Retirement Savings

[MelBay]

Have you considered a reverse mortgage or out right sale of their primary residence if you can realize on the promissory notes?

I've sold their home and had to carry the note. It would have NEVER passed an inspection for any type of traditional loan, and I was not going to spend money to get it there with the way the real estate market is now. I'm happy to have someone in it - he actually pays on time, and I'm now out from under utilities and insurance on it, not to mention lawn upkeep, etc.

As for selling the promissory notes, none of these people have a FICO score over 400. I'd be lucky to get 20 cents on the dollar and that seems to be financial suicide at this point.

My dad left me in a bind, but it could have been much worse. No debt, some annuity money coming in for the next 4.5 years and we just put mom in hospice. You should see my nightly prayer list.

 

[caribbeansun]

Yes, but presumably there are expenses that fall off the table after retirement ie. no more contributions to 401k, no mortgage payments, lower vehicle costs, etc.

As to health care, lets just say I'm glad I'm Canadian and don't have to worry about it although nursing home costs can take a sizable chunk out of things.

If one were to assume 40 years of work and 20 years of retirement, one would have to put aside more than 50% of income each year to have the 100% of the last year's income during each year of retirement. (assuming one's income increases over time and not factoring in interest, inflation, etc--just using simple numbers to make a simple point). Most people cannot live on less than 50% of their annual income. We haven't even discussed after-tax income.

 

[Rose Pink]

Yes, but presumably there are expenses that fall off the table after retirement ie. no more contributions to 401k, no mortgage payments, lower vehicle costs, etc.

....

Which is why the old formulas were for a percentage less than what was earned. Now some of the experts are recommending 100% and more because of medical expenses (including the costs of insurance), etc.

If we can stay on schedule, our house will be paid off in 3 years but there are always repairs to be made. The cars are old and will need to be replaced. The only thing that isn't old is us--we've probably got 30 to 40 years ahead of us if we live as long as our parents.

 

[DG001]

I've never gotten the overall % returns on the 401k that the "experts" use in their calculations.

I had to laugh at this.

I am in my early 30s. I have faithfully put away money in retirement accounts since my first internship at college. I think right now, I would be lucky if I have no "negative growth" in all the money I have put away. And its not as if I don't "rebalance" every once in a while either! No - for example, in 1999, I got the promised 8%, but the two years after, it was -10%!

Even Buffet said in the Berkshire Hathaway newsletter that it would be futile to hope that the stock market of the next twenty years will in any way resemble the one from the last thirty years (or words to that affect).

So for now I am putting away money - but there is no way that promised (put away $100 a month now, and in 45 years when you retire you will have $$$$ - *** assuming a 8 % return and 2% inflation) retirement is going to look like anything like what the brochures promised!

 

[Rose Pink]

I had to laugh at this. ....
So for now I am putting away money - but there is no way that promised (put away $100 a month now, and in 45 years when you retire you will have $$$$ - *** assuming a 8 % return and 2% inflation) retirement is going to look like anything like what the brochures promised!

I take it you are laughing with me, not at me. 'Tis a sad laugh, to be true.

 

[Charlie D.]

I was really going to blast the 130% of income theory but I’ve had a little change of heart. I was taking my own retirement into consideration and thinking it could not be done. I started planning my retirement pretty well from the time I went to work for Uncle Sam. I knew in 30 years at age 57 ½ I could retire. I put in 35 years with the Naval Reserve and later this year at age 60 will start drawing the military retirement check. At age 62 my wife and I will start drawing SS. My personal retirement savings had to be enough to tide us over from 57 ½ to 62 when the triple dip will be in full force. By putting enough into the TSP (401k) and the government’s match, that was accomplished. I retired 3 days after I was eligible. All that planning, scheming, and saving will get me about 80% of my high three (not counting the Naval Reserve pay – which is kind of fudging).

Now, IF my desire was to have 100% of income during retirement, I would still be working and probably so for at least another 6-7 years. 10 less years of retirement but more income per month during retirement. That is the catch!! The other bigger catch is how long will the good Lord give us to live? Personally, an assumed 30 years retirement at 80% is better than 20 years at 100%. The other factor that comes to mind is that physically I am going down hill. Post 50 has been much rougher on me than 40-50. If 60-70 goes as bad as 50-60, than my quality of life is going to do nothing but go down hill. 130% may be obtainable for a few people but it won’t be by savings alone. I agree with Rose Pink – it would take a much bigger percentage of our paycheck than most of us could afford. Any retirement savings is better than none and compound interest was wonderful to watch in the TSP. We have been richly blessed and I am living one of my heart’s desires – retirement. It has not been disappointing!!

