For those that must save for their own, how much money will you need for retirement?
 

Obvious typo I should have caught, the one entry should be 150k-200k. Last choice should be 500k+

This poll is for the people that must totally save for their own retirement with a 401k,IRA or whatever they will use. People like my wife and myself that will only have what we save and the possibility of Social Security. We're not talking net worth I mean actual dollars in savings.

I'm shooting for 250k and if, there's always the big if, I can stay healthy and the investments continue to grow I should surpass my goal.

Beeman, you can't live off the income produced by $250,000 in savings or income producing funds.

Rose

Realistically I will need a minimum of $500K. I will get a small pension from a company I worked at for 21 years, and I am not betting on Social Insecurity to be there 20 years from now.
My only real hope is the Lottery.

galump

My form of retirement doesn't mean I plan on stopping making money if I'm able.

We can live on 12-15k right now and that would be the interest at 5% on 250k.

Make sure your savings grow faster than the rate of inflation.

Even with a savings account of $500k and substantial real estate holdings

cannot one major illness costs the equivalent of the savings and wipe it all out?

savings
 

Beeman,
I think you got it right with the $250,000. Especially if you will also get some social security.
I just applied for social security and Medicare. With Medicare, including Part B which currently costs $93 a month, plus maybe another $150 (or more) for a supplemental insurance, you will be mostly covered for health insurance. I have a friend that has had surgery for prostate cancer, triple by-pass and removal of kidney with chemo. With an AARP supplemental he had to pay very little out of pocket.
Then I think if you can now live on $12-15,000 you should be able to live on that after retirement, assuming you don't need to hire out a lot of extra help to maintain your home, driving, etc.
What will you be expecting from social security when you are eligible. I found, and then after signing up for it, that their estimates that they send each year are a little UNDER stated.
I now know what I should be getting, as they can figure it out on the computer quickly. With that figure, you should be able to determine what the minimum is in personal savings (IRA, CDs, 401ks, etc.) you will need to meet your needs.
The major stumbling blocks over which you have NO control are inflation and politics. If inflation is equal to or more than the inflation rate, you can discount what you can expect to make from your savings. Also, politics could affect what social security will change in future years. A big third factor is what the interest rate will be. Now you can easily get 5% in CDs for long term ones which would make you about $12,500 a year on the $250,000. But, suppose the interest rate goes down to 2 or 3 percent. You are then looking at less money to work with.
Don't forget that if you have $250,000 lump sum in savings, and can live for say 15 years past retirement on its interest and social security, you should be 80 by then (assuming you retire at 65). At that point or anyway along the line, you have the option of taking some of the $250,000 to use to live on, with the knowledge that each time you dip into it that you will decrease the interest earned for subsequent years.
Another option is to retire with social security and work part time so that the social security and the work money maintain you while the $250,000 continues to increase by putting the interest back into savings, rather than using it to live on. They will greatly increase your dollar figure when you finally need to use it.
My idea (remember I just applied on Friday) is to know all the options, do what you think is best, then not fret about it.
I had thought that when I collected social security I'd stop my part time job which I am getting to dislike, but have decided that for my own personal sense of security, I'll continue with it so that I can live on the social security and the part time gig, while my savings continue to grow. I have no pension at all.
Good luck and please keep us informed of your thought processes as I think it helps everyone.
Ann

Our house will be paid of by the time I retire and we can live on 15K or less. At the rate I'm contributing to my retirement plan and with it making a conservative interest of 6%, I'll have right at 500K in it. Average interest rate earned by my retirement was 20%.

Bob

According to our 401K stats we should be able to use $350.00 a month per each 100K without touching your original nest egg!Thats at an 8% average growth rate.Fortunately I made about a 100K two years in a row for a 79% and this year 49% increase.
Lord willing and the creeks don't rise retirement to the homestead will be in three years when I'm sixtyfour :dance: .
Chas

Dont worry we have such a good robust economy and the govt is doing such a great job, when you retire, you can probably get a job at McD and earn $200,000 a week. Course a BigMac will cost you $3000.

It depends on alot of different things, like how good your health is, what you pay for property taxes, how old you are when you retire, if you need to pay for health insurance, and the list goes on and on. The situation is different for everyone and therfore the amount of money it takes is also different.

If you have a million in the bank in a traditional IRA @ 5% interest and try to live on that, first you pay fed tax, then quarterly state tax, on the monthly payments.

If you had the same million in a regular savings account it's worth more because taxes have already been payed on the balance.

