Preserving principal is not our aim. We joke that we plan to die with a dollar. Though we probably won’t, spending down most of the pile is the goal. That’s what we amassed it for, not to enrich anyone else.
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Same here.
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I don’t know what that means. What’s the point of saving lots of money during your working years if you never spend any of it? It’s nice if you happen to leave some money to your kids. It’s not a requirement. If we leave our kids a paid off house then they will be well off, even if all our other retirement assets have been spent.
4% withdrawal doesn’t mean that your savings go down 4% because presumably the remaining 96% is still earning a return, which will hopefully be more than 4% (ideally 4% plus inflation).
It makes little sense to assume your savings will earn 8% on average during your working years then fail to earn 4% on average during your retirement, even if there are Monte Carlo scenarios where you might not earn much if anything for several years.
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Which is what makes me wonder about annuitizing some of our savings to cover fixed costs (to the limited degree that these might exceed social security). Because I really don’t see why we should take more investment risk or impair our current standard of living so we can save even more, just to plan to leave it to our kids.
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I think every couple of years we revisit some of the same stuff on this thread, which is fine with me. I did have a MINIMUM number I needed to have before I retired. I wanted to have a paid off house, fairly new cars, kids done with all college we were paying for, and no debt before I retired. I also had to have a pretty realistic understanding of expenses, including both normal/regular expenses and more “lumpy” ones. Understanding “must haves” vs “wants” was another consideration. Having a reasonable pile of money set aside for potential medical expenses was included in calculations, because we don’t have LTC insurance.
And the good news in my case is both my husband and I have pensions with partial COLAs, and all of our must-pays should be doable with just our pensions, and eventually social security.
Regarding the age part of the original question, I retired at 59, partially because my family (at least the part I know of) tends to die early (early 70s) and dementia seems to run in my family. My husband waited until 62, because the retirement benefits were better by waiting.
For any “newcomers” to the thread, I’m one of the people who believes understanding your expenses is a very important part of the retirement decision… much more than a “magic” dollar amount.
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That means you take your mandatory withdrawals and invest for income.
Even if you want to die with nothing, you can donate it - endow a scholarship or find a charity.
Trying to die peniless might make it so you outlive your money.
To each his own but the idea and not everyone can, is to have more income than you spend - no matter your desired spending pattern.
There have been two times in my life where I had to reset my mindset of saving not spending.
The first was when I doled out tuition payments while my daughter was in college. It was tough to see that much being spent at a time. I had to remind myself, this is what the money had been saved for - to pay for her college.
Now I am at the second point in my life where spending is in excess of our income - our retirement. Again. I have to remind myself, this is what we saved the money for, to pay for our retirement years.
I think we have plenty saved for retirement. We probably have too much in restricted 401K/IRA type accounts and worry about Required Minimum Distributions.
Our principle is going down and will for the rest of our lives. Not that our goal is to die with zero, but our goal is to spend what we want, without worry and enjoy our retirement years.
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I also worry about RMDs. Most of my retirement $$s are in tax deferred accounts. Since I’m lucky enough not to need most of that money for many years, I expect it to keep growing.
I have considered Roth conversions, but have never actually done any (unless you count minimal back door Roths for a couple of years).
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THIS!
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Why? When investing in those traditional assets you deferred taxes, you didn’t eliminate them. Having to pay them later isn’t the end of the world. If funds had been invested in a Roth the taxes would have been due up front. Now they are just due on the back end.
RMDs are just the deferred taxes coming due. They were never going to be avoided forever.
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We save/invest some money in taxable accounts so that it should make financial sense to do some Roth conversions between the time when DH retires and when we start taking SS and RMDs. So saying, it still depends on what the landscape looks like when we reach that age.
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I understand the trepidation about RMDs because you might not “need” the money you have to withdraw. But hey, you can just reinvest in after tax investments. The part that stinks is that a surviving spouse often gets slammed on taxes and IRMAA due to the change in tax brackets after their spouse passes.
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My worry about RMDs is that the amount we may be required to withdraw per year may put us in a tax bracket that is actually higher than when we were working before retirement (and that is with 2 people - forget the big hit when one of us dies or when our child inherits a big sum).
