&P 500 index since 1973 (I doubt many of us were investing much before that date).
> 
> ...



Kurt, thanks that makes sense. My FA said that any illustration that they do for any investment vehicle or strategy uses no more than a 6% annual growth rate for the S&P index. Although that seems conservative based on the stats you showed that rate seems reasonable. 


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## geekette (Apr 21, 2021)

bogey21 said:


> The problem today is that many are not saving either by design or necessity.  This is why I advocate changing Social Security from a safety net into forced retirement savings by increasing the amount withheld from earnings and the accompanying  employer match.  Withdrawals and loans from 401ks and IRAs become too tempting for those  who started contributing but don't have the discipline not to tap for whatever reason.  Thus I say we need to protect these people from themselves now rather than wait until they are old and destitute...
> 
> George


I have to disagree with taking away more from a paycheck.  It's hard enough to make ends meet, and so many things go by a person's salary but it keeps getting farther removed from actual take home pay.   What "should be" affordable on a 50k "salary" will need 70k "salary". 

Further, keep in mind that not everyone has an employer, so any increase to 'employer share' is coming from the self-employed along with employee portion.

Today's SS extraction is enough, we just need to remove the ceiling on wages to which it applies.  We'll also improve 'the trust fund' with increases to minimum wage.


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## am1 (Apr 21, 2021)

geekette said:


> I have to disagree with taking away more from a paycheck.  It's hard enough to make ends meet, and so many things go by a person's salary but it keeps getting farther removed from actual take home pay.   What "should be" affordable on a 50k "salary" will need 70k "salary".
> 
> Further, keep in mind that not everyone has an employer, so any increase to 'employer share' is coming from the self-employed along with employee portion.
> 
> Today's SS extraction is enough, we just need to remove the ceiling on wages to which it applies.  We'll also improve 'the trust fund' with increases to minimum wage.


People need to consume less.  Focus on needs not wants.  
Raising minimum wage does not solve the problem and raises prices and puts people out of work.  
Sadly there is no solution where everyone can drive a car, live alone, latest iPhone and wear Air Jordans.


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## TheTimeTraveler (Apr 21, 2021)

I am not sure there is any one right or wrong answer here;  rather a combination of things can and will make living a fuller financially comfortable lifestyle in retirement.

To begin with, if people live their lives within their means (starting in their 20's) then things will likely go better as time progresses.  Granted, it's not easy, and a lot of endless self discipline is absolutely required.   You won't get any thanks for it, but one will likely live better as years progress.

Hard work (maybe overtime or a second job) plus disciplined savings and investment does make a huge difference over time.  Scrimping on living expenses also makes a huge difference over time (which includes home ownership as opposed to renting).  

Many employers offer matching funds for a retirement account, yet there are still those who do not take advantage of this "free" money.  If this option is available then one would be financially foolish not to take advantage of this "free" money.  This is an easy no brainer in my opinion.

IRA's;  Set one up the first day you legally can.  Contribute the maximum allowable, and don't forget to max out the over 50 catch up.  If you are financially able to, make 100% of your contributions on January 1st each contribution year (instead of April 15th of the following year) so that your money will work for you an extra 470 days each year for your IRA to earn and grow.  Compounded over time this will make a very large difference in your net worth.

It's not easy to get to the piece of cheese;  but it is easier if one has a disciplined plan in place.  And yes, there will be ups and downs.

Is it easy?  Heck no!  Is it aggressive?  Yes.  Is it worth it?  Well just ask yourself would you rather eat Hamburg or Lobster in retirement?



.


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## geekette (Apr 21, 2021)

PigsDad said:


> Just my opinion, but I don't like the "subtract your age" formulas when talking about retirement investment mixes.  Given that one will not be touching retirements funds until they are retired, and given the historical fact that equity investments have outperformed bonds in any 10 (or is it 15?) year period, why would one need to start adding bonds to one's investment mix to reduce risk until they are 10-15 years away from retirement?
> 
> Personally, our retirement assets were 100% equities until we were about 53, and that is a huge reason why we are way ahead of the game in our retirement numbers.  We probably should have started shifting our mix a bit earlier than that, and I admit we got a bit lucky waiting, but I never saw a need to be so heavily invested in bonds as these common rule of thumb formulas suggested when we were in our 20's, 30's or 40's.  I wanted as much of my retirement money invested in the highest growth possible (without trying to time the market, which I firmly believe is a fool's game in the long run).
> 
> ...


I'm with you, Kurt.   It never made sense to me to kick my best horses out of the stable.  Made even less sense to start moving out of stocks decades before my likely demise.   Seems like this would increase the rate of spend down ever quicker.   Bonds are treading water, I need to swim laps.

I don't pay attention to 'rules of thumb' and so forth, I instead figure out what is right for me.  What is right for me is to be 90%+ in stocks from the first day to last day.   I come from long lived people so if I were to give up the superior growth prospects of stocks, and too early, I could outlive my money.  It all comes down to that for me.   Old and poor ranks right up there with spiders and tornadoes when it comes to biggest fears.  

