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For the thread title topic (âHow Much Do You Think You need to Retire?â), I think stocks vs fixed income is a critical component to this answer.
In the chart I posted earlier, a 100% fixed income portfolio only had a 19% chance of success in 30 years of retirement with 4% withdrawal, compared to 100% chance of success with 75% stocks / 25% bonds with 4% withdrawal. These chances were based on historical returns, so large driven by the two worst times in US history to retire (for which 30 year sample is available) â retiring in mid/late 1960s and retiring shortly before the Great Depression. With this degree of difference, portfolio weightings can have a tremendous influence on how much you need to retire.
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I think this all depends on how much you are starting with - and what your needs are.
What sort of starting point was used and how much was expected a year ?
If someone has $10 million and spends $100k a year, a 100% fixed income portfolio works 100% of the time. If itâs $1 million, it doesnât.
But in order to answer the how much question, one would need to know the âplanâ someone had.
While a share of equities has historically helped returns, not everyone is comfortable with the âswingsâ as noted by some in the thread.
So often a strategy is picked for emotional reasons and not just for expected return - and that will factor differently for everyone.
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Iâll go on topic. How much? That is a tough question. Enough to live off of pensions and SS and have savings from many years of working. Today we have additional expenses due to home improvement, trips, etc. Most of the additional expenses we chose to do, not had to do. I (69) retired at age 60 and H (74) retired at age 65 with very part time work for 4 years then covid hit. I think part of the problem is there are so many unknowns that can happen. And unknowns that could happen to your kids. Will they need help? I think living below your means has been extremely helpful.
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Thank you!! Seems this other thread is now a better place to talk all things retirement and not investment related. See you in that thread! Life in Retirement - We've made it! Now what? (No investment discussions permitted)
Issues OTHER than retirement investments should be discussed HERE Life in Retirement - Weâve made it! Now what? (No investment discussions permitted)
This thread seems to have morphed into investment opinions. Maybe that should even be its own topic- separate from retirement. JMO
I remember years ago someone who had $1 million told me it was all in CDs getting 5% interest.
They said they can live on $50k per year plus Social Security and never touch the principal.
Unfortunately, interest fell from 5% to 1%. And instead of $50k per year, they only received $10k per year plus Social Security which was not enough for them.
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Precisely why I buy bullet proof securities with long (10 year) calls - so interest rate direction doesnât, at least short term, cause issues.
Both CD, and other fixed income instruments, donât account for inflation. Historically stocks outperform in inflationary environments. But you still have âswingsâ.
Weâre about to find out - unfortunately - most believe inflation is about to ramp up.
It was a 4% withdrawal rate. This is defined as withdrawing 4%/12 of balance on first month, and withdrawing the same amount every subsequent month, with adjustments based on inflation such that you have the same buying power throughout retirement. The table also shows other withdrawal rates besides 4%. As you note, a 1% withdrawal rate ($100k/$10M) is successful, regardless of how your stock/bond balance is structured.
100% bonds also does well for short duration. However, the longer you live, the more important it becomes to have an asset that averages significantly higher returns than inflation (or inflation controlled annuity). For example, if you extend to 40 years, then the table as follows â 92% success for 75% equity portfolio, but only 6% chance of success for 100% fixed income portfolio.
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I donât disagree - historically equities outperform - while past history does not determine the future, thatâs known.
Equities have volatility - and not all like that - and equities donât necessarily provide a cash flow, but certainly could.
This all assumes âspendingâ down principal - which I donât want to do - but of course some do. Or some have no choice but to.
Thanks for the data.
This thread is about so much more than investments. I donât get the new name.
For instance, where do we talk about long-term care, which we have here? Certainly money plays a role in that, but itâs not what I call an âinvestment discussion.â
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I agree. Can this please be changed back as itâs a continuation of two previous threads of the same continuous name. Shouldnât be changed now. This thread
This is part three of this:
How Much Do You think You Need to Retire? What Age Will You/Spouse Retire? General Retirement Issues (Part 2)
If folks want a retirement investment ONLY threadâŠstart thatâŠin my opinion. also discussed things like when to retire, etc. Not investment related necessarily.
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Agree that the name change does not make sense.
Jym was discussing vacations while suggesting the investment discussions be taken to another thread, but vacations have less to do with the original thread title than investment discussions do.
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For travel and vacationing, posters have been steered here:
For âdaily lifeâ discussions:
Many of us find financial and $$$$ discussions cause unnecessary stress so we try to avoid those topics in the second thread.
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I see your pointâŠbut itâs getting confusingâŠand there seems to be some overlap on these categories. Like vacationsâŠdo you have the money for these (might be investment related). How about living arrangements, againâŠmight be investment related.
And where do we put things like âhow old do you think you need to be to retireâ (which could also be investment related).
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I agree this thread needs to return to the original title continuation. Beyond that, I have no opinion.
Perhaps to make it clear that itâs separate from the other thread, the word investment should be in the title. It will be easier to open the correct threads that way.
Iâm sure all of us wishes we had a crystal ball. But we donât. If we want or need to spend part of our principal at some point, we will be happy we have it for our needs.
And as Iâve mentioned, part of our retirement plan (done with our CFP) includes gifts to our kids, and travel. Itâs part of the retirement budget. We love giving to our kids now, and seeing what they do with the gifts we give to them.
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Happy to talk about retirement budget, but not interested in debates about specific types of investments. Thatâs why I agree with those who suggested it might be better to have a separate thread as specifically for a discussion of different types of investments. Many of the recent posts have been entirely about investment types and not much about retirement. Had to scroll past a lot of these investment debates in order to avoid having my eyes roll into the back of my head.
I am about to make a large donation to my upcoming college reunionâs class fund. But even though I am âretiredâ and this is related to retirement in some fashion, discussing how and why we moved the money from one account to another and why we moved it is IMO not necessary to discuss. Perhaps some of the discussion about why to use a certain account for donations is wiser for tax purposes is relevant to the thread, arguing about which kinds of investments and bond funds are better seems better discussed in another thread. but thatâs just me.
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Youâre assuming you need to spend down your nest egg to make gifts. You may need to. Others may not.
I plan to provide gifts AND retain and grow my principal and passive income. Iâm already very generous with my working son so he can put some money away as he begins his working life. I will be similar with my daughter - just bought her a car and I pay the insurance etc.
Everyone is in a different situation (you and I likely are) and everyone has to do what is best for them.
But youâŠor IâŠare not necessarily representative of most out there.
One size doesnât fit all. But understanding what different people do might help others in some way.
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If arguments about different types of investments are not being redirected to another thread, then talking about vacationing during retirement, costs and travel styles are just as reasonable to talk about here. Point being, if a separate thread was spun off to talk about vacations, then a separate thread to talk about different types of investment tools Also should be spun off. Some conversation is reasonable, but the ongoing arguments are getting ridiculous.
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