How much is enough to retire?

[Jean-Paul]

Mathjak You mix up the US government liabilities ( on books plus off the books) with the assets " value of everything in the country " owned by the PEOPLE, and not government property.

audit the Fed, audit the Pentagon,

Jon

 

[mathjak107]

Mathjak You mix up the US government liabilities ( on books plus off the books) with the assets " value of everything in the country " owned by the PEOPLE, and not government property.

audit the Fed, audit the Pentagon,

Jon

I am not mixing it up at all ….that debt is like a mortgage on the value of this country and all our assets as well as the govt assets all owe it ….we are the govt

 

[palides2021]

Ahhhh, nope, not a paid off house. all 3 financial advisors advised against it. With a 2.75% interest rate and monthly P&E of $866.00, I could get far more on my investments than 2.75%. At anytime I could pay it off, but won't. Let it ride and use the money to make more than the 2.75%.

I could never understand why these financial advisors advise against paying off your house. It's not really yours until you pay it off. Is it?

 

[palides2021]

Live your best life, everyday, because you never know if there will be a tomorrow.
Every morning when I wake, I put my two feet on the floor and think. God has a plan for me because he let me wake up today and move under my own power. How lucky we all are to say that and yet we take it for granted sometimes. Some people would give anything to be able to do that every day.....Live your best life.

Yes! I agree with you absolutely!

 

[Sippican]

I could never understand why these financial advisors advise against paying off your house. It's not really yours until you pay it off. Is it?

Well, actually it is yours, for as long as you want it to be. When you look at a home from a financial standpoint, it makes sense.
The money I would have spent paying off the house to do away with 2.75%, I can make 5,6,7%, pay the 2.75% and still make money.
If paying off a house brings someone comfort, then thats fine. But from a 'utility' standpoint (having a roof over your head) it makes sense from a financial standpoint.
I can do the same things to the house/home either way.
Putting your money in revenue generating assets, while paying down a very low interest rate, is a prudent approach.
Its all about the interest rate and your funds available that determines if it makes sense. If someone has a high interest rate (6-7%) then it makes sense to pay it down sooner or refinance at a lower rate if possible.

 

[palides2021]

Well, actually it is yours, for as long as you want it to be. When you look at a home from a financial standpoint, it makes sense.
The money I would have spent paying off the house to do away with 2.75%, I can make 5,6,7%, pay the 2.75% and still make money.
If paying off a house brings someone comfort, then thats fine. But from a 'utility' standpoint (having a roof over your head) it makes sense from a financial standpoint.
I can do the same things to the house/home either way.
Putting your money in revenue generating assets, while paying down a very low interest rate, is a prudent approach.
Its all about the interest rate and your funds available that determines if it makes sense. If someone has a high interest rate (6-7%) then it makes sense to pay it down sooner or refinance at a lower rate if possible.

Yes, paying off the house did bring me comfort, and the worst-case scenario is the bottom-line for me. For example, if there was a Stockmarket crash, or run on the bank, or a catastrophe, or an illness that ran through all my money (I've seen this with people who had cancer and spent all their money on treatments) and I was left with little or no money. Then I would lose the house that I thought was mine (or borrow more money to keep it) if I could not continue paying my mortgage payments, and insurance, and property taxes, etc. Also, by the time you're done paying, let's say a 500,000 dollar home, with 30-year mortgage, for example, you will have paid a lot more for it than the initial cost. I know 2.75% is low, but it is not 0%. I will continually be on this treadmill of owing money on my house - somehow like a rental. These are my thoughts.

 

[Sippican]

Yes, paying off the house did bring me comfort, and the worst-case scenario is the bottom-line for me. For example, if there was a Stockmarket crash, or run on the bank, or a catastrophe, or an illness that ran through all my money (I've seen this with people who had cancer and spent all their money on treatments) and I was left with little or no money. Then I would lose the house that I thought was mine (or borrow more money to keep it) if I could not continue paying my mortgage payments, and insurance, and property taxes, etc. Also, by the time you're done paying, let's say a 500,000 dollar home, with 30-year mortgage, for example, you will have paid a lot more for it than the initial cost. I know 2.75% is low, but it is not 0%. I will continually be on this treadmill of owing money on my house - somehow like a rental. These are my thoughts.

