What will it take $$$ to retire?

[Beeman]

With prices of everything rising and nobody fixing Social Security how much actual money will it take to consider retireing?
There is only so much you can cut expenses. Even if your home is paid for it will always need maintenance, appliance replacement, and insurance. Vehicles require insurance, maintenance and of couse fuel. Then there is always the health care costs. All this is with a very simple life and betting that your health holds out so you can keep doing the physical things that keep your expenses down.

[Beststash]

Beeman, I retired at 53 after 33 years with "the company", I had worked 27 years in a union job and my last 6 years in management. I have a very modest pension and my savings which for the most part I can't touch until 59 1/2. I have totally loved it for the most part. I walk everyday and feel good physically.
The largest change that I have seen has been healthcare. My healthcare monthly payment has gone from $102 per month in 2003 to $600 per month this year and as we approach 2006 signup period the rumor is that we will see a 34% increase so I am expecting around $800 per month. My place is paid for and I have no debt and I have been paying for everything except insurance, taxes, and extras out of my pension.
I will turn 55 soon and my DW just did also, I expect the next 10-15 years to be the most exciting of my life and try to remind myself of that every day. Time sure does fly!!!! I actually think that money (although I don't have a lot) is probably the least of my concerns.

[Explorer]

I would figure on between 60 and 80% of your pre-retirement income. You can reduce that if your house and car are paid for. Car purchases and health insurance will be a major influence in your future spending.

[mpillow]

We pay $1000 a month for health ins....and make less than $50k a year with no company retirement....I'm hoping that my kids will want mom and dad to live with them....kind of like the Walton's....We will probably have to make some of the "Recipe" to pay taxes and take the edge off

[Alice In TX/MO]

"With prices of everything rising and nobody fixing Social Security how much actual money will it take to consider retireing?"

Just a reminder that Social Security was never designed to be a complete retirement program.

That said, if you don't have $500,000 to $1,000,000 saved in a retirment plan and/or income producing investments, retirement is probably out of the question.

Another thing to think about...the concept of "retirement" is new, historically speaking. If you will think about the homesteaders who founded this country, as recently as the early 1900's, there was no retirement. You continued to farm or ranch, or raise turkeys, etc., until you just couldn't any more. Then you lived with family, doing whatever you were capable of, or you died.

I found this 'history of retirement' in a Google search.

"The concept of "retirement" at some fixed age is a relatively recent
phenomenon which results from government social security programs. You
can read about the history of the nominal age-65 retirement age at the
US Social Security Administration website:

http://www.ssa.gov/history/age65.html

Apparently, the US standard was first established as a compromise in
1935 by the Committee on Economic Security (CES) charged with
developing guidelines for the new Social Security Administration. It
was based in part on a German precedent. Germany started the world's
first old-age social insurance system in 1889. It initially had a
retirement age of 70 which was later (in 1916) reduced to 65. In the
CES analysis, the "decision was not based on any philosophical
principle or European precedent. It was, in fact, primarily pragmatic,
and stemmed from two sources. One was a general observation about
prevailing retirement ages in the few private pension systems in
existence at the time and, more importantly, the 30 state old-age
pension systems then in operation. Roughly half of the state pension
systems used age 65 as the retirement age and half used age 70. The
new federal Railroad Retirement System passed by Congress earlier in
1934, also used age 65 as its retirement age. Taking all this into
account, the CES planners made a rough judgment that age 65 was
probably more reasonable than age 70. This judgment was then confirmed
by the actuarial studies. The studies showed that using age 65
produced a manageable system that could easily be made self-sustaining
with only modest levels of payroll taxation."

During the 67 years since 1935, there have been numerous changes to
the system. Some of these introduced other age thresholds. You can
read a variety of versions of the history at the SSA web site:

http://www.ssa.gov/history/history.html

The first introduction of an age other than 65 in the SSA occurred in
1956, when disability insurance was added to the system. Initially,
disabled people between 50 and 65 were entitled to benefits. However,
the first use of age 60 as a retirement age in the US seems to date
back to 1875, when American Express adopted the first private pension
plan for employees with at least 20 years of service at age 60.

