How much do I need to retire?

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Topic Author
Twiggsapproved
Posts: 20
Joined: Sun Jan 06, 2019 1:58 pm

How much do I need to retire?

Post by Twiggsapproved »

Let’s take this in reverse if I may do so.

We are 54/52 with one 12 year old.

We are fine with a 529 to meet the child’s needs in 5-6 years.

We want to spend 140k annually in retirement and that includes taxes and housing (paid off)

Assume a 40 year lifespan from here and ss at 62 being $15000 annually and the other at 70 being $35000 annually?

What would be the number needed to retire as to total assets?

We currently have 4.2m outside our home and 529.

Thanks for your input!
Boglelicious123
Posts: 116
Joined: Tue Jun 11, 2019 9:50 pm

Re: How much do I need to retire?

Post by Boglelicious123 »

I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
sailaway
Posts: 8215
Joined: Fri May 12, 2017 1:11 pm

Re: How much do I need to retire?

Post by sailaway »

Well, you already have 25x++ outside of SS, so the rest just depends on your comfort level.

As for spending that much, it doesn't take that much imagination!
Topic Author
Twiggsapproved
Posts: 20
Joined: Sun Jan 06, 2019 1:58 pm

Re: How much do I need to retire?

Post by Twiggsapproved »

Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: How much do I need to retire?

Post by KlangFool »

Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm
Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
Twiggsapproved,

1) Is that with or without a mortgage?

2) How much is your mortgage payment now?

3) Why you cannot retire now?

4) Your numbers do not make any sense for me.

A) If your current annual expense is really at this level, there is no reason why you cannot retire now?

B) If your current annual expense is much higher, why would you think you would spend a lot less?

I might be wrong. But, there is something that does not add up with your numbers.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
JS-Elcano
Posts: 992
Joined: Wed Jun 10, 2020 7:29 pm

Re: How much do I need to retire?

Post by JS-Elcano »

Twiggsapproved wrote: Fri Oct 15, 2021 8:46 pm Let’s take this in reverse if I may do so.

We are 54/52 with one 12 year old.

We are fine with a 529 to meet the child’s needs in 5-6 years.

We want to spend 140k annually in retirement and that includes taxes and housing (paid off)

Assume a 40 year lifespan from here and ss at 62 being $15000 annually and the other at 70 being $35000 annually?

What would be the number needed to retire as to total assets?

We currently have 4.2m outside our home and 529.

Thanks for your input!
To come up with my number I would go with a 3% withdrawal since its for a 40 year retirement (instead of the 4% for 30 years), so 4.6 million. Knowing that SS will come in on top would just help to SWAN; I wouldn't waste my time coming up with a more elaborate calculation to include SS payments in 20 years especially since you are so close to that 4.6 million already :beer

EDIT: the 50k SS payment in 20 years may allow you to withdraw an extra 0.4% from your 4.2 million portfolio (60/40 AA, 40 years) if retiring now.
Last edited by JS-Elcano on Fri Oct 15, 2021 9:17 pm, edited 1 time in total.
Topic Author
Twiggsapproved
Posts: 20
Joined: Sun Jan 06, 2019 1:58 pm

Re: How much do I need to retire?

Post by Twiggsapproved »

KlangFool wrote: Fri Oct 15, 2021 9:02 pm
Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm
Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
Twiggsapproved,

1) Is that with or without a mortgage? Without

2) How much is your mortgage payment now?paid off

3) Why you cannot retire now? We are youngand scared we will run out of money

4) Your numbers do not make any sense for me. What doesn’t make sense?[b][/b]

A) If your current annual expense is really at this level, there is no reason why you cannot retire now?

B) If your current annual expense is much higher, why would you think you would spend a lot less?

I might be wrong. But, there is something that does not add up with your numbers.

KlangFool
Last edited by Twiggsapproved on Fri Oct 15, 2021 9:05 pm, edited 1 time in total.
Boglelicious123
Posts: 116
Joined: Tue Jun 11, 2019 9:50 pm

Re: How much do I need to retire?

Post by Boglelicious123 »

Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm
Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
Not out of bounds…I mean it’s your $$$ so spend it however you want! I don’t live in a HCOL area so my perspective on how far $140K would go is different than yours
Normchad
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Joined: Thu Mar 03, 2011 6:20 am

Re: How much do I need to retire?

Post by Normchad »

Boglelicious123 wrote: Fri Oct 15, 2021 9:05 pm
Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm
Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
Not out of bounds…I mean it’s your $$$ so spend it however you want! I don’t live in a HCOL area so my perspective on how far $140K would go is different than yours
I’m roughly budgeting $105K/year in retirement, so we are in the same ballpark.

By the 4% guideline, you’re good now. If it keeps compounding for a while, even better.