I guess you pay now or you pay later and there is no real way to avoid taxes. We did what was the “right thing to do” by investing in retirement accounts and having lower taxes at that time.
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Yup. And to be honest, we needed the tax break when we were raising kids & paying for college. We’re in a better position to pay the taxes now than we were back then.
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The known expenses don’t worry me. It’s all the unknowns that are concerning. Changes in tax rates, Social Security benefits (or lack thereof), Medicare, rates of inflation, and (most significantly) long-term health and care costs.
That’s why I think there’s never, “enough.”
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Once I’m done spending buckets of money on solar, fencing, landscaping, electric charger and electric vehicle….which should take place within the next 6 months, I think DH and I need/want about 80K a year to live on. House is brand new, energy efficient and paid off, vehicle will be new or newish (we are retired, and can share the vehicle), electricity will be covered, and other utility expenses are minimal. Health insurance will be Medicare and a retiree city health care plan that is comparatively inexpensive.
We don’t buy fancy clothes,haircuts, or have expensive hobbies, and we now live in a beautiful part of the country so can travel locally. Two Grandchildren are literally right next door and other is 12 minutes away, so no need to travel to see the grandchildren.
Basically, our expenses going forward are food, healthcare, insurance and real estate taxes. We are fortunate to have pensions, though they are not indexed for inflation and will not increase. I am receiving soc. Security, but DH will wait to file at 70. Currently our pensions will be more than adequate to cover our expenses, so I plan on continuing to save money inCDs or high interest savings accounts. Our Roth and deferred comp accounts will remain untouched, hopefully for a long time.
I think the biggest financial uncertainty we have will be if DH’s aging parents need financial help, or if our kids need financial help. If our kids needed help because they lost a job, I know I would want to help. In the case of DD and her spouse, if one were to become unemployed, we would need to help out, because we jointly share one piece of property, and they have a mortgage for their share…
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Our parents have passed away, and our children are now homeowners with incomes that surpass what we earned at their age. They are financially independent and don’t need to rely on an inheritance.
I will join those of you who say it’s possible to enjoy retirement without financial worries. We’ve worked hard, saved diligently, and invested wisely, and we’ve reached a point where we know we have enough to meet our needs.
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It absolutely depends on many things as to what is a ‘safe’ amount for retirement. However I think the income/expenses going into retirement, and what the projected income/expenses in retirement will be telling. For example, knowing the income sources, or how you will draw down on investments; how expenses will change.
Way earlier on this thread, some tracked their expenses for a year or two before retirement, and understood the expenses that would go away when they stopped working.
We just were with our cousin (married no children) and she plans to work 1 day into age 69 (she is 67 now).
Some people do aggressive save to retire ‘early’ or to do a lot of travel the first few years in retirement. We know some that have done this, and some that continue to travel with some big trips once or twice a year. Of course some people have always done a big vacation (at least one week) funding their kids or extended family as part of their yearly expenses.
Our goal was for us both to retire at age 65, and I hit it while DH retired some months earlier than his turning 65. We have been pleased our nest egg hasn’t really ‘spent down’ - in part due to investment returns.
Still have some short term and longer term plans on money for transition on housing when we make that leap.
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So your thought is to leave the principal for inheritance.
One can spend down principal if the principal is big enough and they do not outlive their drained funds. That is why there are tables for how long your money will last with these specific conditions.
I do understand the concept. DH’s aunt had the sale of her farm and social security - so the investment return and SS was what she spent, and she had to be careful with her funds. I was surprised reading her obituary that her daughter had gone to a private 4 year college for nursing - but that may have been done very carefully as well.
Understanding the risk level one is at and the risk level one is comfortable with is important. Once we found a financial advisor that offered us solutions on this, we were able to reduce our risk and we SWAN. We made investment changes starting at that time 11 years ago when we were 59 - consolidating and simplifying. We also are on track with having some adjustments (moving some money from 401k to Roth IRA, and spending down some) to deal with RMDs when the time comes.
Keeping an eye on what taxes are doing, and also making decisions with tax implications in mind.
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