 

[bltfam]

One of the comments made about saving 130% for retirement well thats if you retire when your 62 If you wait an addition 7 years and retire at 69 then you'll only need 11% to be saving. I am the last couple years of the baby boom generation and as I see things the people years younger than I am will have the most proplems I see it now in my younger circle of friends I think the mentality is less sacrificing they want it now! and i know I will sould like my grandmother now but when i first got married we didnt rush and buy a home we rented a year and saved and we save sometimes too much for college and weddings for our teens retirement for us sometimes I feel we never enjoy it Now but we have NO debt except our house we pay cash for everything or we dont get it its that simple I guess when we retire and have a house on the lake somewhere I will be thankful we saved!!!

 

[jwq387]

I had to laugh at this.

I am in my early 30s. I have faithfully put away money in retirement accounts since my first internship at college. I think right now, I would be lucky if I have no "negative growth" in all the money I have put away. And its not as if I don't "rebalance" every once in a while either! No - for example, in 1999, I got the promised 8%, but the two years after, it was -10%!

Even Buffet said in the Berkshire Hathaway newsletter that it would be futile to hope that the stock market of the next twenty years will in any way resemble the one from the last thirty years (or words to that affect).

So for now I am putting away money - but there is no way that promised (put away $100 a month now, and in 45 years when you retire you will have $$$$ - *** assuming a 8 % return and 2% inflation) retirement is going to look like anything like what the brochures promised!

What Buffett is probably saying is that the stock market may be what is known as a "trading range". In a trading range, the market moves around over a range of about 1000-1500 points for a very long period of time, 20+ years. The end result is usually a 2-4% per year gain, if that. Our stock market has gone through 2 of these since its inception. The 2 trading ranges lasted 20-25 years each. We have also had 3 bull markets in the last 100 years, each lasting 15-20 years, where average rates of return are about 11%. The people who advocate buying and holding for 50 years always quote that 11% figure, but don't even talk about trading ranges. How you do with your retirement investments is really going to depend upon whether you are investing during a trading range, or a bull market. I wish I knew what was going to happen(don't we all!) but if we are truly in a trading range market, 2-4% per year over the next 20-25 years is a real possibility.

 

[talkamotta]

The goal in life is "BALANCE"

There are many places I would love to retire to but most for only a portion of the year, so I guess I will just visit. Family would keep me in the USA. As much as I love visiting other countries, its always good to come back on US soil. Im sure others not from US feel the same about thier homes. Its home.

When to retire, how much to save. There are no right answers. I tell my kids Im going to become a burden to them. (Maybe thats why 2 of the 5 live out of state )

I have a pension, 401K (that isnt all that strong), income property, savings, and a personal residence. Hopefully, health care costs wont kill us and there will be Soc Security. I tried to cover all the bases but no one really knows for sure. So, do I want to retire at 57? (with my 30 years) or wait until 62? I have a few years to decide.

My parents died at 65 and 60. Strong cancer and heart disease in my family. So how long does one live? I decided 7 years ago when I fell off the roof and had 10 months in a turtle brace to think about how lucky I was that not only could I still walk but it was time to make living a priority. I spent alot of years working hard and way too many hours away from my children. I sometimes see them making the same mistake. I want to take the family on trips, thats why I spend so much time figuring out ways to do it. I dont want to be a long distance relative to my grandchildren, I want to participate in thier lives.

So the hardest job in life is Balance, at least for me.

 

[caribbeansun]

Interesting - I've seen this time and again where all of a sudden a previously MIA parent becomes a doting grandparent.

I spent alot of years working hard and way too many hours away from my children. I sometimes see them making the same mistake.

I dont want to be a long distance relative to my grandchildren, I want to participate in thier lives.

 

[caribbeansun]

OR, perhaps it's that the baby boomers put so much capital into the markets that they drove the markets upward and now as they enter or approach retirement years they will be removing capital from the markets creating a different dynamic. The saving model is giving way to the consumption model and with the much talked about transfer of wealth there may well be a reduction in capital left in the markets. Of course I could be completely wrong but...

What Buffett is probably saying is that the stock market may be what is known as a "trading range". In a trading range, the market moves around over a range of about 1000-1500 points for a very long period of time, 20+ years. The end result is usually a 2-4% per year gain, if that. Our stock market has gone through 2 of these since its inception. The 2 trading ranges lasted 20-25 years each. We have also had 3 bull markets in the last 100 years, each lasting 15-20 years, where average rates of return are about 11%. The people who advocate buying and holding for 50 years always quote that 11% figure, but don't even talk about trading ranges. How you do with your retirement investments is really going to depend upon whether you are investing during a trading range, or a bull market. I wish I knew what was going to happen(don't we all!) but if we are truly in a trading range market, 2-4% per year over the next 20-25 years is a real possibility.

 

[talkamotta]

Interesting - I've seen this time and again where all of a sudden a previously MIA parent becomes a doting grandparent.