In your shoes, (actually in my shoes), I’m aiming for more like 3%. So something like 4.8M for you. Of course you won’t need that much from your portfolio once SS starts, so you’re probably just fine right now.
KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: How much do I need to retire?

Post by KlangFool »

Twiggsapproved wrote: Fri Oct 15, 2021 9:03 pm
KlangFool wrote: Fri Oct 15, 2021 9:02 pm
Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm
Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
Twiggsapproved,

1) Is that with or without a mortgage? Without

2) How much is your mortgage payment now?paid off

3) Why you cannot retire now? We are youngand scared we will run out of money

4) Your numbers do not make any sense for me. What doesn’t make sense?[b][/b]

A) If your current annual expense is really at this level, there is no reason why you cannot retire now?

B) If your current annual expense is much higher, why would you think you would spend a lot less?

I might be wrong. But, there is something that does not add up with your numbers.

KlangFool
Twiggsapproved,

Before you project/predict your retirement expense, you need to know and make sure that your current annual expense is accurate. If you start with a wrong baseline number, your projection/prediction would not be correct.

Please verify your number with this simple formula,

Gross income = current annual expense + current annual savings (tax-deferred and taxable) + taxes.

Verify your number with last year's tax filing and pay slips.

If you are retired, aka not working, why do you need to stay at a HCOL area?

KlangFool
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Jovby
Posts: 396
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Re: How much do I need to retire?

Post by Jovby »

Seams like you are close. 140k out of 4.2 mil is a 3.3% withdrawal rate. SS gives you a nice buffer.

Unfortunately SS is a long ways off, so that’s a lot of years for things to go south.

What’s your plan for healthcare? That’s a lot of pre-Medicare years.

I think you can definitely make it work nowish if you have some flexibility if things don’t go your way with the markets. Decreased spending, move to lcol, part time work, etc.

I would first get a better understanding of your expenses. Maybe even break it down to needs, wants, and nice to haves.

Then make a cash flow plan from now till age 70. Where exactly is your income coming from each year? How much do you have left when you reach 70, and is that sustainable?
Topic Author
Twiggsapproved
Posts: 20
Joined: Sun Jan 06, 2019 1:58 pm

Re: How much do I need to retire?

Post by Twiggsapproved »

KlangFool wrote: Fri Oct 15, 2021 9:16 pm
Twiggsapproved wrote: Fri Oct 15, 2021 9:03 pm
KlangFool wrote: Fri Oct 15, 2021 9:02 pm
Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm
Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
Twiggsapproved,

1) Is that with or without a mortgage? Without

2) How much is your mortgage payment now?paid off

3) Why you cannot retire now? We are youngand scared we will run out of money

4) Your numbers do not make any sense for me. What doesn’t make sense?[b][/b]

A) If your current annual expense is really at this level, there is no reason why you cannot retire now?

B) If your current annual expense is much higher, why would you think you would spend a lot less?

I might be wrong. But, there is something that does not add up with your numbers.

KlangFool
Twiggsapproved,

Before you project/predict your retirement expense, you need to know and make sure that your current annual expense is accurate. If you start with a wrong baseline number, your projection/prediction would not be correct.

Please verify your number with this simple formula,

Gross income = current annual expense + current annual savings (tax-deferred and taxable) + taxes.

Verify your number with last year's tax filing and pay slips.

If you are retired, aka not working, why do you need to stay at a HCOL area? Don’t want to leave school district until college years.

KlangFool
babystep
Posts: 775
Joined: Tue Apr 09, 2019 9:44 am

Re: How much do I need to retire?

Post by babystep »

Simple rule is 25 times the expenses or 30 times if more conservative. Simple math says 140k x 30 = 4.2M, so you are already there. This doesn't even include the SS, Home so you are doing great.

Please see SWR for more details.

When do you plan to retire?

Don't forget about the Roth conversions.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: How much do I need to retire?

Post by KlangFool »

Twiggsapproved wrote: Fri Oct 15, 2021 9:24 pm
KlangFool wrote: Fri Oct 15, 2021 9:16 pm
Twiggsapproved wrote: Fri Oct 15, 2021 9:03 pm
KlangFool wrote: Fri Oct 15, 2021 9:02 pm
Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm

Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
Twiggsapproved,

1) Is that with or without a mortgage? Without

2) How much is your mortgage payment now?paid off

3) Why you cannot retire now? We are youngand scared we will run out of money

4) Your numbers do not make any sense for me. What doesn’t make sense?[b][/b]

A) If your current annual expense is really at this level, there is no reason why you cannot retire now?

B) If your current annual expense is much higher, why would you think you would spend a lot less?

I might be wrong. But, there is something that does not add up with your numbers.