It makes a huge difference where the savings is. Does that make any sense to anyone?

You can see gross income on your check and then the net income after uncle sam gets his share. Remember that any defered accounts are subject to income taxes when withdrawn, just be aware of that.

Anniew, what you say could be true if one was to assume zero inflation rate.

We're shooting for a half mil between the two of us. Currently, I should have 280 grand if I stay in until I'm 60. It will be quite a bit more if I stay in until 65, but almost no one in my family lives much longer than that. As morbid as it sounds, I'd like to have a year or two off before I kick the bucket! If I live to be 80, it'll be a great bonus...and I should have enough to last me that long!

The way I have seen it figured is to take the amount you will need to live and multiply by ten, more would be better but that is the minimum. The money can be invested and should provide tha amount you need plus a little extra.
If you can live on $25,000 you will need $250,000 in savings. If it takes $50,000 for you to live you will need $500,000.
It will all depend on how much it takes for you to live on for a year.

Pancho - You are planning on a 10% return on your money? Tell me where I can "safely" get that kind of return. Your burn rate on your primary money will be fast, and in less than 8 years, someone will be filling out job applications.
Trust me....we've done the math. $250,000 will only provide $10,000 per year without dipping into the savings.

If you want to have $40k a year reliably without eating into the very savings that is generating that money, you will need $1 million dollars. This is called the 4% rule and it has proven out over time to be accurate.

Dianne

DH is a tremendous saver, and thanks to him, we will retire next year with just under 1.5 mill.(at least that's the plan) Our only real concern is health insurance. Inflation is currently running +/- 3%. (That means that what costs you $100 today, will cost about $135 in ten years.) (Today's $20,000 car will be $27,000 in ten years.) How long will retirement last? How long will your car last?
Healthcare inflation is currently running 7.5%/year and that inflation is what's currently driving the high cost of health insurance premiums with no end in sight. So...today's $500 per month insurance premium is going to cost $1030/month in ten years. (The value doubling rule says that 7% return will double your money in ten years - same principal here) At 7% inflation, the cost will double in ten years. Again...no end in sight.
Not trying to rain on anyone's retirement party, but these are the facts, and you are all great folks - please keep these issues in mind before making a life changing decision like leaving a good job. That's what DH and I are anguishing about now, because we don't want to live where we are....we have an "evolving homestead" back home and are anxious to start building our retirement home on our 4 acres of heaven. I can taste the fresh tomato's and hear the rooster crowing now ! <sigh>

Don't mean to rant - Thanks for listening
Dianne

Explorer,
I think I mentioned inflation three times in my post...so I didn't forget it. Ann

15% to 20% return on a safe investment
 

You must only believe in saving your money, not investing it. All investments have "some" amount of risk associated with it but a savings account has even greater risk. Or another way to put it is to say, garenteed risk. That is because of inflation. If you are earning 2% on a savings account and inflation is 3%, you are losing money. A decent mutal fund will generate 10% returns. Loaning money as a hard money lender to private real estate investors will get you more like 15 to 20% return on your money and it is backed with hard collateral that you only lent 70% of the value on. That is a safe investment. There, now you know. :-)

It would depend on if I still have a wife and kids at home! Very little if it is just me, a whole lot if with the wife and kids.

Yes, we save. The 4% rule is a solid rule because it allows for both up and down years in the market with a degree of safety. Plus, how much risk do you want to take with your life savings when you are 65 ? That's when you begin shifting back to bonds and bond funds, to minimize risk, BUT, risk is ALWAYS exchanged for performance.
What I didn't go into detail about is that we ARE invested in the market...we have a nice mix of mutual funds, and stocks along with a few bonds, and money market funds which, as a whole performed in the range of 14% last year. BUT...you cannot depend on a stock fund performing at 10 - 15% year after year, and if you are going to bank on 15% to 20%, then eventually, you have a shock coming.
Over the past 50 years, stocks have performed in the 9% to 11% range, but remember,...that includes 18% return years, AND years with 15% losses as well.

but....on average....the 10% average returns has been falling in recent years. Forcasters estimate that future returns are going to be more in the range of 6% to 8% - in part, this is due to market control by huge mutual funds, and the ability of computers to predict individual stock direction. Check out vectorvest.com for example. I use them, and find them to be very accurate....over time.
Mutual funds which primarily invest in different stocks typically do bring 6% to 9% "OVER TIME". What if you retired with $500k, and the next few years, the market had several "down" years in a row? This has happened a number of times,(2001 - 2002 for example) and is the single biggest risk you have invested in the stock market, because two down years in a row could easily turn your $500k into $300k. NOW...how long does it take to get back where you were? At 10% return, it can take 6 years JUST to get back to where you were 8 years earlier. Actually, it will take longer because you are having to withdraw a living "salary" from a reduced portfolio.