Fair points. But, your worst case scenario is not worst case, albeit cancer is devastating.
Bottom line is, if there was a stock market crash, run on the bank, or catastrophe, the value of your 'investment' would dwindle down greatly from 500,000. Real estate is not immune from external economic downturns.
Your reference to property tax and insurance will need to be paid either way, ownership or mortgage.
Mortgage interest deductions also play into the equation as a plus.
Oh, and if you did (God forbid) get a terminal disease, you may have to sell your house to pay for treatments.
Everyones situation is different, I get it.
It works for me because my principal and interest (I'm leaving out insurance and taxes because they are paid either way) is $860 a month. So, paying it off doesn't really matter. Like I said, everyones situation is different,

 

[palides2021]

Fair points. But, your worst case scenario is not worst case, albeit cancer is devastating.
Bottom line is, if there was a stock market crash, run on the bank, or catastrophe, the value of your 'investment' would dwindle down greatly from 500,000. Real estate is not immune from external economic downturns.
Your reference to property tax and insurance will need to be paid either way, ownership or mortgage.
Mortgage interest deductions also play into the equation as a plus.
Oh, and if you did (God forbid) get a terminal disease, you may have to sell your house to pay for treatments.
Everyones situation is different, I get it.
It works for me because my principal and interest (I'm leaving out insurance and taxes because they are paid either way) is $860 a month. So, paying it off doesn't really matter. Like I said, everyones situation is different,

Thanks for all your insights!

 

[Brookswood]

Check out some of the retirement calculators on sites like Vanguard and Schwab.

Also check out FireCalc which will give you an idea of the how you assets would have survived in over 100 market periods from the past. Nobody can predict the future. The past is the best we can do.

 

[OneEyedDiva]

At least financial "experts" are starting to admit that everyone doesn't need that cliche one million $$ to retire. How much depends on each person's particular set of circumstances. I remember reading a refreshing article in Money magazine about people who retired on much less than the 80% of final salary usually recommended. My colleagues didn't believe I could make it in retirement when I left at age 50. I wasn't making as much as them because they had been on state payroll much longer than I was. I also lost 4% of my pension due to early retirement and couldn't collect SS for another 11 years (retired a month before turning 51). But I knew I'd be alright because...
~My housing expenses were/are about 27% of the average rents because I own a co-op apartment which seeks to keep costs down.
~I retired debt free
~I had excellent health insurance benefits which I didn't pay any premiums for until I got on Medicare

If any one of those factors had not been in place, I might have had a hard time. Once I started receiving SS, I was able to save/ invest almost the entire amount and have done that for over a decade.

 

[mathjak107]

Anyone who states that a million dollars is needed as some magic number is no financial adviser…those are click bait writers .

any planner knows better and there is no such number

 

[Jean-Paul]

The perpetual debasement of the "dollar" mandated by the private unconstutional so called "Federal Reserve System" means your retirement savings purchase much less each year.

The old theoretical 2% inflation target meant 50% of your savings purchasing power is lost every 10 years.

Today the official (manipulated) rate is 4..6%, but the real rate is 8..13% per year.
Fed vs real CPI index comparisons
http://www.shadowstats.com/alternate_data/inflation-charts

If your portfolio makes less that that rate, your future retirement savings value is ever decreasing.

Thus there's no fixed number for the retirement amount as it will be dynamically ever increasing.

Only one unfortunatet concequence of a fiât unit of account.

Bon courage

Jon

 

[ronaldj]

how much is enough, someone once said, "just a little bit more." I have been a blue collar worker getting along and now a retired blue collar worker, getting along. do I want to leave something for my children, I taught them to work, give and save and they all today make twice or more than I ever did. We are close and leave good memories.