KlangFool
Twiggsapproved,

Before you project/predict your retirement expense, you need to know and make sure that your current annual expense is accurate. If you start with a wrong baseline number, your projection/prediction would not be correct.

Please verify your number with this simple formula,

Gross income = current annual expense + current annual savings (tax-deferred and taxable) + taxes.

Verify your number with last year's tax filing and pay slips.

If you are retired, aka not working, why do you need to stay at a HCOL area? Don’t want to leave school district until college years.

KlangFool
Twiggsapproved,

<< Don’t want to leave school district until college years.>>

Fine. You should verify your expense number. It does not make any sense to me for someone with a paid-off house. It should be a lot higher or lower.

You do not have to tell us your number. But, you should verify your numbers.

KlangFool
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22twain
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Re: How much do I need to retire?

Post by 22twain »

In Firecalc, I entered the following:

On the "Start Here" page:
Spending: 140000
Portfolio: 4200000
Years: 40

On the "Other Income/Spending" tab:
Your Social Security: 15000 starting in 2031
Spouse's Social Security: 35000 starting in 2039
(I'm sure the results would be the same the other way around)

I left the portfolio settings at their defaults.

The results have you after 40 years with about $2.8 million (in today's dollars after taking inflation into account) even in the worst case historical sequence of 40 years out of the past 150 years or so. The best outcome is over $62 million, and the average is about $17.5 million.

Obligatory disclaimer: The Worst Times Ever may be just around the corner!!!!

Barring that, and assuming your numbers are accurate and you've taken all your expenses into account, you're good to go right now.
Last edited by 22twain on Sat Oct 16, 2021 12:37 am, edited 1 time in total.
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willthrill81
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Re: How much do I need to retire?

Post by willthrill81 »

Twiggsapproved wrote: Fri Oct 15, 2021 8:46 pm Let’s take this in reverse if I may do so.

We are 54/52 with one 12 year old.

We are fine with a 529 to meet the child’s needs in 5-6 years.

We want to spend 140k annually in retirement and that includes taxes and housing (paid off)

Assume a 40 year lifespan from here and ss at 62 being $15000 annually and the other at 70 being $35000 annually?

What would be the number needed to retire as to total assets?

We currently have 4.2m outside our home and 529.

Thanks for your input!
Considering that you'll be on Medicare by age 70 and you'll have $50k of SS benefits coming in, it sounds like you'll only need to withdraw about $70k from your portfolio at that time, and it's extremely unlikely that you would need to do so for 30 years. Assuming 4% withdrawals, that works out to $1.75 million in today's dollars. For a 70 year old couple, a 4% withdrawal is, IMHO, perfectly fine.

The question then remains how much you need to get you through the next 16 years. If you assume 0% real returns on your portfolio for time, an extremely conservative approach, you would need 16 times your $140k annual spending (assuming that your $140k includes income taxes). That's $2.24 million.

Add the two amounts together, and you would basically need $4 million, just under what you have.

So I'd say that you're in good shape to retire right now, based on your spending needs.
The Sensible Steward
Matt3
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Re: How much do I need to retire?

Post by Matt3 »

Only on Bogleheads would people be saying it is risky to retire now...

You have 16 years to withdraw a semi-conservative 3.33% and then $50k of SS kicks in at 70 and your withdrawal rate drops to 2.1%. Not to mention you are including in your budget $20-25k for healthcare in your semi-conservative 3.33% withdrawal needs. Honestly, I'd be comfortable with a 60yr time horizon with those kinds of numbers, but to each their own.

You can literally quit both your jobs today and you will be fine as long as you are confident in your expense numbers. You will more than likely end up giving your child a healthy inheritance once you pass because it is highly unlikely you will run out of money.
59Gibson
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Re: How much do I need to retire?

Post by 59Gibson »

I'd assume there's a good chunk of fat in the 140k/ yr so there's room to cut to 100-120k if mkt flatlined for a period..you're definitely good.
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JoeRetire
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Re: How much do I need to retire?

Post by JoeRetire »

Twiggsapproved wrote: Fri Oct 15, 2021 8:46 pm We want to spend 140k annually in retirement and that includes taxes and housing (paid off)

Assume a 40 year lifespan from here and ss at 62 being $15000 annually and the other at 70 being $35000 annually?

What would be the number needed to retire as to total assets?

We currently have 4.2m outside our home and 529.
You have already exceeded what you need to retire today, assuming all of your numbers and assumptions are correct.
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muffins14
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Re: How much do I need to retire?

Post by muffins14 »

Seems reasonable to me.