SO...give me a break on 15% to 20% returns....just is not gonna happen every year, and no one is that good at fund selection, or market timing.

Sorry for going on, but this is important stuff, and it's what I do.

Also, for you to recomend REIT's at this time is reckless. Hard assets also go up and down in value. Ask someone in California that bought a house for 500k last year, and now it's worth 425K when they owe 475K. Ask me about the number of folks that are upside down, and the number of folks who will be defaulting on their mortgage in the next year or so, because they bought way more house than they could afford. They borrow this money from subprime lenders which is where reits invest for that huge return you refer to. Primarily, the east and west coasts have many people in that predicament. What happens to that reit value when they default? Your 20% returns just might drop like a rock along with your principle value. As soon as a reit cuts it's dividend, then their stock value will drop proportionately. Better take a look at a recent copy of the wall street journal, or just do a search about reits on yahoo finance.
Something to think about.

Have a blessed day.

Dianne

Think real estate - 3-4 houses paid for [or pretty much paid for] by the time you are retiring - plus the one you live in paid in full - can generate enough rental income to comfortably live off and have extra let over for repairs and maintenance - however this is also subject to where you live and how much r.e. goes in your area for.

Rental management can be a pain in the you know what if you do not know what you are doing, but is in my opinion a safer longterm investment than stocks, bonds and goverment backed/funded retirement funds - ppls will always need a place to live at and there will always be tenants. Again - location is the key here.

Add to this appreciation and rising costs of living - when you are too old or do no longer want to manage them yourself, sell and invest or live of the income.

Thats assuming zero inflation and you don't need to pay capital gains taxes. While gov't statistics state that inflation is near 2.5% per year, inflation for retirees is much higher. This is because the gov't figures are based upon everything to jet airliners and computers. For retirees, the majority of thier purchases consist of food, energy, and medical services, all of which have had near double digit inflation over the past several years. So if your getting 5% on your money, but the inflation on goods and services you are consuming is rising 7%, your losing ground.

Thats assuming you can find work. Lots of business are reluctant to higher folks near or past retirement age since the benefit obligations are significantly hire, and they are concerned that older folks make work just a few years and quit. Or they stereotype them as not being capable of doing the job. In any case, older folks near or past retirement can run into difficultly finding employment.

FWIW: Your best option long term may be to become self-employeed so that you can't be fired or laid off. Plus you don't have deal with a crazy boss!
If you own your own business, you're more likely to retain your job, post retirement years. Although I recommend avoiding high risk businesses or business that are highly dependant on discressionary income, such as resturants, selling durable goods (retail store), etc. If you can I would avoid any business that requires a substantial capital investment, don't blow your retirement savings on a business that might fail, which will leave in worst shape than you started.

"Q: How to do make a a small fortune?
A: Start off with a large one!"

We figured we need/want $1 million back when we got married. Now we're facing college for two guess Imay not be able to retire on schedule. And we probably need $1.5 million.

Good luck everyone!
 

Dianne, Thanks for bringing your thoughts into this discussion. I was not suggesting that someone invest in a stock that lends money for mortgages. I said that they could become a hard money lender. For those that might not know, a hard money lender will lend up to 70% of the value of a property on a short term loan. It seldom is ever more than 12 months at a time. A loan like this is typically made to an investor who is needing to finance the total cost of buying and fixing up a house. Often a hardmoney lender will get points and 15% to 20% interest. If the investor cannot pay then the lender owns it.
Now, lets say it was a home valued at $500K. As a hard money lender, you would only lend up to $350K. If the investor defaults, you only have $350K in a house that is worth $500K. At which point you can sell it for anything above $350K and still come out ahead. This is not something that I just dreamed up. This is happening in every state of the union every day of the week. Weekends included. :-) I understand that people are more likely to be cautious with their money as they age but I think it is a mistake to get too cautious.
A lot of people are not aware of the private money lending market that is out there so I was trying to share something that I have been exposed to.
Good luck everyone!

Wow. I guess I am not living right or something. I have no clue how I would retire on 500K. I am figuring I would need at least 2+ million. I can not count on social security nor a pension. If I get any of that it will be a bonus...

