How much money for retirement?

Parent Cafe
1

<p>My friend, who is facing the ugly divorce now.
She married for more than 25 years, no working experience and has no idea about “money”.
Her H will only give her very small alimony. </p>

<p>I’m worry about her. But from her, I look at myself, wondering how much money do I need to save if I want to retire at age 55 (almost there, only few years left).</p>

<p>I google, there are so many website teach you how. Well, they are all too complicate for me. Is there any simple way to figure out the number?</p>

2

<p>I’m doing exactly this calculation right now. I have a spreadsheet that I got from this book: [Work</a> Less, Live More: The Way to Semi-Retirement: Robert Clyatt](<a href=“http://www.amazon.com/Work-Less-Live-More-Semi-Retirement/dp/1413307051/ref=pd_bxgy_b_img_a]Work”>http://www.amazon.com/Work-Less-Live-More-Semi-Retirement/dp/1413307051/ref=pd_bxgy_b_img_a) that I’ve been working through, and I’ve been pleasantly surprised by the results (how often does that happen with financial planning?)</p>

<p>Here’s a simple online calculator: [FIRECalc:</a> A different kind of retirement calculator](<a href=“http://www.firecalc.com/index.php]FIRECalc:”>FIRECalc: A different kind of retirement calculator)</p>

<p>To use it, you’ll need to know these things:</p>

<ol>
<li> Year you expect to retire</li>
<li> How much you’ll spend per year when you retire (start with what you’re spending now per year).</li>
<li> What you have saved so far.</li>
<li> What you’ll get in social security per year (SS sends a statement every year, or you can estimate it) and what year it will start</li>
<li> Your estimate for inflation.</li>
</ol>

<p>You have the option of using an estimate that assumes your spending will decrease by 2-3% per year, rather than holding your spending constant. There are other tweaks you can make, but these are the basics for any retirement calculation. Look at the results to determine the probability that your current investments will support your retirement.</p>

3

<p>20 times more $$'s than you need to live per year…that way you invest the money at .05% interest and never touch the principle. if you need $100,000/year to live on then you need $2,000,000 earning .05% interest per year.</p>

4

<p>But you’ll have to touch principal under your scenario because your $100,000 a year will buy less and less every year. You will either have to lower your standard of living, touch your principal, or invest your money with the object of making a higher return.</p>

5

<p>My parent’s retired early. But, they were younger when they had me and my brother, they inherited money from my grandmother and she also paid for college, my dad had a pension, and they had no elderly parents to care for. I’ve been saving for retirement since the age of 22 but don’t have my parent’s advantage and doubt I can retire early and live the life I would like with traveling and not worrying about money. My goal is to just work less at 55.</p>

6

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<p>I’m sorry for your friend. What does she consider a “small alimony”. If it’s REALLY small…then she should discuss this with her lawyer. It’s not only about what her husband WILL ONLY GIVE HER. This item needs to be negotiated</p>

7

<p>One common rule of thumb is that you can take 4% of your assets out in the first year of retirement, then increase this amount by the rate of inflation every year. Assuming that you will be retired for 30 years or so, this approach supposedly has you run out of money before you die in only something like 10% of the scenarios they’ve run, based on historical experience.</p>

<p>Another way to go is to get quotes on immediate annuities. How much do you need to invest today to get an annuity that is large enough (and inflation indexed) for you to live in retirement? This way, you don’t have to worry about outliving your money, but you will leave little or nothing for your heirs (except, perhaps, having paid for their college education!)</p>

<p>I think one of the most difficult things to calculate is how much you will (want) to spend in retirement. Many guidelines say you will need only 70 - 80% of your pre-retirement income. This is based on many surveys, which show that retires do, on average, spend 20-30% less in retirement. But it is not clear that they spend less by choice, or because they don’t have as much money as they would like.</p>

<p>In one retirement seminar my wife and I took, they talked about 3 phases of retirement: the go-go years, the slow-go years, and the no-go years. In the go-go years you may want to do a lot of travel, or take the vacations you were never able to schedule or take when working. In this initial period of retirement, your spending may well be higher than it was when working. As your energy level and health status diminish over time, your non-medical spending will go down, but your medical spending may go up.</p>

<p>One other thing for the OP’s friend to consider is what SS benefit she is entitled to. She may not be entitled to any SS benefit under her own work record if, for example, she never worked outside the home. You need, I think, 10 years of covered employment before you are eligible for any SS benefit, and with only 10 years the benefit is rather low. She may, on the other hand, qualify for a SS benefit based on her spouse’s work record. She should probably talk to a good financial planner who is knowledgeable about SS rules and regs - they are very complicated.</p>

8

<p>This is not a good time to retire at 55 unless you have a really good retirement plan or really good investment portfolio. . Figure out what kind of work can be done at least part time to bridge the gaps until 65 or 67 depending on SS. That is also a way to fund the go-go retirement phase. I consider myself semi-retired. The money I make working funds our trips, especially since the last tuition check was written in January (does happy dance).</p>

9

<p>I agree with Thumper. If she can not afford a lawyer, she should see if there is a legal clinic at a law firm near her that can help her with filings. 25 year marriage – if he has any retirement accounts, she should be looking at close to 1/2 of them or 1/2 of pension, along with other assets, spousal support.</p>