Personally I’m hoping for about 3.5% withdrawals around age 45-47 to support 185k annual spend for two people. my number includes potentially paying about $5k in monthly rent. If we buy a place before then, I assume expensed would drop to closer to $140k like yours, and I’m also assuming about $600 per person per month for health insurance, no idea if that’s enough.

If I had your number and loved my job, I’d take a bunch of vacation but also work like 2 more years to be confident in my 3.5% number.

Maybe 3.5% is too conservative though, since on SS, you’d be much lower?
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chassis
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Re: How much do I need to retire?

Post by chassis »

@Twiggsapproved

4% rule says you need $3.5m

Ignore the unfortunately high number of useless and meddling replies to your very legitimate question. $140k living expenses are not out of line for you.

They might be out of line for a 90 year old living in a 1 bedroom home in Arkansas, however.

More power to the 90 year old, and you.
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Watty
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Re: How much do I need to retire?

Post by Watty »

Twiggsapproved wrote: Fri Oct 15, 2021 8:46 pm We want to spend 140k annually in retirement and that includes taxes and housing (paid off)
That is overly simplistic since your income needs will be different each year, at least until you are in your 70s.

My numbers were a lot different but when I was getting ready to retire I made a spreadsheet that outlined my expected finances each year up until may wife and I were both past 70 when it would be stable since we would both be getting Medicare and Social Security by then.

This included things like;
1) spending
2) income taxes
3) His Social Security income
4) Her Social Security income
5) His pre Medicare healthcare cost. (Premiums and deductibles)
6) Her pre Medicare healthcare cost. (Premiums and deductibles)
7) His Medicare costs (supplements, Part D, deductibles, etc)
8) Her Medicare costs (supplements, Part D, deductibles, etc)
9) Calculated funds needed from nest egg using all the above.

I did not try to adjust for inflation so I just did all the calculations in current dollars.

That is really easier to do than it might look like.

One thing to note is that you may have years where you might start Social Security or Medicare during the middle of the year so you may have some years when you have both normal health insurance and Medicare costs in the same year.

One way of looking at it is that you need two buckets of money. One to cover your retirement until you are 70, the other to cover your retirement after you turn 70. That gets real complicated though.

What I found more useful though was to slice and dice it differently where you had a base level of expenses from when you retire for the rest of your life. You would also need another chunk of money to supplement that during early retirement.

For example in purely make up numbers.

1) Once you turn 70 if in addition to Social Security you expect to need an additional $50K a year(a made up number) then that would be your base amount. Using a 3% safe withdrawal rate because you are younger you would need about $1.7 million to support that.

2) You would have 18 years until you are both 70 so you could then look at the spreadsheet I described to see if your other funds could cover that. With a $4.2 million dollar nest egg you would have $2.5 million left after allocating $1.7 million for your core expenses(see #1).
marcopolo
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Re: How much do I need to retire?

Post by marcopolo »

KlangFool wrote: Fri Oct 15, 2021 9:30 pm
Twiggsapproved wrote: Fri Oct 15, 2021 9:24 pm
KlangFool wrote: Fri Oct 15, 2021 9:16 pm
Twiggsapproved wrote: Fri Oct 15, 2021 9:03 pm
KlangFool wrote: Fri Oct 15, 2021 9:02 pm

Twiggsapproved,

1) Is that with or without a mortgage? Without

2) How much is your mortgage payment now?paid off

3) Why you cannot retire now? We are youngand scared we will run out of money

4) Your numbers do not make any sense for me. What doesn’t make sense?[b][/b]

A) If your current annual expense is really at this level, there is no reason why you cannot retire now?

B) If your current annual expense is much higher, why would you think you would spend a lot less?

I might be wrong. But, there is something that does not add up with your numbers.

KlangFool
Twiggsapproved,

Before you project/predict your retirement expense, you need to know and make sure that your current annual expense is accurate. If you start with a wrong baseline number, your projection/prediction would not be correct.

Please verify your number with this simple formula,

Gross income = current annual expense + current annual savings (tax-deferred and taxable) + taxes.

Verify your number with last year's tax filing and pay slips.

If you are retired, aka not working, why do you need to stay at a HCOL area? Don’t want to leave school district until college years.

KlangFool
Twiggsapproved,

<< Don’t want to leave school district until college years.>>

Fine. You should verify your expense number. It does not make any sense to me for someone with a paid-off house. It should be a lot higher or lower.

You do not have to tell us your number. But, you should verify your numbers.

KlangFool
I am curious what you think does not make sense?
It would make sense if it is lower, and it would also make sense if it is higher, but not where it is? That does not make sense to me.
Once in a while you get shown the light, in the strangest of places if you look at it right.
KlangFool
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Re: How much do I need to retire?