Plus health care will be out of sight when I retire. It only takes one good sickness to wipe out savings. Right before my grandfather died he blew through 60K in just a couple of months on health care.

I'm still rubbing my eyes. . . Is this the same HT board that I know and love, or is just an especially affluent segment of its membership responding? No offense to anyone, but are the regular folk who generally frequent this board actually expecting to accumlate half a million bucks to be able to live a good and reasonably self-sufficient life? I don't know of too many homesteaders who have any chance of generating that kind of income, and none who would be willing to make the trade-offs necessary to do so.

Good question, though. I'm just wondering how the regulars here would weigh in on this question.

life expectancy:
most of the time they talk about "average life expectancy". if you plan for being retired the number of years up to the 'average', that means you have a 50% chance of living longer than that.

today, if you're 69, the average life expectancy puts you up to about age 75 or 80. however, there's a 5% chance of living to almost age 90. and about a 1% chance of living to about age 95. (i can't remember the numbers exactly, as i calculated them quite some time ago.)

so, if you retired today at age 69, and only wanted a 1% chance of running out of money before dying, you'd need to plan for retirement expenses for 95-69= 26 years. if you want only a 5% chance of outliving your money, you'd need to plan for 90-69=21 years of retirement.

of course, you can buy an annuity, that pays until you die. i have not investigated those much, but my understanding is they're fairly expensive, after all the annuity company has to take their profits too.

but my overall point is, i think most people are underestimating how long they may live after retiring.

investment returns:
i won't say a whole lot, except that there was a roaring bull market 1982-2000, that is unlikely to be repeated over the next 20 years. based on current stock prices, it's very unlikely stock market returns will be over about 5%/year over the next decade. one good source for this view is the commentary of John Hussman, of hussman funds. (hussman funds )

in short, i'm in my mid 40's, have low expenses, and decent savings. but i still think i'll need well over 500k to retire, based on inflation (probably higher in the future), taxes (probably higher in the future), stock returns (probably lower in the future), social security (probably non-existant or pure welfare by the time i retire), etc.

--sgl

Taking risk with money is only necessary during the accumulation fhase of the process. Once you have enough that you can safely withdraw 4% annually and never run out of funds, then the need to take the added risk of the stock market is not necessary.

While it is by far the fastest way to make money, it is also the fastest way to lose money. One learns by experience and I've been on both ends of the spectrum.

While intrest rate risk exists, that risk is not nearly as severe as losing your nest egg.

I assure you once you retire and cannot replace losses by simply contributing additional money, your tolerance for risk changes.

In regards to the inflation of health insurance, it goes up between 17% to 30% per year, I've been retired for 5 years and that's how much it has gone
up.If you have your own health insurance 90% increase in the last 3 years is common.

I've done buisness with many financial advisors and can tell you that nobody will look out for your money better than you will.

Make your own decisions after you have enough education to make good choices you can live with, there is no such thing as a perfect plan. :)

Mutual funds usually average around 15%, or at least the good ones. I figure the remaining 5% is for inflation and taxes. Never touch the principal, live off the interest and returns.

Find me an open mutual fund that has had 15% annulized returns over 10 years--feel free to pick any ten year period.

S&P generates around 9% over time (in all but 1 20 year period); few fund managers beat the S&P yearly.

Stock markets can fluctuate greatly year by year; I wouldn't want to be anywhere around stocks at retirment age. Ask those who retired in 1999-2000. At that age, you should be in bonds (4-8% depending on T-Bills or Junk)

I can only speak for myself, but we aren't particularly affluent! We have consulted financial planners several times. They have charts that project how much you will need to retire if you want to make "X" amount each year. $250,000-500,000 will still mean frugal living when taking into account life span and inflation. Also, unless my son is willing to care for us completely, I can't imagine being physically strong enough to have a high degree of self-sufficiency in the golden years. I'm guessing that most of us are making those projections based on investments in retirement funds rather than actual dollar contributions. I sure wish we didn't have to think about retirement now!

We are not affluent but if one certain party gets hold of this country you are going to need every penny to live. Taxes will hit the roof, everything will be outrageous. Hubby is looking at over a million the way he stands now and I know I will have to get jobs.

500k, 1million, out of my ballpark, i'm just going to stick with woodsmoke, my hands in the dirt, the cellar an mother earth news

Ah!, here we go! a man or woman? after my own heart!.