I call myself retired now and have not moved one penny out of stocks and no movements planned.   I started investing life as a long haul dividend investor and nothing has changed.   probably it matters that most of my owned companies are very old and relatively stable, I don't ever go for new shiny objects.  So, being labelled "aggressive investor"  has always puzzled me.  How can I be "aggressive" owning stuff like PG, railroads, 3M...  ?   Whatever.   Companies pay out real money in dividends and I am onboard with that, so labels aren't an actual concern.  

It was some time before I was 30 and I forget who/how many told me I'd lose everything in the stock market.  Weird, all these decades later, I haven't lost anything.  I have gained and gained and gained.   Market downturns aren't a big problem for me since I am not focused on stock price changes but on long term ownership and dividends.  For me, compounding dividends are the secret sauce.   Probably not going to find rules of thumb for that.


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## geekette (Apr 21, 2021)

bogey21 said:


> I've never put the pencil to this but if I were in my 30s, 40s and 50s I would conside picking times when interest rates were reasonably high (let's say between 6% and 8%) and slowly investing  in Deferred Annuities (with only AAA+ Counterparties), with some starting to pay at age 65, some at age 75 and some at age 85.  Of course at age 86 I'm way past this and living on a very nice Pension (really and annuity) and Social Security (really another annuity).  I see this as a reasonable alternative to managing a portfolio of stocks and bonds.  Any thoughts...
> 
> George


I greatly respect you, George, and we are simply polar opposites.  I couldn't possibly lock in dollars early for some down the road payments but I most happily manage my stocks (somewhere around 80 companies; I have never found "management" to be onerous or terribly time consuming).   I grow it every year and don't 'suffer' the angst of parting with a massive hunk of it for promise of future payments (for me it would be angst, for others it could likely feel quite normal and natural to buy annuities).   

As alternatives go, these are definitely two distinct ways to go!


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## geekette (Apr 21, 2021)

joestein said:


> Economic downturn has nothing to do with it.     It is about squeezing extra profits.   When my wife was with Merrill Lynch they had record profits every quarter.  The first quarter the profit slide a bit (they still had a $1BB profit for the quarter) they laid people off.
> 
> They (HR?) walked around the offices and would tap someone on the shoulder.   Then you would immediately have to grab your personal belongings and were given an exit interview and escorted from the building.    My wife said it was one of the most unsettling days of her career.  Just sitting there and not knowing if your shoulder would be the next one to be tapped.


I lived that in high tech before it was called high tech.   everyone on edge come Friday afternoon, once you saw the police cars show up at the parking lot exits.   I guess they expected some people would very much not like being fired and cause trouble?   Regardless, the sides of the buildings were glass, everyone knew when the cop cars showed up, everyone knew what they meant:  firing time.


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## geekette (Apr 21, 2021)

Fried_shrimp said:


> There is no set amount anyone needs to save for retirement. One only needs to spend less than what they have coming in to retire successfully.



Yes.  It's not what you have, it's what you spend.


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## geekette (Apr 21, 2021)

joestein said:


> I also think we need to take into account cost averaging.   I will be putting in as much money as legally allowed under our 401K plans until we retire in 10 - 15 years.   When the market decreases, i get more shares for my contribution.
> 
> Joe


YES!  Market downturns are not big ole bummers, they are Opportunities for Buying!


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## Brett (Apr 22, 2021)

geekette said:


> Yes.  It's not what you have, it's what you spend.



In a strict sense that's true.  But old people like comfortable retirements so that means more savings
And then there are  YOLO's and their "retirement"

https://www.nytimes.com/2021/04/21/technology/welcome-to-the-yolo-economy.html

"Burned out and flush with savings, some workers are quitting stable jobs in search of post pandemic adventure.


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## bogey21 (Apr 22, 2021)

geekette said:


> I have to disagree with taking away more from a paycheck.  It's hard enough to make ends meet, and so many things go by a person's salary but it keeps getting farther removed from actual take home pay.   What "should be" affordable on a 50k "salary" will need 70k "salary".
> 
> Further, keep in mind that not everyone has an employer, so any increase to 'employer share' is coming from the self-employed along with employee portion.



Two points.  I think we all agree that people should save but many don't.  Increasing the deduction for Social Security and the nature of Social Security would force them to.  Second, I agree with your comments regarding the Employer share.  Maybe the way to go is to increase the Employee deduction but not have the Employer have to match the increased amount.  Just thinking out loud.  My point is if something isn't done many will have little when they retire other than today's version of Social Security.  At that point there will be pressure for the Government to step in using tax dollars collected from others...

George


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## ccwu (Apr 22, 2021)

geekette said:


> Yes. It's not what you have, it's what you spend.



Partly it is what you invested. The growth stocks over years perform much better. There is a risk but my experience is if you invested in solid growth company? Risk is very small. Also if the growth alway outperform the spending, that is a good thing. 


