How much does one need to retire peacefully?

[Mari333]

saving wise, whats a good amount for retirement to be saved, if one lives a frugal and simple lifestyle? Just a rough estimate from some of the financial whiz kids on DU?

[tk2kewl]

1. figure you need the annunal amount

you make today times how many years you expect to live.

[Mari333]

5. geez! thats a lot of money.....sigh

just added it up.

[Yupster]

17. that would assume

she gets no sodcial security or pension, and her savings make no interest. Things shouldn't be that bad.

If you want $ 20,000 per year, start by deducting your social security and pension -- say $ 14,000 per year.

That means you need to make up $ 6,000 per year from your savings. Put $ 125,000 in bonds paying 5 % and you get a little over $ 6,000 per year interest.

That doesn't account for inflation though.

You should probably have another $ 100,000 in some investments that have a little growth potential so you can buy another $ 5000 bond every now and then to increase your income as inflation goes up.

Of course we are all just making rough estimates.

You should go see a professional in person.

[judge_smales]

2. .

Depends.

How old will you be?

Will you have health insurance to pay for?

Housing? Own, own w/ mortgage, rent?

[Mari333]

3. no mortgage, house paid for, 350 dollars a month health insurance

single woman, getting SS benefits by age 60...living very frugally. Add to that the genetics of a family of women who live into their late 80s.

[amazona]

20. insurance won't stay at $350 a month

Don't retire until you can get on medicare because private health insurance keeps spiraling up. I don't know how old you are or what state you are in, but in my area, a woman over 45 or 50 is going to find it just about impossible to buy private health insurance that actually covers anything.

[ashling]

4. I assume that by "peacefully"

you mean without having to rob banks, comitt armed robbery, etc.?

[Mari333]

7. lol....ya that kind of peacefully

oh well Im 53, if I live to be 83 and I only make about 20,000 a yr now I would have to save 600,000 to survive for the next 30 years.
Calling Dr Kevorkian! j/k

[Julien Sorel]

6. There is no magic number.

What kind of lifestyle do you want? Do you want to travel? Do you have children or parents to take care of? How much of a safety net do you feel comfortable with -- that is, after you've calculated how much money you need to live on, how much extra do you want to put aside, "just in case?" How marketable are your job skills should you want or need to go back to work? The more confident you are about being to sell yourself in the job market if necessary, the less you would need to put aside.

You will need money for housing, transportation, food, insurance -- especially health insurance, which becomes ludicrously expensive after about 40 years old, entertainment, and emergencies.


As an aside, almost everyone I know who retired early ended up getting bored and going back to work in one way or another. Apparently retirement isn't everything it's cracked up to be. I also know several people who retired at about 40 years old a few years ago with several million dollars put away, who ended up blowing it all day trading in the stock market. I think they simply got bored sitting around all day, and found the thrills of the stock market a good way to spend their time. It turned out to be quite expensive.

[elehhhhna]

8. your expenses should go down--commuting, etc.--

and don't forget a reverse-mortgage if push come to shove...

[Julien Sorel]

9. Expenses often go up.

All that extra time to fill.

It depends on the person, and how they spend their leisure time.

[Mari333]

11. well, I paint and read. and walk.

and garden. So I dont do anything that requires spending money. My house is paid off and Im selling it in the spring. and selling all my land I own seperately. Investing in conservative funds. I buy all my groceries at bargain basement prices. Never go out to eat. Buy only second hand clothes. My only bills are electric, gas, and food, and health insurance. I wont be paying for my kids, or my parents in any way. Just me, taking care of me.
I already paid my car off. I dont actually owe anyone anything.

[Julien Sorel]

14. It's unlikely you will keep the same car for the rest of your days.

It's stuff like that that can trip you up.

If I were you, I would go visit a fee-based financial planner. For X amount of dollars (it varies with the planner and the complexity of your needs), they will sit down with you, go over your finances, discuss options, and point out possible pitfalls. It isn't anything that should be done online with relative strangers. Generally it will cost about $400 or so, which is easily worth it when you consider it's literally the rest of your life you are planning out.

Stay away from the ones who will charge you a percentage of your portfolio, or who make recommendations to buy things they might have a financial interest in, as they are often times less interested in you than they are in making commissions from you.

If you want general advice, for example, if you see a planner and want to talk about his or her recommendations, I'll be happy to do it, but I'm not risking my licenses and so on by doing anything specific. :-)

[DemWitch]

10. Mari...

there are several good retirement projection programs at investment sites like Schwab, Janus, etc. They ask you for your income now, how long before you retire, how long you plan to live, assests, etc. Pretty accurate.

I'm only budgeted to 72. If I live after that I'll be one of those old homeless guys pushing a cart around and eating cat food from the dollar store.

Also, if your under 42, remember that Social Security doesn't kickin until 67, 65 early pay. I'm budgeted to not even count SS. I retire at 55 with full government benefits, so fo at least 12 years I hav to make it off my own savings, investments and pension. At 67, if I live that long it'll be a bonus... but I'm not planning on getting a penny from SS... either I'll be dead or the governemtn will have fucked it up so bad you wont be able to draw until your 80

[Massacure]

12. Well if you have a half million dollars stashed away

I suppose you could put them in CDs. A 5 year CD is 3.8% right now.

If you put $100,000 in a CD per year, then at the end you would make $20,500. Of course you do $100,000 for fives years, and then you get $20,500 per year provided the rate stays at 3.8%. If it goes up you earn better. I doubt it will be going down with the huge deficit the U.S. has currently.