The first reference I could find to a reduced benefit at an earlier
age than 65 occurred when such benefits were extended to widows in
1965. The first reference to age 70 occurred the next year in the Tax
Adjustment Act of 1966, which "provided for payment of cash benefits
under OASDHI [Old Age Survivor and Disability Insurance] for all
persons aged 70 or over even if they lack insured status."

However, the mysterious 1/2 numbers do not appear anywhere on the SSA
site. Those numbers appear to derive from tax calculations by the
Internal Revenue Service. The earliest reference I've found dates from
the creation of the Individual Retirement Account in 1981.
Essentially, the rules established an approximate 10-year window about
the nominal age-65 retirement age. Before the window, any withdrawals
incurred an additional penalty tax; after the window, mandatory
minimum withdrawals occur. Fairly arbitrarily (I think), the
additional 1/2 year was added in the detailed calculations. While the
suggestion that I made in the Comment regarding mid-year and end-year
differences in calculation is plausible, it doesn't seem to be borne
out by the actual calculation rules as they have evolved. For example,
the IRS requires minimum withdrawals from an IRA beginning on April 1
of the year after you turn 70 1/2. I'm sure it all made sense to the
person who first drafted the rules, now that the rules have been
amended a few times by different people, the actual consequences
appear rather arbitrary."

[moonwolf]

I believe if you are in reasonable health and living a true homesteading lifestyle, you could easily retire with half or less of your 'original' pre retirement income. Assuming your house mortgage is paid and what you are left for expenses to calculate are property taxes, heating costs, water, energy, and required insurances. The figures seem to be bandied about by financial planners take into account many luxuries such as travelling, maintaining expensive vehicles, and so on. If you don't require those and live 'off the homestead' , so to speak as a comfortable lifestyle than one could do it. If you calculate all the 'extra' things money is spent on, it's astounding what the 'want' is to the actual 'need'.
I don't have an itchy travelling foot for seeing distant lands that much, nor am I too enthralled with overusing expensive fuels for expensive new vehicles near retirement time. I hope, and plan to spend it 'on the land' which I worked for to achieve rather than those other things. It's mostly choice what one chooses at retirement to 'spend' it on. The necessary expenses don't go away, and those are what you need to have the pension income for. Might want to save a few extra bucks for that desireable companion animal or livestock that makes homesteading so worthwhile. Of course, that's a good reason to not travel as much, either.

[Beeman]

Beststash, You have what most don't in the peace of mind of a pension. In your case it's worked out great and I can see why money isn't your worry. But answer this, what if your pension disappeared like many others have?
Explorer, I wonder how many could actually save enough to generate 60-80% of their pre retirement income? My house and vehicles have been paid for quite some time ago and the bills roll on.
mpillow, you are not alone and that's part of the reason i ask this question.
Rose, not a doubt in my misnd SS wasn't designed as a full retirement plan. But with expenses soaring and our Congress doing nothing there is a great possibility it will be nothing instead of a supplement. In all seriousness do you think there are many people with $500,000 to a million in their retirement accounts?

In no way is the retirement I'm speaking of in any way indulgent. I'm referring to a very simple lifestyle with no frills. With the energy situation the way it is there is no doubt any tecnology old or new will be expensive. Vehicles, luxurious or not will be expensive to keep and or buy. they have reached that point now and the only way to avoid high vehicle expenses is with an older vehicle. Unfortunately the old vehicles of tommorrow won't be the simpler old vehicles of today and they will be expensive to keep if wearing out. Someone quoted $600 per month for health insurance. Now add home insurance, car insurance, property taxes, electric,gas, water, phone and of course internet service. It's easy to see how very basic "existence" expenses can be $3-$500 per week in many cases without food or clothing and definetly without any frills.
I don't ever see myself as stopping working as that is all I know and a lot of what I enjoy. If I have any wants it would be to work at what I want and not what I have to.

