<p>It seems a bit exaggerated to me. If you withdraw 4% of $2M, that’s $80,000. If this person receives Social Security benefits, about $30,000 a year, his or her annual income will exceed pre-retirement pay.</p>
<p>Well Igloo, this study agrees with you that it takes less to retire.</p>
<p>11 times your income plus SS.</p>
<p><a href=“http://www.aon.com/attachments/human-capital-consulting/The_2012_Real_Deal_Highlights.pdf[/url]”>http://www.aon.com/attachments/human-capital-consulting/The_2012_Real_Deal_Highlights.pdf</a></p>
<p>The people who tell you that you need 20 times final salary have a vested interest in saying that. ;)</p>
<p>That said, if you are fortunate to have saved 2 million, and i know a few,you should be fine…as that is 80k at 4% withdrawal rate plus SS…</p>
<p>I know we will not even approach 20 times salary,if lucky 5 times ±, though we have 1 small pension, and hopefully another decent one,if we stay at current employer for 12± years</p>
<p>Also home will not be paid off,though currently owe 1.5 times current salary on it</p>
<p>I think there is a lot of truth to what you are saying Phillyfed in regards to financial professionals saying you need more than necessary to retire, so they can manage your money.</p>
<p>If you have a very large salary, and you don’t really need that kind of money to retire, then you are to not going to need 20 times your salary to retire.</p>
<p>Also, a lot depends on how long you live, your health, supplementary income, your
future returns, inflation, and any obligations you might have. </p>
<p>I don’t think it is a good idea to find out when you are 80 that you have outlived your assets. Looks like millions of people are going to be in trouble. I don’t know how society is going to handle this shortfall.</p>
<p>I look at my aunt and uncle. They have a net worth of over 1 million and they could run out of money. It might take 20 years. </p>
<p>If you need make an additional 40,000 a year today, and inflation is 3 percent and your after tax return is 3 percent for 20 years, you need to save 800,000.</p>
<p>Many areas of the country you won’t need an additional 40,000, but in some areas 40,000 won’t cut it.</p>
<p>And 40,000 today is 70,000 in 20 years. What is affordable today may not be affordable in 20 years.</p>
<p>I think pensions are extremely vauable, especially if there are inflation kickers.</p>
<p>40k would not work at all, not even close…my friend who is late 50’s said recently her accountant suggested 160k, they have no pensions but loads of savings ,3M+, and a likley 1M in real estate with no mortgages…she is very worried, and i tell her she is fine, and should stop moaning. ;)</p>
<p>Hmmmmm… Your friend may have to cut her lifestyle at some point or she might run out of money.</p>
<p>A good friend’s aunt retired in the 1970’s when she was in her 50’s. She had a 500,000 nest egg. That was a lot of money back then. She is running out of money. She is 92. She is in a rest home. She has 3 years of money left. Probably won’t live that long.</p>
<p>So you think 3 m is not enough? Wow…the problem with the 4% withdrawal concept is the simple fact people do less as they get older,what you spend at 62-65 is significantly more then spending habits at 70… If you can’t live on 120k plus SS, wow…</p>
<p>No…I was using 160,000 plus SS.</p>
<p>While it is true that expenses can be cut, health care expenses may go up, especially with some of the ideas floating around.</p>
<p>120,000 plus SS…she will probably make it. She also doesn’t need to live on 120,000 a year plus SS. If she cut to 80,000 to 90,000, piece of cake.</p>
<p>I don’t want to be too gloomy here. :)</p>
<p>Funny thing is my parents and their siblings likley didn’t have 50k saves when they retired 12 years ago…they still eat,drive,live in a home or apartments…living low on the hog, without question…but still living and breathing,and surviving…we as a country have fallen for the " dream" retirement that investment houses have portrayed, and that dream is out of reach for 90% of the population…vacations, second homes,fine dining, etc…</p>
<p>I will let you know how it works out. After 5 years of not working, we are enjoying our (retired? are we retired?) lifestyle but I am not quite sure it is sustainable. It is not very well planned out, although I frequently play with the numbers. One thing I am planning on doing is waiting as long as possible before starting social security. Hopefully beyond 66, maybe even past 70. That way, if (when) our money runs out we will have maximum monthly income for the rest of our lives.</p>
<p>For those who haven’t save 20 times your income, don’t worry, here comes tiny house.</p>
<p>[Now</a> that’s a tiny house: 1 square meter - Yahoo! Homes](<a href=“http://realestate.yahoo.com/news/now-that-s-a-tiny-house--1-square-meter.html]Now”>http://realestate.yahoo.com/news/now-that-s-a-tiny-house--1-square-meter.html)</p>
<p>I don’t like the 4 percent withdrawal concept, because mathematically, I don’t understand it. ;)</p>
<p>Let’s say you have 3 million dollars. Your income is 100,000.
You spend 120,000 the first year.</p>
<p>Now you have 2,980,000.</p>
<p>The second year…
Your income drops to 99400.
And your expenses rise 3 percent to 123,600.</p>
<p>Now you have 2,955,800.</p>
<p>Do you see where this is going?</p>
<p>Well NJres, you know what you are doing so it is silly to mention this, but you are right. It pays to wait before collecting SS (Unless you know you aren’t going to live that long).</p>
<p>Like the tiny house.</p>
<p>Phillyfed,</p>
<p>These people that only have 50,000 net worth are living on SS only?</p>
<p>Ever the pessimists, my relatives plan are taking SS the moment they can, forgoing larger checks for taking it asap…they believe there will be some type of reduction at some point, so they want it now. Not sure what i would do, but i have time</p>
<p>The 4% withdrawal model originated when interest rates were higher than 4%, so the idea was you could withdraw 4% without touching principal, and even maybe growing the balance over time. If earnings are zero, then the model sort of collapses as you have shown - you withdraw a smaller amount each year from a shrinking pot. Ack! </p>
<p>time to watch political animals. bbl</p>
<p>Yes, SS only…house rich, cash poor</p>
<p>Well…phillyfed, you said earlier 40,000 a year wouldn’t cut it.</p>
<p>I guess it does. :)</p>
<p>For them,yes…for me, no way. ;)</p>
<p>And NJres’ post 2316 explains the problem retirees are going to have with the rate structure we have now. </p>
<p>With these interest rates, poverty for the elderly is going to increase dramatically.
And people are arguing that they want SS cuts on top of this. Lol</p>
<p>I guess when people get to a certain age and run out of money, we can put them to sleep.</p>
<p>One thing that is true is multiple generations can live together again, like the old days.</p>
<p>That does cut costs.
I did tell my dad, who I have said before is one of the nicest people on earth, that there is no way he is going to live with me.</p>
<p>I am not one of the nicest people on earth. :)</p>