I had 5 children in 10 years. I worked a full time job and sometimes a part time job or at least worked on the rental properties. My kids were all active in scouts, soccor/baseball and church activities. I used to go to 5 soccor games on Saturday. I kept a day planner to keep track of where my kids were at after school and which kid I had to pick up after a baseball practice or gymnastics. I was a soccor team mom for 8 years.

My husband thought that kids should stay home and watch tv. I thought you should keep them busy enough they didnt have the energy to find trouble. So he stayed home and watched tv and I kept them busy. Competition sports, scouts, costs alot of money. I helped them each with 2 years of college but thats the best I could do. Looking back there was a lot of stuff that fell through the cracks.

All my children are grown now and are doing well. None of them got into any trouble. What makes me sad is that I cant remember all the little things they did. I notice those things with my grandchildren. They are very entertaining. Ive slowed down.

Im not married anymore. We were married for 21 years and have been divorced since 1993. I travel and plan things with my family. He found a nice lady that likes watching tv. He will continue to plug along and work until he is 65. Im trying to figure out a way to be able to do the things I want to do inexpensive enough that I can retire at 57 to 60. For example, I remodeled most of my kitchen myself. It took me 2 years to do it because I wanted to spend money on trips in between. Others would have finished the kitchen, maybe paid a contractor and forgot trips for 2 years. Thats why balance is such a big deal. You cover your bases as good as you can but you still make time for living.

I dont know if there is a right or wrong way.

 

[Charlie D.]

Caribbeansun,

That sure sounds pretty logical.

Charlie D.

 

[caribbeansun]

I hope you didn't take my post as a judgment as it was not intended that way. I was actually thinking of my own father who was pretty much absent from my life - oh, he was physically there but never took much interest in the things I was doing. When my sister's kids came along he was all over them and I'd hear comments like "he's so wonderful" and "he takes such an interest" - it was a real disconnect from my own perspective. The problem of course is that he was probably doing the same thing his father did and now I'm afraid I can see some of the same things happening with me and I'm fighting to stop it. I don't blame him or think any less of him for it but I do want to be aware of it for myself and change my own actions.

Balance is really tough, particularly with all the baggage that we get without even realizing it. It sounds like you've done a wonderful job and that's something you can reflect on down the road even if you can't remember all the small things.

Thats why balance is such a big deal. You cover your bases as good as you can but you still make time for living.

I dont know if there is a right or wrong way.

 

[normab]

I think it's hard to generalize

I think the "number" depends on your own lifestyle and location more than anything.

If you are any of the following, the target number might be on the high end: heavily mortgaged, buying your own medical coverage, living in a high property tax location, have high timeshare fees :ignore: , someone who has never lived with some kind of a budget, etc.

However, if you live below your means prior to retirement, say you only spend 75% of your take-home and save the rest, why would you need more than your income (a la 130%) if you are only spending say, 75% prior? Also, many people financially downsize when retired, thereby reducing expenses, and the target number downsizes also.

I don't mean to sound judgemental, but the fact is that peoples' own habits determine what they will need to retire. Right now so many people are living above their means--I know several people, locally, in their 50s, of above average income--who are mortaged for more than their houses are worth. Note-I am not talking about people who have lost 50% value in their houses or low income people, these are people with good incomes who have just bitten off more than can chew financially.

They are people who, if they can afford to retire, will need many times more than their current salary since they have not figured a way to live within their means. And perhaps the financial guru was making their prognostications based on this type of person.

Just my 2 cents worth,

Norma

 

[Texasbelle]

Our idea was to keep the entire principle of the retirement account intact and only take the interest or growth out. However, the government requires a certain amount withdrawn and taxes paid on it. Now, where to put the money not needed? Interest on CDs is puny, stocks flutuate. Government interference with interest rates keeps the balance out of whack. Oh, maybe we should take that trip to Greece. There is something to be said for enjoying a good salary--we wish we had timeshares when our kids were small. Our grandkids benefit now.

 

[talkamotta]

There is something to be said for enjoying a good salary--we wish we had timeshares when our kids were small. Our grandkids benefit now.

I used to cram 7+ people into a hotel room. Eat cereal in the room, to save money and wash the bowls in the bathroom sink. The kids (now grown) with a smile on thier face tell thier children, you are lucky. "Hey, when we were young and poor your grandma made us .........(and the stories get better with each year).
Buying timeshares is part of my retirement plan. We went to Canada for 2 weeks this month. Spent 1300 on the timeshares (1 rental +1 mf+trading fee), ate in the resort all except 3 meals, hiked and fished. We spent $400 on food and the park pass + gas . B & B during July go for $200 a night.

Just like many of us on this site. I will continue to travel after Im retired and as things/money gets harder I will just figure out ways to cut corners somewhere.

 

[talkamotta]

I hope you didn't take my post as a judgment as it was not intended that way. .

No not at all.