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$$$ Needed for Retirement-Numbers Only

TatinGTatinG 6361 replies113 postsRegistered User Senior Member
The other thread has gotten so long and so off track so....
Assume that a single person wants to have an upper middle class lifestyle. Assume 30 year projected life span. What is the 'magic' number?
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Replies to: $$$ Needed for Retirement-Numbers Only

  • ucbalumnusucbalumnus 77198 replies672 postsRegistered User Senior Member
    edited July 30
    Some of the FIRE people seem to suggest 25 times annual expenses. In that case, if the investment gains are 4% after taxes and inflation, that amount of money should last indefinitely.

    If you have a more conservative estimate on investment gains, then you may want a higher number.

    If you are willing to consume principal because you do not expect to live beyond 120 (or whatever), then you may be able to use a lower number.

    However, be sure to consider unexpected "one time" expenses that can come up occasionally (e.g. medical bills), or expenses that occur only once every several or many years (e.g. replacing roof or appliance in the house, replacing car). Also, medical insurance may be subsidized by your employer; be sure to consider costs of that in retirement (which can be substantial if you retire before you are eligible for the socialized insurance subsidy of Medicare; even after, there are still some costs to pay). If retirement activities that you plan to do but are not doing now are expensive, those need to be considered as well.

    But it all depends on how much you think you will spend to maintain what you consider an "upper middle class lifestyle", and how accurate your estimate is. Current spending may be worth evaluating as a baseline, then adjusting for the factors mentioned above. Obviously, someone accustomed to spending $250,000 per year "needs" a lot more than someone accustomed to spending $25,000 per year.
    edited July 30
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  • TatinGTatinG 6361 replies113 postsRegistered User Senior Member
    And I assume if a person has some income to cover a portion of yearly expenses, then the 25 times figure would be 25 times the expenses not covered by yearly income.
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  • HoggirlHoggirl 1647 replies195 postsRegistered User Senior Member
    @TatinG - try looking for online retirement calculators. Here is one example:
    https://www.nerdwallet.com/investing/retirement-calculator
    Make sure to fill out the optional part first and then put in the main numbers.

    This is just one example. There are probably some that are much simpler and some that are more complex. Depending on how detailed the calculator is you can play around with many assumptions - age at which you will retire, how long you will live, inflation rate, anticipated return on your investments, how much you will withdraw per month and desired % increase in that amount over time, federal tax rate, etc. Of course, it is difficult to predict ALL of these, which is what makes it so daunting. We like to think our “pile” is large enough, but it’s really hard to know for sure!
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  • ucbalumnusucbalumnus 77198 replies672 postsRegistered User Senior Member
    Hoggirl wrote: »
    try looking for online retirement calculators.

    But note that many calculators are based on your working income, rather than an estimate of spending/expenses.
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  • doschicosdoschicos 20628 replies209 postsRegistered User Senior Member
    I've mentioned it on the other thread before about Fidelity's Retirement Calculator which is a decent tool. You can use it without being a customer.

    https://www.fidelity.com/calculators-tools/retirement-planning-and-guidance

    For any of these tools, if you want to base it on estimated spending/expenses in retirement instead of on your working income, just plug the numbers you want to use into the tool instead. Easy peasy.

    It's interesting playing around and adjusting inputs to see how these will factor into your retirement scenario.
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  • itsgettingreal17itsgettingreal17 3882 replies25 postsRegistered User Senior Member
    edited July 30
    I’m single and planning to retire early. The plan is $2.5 million, with no debt (house, student loans, etc will be paid off). I do plan to do some gigs, however, to have something to do, but I haven’t factored that in.
    edited July 30
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  • dragonmomdragonmom 5871 replies154 postsRegistered User Senior Member
    Vanguard has one as well.
    Way , way, way back In the retirement thread, it was noted that most of these calculators used a rule of 3% . If you have a nest egg where you use 3% per year, statisticaly your earnings should hold out. Playing with it today, if I needed $135000 income I would need close to your number . Congratulations and enjoy.
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  • rickle1rickle1 1822 replies14 postsRegistered User Senior Member
    The no debt piece is key. Amazing how far it goes without mortgage, car, etc. college payments.
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  • 1214mom1214mom 4475 replies177 postsRegistered User Senior Member
    There is so much to consider besides $$$ number. Throwing a number out doesn’t make any sense without context.
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  • rickle1rickle1 1822 replies14 postsRegistered User Senior Member
    ^ Yes context is key. My point re debt wasn't to not have any, but rather to add that wrinkle to the conversation. Essentially, if you owe less, you don't need as much. Completely get the argument of the arbitrage experienced in investment gain outperforming loan cost.

    As a financial advisor, I deal with all types. I can easily make a mathematical argument why you should never pay off (or even down) your mortgage. How you could grow a massive account that would dwarf your mortgage which means you could always stroke a check to knock that out (if you wanted to). I could also make the argument that consistently outperforming your mortgage cost on an after tax basis could require a certain risk tolerance to take on more chance than the stomach could take.

    It's not just about numbers. It is primarily about context. So many different ways to get there based on individual circumstances.
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  • jasmomjasmom 1125 replies37 postsRegistered User Senior Member
    @bluebayou my husband makes the same argument you do re: investment gains outpacing mortgage cost.
    @rickle1 I don’t like having a mortgage.
    Our compromise is that he maintains enough life insurance to cover the mortgage.
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  • bluebayoubluebayou 26661 replies174 postsRegistered User Senior Member
    edited August 1
    actually, jasmom, I'm conflicted. I plan on cashing in a large NUA in Jan which could easily pay off the mortgage using LT tax rates. That would feel great (heart talking). Then I put on my Finance hat (left brain), and think, 'huh? what a silly idea...' Really makes no sense if we might move in say, 5 years. (at which point, it gets paid off anyway).

    edited August 1
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  • Singersmom07Singersmom07 4118 replies80 postsRegistered User Senior Member
    We have the continuing debate. Are we moving or not. That is a major factor in decisions. If moving don’t pay off. If not, pay off. FA can’t make that decision for you.
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  • mominvamominva 3017 replies35 postsRegistered User Senior Member
    edited August 1
    I can pay off my mortgage with my assets; but I am making more with those assets than my mortgage is costing me. I am net gaining my net worth.
    When that is no longer the case, I'll pay off the mortgage.
    edited August 1
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  • itsgettingreal17itsgettingreal17 3882 replies25 postsRegistered User Senior Member
    I’m not paying off my mortgage early. I’ve just tied my retirement to when my mortgage is paid off in due course. I don’t want to retire with any debt, which is just a personal choice.
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  • rickle1rickle1 1822 replies14 postsRegistered User Senior Member
    ^ and that's exactly the point. To each their own. It's not just about numbers. It's about feeling good about things, having confidence, being comfortable. Strategies vary by individuals.
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