I'm with Amelia....what happened to all the people who say they live paycheck to paycheck. Stretch meals with beans and pick up road kill to eat (that one was a little disgusting). How can you people come up with $1M? I have a boss who has no children, is a penny pincher and the most he'll come up with is $750K. I'll be lucky to break $400K since the crash of 9/11. Wow, this just blows my mind.

because it is as Amelia aluded to in her post . this is not a true picture of the majority of the people on HT. this is just my take on it of course, based on my reading here for some time. let's hear from some of you! Georgia.

I dont know what im going to do when I am unable to work. Im 37. I dont make enough to put any retirement away. I am trying to buy a tool rental business, and combine it with my current sharpening, and tool repair bunsiness. THen I might be able to put some money away. I hope to have my house paid off by the time Im 60. I hope to be able to live on $10-$15 per year by then. I plan on getting enough labor saving devices installed so I can make 500 gallons of maple syrup per year with little physical labor by the time im 50. I dont have a good retirement plan. I plan on working into my 70s, and 80s if im able.

I can't speak for everyone but our retirement assets aren't accessible for day to day expenses. So when I say "eek.. we're really in a crunch and can't afford" what that means is "our current income doesn't meet this expense." We do, however, have assets in a 401K and an IRA. And I suppose under very dire circumstances we could tap those assets.. but I don't even remember I have them when I'm trying to figure out how to pay for unexpected expenses like a blown car tire.

Also.. my guess is that those of us participating in this conversation are not in our 20s, but the vast majority of us are in our 50s. At 20 I couldn't imagine where I'd be at 50, and at 20 I had no clue what simply socking money away, even badly invested, year after year, decade after decade, would do. Eventually... it adds up. Not to the $1 mil mark, which is my comfortable "don't have to worry" mark, but it does add up.

The old joke is that a VT farmer won the million dollar lottery and the press shows up to see how he's celebrating. The find him out in the barn waging war with an old spreader and heaving cow waste by-product with a fork.

"Well old man.. what ya gonna do now that you're rich?" they ask him.

He thinks on it.. throws a few more forkfulls, and says...

"Guess I'll just keep farmin' till it's all gone..."

And that's how I feel about what we do. I do not think "homesteading" is, when the pen meets the paper and the age hits 65, a particularly "inexpensive" retirement. Sheep cost money to maintain. Trucks cost money to maintain. Tractors cost.. well, you get the idea. Even the garden which is supposed to be "saving money" in groceries really doesn't. When tinned tomatoes hit ten cents for a 32 oz can.. heck.. I don't think I can buy jar seals for that price. The food may be a more environmentally sound way of making a tomato happen, it may taste better... it isn't cheaper.

But it is what we like to do. And to keep on doing it I assume we'll need a pretty hefty bank account when we retire or we will find ourselves having to sell out and live a lifestyle which is much more restrictive... and probably in the kind of community we really don't want to be living in.

Anyhow, for anyone reading this thread and thinking "YIKES!" remember you can't see the age of the poster, and you can't see where the assets are. Assets which can't be accessed aren't all that helpful in the day to day grind.

I think part of the "homesteading mindset" is planning sensibly for the future, and it scares me when I see someone say, "Haven't thought about it, don't plan to." I too plan to be working well past the typical retirement age, but you never know whether that will be possible for you (health factors, competition from younger workers, etc.).

I'd say that $1 million for the two of us is a reasonable goal, and DH will get a pension as well. Part of how we hope to get there will involve, obviously, working off-farm (and I think the majority of folks here have at least one person who does), part will involve thrift and living below our means during our working years, part will involve (I hope) good long-term investing, and part will involve continuing to work and earn for as long as we can. I don't have a clue what the cost of living will look like in 40 years (I'm 38) and I have no wish to end up without the means to support myself. I don't really see how an unwillingness to plan for this squares with a "self-sufficient" mindset.

Please don't misunderstand me-- I'm not at all implying that planning for retirement is inconsistent with a self-sufficient mindset. What's so startling to me is that for many years I've been reading post after post from people who are struggling to make every dollar count, many of whom have difficulty with the basics such as buying groceries and paying for medical care and who nonetheless have the will and perseverence to make it all work out. I've actually considered myself an anomaly (and a bit of a chicken) for having deferred the kind of lifestyle I want in the interest of staying in the ratrace a little longer and saving up a little more. In fact, I felt a little ahead of the game in view of the fact that so many on the HT board were boldly facing the future with much less certainty than I have. . .

Yet I'm not even in the ballpark of the numbers that are being tossed around here. Made me a little depressed, and caused me to wonder whether I've misgauged everything.