Anyways, that's just the two cents of a 17 year old kid. Don't blame me if you take my advice and something goes wrong. :P

[alwynsw]

13. A simple formula is not always simple. Here's a thought.

You can get an estimate from SS on what your benefits will be. Subtract that from what you're currently earning to find what income you'll need. Remember that work-related travel, meals, clothing won't be in play, so those costs should decrease somewhat.

X salary times Y years is not correct. The question is what amount do you need to have invested to return the difference between SS benefits and current salary (with inflation adjustments figured in) in interest or dividends. If the difference is $10,000 per year, you'll need around $250,000.00 invested to be relatively safe with your money in mutuals funds and bonds - preferably A rated bonds if you choose to use them. CD's and such are a losing money proposition. The return rates are generally lower than the inflation rate which means you lose money. 5% to 15% returns are not uncommon in the mutual fund and bond markets. There wil be thin years in any investment portfolio. That's why you need a little extra in the base account.

As you likely do now, save extra funds after you retire. There will always be a rainy day. The washer will break, you'll need a refrigerator or car.

You can do it with less money than you might think. I strongly recommend that you meet with a qualified investment counselor and work out a plan.

[murray hill farm]

15. I am retired..and it still scares me a little when i hear

the projections of what i would need to retire..ha! Even though i live on very little..and am doing OK. My retirement and social security, which is a pension and soc. sec. equals about $1700 a month. When i retired..3 yrs ago..i sold my house in Florida and paid cash for a little house where i live in Mexico...from the profits of the house sale. I also bought a 10 year old truck..for the move expect that will last for another 8 to 10 years..i don't really need it where i live. i thing that the main thing is not how much money you have, but how you live..and i live a simple life..have never been bored..ha..with retirement..and mainly wonder how i ever managed to live a full life while working. If you can work out a way to not have payments on a house or vehicle..or other monthly payments, then you can retire on very little. now, if soc security goes...then that is a different story. my feeling is that if that happens, i would sell my house here..move back to the usa..and live as long as possible from the profits of that sale.

[DemExpat]

18. Wondering....why would you move back to the USA then?

Thanks,

:hi:

DemEx

[amazona]

21. have to live in USA to get Medicare

After a certain age, you have to live in the U.S. to get Medicare, so you will have to live here if you want the coverage you have paid in for.

Younger retirees below age 65 can live where they like and private health plans can be significantly less expensive in other countries. Indeed, at one point, it looked like I would be forced to leave the USA because I'm at that awkward age -- too old to get private health insurance, too young for Medicare.

[DemExpat]

23. Ok then....thanks.

:hi:

DemEx

[murray hill farm]

24. have planned for that too

recently bought a little house in Brunswick, Ga. very little, a fixer upper..bought it for $24,000. This house is for any visits i make to the USA..my children and grandchildren live there..and also for the point when , because of age..and the medical needs that go with it, i will need to leave my home here and move back to the usa. I have learned, living in Mexico..that one does not really need all that much in the way of "things" to live well and be happy..it is one of the counter culture shocks that one experiences when returning to the usa...that hectic scramble to maintain the life that requires lots of things..material things..to maintain the feeling that one is OK and safe. My little house in Georgia has wonderful soil and room for a large garden..it will allow me to not "need" a car to be OK..get to stores, etc. I believe that the learning to develop that perspective..that other way of looking at what one really needs is the real key to surviving the coming years not only for retired folks, but for everyone. Survival, happiness, peace in ones life is really not dependent on the many material things..that we have been brainwashed all of our lives to think we need that, for the most part, do not enrich our lives, but steal from them.

[OneTwentyoNine]

16. Depends on how many years of Repuke rule until you retire....

Your heating bill might be $1,000 a month by the time you retire,gas ohhh about $5.00 per gallon. With these fuckers in office and more in the future there's no telling what you'd need.

[MISSDem]

19. There are planners all over the place

like at vanguard.com. These can tell you pretty close what you need to do. Or at moneymagazine.com

[amazona]

22. they'll tell you retirees need $2-4 million dollars

The financial planning industry has a vested interest in convincing people to set aside huge sums of money that are, in practice, pretty un-obtainable for most of us. You'll give up your whole life and die in your tracks still working if you are trying to get $3 million together on most of the salaries I see here in Louisiana!

Vanguard and Money Magazine are selling products. I do read what they have to say, but in the end, I have to question the very high figures they come up with for a normal person's retirement needs. If these figures are for real, most people can never retire. $1 million is more than my dad earned in his entire career, and he's having a successful retirement with travel, etc.

[MISSDem]

25. That's not true. I did my own and I don't have 2 million

saved but I'll be ok if I ever decide to retire, which I have no plans to do for a long time. Who wants to be at home every day? re

[amazona]

26. well they told me something quite different

For what it is worth (perhaps not much)...We had this discussion on a finance board, and IIRC everyone who participated came in around $2 to 4 million needed to retire to cover their expenses, and some felt that this sum was too low -- but those who felt that way were very highly compensated so $6 or 8 million seemed more trivial than to the rest of us.

I argued that the requirement to have $2 million invested to retire was ridiculous, but the majority felt that it was indeed necessary to have $3-4 million invested, and a great many of the participants in the discussion were long-time Vanguard investors. You might be surprised at how often you see this figure tossed around by financial advisors.


Who wants to be at home every day?

The second part of your question is, a great many of us do feel that we can use our own time more wisely than a boss or supervisor can. I don't have any problem whatsoever being at home every day, especially since being at home really means I have the freedom to go and do what I want. I did have BIG PROBLEMS having my time -- the stuff of life itself -- bought and paid for by someone else. Not everyone needs or wants structured time, especially when the structure comes from someone else.

Retirement may not be desired by everyone, but it is very, very important to those of us who do desire it.