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## slip (Apr 22, 2021)

Brett said:


> In a strict sense that's true.  But old people like comfortable retirements so that means more savings
> And then there are  YOLO's and their "retirement"
> 
> https://www.nytimes.com/2021/04/21/technology/welcome-to-the-yolo-economy.html
> ...



This is definitely my thinking in deciding to retire in January but I am a Boomer not a millennial.


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## DavidnRobin (Apr 22, 2021)

To Retire - it is imperative to know your Spend. 
That is Total Spend (annual) - regardless of what you spend it on.
This is relatively easy to do - just look at credit cards and checking going back a few years (doesn’t matter what you spent it on - just that you spent it).

Now that you have your Spend - then attempt to look at your future annual spend in the near term, mid-term, and long term. This is where you need to understand what is spent.

Understanding Spend is critical before considering assets/income.

To put it in extreme terms - if your Spend is zero, then you can retire now regardless of your assets. If your assets are 10 million, but spend 10 million per year, then you will be broke soon.

Of course, that is unrealistic, but it goes to show how important Spend is in the Retirement equation.

Once your assets/income can match your annual (inflation-adjusted) Spend until you die (minus what you need to leave to others) - that is The Retirement Point.

Understanding the impact of your Assets/Income and inflation on Spend is the difficult part, and is individualistic as it is not a one-size-fits-all situation.

This is where ‘Rules of Thumb’ can help. You can assume a specific inflation (based on history), and also return on investment of assets.
Debt payments go against Spend.

So...
Let’s say you what an inflation -adjusted Spend of $100K annually (now).
And you get (e.g.) social security and pension of $50K.
That means that need to make up the other $50K (or reduce your spend) with your assets.

The question now becomes how do you attain enough assets to achieve $50K?
If you have $5 million - no problem - all you need is a ROI of ~1% (Easy!).
What if you have assets of $500K?
Well... you need a ROI of 10% (Risky!).

This is where the premise of Risk/Reward of asset allocation comes to play.

This is a simplistic view, but First!
Understand your current and future Spend!

There is a great and useful retirement (and free) calculator out there that accounts for a variety of scenarios.
It asks 3 basic questions.
Spend?
Investments?
Time?

Then allows you to play around with various aspects (e.g. ROI, change of Spend and Income).

Then shows the probabilities of the money lasting.





__





						FIRECalc: A different kind of retirement calculator
					






					www.firecalc.com
				





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## am1 (Apr 22, 2021)

Once you retire and use your savings to supplement any pensions you stop investing in your retirement.  Retirement 101. Hopefully house payment as well.


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## HitchHiker71 (Apr 22, 2021)

am1 said:


> Once you retire and use your savings to supplement any pensions you stop investing in your retirement. Retirement 101. Hopefully house payment as well.



Pensions? What are those? For us Gen-Xers and younger, they don’t or won’t exist. 


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## slip (Apr 22, 2021)

HitchHiker71 said:


> Pensions? What are those? For us Gen-Xers and younger, they don’t or won’t exist.
> 
> 
> Sent from my iPhone using Tapatalk



There are many government jobs that still have pensions.


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## am1 (Apr 22, 2021)

HitchHiker71 said:


> Pensions? What are those? For us Gen-Xers and younger, they don’t or won’t exist.
> 
> 
> Sent from my iPhone using Tapatalk


Any other retirement investment as well. Remains the same once retired that payment (spending) is no longer needed.  I’m a fan of reverse mortgage when needed but even more kids doing the reverse mortgage or paying the expenses outright.


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## HitchHiker71 (Apr 22, 2021)

slip said:


> There are many government jobs that still have pensions.



Public sector jobs account for a paltry 14.5% of the workforce though. They are outlier cases from a statistical perspective. 85.5% of the workforce exists in the private sector - the vast majority of which dumped involuntary pension plans long ago now. 


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## slip (Apr 22, 2021)

HitchHiker71 said:


> Public sector jobs account for a paltry 14.5% of the workforce though. They are outlier cases from a statistical perspective. 85.5% of the workforce exists in the private sector - the vast majority of which dumped involuntary pension plans long ago now.
> 
> Sent from my iPhone using Tapatalk




Google also says 17% of the private sector offered pensions in the last year for the data 2018. That has probably gone down a little since then. It it still leaves it at about 30%. While many people know that pensions aren’t available like they used to be, I think some people would be surprised that 30% of jobs still have them.


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## HitchHiker71 (Apr 23, 2021)

slip said:


> Google also says 17% of the private sector offered pensions in the last year for the data 2018. That has probably gone down a little since then. It it still leaves it at about 30%. While many people know that pensions aren’t available like they used to be, I think some people would be surprised that 30% of jobs still have them.