[moonwolf]

Originally Posted by Beeman

Beststash, You have what most don't in the peace of mind of a pension. In your case it's worked out great and I can see why money isn't your worry. But answer this, what if your pension disappeared like many others have?
I don't ever see myself as stopping working as that is all I know and a lot of what I enjoy. If I have any wants it would be to work at what I want and not what I have to.

If one put into a pension, I can't see that any majority of pensions out there will completely disappear. If that is to happen, you're better off than most being on a homestead property in the first place and have learned a good degree of self reliance.

The point about never stopping to work. I haven't yet heard too many so-called retired people, even after age 65 telling me that they don't 'work' at something and some part time job, if necessary can be fulfilling to plug the gaps and still have time doing what you can for yourself, including generating self income as much as possible.

[Alice In TX/MO]

IF people started investing a small amount in a retirement fund when they begin work in their teens or 20's, then the answer is YES, you will have over $500,000 in funds or other investments for retirement.

My older son is about to hit age 30. He started his 401K and other savings as soon as he went to work as an intern with IBM during his junior year in college. Now, just 10 years later, his nest egg has hit the six figure mark.

Most folks DON'T even begin to think about it till their parents hit retirement and panic.

Starting to think about retirement at age 40 or above is too late. Investment counselors and even the commercials on TV will tell you this.

It's not my fault that many people (NOT necessarily the folks on this list) think driving a new car every couple of years is more important. When I taught in the public schools (15 years of classroom experience), most teachers drove really nice cars or trucks. I bought ONE family vehicle after I taught a year, and I'm still driving it. Then, those funds that most of my colleagues would fritter away on shiney new cars, I spent on old run down homes and the repairs and remodeling to turn them into nice middle class rental properties. Now, I have the rental income, no longer teach, and don't need to worry about whether Social Security is there.

Most likely, I've ticked some people off because they are sensitive to the fact that they might not be preparing for retirement adequately. Flame me as you see fit, I guess. What I'm TRYING to do is help you think outside the media and government programmed box about retirement.

[mpillow]

Rose....hubby and I did the 401k thing starting at age 21....by age 30 health ins. and children came along and we had to cutback....then the technology market busted...9/11 happened....our money is at only a 1% over initial $$ invested.....his wages have not increased with loss of OT from former job, but insurance rates for our family have gone from $25 per week to $179 and due to increase in Jan.
We have done way better with real-estate investments.....but as property taxes increase and retirement wages decrease we may not be able to retain enough land to be close to self-supportive unless we are able to pool resources with our children.....IMHO

[Explorer]

Originally Posted by Beeman

Explorer, I wonder how many could actually save enough to generate 60-80% of their pre retirement income? My house and vehicles have been paid for quite some time ago and the bills roll on.

You are correct. I omitted one very IMPORTANT part - if you want to maintain your current lifestyle. The vast majority, if they can retire, will have to reduce their lifestyle expenses. Maybe that is why you see a lot of people moving to the country thinking they can reduce expenses in the same kind of house and car. You can't. Something has to give.

All insurance costs are soaring, especially medical. You can drive an older auto with minimum insurance, reduce home insurance to the bare minimum, but you should carry catastrophic medical insurance if you don't want to lose your home (not all states).

Most private pension plans do not have an annual increase and SS is very small compared to insurance increases. Also taxes, my property tax increased 35% this year due to increased property values in the county. Ouch!

As they say, old age is not for the timid.

[caballoviejo]

Originally Posted by Rose

IF people started investing a small amount in a retirement fund when they begin work in their teens or 20's, then the answer is YES, you will have over $500,000 in funds or other investments for retirement.