Post by KlangFool »

marcopolo wrote: Sat Oct 16, 2021 4:54 pm
I am curious what you think does not make sense?
It would make sense if it is lower, and it would also make sense if it is higher, but not where it is? That does not make sense to me.
marcopolo,

I do not see how the numbers add up to 4.2 millions. The only possible explanation is some kind of windfall aka inheritance. If you can, let me know.

It is just my instinct aka gut feeling looking through the typical numbers.

The point still remains. If OP's annual annual expense and projected expense are accurate, he is good to go. If not, OP may need to do something else.

KlangFool
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Carol88888
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Re: How much do I need to retire?

Post by Carol88888 »

I am confused. Don't we need to know from OP how the money is invested. If it is in a 60/40 portfolio it might not produce 3% over the next ten years.
marcopolo
Posts: 8445
Joined: Sat Dec 03, 2016 9:22 am

Re: How much do I need to retire?

Post by marcopolo »

KlangFool wrote: Sat Oct 16, 2021 4:57 pm
marcopolo wrote: Sat Oct 16, 2021 4:54 pm
I am curious what you think does not make sense?
It would make sense if it is lower, and it would also make sense if it is higher, but not where it is? That does not make sense to me.
marcopolo,

I do not see how the numbers add up to 4.2 millions. The only possible explanation is some kind of windfall aka inheritance. If you can, let me know.

It is just my instinct aka gut feeling looking through the typical numbers.

The point still remains. If OP's annual annual expense and projected expense are accurate, he is good to go. If not, OP may need to do something else.

KlangFool
I don't see where OP mentioned anything about his income or past financial history. The only thing stated was a $4.2m portfolio, and $140k anticipated expenses.

None of that seems unreasonable. What makes you question It? Why not focus on answering the OP's question?

OP,
With a planned 40 yr retirement, I would lean toward something between 3-3.5% as a rough WR. With SS as a safety net, I think you are pretty much there.

Also, regarding expenses, it is good to plan a healthy budget for health insurance, we did the same. It appears, without the health insurance, you are at roughly $110-$120 range of spending. You do not mention how your portfolio is divided, but if you have a good chunk of it in a taxable (or Roth) account, it is possible that with current tax laws, you could get a significant ACA tax credit to cover much of the premium.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Twiggsapproved
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Re: How much do I need to retire?

Post by Twiggsapproved »

marcopolo wrote: Sat Oct 16, 2021 5:08 pm
KlangFool wrote: Sat Oct 16, 2021 4:57 pm
marcopolo wrote: Sat Oct 16, 2021 4:54 pm
I am curious what you think does not make sense?
It would make sense if it is lower, and it would also make sense if it is higher, but not where it is? That does not make sense to me.
marcopolo,

I do not see how the numbers add up to 4.2 millions. The only possible explanation is some kind of windfall aka inheritance. If you can, let me know.



It is just my instinct aka gut feeling looking through the typical numbers.

The point still remains. If OP's annual annual expense and projected expense are accurate, he is good to go. If not, OP may need to do something else.

KlangFool
I don't see where OP mentioned anything about his income or past financial history. The only thing stated was a $4.2m portfolio, and $140k anticipated expenses.

None of that seems unreasonable. What makes you question It? Why not focus on answering the OP's question?

OP,
With a planned 40 yr retirement, I would lean toward something between 3-3.5% as a rough WR. With SS as a safety net, I think you are pretty much there.

Also, regarding expenses, it is good to plan a healthy budget for health insurance, we did the same. It appears, without the health insurance, you are at roughly $110-$120 range of spending. You do not mention how your portfolio is divided, but if you have a good chunk of it in a taxable (or Roth) account, it is possible that with current tax laws, you could get a significant ACA tax credit to cover much of the premium.

Well one option we are seriously considering is to have one of us keep working and making about $100k a year. This would give us health and dental benefits for a few more years. If we did this we would eat little into savings.

This wasn’t in our original question, but if one of us did keep working, would maxing out the 401k still make sense if we had to withdraw some every year out of taxable accounts to make up the difference of our annual spend?

Thanks for the help and helping with yet another question.
KlangFool
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Re: How much do I need to retire?

Post by KlangFool »

Twiggsapproved wrote: Sat Oct 16, 2021 6:49 pm

Well one option we are seriously considering is to have one of us keep working and making about $100k a year. This would give us health and dental benefits for a few more years. If we did this we would eat little into savings.

This wasn’t in our original question, but if one of us did keep working, would maxing out the 401k still make sense if we had to withdraw some every year out of taxable accounts to make up the difference of our annual spend?

Thanks for the help and helping with yet another question.
Twiggsapproved,

We cannot answer your question until we know

A) How much of your 4.2 million is in the tax-deferred account?