Yes but when you dig into that 17% and look at the actual data from the BLS, the most recent of which is from 2019, here’s what the data says:

1. Defined benefit plans offered fell to 15% in 2019 - down from 17%.

2. Private sector overall participation rate was only 12% - meaning of the 15% offered - only 12% were actually enrolled/participating. 12% of 15% is roughly 1.75% - which doesn’t move the needle much at all. This is because at most companies - you can only choose one option - either defined benefit or voluntary contribution - not both. Most companies have designed the current plans in such a way as to make the voluntary plans more attractive than the involuntary plans - as has the government by giving pre-tax contribution breaks only to voluntary contribution plans. 

3. In 2019, of the civilian workers participating in defined benefit plans, 53% had open defined benefit retirement plans, 38% had soft frozen plans, and 7% had hard frozen plans. 

In other words, roughly half of the defined benefit plans out there are frozen - which is another way of saying - they are not available to any younger workers - ie. the Gen X/Millennials generations. Only older workers are grandfathered. If we then adjust the numbers properly - 53% of 15% - let’s call it 8% - we are sitting at 14.5+8=22.5% - And falling further every year given the most significant portion of the working population attached to defined benefit plans are from the grandfathered baby boomer generation that are retiring in droves every year now. 

We can expect these numbers to drop by 1-2% a year for the next 5-10 years as the baby boomers cycle out of the workforce, after which defined benefit plans will be all but gone in the private sector. 


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## slip (Apr 23, 2021)

HitchHiker71 said:


> Yes but when you dig into that 17% and look at the actual data from the BLS, the most recent of which is from 2019, here’s what the data says:
> 
> 1. Defined benefit plans offered fell to 15% in 2019 - down from 17%.
> 
> ...



That’s all true and I think most people would know that. But I think people would still be surprised at 22%. That was my only point. Definitely a dying benefit though.


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## CalGalTraveler (Apr 23, 2021)

Are union pensions included in the 15%. If so that would make company pensions even lower.  I agree about the freezes. When I worked in Corp America the company switched from pension to 401k. I had a small amount in the pension but chose to roll it out because they put significant disincentives to stay e.g. if I passed my DH would only get half the amount, whereas if I rolled it and managed myself we would keep 100%. Despite the disincentives many people still have the plan but it is frozen.


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## Pathways (Apr 23, 2021)

Too many of you are numbers people for me to take the time and make this calculation. so here is a challenge to all of you:

The US govt just made numerous changes to the child tax credit. (as in throwing money out there) 

If the govt would take the child tax credit for a newborn (or even add together 2 or 3 years of the credit) and instead of throwing it our there to spend they purchased an annuity for that person, what would the numbers be at retirement? (assuming no further contributions)


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## HitchHiker71 (Apr 23, 2021)

CalGalTraveler said:


> Are union pensions included in the 15%. If so that would make company pensions even lower. I agree about the freezes. When I worked in Corp America the company switched from pension to 401k. I had a small amount in the pension but chose to roll it out because they put significant disincentives to stay e.g. if I passed my DH would only get half the amount, whereas if I rolled it and managed myself we would keep 100%. Despite the disincentives many people still have the plan but it is frozen.



As long as the unions are not for public sector employees then yes - they are included in the 15%. I haven’t seen a breakdown of the 15% by industry segment or anything similar that would give more visibility into an answer to your question. If I can find it I will post back. 

Thank you for providing an anecdotal example of the disincentives almost all companies have implemented to discourage use of defined benefit plans even if they are still offered.  


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## HitchHiker71 (Apr 23, 2021)

Pathways said:


> Too many of you are numbers people for me to take the time and make this calculation. so here is a challenge to all of you:
> 
> The US govt just made numerous changes to the child tax credit. (as in throwing money out there)
> 
> If the govt would take the child tax credit for a newborn (or even add together 2 or 3 years of the credit) and instead of throwing it our there to spend they purchased an annuity for that person, what would the numbers be at retirement? (assuming no further contributions)



That’s a good question. Our “kids” are all young adults (21-26) now so I haven’t really been paying much attention to the child tax credit changes since they don’t impact us any longer. 

Your point brings us back to another topic I brought up earlier in this thread - moving toward personal retirement accounts as opposed to the redistribution program that we have today from SS. Credits like this could simply be deposited into personal retirement accounts. As the individual approached retirement age they could convert a portion of their PRA into an annuity if so desired. 


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## bluehende (Apr 23, 2021)

Does anyone have numbers for how many companies have gone the 401K way and place money into it without any contribution needed from the employee.  Two of my kids have that.  There is the same matching contribution also.  One has 8% and one has 6% coming from the employer.  While not a defined benefit most young people found that kind of pension plan preferable.  It was portable with the modern employment method of having 3 or more jobs through your career.  The old pension model did not treat that scenario well.


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## SmithOp (Apr 23, 2021)

Pathways said:


> Too many of you are numbers people for me to take the time and make this calculation. so here is a challenge to all of you:
> 
> The US govt just made numerous changes to the child tax credit. (as in throwing money out there)
> 
> If the govt would take the child tax credit for a newborn (or even add together 2 or 3 years of the credit) and instead of throwing it our there to spend they purchased an annuity for that person, what would the numbers be at retirement? (assuming no further contributions)



The problem with that is the CTC is to help young families now that are working at lower pay scales, like the EIC helps to keep them working and off entitlements.