Originally Posted by Rose

My older son is about to hit age 30. He started his 401K and other savings as soon as he went to work as an intern with IBM during his junior year in college. Now, just 10 years later, his nest egg has hit the six figure mark.

Most folks DON'T even begin to think about it till their parents hit retirement and panic.

Starting to think about retirement at age 40 or above is too late. Investment counselors and even the commercials on TV will tell you this.

It's not my fault that many people (NOT necessarily the folks on this list) think driving a new car every couple of years is more important. When I taught in the public schools (15 years of classroom experience), most teachers drove really nice cars or trucks. I bought ONE family vehicle after I taught a year, and I'm still driving it. Then, those funds that most of my colleagues would fritter away on shiney new cars, I spent on old run down homes and the repairs and remodeling to turn them into nice middle class rental properties. Now, I have the rental income, no longer teach, and don't need to worry about whether Social Security is there.

Most likely, I've ticked some people off because they are sensitive to the fact that they might not be preparing for retirement adequately. Flame me as you see fit, I guess. What I'm TRYING to do is help you think outside the media and government programmed box about retirement.

Numbers mean little though without adjustment for inflation. Catch a bad few decades and one's lifetime savings of $500k is piffle. I've saved all my life, have no debts, own my house in town and a farm a piece farther out. But all it would take is a few events and a few changes in law that worked against me (and these must occur!) and I'd be fiddling for my supper along with the grasshopper in a world of foreign ants. Plan but put your faith in God or choose your parents well and die just before you are bankrupted.

[Snakeoil]

Well if Rose is correct, very few people will ever retire. I'm retiring next year, approximately $1200 from SS, and another $400 from a private company retirement plan. I also have a 401 account but do not plan on touching it. I can purchase insurance for $274 a month from my employer and having no bills I plan on saving money, so who needs a $500,000 to 1 mil?

[Beeman]

Rose, 401k's didn't exist when I was in my 20's. I made the other mistake of getting married and starting a family which cut drastically into the amount could save. One of my other mistakes was not getting a gov't job with a pension and gauranteed health benefits. In no way did I imply that any of this is your problem or your fault. I somehow don't see your post as helping anyone think outside the box, it does seem more like talking down to people. As an educator I would think you could contribute more.

Explorer said:
"You are correct. I omitted one very IMPORTANT part - if you want to maintain your current lifestyle. The vast majority, if they can retire, will have to reduce their lifestyle expenses. Maybe that is why you see a lot of people moving to the country thinking they can reduce expenses in the same kind of house and car. You can't. Something has to give."

Since this is a homestead board I would say that many don't have much to cut out of their lifestyle for retirement, they are probably living simply now.

Moonwolf said:
"If one put into a pension, I can't see that any majority of pensions out there will completely disappear. If that is to happen, you're better off than most being on a homestead property in the first place and have learned a good degree of self reliance."

"The point about never stopping to work. I haven't yet heard too many so-called retired people, even after age 65 telling me that they don't 'work' at something and some part time job, if necessary can be fulfilling to plug the gaps and still have time doing what you can for yourself, including generating self income as much as possible."

There is a post in GC about Delphi and an airline making major cuts. there is almost no doubt GM and other airlines will go the same direction. Many are working currently and in their 40's and might very well have no pension that they planned on. I wasn't thinking so much about people that are currently receiving pensions, but I would say that some of those could possibly be in jeopardy and much of their pension could easily be lost to loss of the health insurance they might have to buy which seems to be the first step companies make in reducing their costs to survive.

I see many retired people and know many past 65 that don't work at all. Most are by choice but you also have the health factor. I've also recently spoke to some that more or less had to retire for health reasons.

[edcopp]

Hindsight is 20/20. so the question can not be answered. It is like asking how high is up?

The real best way to approach this problem is not to retire. It would be ideal to remain active and productive until death. In that case if one was completely self sufficient at all times there would be no reason to retire.