B) Your taxable, Roth, Tax-deferred account breakdown by percentage of your portfolio.

C) Your asset allocation.

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marcopolo
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Re: How much do I need to retire?

Post by marcopolo »

Twiggsapproved wrote: Sat Oct 16, 2021 6:49 pm
marcopolo wrote: Sat Oct 16, 2021 5:08 pm
KlangFool wrote: Sat Oct 16, 2021 4:57 pm
marcopolo wrote: Sat Oct 16, 2021 4:54 pm
I am curious what you think does not make sense?
It would make sense if it is lower, and it would also make sense if it is higher, but not where it is? That does not make sense to me.
marcopolo,

I do not see how the numbers add up to 4.2 millions. The only possible explanation is some kind of windfall aka inheritance. If you can, let me know.



It is just my instinct aka gut feeling looking through the typical numbers.

The point still remains. If OP's annual annual expense and projected expense are accurate, he is good to go. If not, OP may need to do something else.

KlangFool
I don't see where OP mentioned anything about his income or past financial history. The only thing stated was a $4.2m portfolio, and $140k anticipated expenses.

None of that seems unreasonable. What makes you question It? Why not focus on answering the OP's question?

OP,
With a planned 40 yr retirement, I would lean toward something between 3-3.5% as a rough WR. With SS as a safety net, I think you are pretty much there.

Also, regarding expenses, it is good to plan a healthy budget for health insurance, we did the same. It appears, without the health insurance, you are at roughly $110-$120 range of spending. You do not mention how your portfolio is divided, but if you have a good chunk of it in a taxable (or Roth) account, it is possible that with current tax laws, you could get a significant ACA tax credit to cover much of the premium.

Well one option we are seriously considering is to have one of us keep working and making about $100k a year. This would give us health and dental benefits for a few more years. If we did this we would eat little into savings.

This wasn’t in our original question, but if one of us did keep working, would maxing out the 401k still make sense if we had to withdraw some every year out of taxable accounts to make up the difference of our annual spend?

Thanks for the help and helping with yet another question.
In most situations that would still make sense.
You are effectively moving money from taxable to a tax-deferred account by doing that. So, unless you think your tax rate is going to be higher in retirement, it makes sense to take the tax savings now.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Houdini563
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Re: How much do I need to retire?

Post by Houdini563 »

I will have 2.3 million along with $53,000 in SS for my wife and I. I plan to pull $140,000 inclusive of SS. After tax that should give us $10,000 monthly.

I strongly suggest completing some “what if” scenarios via a good tax calculator. I use the ASRP 1040 tax calculator you can find on line. I found that the tax burden in retirement is not a huge deal to worry about when you look at it in depth.

My annual income streams will be the following:

SSec. $54,000
Traditional IRAs. 24,030 (taking 4.5% interest)
Mutual funds. 64,000 (4% from 1.6 million $)
Total pre tax. $142,030

Post tax approximately $120,000 or $10,000 monthly.
tibbitts
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Re: How much do I need to retire?

Post by tibbitts »

chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.
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Re: How much do I need to retire?

Post by Wannaretireearly »

Nice work OP. I could see why you may be cautious with your son being his age. I think you could drop to one income now if that’s what you want. Both could retire in less than 3 or 4 years
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RoadagentMN
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Re: How much do I need to retire?

Post by RoadagentMN »

Boglelicious123 wrote: Fri Oct 15, 2021 9:05 pm
Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm
Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
Not out of bounds…I mean it’s your $$$ so spend it however you want! I don’t live in a HCOL area so my perspective on how far $140K would go is different than yours
We live in a MCOL area, honestly 140k would be kinda low for us -we don’t live crazy lifestyle.
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Re: How much do I need to retire?

Post by chassis »

tibbitts wrote: Sat Oct 16, 2021 7:37 pm
chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.

@tibbitts I would suggest the 4% "rule" for the OP. Why wouldn't you suggest it for the OP?
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Re: How much do I need to retire?

Post by willthrill81 »

chassis wrote: Sat Oct 16, 2021 8:49 pm
tibbitts wrote: Sat Oct 16, 2021 7:37 pm
chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.

@tibbitts I would suggest the 4% "rule" for the OP. Why wouldn't you suggest it for the OP?
Because there's a good chance the OP and/or spouse will live for more than the 30 years that the '4% rule' is associated with. The OP is explicitly planning on a 40 year retirement.
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tibbitts
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Re: How much do I need to retire?

Post by tibbitts »

willthrill81 wrote: Sat Oct 16, 2021 8:51 pm
chassis wrote: Sat Oct 16, 2021 8:49 pm
tibbitts wrote: Sat Oct 16, 2021 7:37 pm
chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.