10

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Only a few percentage points per year? That surprises me because it would seem that we’ll be spending much less than that once we no longer have tuition checks to write and retirement or things like weddings to save for. Of course, we’re not “spending” money when we save it - it just feels that way because we don’t have it available to us once it goes into a retirement account. Our mortgage is paid already, but many folks pay that off in the period between tuition payments and retirement, which means their housing costs will often be less in retirement until or unless they need assisted living or a higher level of care. </p>

<p>One nice realization we’ve had since our kids have moved out is how little money we spend for a comfortable way of life. I feel that we could get by happily on perhaps 2/3 of our current income, maybe even less? I guess I need to reassess how much we spend on living expenses vs. how much money goes for other things. Like most parents, we would love to be able to leave our kids something when we’re gone, especially for their children’s educations - but I don’t know how many of us will be able to do that.</p>

11

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Actually, we told ours that our perfect plan is to slide out with the last check bouncing :slight_smile: We have worked hard and did not get anything much from our parents. I will think of funding some things, help with house down-payment, education fund for grandkids, if we are comfortable in our retirement and they are making like investments. We gave them debt free educations and that to me is more important than leaving them anything when we’re gone.</p>

12

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<p>I agree. We will have no mortgage then (the only reason who do now is because we bought our future home and are still in the present one–once we can move, the old one gets sold and pays off what’s left on the mortgage on the new one, maybe even with something left over.) We live really frugally. I’m pretty sure we could be comfortable on the inflationary equivalent of 25/30000 in today’s dollars.</p>

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<p>Also agree with this. Gave my kids an opportunity for a good education, will help them out along the way as possible, but have no plans to leave anything to them (as doesn’t my mom to me, which is fine.)</p>

13

<p>I am the sole check writer for putting my d and s thru the college right now. I have told them both I want to live long enough to become a financial burden on them while they are changing my diaper daily. That’s my retirement plan… lol, jk.</p>

14

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Wow, that’s a really cool calculator.</p>

<p>I wouldn’t call it simple though… apparently my kids are going to either inherit a few million, or we’ll be broke and living in <em>their</em> basement by the time we are 70.</p>

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I don’t think there are many if any investments paying 5% these days that do not place the principal at risk.</p>

15

<p>This may be tangential to the conversation, but I was reading this the other day [U.S&lt;/a&gt;. millionaires say $7 million not enough to be rich - Yahoo! News](<a href=“http://news.yahoo.com/s/nm/us_fidelity_survey]U.S”>http://news.yahoo.com/s/nm/us_fidelity_survey)

Not sure when we will ever feel we have enough to retire .</p>

16

<p>“I wouldn’t call it simple though… apparently my kids are going to either inherit a few million, or we’ll be broke and living in <em>their</em> basement by the time we are 70.”</p>

<p>I think this is the crux of the matter … circumstances will materially effect how things turn out. That doesn’t mean you don’t do your best to plan for success. But it’s hard to factor in the unforeseen.</p>

17

<p>I think our generation (people born in the '50s and '60s) will redefine what the retirement years involve. I think a lot of people (for economic reasons) will keep working into their '60s and '70s, and there’s also been some studies that show you stay mentally and physically healthier if you keep working (whether or not it’s paid employment). </p>

<p>Ideally, we’d all have a lucrative side career that we could segue into after we leave our regular jobs. It would be at our own pace, be meaningful and challenging, and be financially rewarding. And all our kids would be accepted at their reach schools. And a regular diet of brownies would eliminate cellulite.</p>

18

<p>When I read these calculations about spending more than you make in retirement…like the 4% rule for example…</p>

<p>I think…one…there is the reality that a person may run out of money before he or she dies…</p>

<p>the pychological affect of knowing that you are spending more money than you make and you may run out of money is very heavy from older people I talk to…</p>

<p>most people do not have millions saved for retirement…and with pensions going the way of the dodo bird…and social security and medicare under attack…and housing prices lower than many expected…</p>

<p>it is going to be really ugly…unless Kurzweill is right and we find the fountain of youth…</p>

<p>people who think they are easily going to work in their 70’s…need to look at people in their 70’s…</p>

19

<p>For those people born in the '50s and '60s who worry about retirements - I got bad news, good news and a suggestion.</p>

<p>The bad news - if you don’t have enough to retire “comfortably” now, there is not much really you could. Our earning power is well set and means of generating significant amount of extra income is limited. Other than winning the lotto, I don’t see how could we become “rich” in the next 10 ~ 15 years, even if the stock market is going up 8% a year.</p>

<p>The good news, we will retire - one way or the other. Look around, there are many people who have far less than we do have retired.</p>

<p>My suggestion, - think of your health first and don’t worry about retirement that much. it will come when the time is right. Enjoy life now when you still have the physical capability. The millions, you would have saved up by no enjoying life now, will not do you any good when you laying on a hospital bed with 5 needles stuck in your arms.</p>

20

<p>I am wondering why money is concern, but not what you do when you retire that early. I am so ccared by that thought, that I have no plans to retire ever, I will wait until I am kicked out. I know that I will go straight into the box right after that. And I am the one with great hobby and 2 hrs/day exercise routine and I have discovered some awesome place to go on vacations. How people envision their day when they do not work. I do not like to do anything, including reading, watching TV, shopping, traveling or any house chores and I absolutely love my job, which is the greatest entertainment for me. I love going to museum, but it is the only thing I enjoy in addition to my hobby, exercise and going on very expensive vacations. I am really scared and do not care about money. I will not need them when I am dead.</p>