To retire, as such is foolish if it can be avoided. Expect some costs to just blast you right back into the work force. A real good example is health care costs, retire and watch this cost increase 600-1,000%. Then if you have a medical problem you are in real trouble.

Now if one were to move to the homestead at the age of 40 or so and attempt self sufficiency, it is likely that no money would be set aside for retirement. It is also likely that there would be years when no money would have been made, so no payments would go int social security. It is also likely that from time to time that the homesteader would need to work away from the homestead. In this case the jobs available would be meanial and of the low pay variety. A little might be paid into S.S. but probably nothing else for retirement.

In this case the homesteader would likely learn to live a thrifty life. When age 62 comes he would no doubt apply for S.S and just look at that money as a raise. He will enjoy little in the way of cash, but he will have had 20+ years experience of doing that on his own homestead. So a good plan would be to do the very best to keep doing that for another 40 years or so.

[Beststash]

Originally Posted by Beeman

Beststash, You have what most don't in the peace of mind of a pension. In your case it's worked out great and I can see why money isn't your worry. But answer this, what if your pension disappeared like many others have?

You are absolutely correct - My pension is underfunded like almost every corp in this country - I think this is a issue that needs to be addressed. If I lose my pension thru bankruptcy I hope that the current PBGC rules will at least cover some of the pension. I however, do not think it is the responsibility of tax-payers to fund my pension and that is the reason that the issue needs to be addressed legislatively. Inflation (and healthcare) is without a doubt my biggest obstacle in the future - how to deal with it is an ongoing challenge.
If you can, retire debt-free and become adjusted to a reduced income - I think that is one of the biggest factors in a successful retirement. Before retiring, my wife and I cut our budget to what our projected income would be just to see how it would affect us - we were able to increase our savings but more importantly the transition to retirement was not a shock.
As far as working in retirement - I don't think that is a real issue....you will be doing something for extra dollars or for personal satisfaction, or just to stay active - that is just the way it works. You cannot just sit down and do nothing, impossible. What I enjoy most is knowing that my accumulation phase is over and my enjoyment phase is now in progress - it is actually fun being frugal, in my case more exciting than the "work" phase.
Sorry for the long post - remember you only go around once - enjoy it. I think worrying can sometimes be self-fulfilling. Don't sweat the small-stuff, and it's all small stuff. The nice thing about retirement is that it is always your choice when to pull the plug - with the exception of health issues in which case all you can do is your best.

[Beeman]

Originally Posted by Snakeoil

Well if Rose is correct, very few people will ever retire. I'm retiring next year, approximately $1200 from SS, and another $400 from a private company retirement plan. I also have a 401 account but do not plan on touching it. I can purchase insurance for $274 a month from my employer and having no bills I plan on saving money, so who needs a $500,000 to 1 mil?

Snakeoil, I wish you well and congratulations. I do wish you luck and good health and would appreciate if you could share more of your expense figures with us. To get a discussion going about this and get more actual figures would be beneficial to many. You do hear all of these huge figures and have to wonder how many can actually build up that amount, especially blue collar workers.
One of the things that got me thinking about the retirement figures was the last household expense budget we did. The increases were very noticeable over the last budget. A simple cost like license plates has risen considerably and our county is considering raising them again to pay for rising fuel costs. Our electricity has always been inexpensive, but we just received a notice that rates are rising of course due to energy costs. Our property taxes are reasonable, but of course they are rising also. I am fortunate and only pay a portion of my health insurance costs and my employer pays the rest. I can definetly see health insurance costs being a major factor in retirement decisions, especially any early retirement.

[pickapeppa]

I don't plan on being able to retire. My feeling is that future taxes will have to be sky high to pay back bushes war and other spending sprees that it won't be possible to retire, even if I have ss payments and 401K and savings bonds. We save for it, but don't plan on being able to take it. We will need our savings and retirement money to supplement our incomes later. Who knows, maybe we will get lucky and have a couple of good earning decades to come, but I don't see it happening. The way I calculated it we will need $2,000,000 to afford our current lifestyle in the future (which is pretty minimal, but comfortable ie. heat, food, cheap entertainment, bare bones travel every 3 or 4 years).