@tibbitts I would suggest the 4% "rule" for the OP. Why wouldn't you suggest it for the OP?
Because there's a good chance the OP and/or spouse will live for more than the 30 years that the '4% rule' is associated with. The OP is explicitly planning on a 40 year retirement.
Exactly. Also today the OP would have a somewhat globally diversified portfolio (assuming in the range of the 20% international vs. market weight debates for the moment), and evidence suggests that that would have lowered the 4% result in the original research to somewhere in the mid/upper-3% range.
Ferdinand2014
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Re: How much do I need to retire?

Post by Ferdinand2014 »

Twiggsapproved wrote: Fri Oct 15, 2021 8:54 pm
Boglelicious123 wrote: Fri Oct 15, 2021 8:49 pm I’m curious…what are you planning on spending 140K on annually (assuming it’s just the 2 of you and your house is paid off)?

Not trying to be rude, just having a hard time figuring out how I could spend that unless I go on vacation every few weeks. Maybe you can give me some ideas for retirement!
Well we spend just under that with a kid in a HCOL area. Once our child reaches college we assume not much change, just a little extra travel, say another $10k a year. The $140k includes about $20-25k in healthcare costs until we reach Medicare.

Is it so out of bounds???? Really? We assume healthcare will take a big bite.
It seems low to me. I'm budgeting 200,000 plus a year in expenses at retirement. As they say, you cant take it with you. My goal is a zero balance at my funeral. Its gonna be close...
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Re: How much do I need to retire?

Post by smitcat »

willthrill81 wrote: Sat Oct 16, 2021 8:51 pm
chassis wrote: Sat Oct 16, 2021 8:49 pm
tibbitts wrote: Sat Oct 16, 2021 7:37 pm
chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.

@tibbitts I would suggest the 4% "rule" for the OP. Why wouldn't you suggest it for the OP?
Because there's a good chance the OP and/or spouse will live for more than the 30 years that the '4% rule' is associated with. The OP is explicitly planning on a 40 year retirement.
Would it not matter which AA the OP had and how flexible they would be in their yearly draw? I typically like to review the ERN site when I have internal conflicts and thoughts about these rules of thumb.
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Twiggsapproved
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Re: How much do I need to retire?

Post by Twiggsapproved »

We are 65/35 right now.

We are somewhat flexible on spending but a pre teen child could make a dent in the beat laid plans!
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willthrill81
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Re: How much do I need to retire?

Post by willthrill81 »

smitcat wrote: Sun Oct 17, 2021 9:22 am
willthrill81 wrote: Sat Oct 16, 2021 8:51 pm
chassis wrote: Sat Oct 16, 2021 8:49 pm
tibbitts wrote: Sat Oct 16, 2021 7:37 pm
chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.

@tibbitts I would suggest the 4% "rule" for the OP. Why wouldn't you suggest it for the OP?
Because there's a good chance the OP and/or spouse will live for more than the 30 years that the '4% rule' is associated with. The OP is explicitly planning on a 40 year retirement.
Would it not matter which AA the OP had and how flexible they would be in their yearly draw? I typically like to review the ERN site when I have internal conflicts and thoughts about these rules of thumb.
Flexibility helps, but even ERN has shown that big reductions in withdrawals that lasted for many years would have been necessary in at least some historic instances to reach 40 years.

Regardless, I've shown further up thread that even if the OP gets 0% real returns between now and age 70, once SS benefits are claimed, they should still have plenty to last the remaining planned 24 years.
The Sensible Steward
delamer
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Re: How much do I need to retire?

Post by delamer »

Carol88888 wrote: Sat Oct 16, 2021 5:01 pm I am confused. Don't we need to know from OP how the money is invested. If it is in a 60/40 portfolio it might not produce 3% over the next ten years.
Why does the next 10 years matter specifically in a 40 year retirement?

As long as the portfolio has at least 30% equities, it isn’t an issue.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
delamer
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Re: How much do I need to retire?

Post by delamer »

Watty wrote: Sat Oct 16, 2021 4:45 pm
Twiggsapproved wrote: Fri Oct 15, 2021 8:46 pm We want to spend 140k annually in retirement and that includes taxes and housing (paid off)
That is overly simplistic since your income needs will be different each year, at least until you are in your 70s.

My numbers were a lot different but when I was getting ready to retire I made a spreadsheet that outlined my expected finances each year up until may wife and I were both past 70 when it would be stable since we would both be getting Medicare and Social Security by then.

This included things like;
1) spending
2) income taxes
3) His Social Security income
4) Her Social Security income
5) His pre Medicare healthcare cost. (Premiums and deductibles)
6) Her pre Medicare healthcare cost. (Premiums and deductibles)
7) His Medicare costs (supplements, Part D, deductibles, etc)
8) Her Medicare costs (supplements, Part D, deductibles, etc)
9) Calculated funds needed from nest egg using all the above.