I think its the parents responsibility to teach their kids about saving. I have my 20-something kid contributing to retirement accounts now. I didn’t start until I was 35 because my parents were not savers, my Dad retired with just SS.


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## bogey21 (Apr 23, 2021)

am1 said:


> I’m a fan of reverse mortgage when needed...



Agree.  A Reverse Mortgage timed right can be  big help for some...

George


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## joestein (Apr 23, 2021)

bluehende said:


> Does anyone have numbers for how many companies have gone the 401K way and place money into it without any contribution needed from the employee.  Two of my kids have that.  There is the same matching contribution also.  One has 8% and one has 6% coming from the employer.  While not a defined benefit most young people found that kind of pension plan preferable.  It was portable with the modern employment method of having 3 or more jobs through your career.  The old pension model did not treat that scenario well.




Both of my wife's employers do - UBS and Merrill Lynch/Bank of America.    They also offer generous matching.       Compare this to my job - only a max $1K match per year.   Night and day.


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## PigsDad (Apr 23, 2021)

CalGalTraveler said:


> When I worked in Corp America the company switched from pension to 401k. I had a small amount in the pension but chose to roll it out because they put significant disincentives to stay e.g. if I passed my DH would only get half the amount, whereas if I rolled it and managed myself we would keep 100%. Despite the disincentives many people still have the plan but it is frozen.


My company did the exact same thing (maybe we worked for the same company?).  For me, they switched to contributing to our 401k (via match) from a defined benefit / deferred profit sharing program early in my career (about 3-4 years after I started).  The pension amount just sat and grew in their system (without any contributions) for many years until I officially left the company (via a corporate split).  Then I was allowed options to roll it over to my 401k, and I jumped at the opportunity.  The amount had decent growth over the years, but the restriction of my wife only getting half if I passed was the tipping factor.  I put that money in a separate fund in my 401k and it has grown handsomely, so I believe I made the right choice.  I would much rather have that under my control vs. in a company-run pension.

Kurt


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## HitchHiker71 (Apr 23, 2021)

PigsDad said:


> The amount had decent growth over the years, but the restriction of my wife only getting half if I passed was the tipping factor. I put that money in a separate fund in my 401k and it has grown handsomely, so I believe I made the right choice. I would much rather have that under my control vs. in a company-run pension.
> 
> Kurt



And yet whenever we even bring up the topic of taking the same approach with SS everyone seems to freak out. Boggles the mind doesn’t it? 


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## ccwu (Apr 23, 2021)

This is from Fidelity Investment 5 rules of retirement. 

Key takeaways
1. Plan for health care costs.
2. Expect to live longer.
3. Be prepared for inflation.
4. Position investments for growth.
5. Don't withdraw too much from savings.
If you're approaching the off-ramp to retirement—or already there—it's important to think about protecting what you've saved and helping to ensure that you'll have enough income throughout your retirement. After all, you worked hard to get to retirement. So you want to be able to enjoy it without having to worry about money. That means thinking ahead and planning for a retirement that may last 30 years or longer.
Here are 5 rules of thumb to help manage some things that can affect your income in retirement.

1. Plan for health care costs
With longer life spans and medical costs that historically have risen faster than general inflation—particularly for long-term care—managing health care costs is important for retirees. Retirement planning conversations should include a discussion of the impact long-term care costs have on individuals and their family’s future.
According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2020 may need approximately $295,000 saved (after tax) to cover health care expenses in retirement.
Many people will live longer and have higher costs. And that cost doesn't include long-term care (LTC) expenses. Having a dedicated pool of monies for long-term care expenses may be an important consideration to cover long-term care expenses, ultimately protecting your retirement income.
As reported by the US Department of Health and Human Services, about 70% of those aged 65 and older will require some type of LTC services—either at home, in adult day care, in an assisted living facility, or in a traditional nursing home.1 According to the Genworth 2019 Cost of Care Survey, the average cost of a semiprivate room in a nursing home2 is about $90,156 per year, assisted living facilities3 average $48,612 per year, and home health care homemaker services4 are $51,480 a year.
Consider long-term-care insurance: Insurers base the cost largely on age, so the earlier you purchase a policy, the lower the annual premiums, though the longer you'll potentially be paying for them. It is also important to research the strength of the company you select, as well as investigate other potential options for funding LTC costs.
Read Viewpoints on Fidelity.com: Long-term care: Options and considerations
If you are still working and your employer offers a health savings account (HSA), you may want to take advantage of it. An HSA offers a triple tax advantage:5 You can save pretax dollars, which can grow and be withdrawn state and federal tax-free if used for qualified medical expenses—currently or in retirement.
Read Viewpoints on Fidelity.com: 3 healthy habits for health savings accounts

