CNBC - Savers needs $2M to retire

[seattlecyclone]

I'm sorry for being obtuse. I'm trying to address something independent of SORR. The Safe Withdrawal Rate (let's say 4%) rule is basically a long term withdrawal strategy assuming the market is going to increase over an extended period of time. SWR is excellent for a younger investor who can forego using principle during down markets. Now, let's say an investor has made it to their 60's. I suppose you could say that a NEW SORR is in effect, as an extended downturn could force you to dip into the principle. By the 80's, though, I'd imagine most people, like me, would be less concerned with using the principle for living expenses, since the odds of outliving your money is greatly reduced. During these later years, however, if one shifts investments to,say, bonds or an annuity (gasp!), the rate of return will be reduced, and the SWR calculated 40 years earlier will no longer be valid. But you would then be protected from significant downturns in the market. Does that make any sense?

I think you have a misunderstanding about what the SWR research is all about. There's no assumption that the market will always go up, or that a person will avoid touching principal during a down market: quite the opposite! The idea is to look at how much you can consistently withdraw (even if the market is down, even if you have to sell investments), and still have a very high probability of ending your retirement with a positive account balance.

[FlytilFIRE]

I'm sorry for being obtuse. I'm trying to address something independent of SORR. The Safe Withdrawal Rate (let's say 4%) rule is basically a long term withdrawal strategy assuming the market is going to increase over an extended period of time. SWR is excellent for a younger investor who can forego using principle during down markets. Now, let's say an investor has made it to their 60's. I suppose you could say that a NEW SORR is in effect, as an extended downturn could force you to dip into the principle. By the 80's, though, I'd imagine most people, like me, would be less concerned with using the principle for living expenses, since the odds of outliving your money is greatly reduced. During these later years, however, if one shifts investments to,say, bonds or an annuity (gasp!), the rate of return will be reduced, and the SWR calculated 40 years earlier will no longer be valid. But you would then be protected from significant downturns in the market. Does that make any sense?

I think you have a misunderstanding about what the SWR research is all about. There's no assumption that the market will always go up, or that a person will avoid touching principal during a down market: quite the opposite! The idea is to look at how much you can consistently withdraw (even if the market is down, even if you have to sell investments), and still have a very high probability of ending your retirement with a positive account balance.

I don't want to bog down the thread, and obviously I need to do more reading. BUT my interpretation of SWR, and the Trinity Study, was that OVER TIME, and allowing for the data in all past years, the SWR will, in most cases, mean YOU time out before your money does. To me, it implies that, over time, the market WILL go up, as indeed it has. So yes, I agree that the SWR is designed to allow withdrawals during downturns.

Malcat, Once again, I apologize. I think of SORR as more of an issue at the beginning,especially for planning purposes,  rather than a sliding, revising construct. Looking at it your way, I now understand what you're saying. Thank you.

[American GenX]

$2M for a single person in a LCOL area who has a generous government pension and a paid off house?   LOL.   Pure comedy.  And they are talking typical retirement age, which is 67 years old, so pure comedy gold.

My barebones retirement expenses are expected to be $22K/yr.   $2M stash?  LOL.   

[rantk81]

It took us 3 years almost exactly (2016 to 2019 sometime, but I'm not at the computer that has our pretty chart). So yeah, 3 or 7 years isn't actually all that long. Compounding is scary powerful.

$2MM is what we retired on this spring. It includes $12K each on property taxes, health insurance/care, and travel (which we're not spending this year, obvs.), as well as an annualized $7K in major capital expenses. There's a lot of fat to trim if needed, and I willingly admit we're piss-poor Mustachians. We definitely aren't eating out every meal, but it's a very comfortable living in a MCOL area in the U.S.

Nice job!  I first hit 1M in mid-2016 too!  However, I haven't yet eclipsed 2M in total net worth.  I'm still around 1.8M.  Expenses have increased for me in the past 3 years.  I'm still on the W2 hamster-wheel, at least for the time being.

[American GenX]

It took us 3 years almost exactly (2016 to 2019 sometime, but I'm not at the computer that has our pretty chart). So yeah, 3 or 7 years isn't actually all that long. Compounding is scary powerful.

$2M is what we retired on this spring. It includes $12K each on property taxes, health insurance/care, and travel (which we're not spending this year, obvs.), as well as an annualized $7K in major capital expenses. There's a lot of fat to trim if needed, and I willingly admit we're piss-poor Mustachians. We definitely aren't eating out every meal, but it's a very comfortable living in a MCOL area in the U.S.

Nice job!  I first hit 1M in mid-2016 too!  However, I haven't yet eclipsed 2M in total net worth.  I'm still around 1.8M.  Expenses have increased for me in the past 3 years.  I'm still on the W2 hamster-wheel, at least for the time being.