I did not try to adjust for inflation so I just did all the calculations in current dollars.

That is really easier to do than it might look like.

One thing to note is that you may have years where you might start Social Security or Medicare during the middle of the year so you may have some years when you have both normal health insurance and Medicare costs in the same year.

One way of looking at it is that you need two buckets of money. One to cover your retirement until you are 70, the other to cover your retirement after you turn 70. That gets real complicated though.

What I found more useful though was to slice and dice it differently where you had a base level of expenses from when you retire for the rest of your life. You would also need another chunk of money to supplement that during early retirement.

For example in purely make up numbers.

1) Once you turn 70 if in addition to Social Security you expect to need an additional $50K a year(a made up number) then that would be your base amount. Using a 3% safe withdrawal rate because you are younger you would need about $1.7 million to support that.

2) You would have 18 years until you are both 70 so you could then look at the spreadsheet I described to see if your other funds could cover that. With a $4.2 million dollar nest egg you would have $2.5 million left after allocating $1.7 million for your core expenses(see #1).
Excellent advice from Watty as usual. Having said that, it’s unlikely that you’ll run into any financial problems given the numbers you’ve provided. I would add, though, that it’s worthwhile to consider what the survivor’s income & expenses would look like when the first spouse dies. One important factor is that marginal federal income tax rates kick in at lower income levels for singles vs. marrieds.

Take a look at this calculator: https://www.i-orp.com/Plans/extended.html

As another poster said, ignore the spending scolds. It’s important to make sure you have an accurate number for expenses, but it’s presumptuous for anyone to ask you to justify that number.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: How much do I need to retire?

Post by Wiggums »

Twiggsapproved wrote: Sun Oct 17, 2021 10:01 am We are 65/35 right now.

We are somewhat flexible on spending but a pre teen child could make a dent in the beat laid plans!
We are 65/35 as well. It’s a good place to be :-)

We have two in college and they pay their bills out of their brokerage account. For the first time, they finally understand saving, budgets and spending money wisely.

You will be fine whenever you retire. We are doing Roth conversions which uses some of our cash. This is a good to think about where you will pull the money from. We just made a simple spreadsheet like Watty recommended.

Good luck to you.
"I started with nothing and I still have most of it left."
WhiteMaxima
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Re: How much do I need to retire?

Post by WhiteMaxima »

25x-30x of your current annual budget saved in a well diversified portfoilo.
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Re: How much do I need to retire?

Post by Toons »

You Have Enough

:wink:
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Re: How much do I need to retire?

Post by JoeRetire »

tibbitts wrote: Sat Oct 16, 2021 7:37 pm
chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.
With an additional $700k and $35k/year starting at 70,
I would.
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tibbitts
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Re: How much do I need to retire?

Post by tibbitts »

JoeRetire wrote: Sun Oct 17, 2021 2:48 pm
tibbitts wrote: Sat Oct 16, 2021 7:37 pm
chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.
With an additional $700k and $35k/year starting at 70,
I would.
I didn't/don't see anything about $700k, at least in the original post - maybe somewhere else in the thread. I would still be concerned about 4% for 40 years.
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Re: How much do I need to retire?

Post by mikejuss »

You're good to go, OP. You can safely withdraw 4% of your portfolio now and then enjoy a little cushion from Social Security later. Question: are you really thinking of retiring--and, if so, why?
Last edited by mikejuss on Sun Oct 17, 2021 5:45 pm, edited 1 time in total.
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Re: How much do I need to retire?

Post by sailaway »

tibbitts wrote: Sun Oct 17, 2021 5:34 pm
I would still be concerned about 4% for 40 years.
But it isn't 4% for 40 years. It is 4% for 8 to 16 years, depending on their SS decisions, then the percent is reduced.
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Re: How much do I need to retire?

Post by willthrill81 »

tibbitts wrote: Sun Oct 17, 2021 5:34 pm
JoeRetire wrote: Sun Oct 17, 2021 2:48 pm
tibbitts wrote: Sat Oct 16, 2021 7:37 pm
chassis wrote: Sat Oct 16, 2021 2:41 pm @Twiggsapproved
4% rule says you need $3.5m
Nobody would suggest the 4% "rule" for someone at the OP's age, assuming the OP projects average lifespans.
With an additional $700k and $35k/year starting at 70,
I would.
I didn't/don't see anything about $700k, at least in the original post - maybe somewhere else in the thread. I would still be concerned about 4% for 40 years.
The difference between $3.5 m and $4.2 m is where the $700k is coming from.
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