2. Expect to live longer
As medical advances continue, it's quite likely that today's healthy 65-year-olds will live well into their 80s or even 90s. This means there's a real possibility that you may need 30 or more years of retirement income. And recent data suggests that longevity expectations may continue to increase. People are living longer because they're healthy, active, and taking better care of themselves.
Without some thoughtful planning, you could outlive your savings and have to rely solely on Social Security for income. And with the average Social Security benefit for a retired worker currently around $1,514 a month, it may not cover all your needs.6
Read Viewpoints on Fidelity.com: Longevity and retirement and How to get the most from Social Security
Consider annuities: To cover your income needs, particularly your essential expenses (such as food, housing, and insurance) that aren't covered by other guaranteed income like Social Security or a pension, you may want to use some of your retirement savings to purchase an income annuity. It will help you create a simple and efficient stream of income payments that are guaranteed for as long as you (or you and your spouse) live.7
Read Viewpoints on Fidelity.com: Smart retirement income strategies

3. Be prepared for inflation
Inflation can eat away at the purchasing power of your money over time. Inflation affects your retirement income by increasing the future costs of goods and services, thereby reducing the future purchasing power of your income. Even a relatively low inflation rate can have a significant impact on a retiree's purchasing power.
Consider cost of living increases: Social Security and certain pensions and annuities help keep up with inflation through annual cost-of-living adjustments or market-related performance. Choosing investments that have the potential to help keep pace with inflation, such as growth-oriented investments (e.g., stocks or stock mutual funds), Treasury inflation-protected securities (TIPS), real estate securities, and commodities, may also make sense to include as a part of an age-appropriate, diversified portfolio that also reflects your risk tolerance and financial circumstances.
The cost of inflation

Even a low inflation rate can reduce the purchasing power of your money.

For illustrative purposes only. Estimated future cost of $50,000 worth of goods or services over 25 years at inflation rates of 2%, 3%, and 4%.

4. Position investments for growth
Overly conservative investments can be just as dangerous as overly aggressive ones. They expose your portfolio to the erosive effects of inflation, limit the long-term upside potential that diversified stock investments can offer, and can diminish how long your money may last. On the other hand, being too aggressive can mean undue risk of losing money in down or volatile markets.
An investment strategy (asset mix) that seeks to balance growth potential and risk (return volatility) may be the answer. You should determine—and consistently maintain—an asset mix that reflects your investment horizon, risk tolerance, and financial situation.
The sample target investment mixes below show illustrative blends of stocks, bonds, and short-term investments with different levels of risk and growth potential. With retirement likely to span 30 years or so, you'll want to find a balance between risk and growth potential.
Find an investment mix with the right amount of growth potential and risk for you


Data source: Fidelity Investments and Morningstar Inc, 2021 (1926-2020). Past performance is no guarantee of future results. Returns include the reinvestment of dividends and other earnings. This chart is for illustrative purposes only. It is not possible to invest directly in an index. Time periods for best and worst returns are based on calendar year. For information on the indexes used to construct this table, see Data Source in the notes below. The purpose of the target asset mixes is to show how target asset mixes may be created with different risk and return characteristics to help meet an investor’s goals. You should choose your own investments based on your particular objectives and situation. Be sure to review your decisions periodically to make sure they are still consistent with your goals.
Consider diversification: Build a diversified mix of stocks, bonds, and short-term investments, according to how comfortable you are with market volatility, your overall financial situation, and how long you are investing for. Doing so may provide you with the potential for the growth you need without taking on more risk than you are comfortable with. But remember: Diversification and asset allocation do not ensure a profit or guarantee against loss. Get help creating an appropriate investment strategy by working with a Fidelity advisor or utilizing our Planning & Guidance Center.

5. Don't withdraw too much from savings
Spending your savings too rapidly can also put your retirement income at risk. For this reason, we believe that retirees should consider using conservative withdrawal rates, particularly for any money needed for essential expenses.
We did the math—looking at history and simulating many potential outcomes—and landed on this guideline: To be confident that savings will last for 20–30 years retirement, consider withdrawing no more than 4%–5% from savings in the first year of retirement, then adjust that percentage for inflation in subsequent years.
Consider a sustainable withdrawal plan: Work with a Fidelity advisor to develop and maintain a retirement income plan or consider an annuity with guaranteed lifetime income7 as part of your diversified plan, so you won't run out of money, regardless of market moves.
Read Viewpoints on Fidelity.com: How can I make my retirement savings last?
You can do it
After devoting many years to saving and investing for your retirement, switching from saving to spending that money can be stressful. But it doesn't have to be that way if you take steps leading up to and during retirement to manage these 5 key rules of thumb for your retirement income.