 

[mathjak107]

The perpetual debasement of the "dollar" mandated by the private unconstutional so called "Federal Reserve System" means your retirement savings purchase much less each year.

The old theoretical 2% inflation target meant 50% of your savings purchasing power is lost every 10 years.

Today the official (manipulated) rate is 4..6%, but the real rate is 8..13% per year.
Fed vs real CPI index comparisons
http://www.shadowstats.com/alternate_data/inflation-charts

If your portfolio makes less that that rate, your future retirement savings value is ever decreasing.

Thus there's no fixed number for the retirement amount as it will be dynamically ever increasing.

Only one unfortunatet concequence of a fiât unit of account.

Bon courage

Jon

Diversified portfolios have beaten inflation over and over ..not every year , but they don’t have to beat it yearly ..it is our longer term averages that matter

 

[leastlongprime]

With all the articles you read these days, and retirement calculators, there is still one number you can't fit into any equation to figure out if you have enough...when you will die.
I am an active investor in the markets and these days with the craziness of the economy, I find (in opposition of my financial advisors) that safe money is the right choice these days. I'm finding that a 4% return is a good return in these crazy times. So, I'm in Money Markets, and CD's. I'm getting 4.29% in MM, 4.25 & 4.50% in two CD's.
I get it, I may miss the upswing if/when the market turns, but I don't like timing the bottom and would be ok with catching stocks on the upswing.
What are other folks doing, and is it working for you?

Hello, Sippican.
I subscribe to a Liability=Income philosophy. Planned. Current Liability<Income.
Income streams and a reserve for severe inflation or major irregular expenses . Discretionary trading account is not counted towards retirement, yet.
Approximate Income: 28% SS; 6% Pension, no cola; 25% GWLB Longevity annuities; 41% Rental Income.
Will probably take the 2023, full allowable withdrawal from the annuities rather than just RMDs and going forward continue to do so. Any excess Income will go into cash account or CDs.
No big debt or mortgage. Remaining student loan (parent's) ~$300/mn for another 8 yrs.
Current age 73/76.

I have no idea "How much is enough to retire."
We live on what we get, whatever that may be.

 

[Lethe200]

Welcome!

In the last couple of years I too have decided fixed earnings are a better fit for me. I still have a little over 20% of my portfolio in the market but the rest is all fixed interest investments. I may pull that last bit out of the market soon and move it to a fixed earning account, then I will never have to check the ticker tape again!

My thinking at this point in my life is a steady return is so much easier to plan around, and just makes me more comfortable. Honestly if I can keep my money in 3% to 5%
earnings I should be able to live comfortably for the rest of my life.

Depends on how long you live. Inflation - even average inflation, far lower than what we have currently - will cut your ability to maintain your current lifestyle noticeably after 10 yrs, and drastically after 25.

 

[mathjak107]

Depends on how long you live. Inflation - even average inflation, far lower than what we have currently - will cut your ability to maintain your current lifestyle noticeably after 10 yrs, and drastically after 25.

Even a 4% draw will fail if one cannot achieve at least a 2% real return average the first 15 years of a 30 year retirement.

fixed income alone has failed to do that about 65% of the 122 rolling 30 year retirement periods we have had REGARDLESS OF RATES.

real returns are after inflation adjusting them

 

[Brookswood]

The old theoretical 2% inflation target meant 50% of your savings purchasing power is lost every 10 years.

I must disagree. 2% inflation will take 36 years for your money to lose 50% of it's value.

Ten years would require an inflation rate of about 7.2%, which we did have for a while this year. Actually we had a higher rate for part of this year. That is a scary thought.

 

[Brookswood]

Depends on how long you live. Inflation - even average inflation, far lower than what we have currently - will cut your ability to maintain your current lifestyle noticeably after 10 yrs, and drastically after 25.

Yup. We all took a nice haircut in 2022. Today's lower inflation rate (if it sticks) only means that we are losing value more slowly. Do not believe those in the news media who imply that somehow we are clawing back some of the inflationary losses of 2022. Or that some government subsidy or rule is reversing the loss. That is nonsense. It is gone.