A financial planner we spoke with a few years back told us the best investment we can make is to double our disability insurance. He said that 1 of every 2 people can plan on being disabled by the age of 70. He also told us we need to put another $800 a month into retirement savings, which just isn't possible.

We plan on paying property taxes that equal our current mortgage payment. Property values are rising quickly here, and the sprawl is coming in. Already our property taxes are 50% of what our mortgage payment is (mortgage payment + 50% of mortgage payment). I expect them to triple or more in the next 20 to 30 years.

[Qwispea]

There are no guarantees. Social Security was never intended to be a sole source of income...and pension plans can and do go bankrupt.
Savings accounts earn only a token of interest income...and can make a person ineligible for other gov't programs.
401k accounts almost always lose money when the stock market falters..and none of the cash in 401k is guaranteed. A person can lose it all.

Another thing that is not guaranteed is the current form of american government. With all the personal debt held by a sizable percentage of this country's population...it seems a lot of people are on the verge of bankruptcy. It won't take many more disasters and/or wars to bankrupt this entire country. If/When the country goes bankrupt...then there goes the entire stock market....and along with it...all the 401K's, Roth IRA's, gov't and private pension plans, and perhaps even the personal property that private citizens supposedly own.

So..looking at the big picture...I would suppose that the more important question would be "What will you do when your money has no value"?

[Beeman]

Originally Posted by pickapeppa

I don't plan on being able to retire. My feeling is that future taxes will have to be sky high to pay back bushes war and other spending sprees that it won't be possible to retire, even if I have ss payments and 401K and savings bonds. We save for it, but don't plan on being able to take it. We will need our savings and retirement money to supplement our incomes later. Who knows, maybe we will get lucky and have a couple of good earning decades to come, but I don't see it happening. The way I calculated it we will need $2,000,000 to afford our current lifestyle in the future (which is pretty minimal, but comfortable ie. heat, food, cheap entertainment, bare bones travel every 3 or 4 years).

A financial planner we spoke with a few years back told us the best investment we can make is to double our disability insurance. He said that 1 of every 2 people can plan on being disabled by the age of 70. He also told us we need to put another $800 a month into retirement savings, which just isn't possible.

We plan on paying property taxes that equal our current mortgage payment. Property values are rising quickly here, and the sprawl is coming in. Already our property taxes are 50% of what our mortgage payment is (mortgage payment + 50% of mortgage payment). I expect them to triple or more in the next 20 to 30 years.

How much did your calculations show 2 million earning to provide income? I would think that amount would provide enough to protect the principle indefinetly.
Your example of property taxes is exactly what I was referring to. With states, counties and cities faced with rising budgets they are obviously going to keep raising taxes.


Edcopp said:
"Now if one were to move to the homestead at the age of 40 or so and attempt self sufficiency, it is likely that no money would be set aside for retirement. It is also likely that there would be years when no money would have been made, so no payments would go int social security. It is also likely that from time to time that the homesteader would need to work away from the homestead. In this case the jobs available would be meanial and of the low pay variety. A little might be paid into S.S. but probably nothing else for retirement."

"In this case the homesteader would likely learn to live a thrifty life. When age 62 comes he would no doubt apply for S.S and just look at that money as a raise. He will enjoy little in the way of cash, but he will have had 20+ years experience of doing that on his own homestead. So a good plan would be to do the very best to keep doing that for another 40 years or so."

In this case thrifty life or not 20 years of experience or not the homesteader might have no homestead to stead on. Everything wears out and needs replacement or repair including the homesteader. Again we come back to the thrift question, there is only so much thrift possible much the same as there is only so much money that menial jobs can generate.