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## ccwu (Apr 23, 2021)

My brother working for a Fortune 500 defense company in a management position. They have both pension and 401K. When he decided to retire when turning 55, he has option to take lump sum pension ($2M) and rolled over to IRA account to avoid taxes. He found a Fidelity FA, who will manage his Rolled over IRA, the deal was the FA will charge him 10% on the growth if the growth is over 10%. If it is below 10%, there is no charge. It worked out well. I think just one year did not over 10%. He is withdrawing the growth. He still have more than $2 million in the IRA. His 401K was managed by the same with the same commission. He did not withdraw from 401K yet. 

I worked for government with defined pension. We need to contribute to pension and it is mandatory to have pension. We also have 401K which is not matching and not mandatory. I can see that very few took the 401K. We do not have the choice of lump sum distribution of pension when retire. There is a formula about how much you get. If you work less than 10 years you don’t get anything. When you leave you can get whatever you contributed. You get 1.5% of the years you worked on your average salary (of the last 5 years) between 10-20 years. You get 2% of the year you worked up to 75%. (0.02x years worked x average salaries). So the formulae is that you can max 37.5 years in order to get 75%. 10 year you get only 15%. The salary is only the regular salary (not including overtime to avoid abuse).  I did see a few people retired snd died in the first year of retirement. If they choose joint life and take a reduced pension in order to give surviving spouse 50% they had to choose before retirement. Those died, did not select it and the spouse get nothing. Sad. I personally like the private lump sum pension choice. Most utilities company has pensions and lump sum choices too. 

My husband works for Fortune 500 tech company and has pension. But he was the last to have it. The company is phasing out of it due to accounting too much book liabilities. He also have 401K with company matching.


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## bogey21 (Apr 23, 2021)

When I retired way back in 2001 there were 12 of us long term employees who went out together as part of an Early Retirement Window.  We were given the choice of (a) a lump sum, (b) a monthly  Pension payments (an annuity) or (c) a partial lump sum and partial Pension (an annuity). [Note that the lump sums were all in excess of $1 million.] The other 11 took the lump sum!!  I took the monthly Pension payments with a 50% Survivor Benefit for my ex-wife.  As a result of some frivolous spending and/or the Market Crash in 2008 the best I can find out is that only 4 or 5  of those who took the lump sum had any of it left ten years later.  Clearly many people do not have the discipline or ability to manage a large amount of money....

George


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## Luvtoride (Apr 23, 2021)

Brett said:


> In a strict sense that's true. But old people like comfortable retirements so that means more savings
> And then there are YOLO's and their "retirement"
> 
> https://www.nytimes.com/2021/04/21/technology/welcome-to-the-yolo-economy.html
> ...



Brett, thanks for posting this. Although this article does focus more on the younger workers, it does (and will) have implications for those of us nearing retirement and being faced with (possibly) returning to the office (and commuting on mass transit or driving into NYC daily). 

I love the attitude of YOLO. Having a couple of very close friends who have passed away the last couple of years just before or just after retirement has made me realize how precious time is to enjoy during my golden years. Who knows how long any of us have? 

I am almost obsessively evaluating / planning the timing of retirement from not only a financial standpoint but how I will occupy my time. 

How do you decide when is the right time?? That’s the hard question.


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## DavidnRobin (Apr 26, 2021)

Luvtoride said:


> How do you decide when is the right time?? That’s the hard question.



When Assets match desired Spend.


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## VacationForever (Apr 26, 2021)

DavidnRobin said:


> When Assets match desired Spend.
> 
> 
> Sent from my iPhone using Tapatalk


I had planned to retire 9 years later which would almost double of what we had saved.  But my husband really wanted both of us to retire, I didn't feel financially comfortable to retire, even though we really only needed to draw on no more than 2% of our savings.  5 years on, we are still in good shape, "upsized/upgraded" our home from a penthouse condo to a single family home this January and rejoined the country club 2 years ago.  We are still withdrawing about 2% per year.


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## Ralph Sir Edward (Apr 26, 2021)

HitchHiker71 said:


> Pensions? What are those? For us Gen-Xers and younger, they don’t or won’t exist.
> 
> 
> Sent from my iPhone using Tapatalk



You can buy your own pension, if you choose. It's called a Single Premium Deferred Annuity (SPDA). They've been around since the 1980's, at least. Check with life insurance companies.


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## elaine (Apr 26, 2021)

Luvtoride said:


> I am almost obsessively evaluating / planning the timing of retirement from not only a financial standpoint but how I will occupy my time.
> How do you decide when is the right time?? That’s the hard question.


I faced this exactly 1 year ago (in a prior post).  Finances are not the issue.
I am a govt atty. PT since I had kids 20 years ago--but it's really more like sorta full-time. We were offered a large buyout. Despite much advice to "take it" from TUG, my work colleagues said think hard...and I decided "no." IMHO, that speaks highly of our unit. A year later, no regrets. I'm working for essentially $30K more this year than if I'd taken the buyout. I think I'll be "ready" in another year or so. I've worked there for 34 years--initially, I could "see myself staying for 2-3 years!"