 

[OneEyedDiva]

Anyone who states that a million dollars is needed as some magic number is no financial adviser…those are click bait writers .

any planner knows better and there is no such number

MJ when I used to subscribe to Money and Kiplinger's, decades ago, I read so many articles that threw out that million dollar number. Same thing when I started reading articles online from ostensibly respected publications.

 

[OneEyedDiva]

I could never understand why these financial advisors advise against paying off your house. It's not really yours until you pay it off. Is it?

Exactly. And once it's paid off, you better not skp on paying taxes either. Could cost you your house. I think they advise against it because they want people to have adequate emergency funds, not wind up paying higher interest if they use other credit sources (with much higher interest rates) to fund their needs because they've spent all their money paying off their mortgages. But for people who can well afford it, I don't see why they shouldn't be mortgage free.

 

[Blessed]

Exactly. And once it's paid off, you better not skp on paying taxes either. Could cost you your house. I think they advise against it because they want people to have adequate emergency funds, not wind up paying higher interest if they use other credit sources (with much higher interest rates) to fund their needs because they've spent all their money paying off their mortgages. But for people who can well afford it, I don't see why they shouldn't be mortgage free.

I am lucky to be mortgage free. I was just reviewing my property taxes last night getting ready to send the payment. In the scheme of things it might seem like a big hit but in reality it is not, still cheaper to live in my own home than in an apartment. The taxes will go down, at least 40% when I hit 65. Then they will be locked in somewhat. We are blessed in that regard. I have just been trying to make a new budget for the next 2 or 3 years based on all the information I can gather. Increased SS, insurance cost once I start Medicare, will it be better to get an advantage plan or keep my federal coverage. Looks like federal will win that one so far.

I always thought I would get to the point I would not have to worry, not to be constantly comparing options. That is not the case for most of us, retired or not, fixed income or not, we all have to be proactive in watching the financial and insurance options we have available.

 

[leastlongprime]

I could never understand why these financial advisors advise against paying off your house. It's not really yours until you pay it off. Is it?

Re: Holding a mortgage while in retirement. Why?
Practically everyone lives on the concept of Liability vs Income or liability < income, through your retirement. If somewhere in your retirement, your Income falls below your liability requirements, for a length of time that also depleted your emergency funds, you will be in trouble.

extreme case A: Asset rich (no mortgage, paid off home, not renting) and suddenly insufficient Income. What are your options?

extreme case B: Same Asset but with mortgage (you chose the equity) and same Income problem in case A. What are your options? and What are the options of the mortgage holder?

Example IRL: We have a PLUS student loan, @ X int rate; 8 yrs remaining; ~$300/mn payment. If we stopped paying on the PLUS, What will happen? Age 73/76. Did We just increase our cash flow ?

 

[mathjak107]

MJ when I used to subscribe to Money and Kiplinger's, decades ago, I read so many articles that threw out that million dollar number. Same thing when I started reading articles online from ostensibly respected publications.

Like I said , financial writers who have no clue …a million here in nyc can be like 500k in cheapsville .

plus we all back in to what we have and make it work ….

no respectable planner will ever throw out a magical number as a blanket statement

 

[mathjak107]

I must disagree. 2% inflation will take 36 years for your money to lose 50% of it's value.

Ten years would require an inflation rate of about 7.2%, which we did have for a while this year. Actually we had a higher rate for part of this year. That is a scary thought.

Actually when spending down to live the math is different .

when spending down you have sequence risk so what happens is excessive negative real returns deplete money faster by causing more spending to buy the same thing leaving a lower balance each year .

any interest is on less money each year so under the worst case outcomes vs the best case you can have a very big difference because of sequence risk.

don’t forget having 10 years up front of excessive inflation then 20 years of low inflation will have a very different balance left then the reverse will when you are spending down . Yet the average inflation will appear the same amount.

so figuring averages when spending down is way way off because of the fact sequence risk plays a bigger roll and that means the order that inflation , our investments and our spending hits us has a big effect on how long the money will last when spending down