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## bbodb1 (Apr 26, 2021)

VacationForever said:


> I had planned to retire 9 years later which would almost double of what we had saved.  But my husband really wanted both of us to retire, I didn't feel financially comfortable to retire, even though we really only needed to draw on no more than 2% of our savings.  5 years on, we are still in good shape, "upsized/upgraded" our home from a penthouse condo to a single family home this January and rejoined the country club 2 years ago.  We are still withdrawing about 2% per year.


Sounds like the hubby made the right call - enjoy it!


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## bbodb1 (Apr 26, 2021)

elaine said:


> I faced this exactly 1 year ago (in a prior post).  Finances are not the issue.
> I am a govt atty. PT since I had kids 20 years ago--but it's really more like sorta full-time. We were offered a large buyout. Despite much advice to "take it" from TUG, my work colleagues said think hard...and I decided "no." IMHO, that speaks highly of our unit. A year later, no regrets. I'm working for essentially $30K more this year than if I'd taken the buyout. I think I'll be "ready" in another year or so. I've worked there for 34 years--initially, I could "see myself staying for 2-3 years!"


I recall that thread - and good for you @elaine if you feel that you made the best decision for you.
That is all any of us can hope to do!


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## bogey21 (Apr 26, 2021)

Ralph Sir Edward said:


> You can buy your own pension, if you choose. It's called a Single Premium Deferred Annuity (SPDA). They've been around since the 1980's, at least. Check with life insurance companies.


I like the concept.  Set up multiple annuities, say one to start at age 60 or 65, one at age 7 or 75 and another at say age 80...

George


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## VacationForever (Apr 26, 2021)

bogey21 said:


> I like the concept.  Set up multiple annuities, say one to start at age 60 or 65, one at age 7 or 75 and another at say age 80...
> 
> George


I have one which starts at 60 for 10 years, and another one which starts at 70 for 15 years.  Each continues to pay to my beneficiaries if I die before the term is up.


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## Ralph Sir Edward (Apr 26, 2021)

Age and treachery. . .


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## Brett (Apr 27, 2021)

bogey21 said:


> I like the concept.  Set up multiple annuities, say one to start at age 60 or 65, one at age 7 or 75 and another at say age 80...
> 
> George



I like the idea of an annuity (besides SS) to cover normal monthly expenses plus a sizable retirement portfolio of diversified stocks or stock index funds


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## Luvtoride (Apr 28, 2021)

VacationForever said:


> I have one which starts at 60 for 10 years, and another one which starts at 70 for 15 years. Each continues to pay to my beneficiaries if I die before the term is up.



We have some “laddered” annuities too, but we don’t have to annuitize (convert them to monthly payouts) unless we need the extra income. Otherwise, we receive the appreciated (they are indexed to the S&P 500) lump sum and can then decide to reinvest or take what we need each year or the RMD after reaching that age. 


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## geekette (May 12, 2021)

ccwu said:


> Partly it is what you invested. The growth stocks over years perform much better. There is a risk but my experience is if you invested in solid growth company? Risk is very small. Also if the growth alway outperform the spending, that is a good thing.
> 
> 
> Sent from my iPhone using Tapatalk


Doesn't have to be a growth stock, either.   A handful of decades owning stodgy old utilities can make a great div stream in retirement.   Dividends are often increased annually as well.  

I am good at living beneath my means so it is for me what I spend, but, since I gain many double digit dividend raises annually, it is indeed how I am invested that gets me across the finish line comfortably.   Compounding dividends over decades has made it easy to stay the course and not need to catch a rocket growth stock.  Or fail in boarding the wrong one.

While I understand that "conventional wisdom" says to move away from stocks as one ages, I don't subscribe to that.


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## Brett (May 13, 2021)

geekette said:


> Doesn't have to be a growth stock, either.   A handful of decades owning stodgy old utilities can make a great div stream in retirement.   Dividends are often increased annually as well.
> 
> I am good at living beneath my means so it is for me what I spend, but, since I gain many double digit dividend raises annually, it is indeed how I am invested that gets me across the finish line comfortably.   Compounding dividends over decades has made it easy to stay the course and not need to catch a rocket growth stock.  Or fail in boarding the wrong one.
> 
> While I understand that "conventional wisdom" says to move away from stocks as one ages, I don't subscribe to that.



yes, living beneath your means
 ---- and understanding the "conventional wisdom"  i.e.  when people get older they prefer a predictable and reliable income stream


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## rapmarks (May 13, 2021)

HitchHiker71 said:


> And yet whenever we even bring up the topic of taking the same approach with SS everyone seems to freak out. Boggles the mind doesn’t it?
> 
> 
> Sent from my iPhone using Tapatalk


Because we know so many people that would spend it now, and expect the rest of us to bail them out later


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## geekette (May 13, 2021)

rapmarks said:


> Because we know so many people that would spend it now, and expect the rest of us to bail them out later


and we also know why it was created - social safety net.  Remove the safety aspect of that by dismantling it puts us back into widows in the streets.  

There are brokerages and retirement plans aplenty.  There is no need to change SS into one of those.


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