It looks like that person is referring to a multi person household since they said, "we".  If you're just a single person, you shouldn't need as much.  Be careful using net worth in your drawdown calculations unless you are planning on selling the house, assuming you have one.  I always just use the stash figure for my calculations since I plan to keep the home.  I'm not quite to $2M, either, but I really don't need to be.  That's a ridiculous figure.  I could live comfortably on half that.  Heck, if I waited until FRA of age 67, I should be able to get by without any stash.  lol  Not planning to wait - 50's is long enough.

[aceyou]

Yeah, circumstances dictate a lot.  Dw and I will each get big.pensions in 11 years when we r 48.  By age 44 our index funds will probably be to 1.4 million, we could certainty retire, but.pretty much forfeit the pension...or work 4 more years, and have about 2 million net worth plus two pensions that pays out 45kk per year each plus health benefits.  We certainly don't need that, but for 4 extra years at a job that benefits society,  why not.  That will allow us to up our philanthropic game in retirement significantly,  which would likely greatly improve our happiness. 

Also, I'm a bit of a futurist.  I think we may be entering a sort of bend point in the next 30 to 50 years where there will be life changing shit getting invented that could drastically extend life or improve the quality of the life we do have.  I've no idea what those things will be, or what they might.cost.  can't really hurt to have a stache of unneeded cash, and as long as teaching and coaching tennis is still super fun, 4 more years would seem like a cheap price I think.

[markbike528CBX]

Savers need $2M to retire is what the average Joe/Jill thinks is the brass ring/unobtainium/ the final goal.

Please tell the whiners at:
https://forum.mrmoneymustache.com/throw-down-the-gauntlet/race-from-$2m-to-$3m/3600/
that your average Everyperson thinks that they have reached the goal.


Disclosure: In that group but FIRED 2 years ago.

[rantk81]

It looks like that person is referring to a multi person household since they said, "we".  If you're just a single person, you shouldn't need as much.  Be careful using net worth in your drawdown calculations unless you are planning on selling the house, assuming you have one.  I always just use the stash figure for my calculations since I plan to keep the home.  I'm not quite to $2M, either, but I really don't need to be.  That's a ridiculous figure.  I could live comfortably on half that.  Heck, if I waited until FRA of age 67, I should be able to get by without any stash.  lol  Not planning to wait - 50's is long enough.

Well, for my part, that time span started out as an "I" and turned into a "we".
I exclude the value of a (paid off) primary residence for the purpose of SWR calculations.
$2M might be ridiculous for you... But we have special considerations that make it not-quite-so-ridiculous for our case.

[flyingaway]

I used to think $2M is enough, but I was wrong. I like travel, visit casinos, sleep well, and probably leave something to my children, so I need at least $4M to have an enjoyable lifestyle. I know people here want to retire with $0.5M, that is their choices.

Hey, if you want to be a monk to pursue purity, you need $0M and can live on donations in an Asian temple. Never worry about money and never worry about anything.

[Villanelle]

I used to think $2M is enough, but I was wrong. I like travel, visit casinos, sleep well, and probably leave something to my children, so I need at least $4M to have an enjoyable lifestyle. I know people here want to retire with $0.5M, that is their choices.

Hey, if you want to be a monk to pursue purity, you need $0M and can live on donations in an Asian temple. Never worry about money and never worry about anything.

What is your projected/desired annual spending?  Because with the exception of casinos (and with wanting to leave money to my favorite charitable causes), what you listed is what I want, too.  You think you can't do that on anything close to $100k/yr?   You need at least $160k year to do that?  How????  Will you not have a paid off or mostly paid off house?

[NorthernBlitz]

If you assume no SS, I bet $2M is probably a decent approximation of what lots of upper middle class people who aren't that frugal would want to maintain their lifestyle*.

Under a 4% rule with zero management fees, that's $80k / year. Most people aren't very frugal and I'm sure lots of people in the upper middle class were spending this much / year.

Many people who don't DIY their finances probably pay management fees ~ 1%, which means they only have 3% left to spend on other things. That's $60k / year. For "typical" (read: non mustacian) people in the upper middle class that think about saving for retirement, that's probably not a super unreasonable annual spend.

I know lots of people here are advocates of skinny FIRE, but I think there's a lot of risk in a strategy like that given that I'm not convinced in the argument that it's always easy to find a job. I believe it would be difficult to find employment in large downturns so you'd eat away at your principle when the value is low. But, maybe I'm wrong.

My number is probably something more like $1.5M. But I could see someone going for $2M at that point. With a very high savings rate and a few good years of returns, I don't think it would take all that long to get the 33% increase from $1.5M $2.0M. Depending on age / health / enjoyment / freedom at work, I could see making a decision to wait a few extra years.

* I didn't read the article and I assume they mean $2M in today's dollars. If you include inflation, this number is even more reasonable. This is one of the reason's I don't have a firm "number". That number will always be changing and if you're talking about something more than a decade in the future, I think fixating on a number will have you retiring too early because it's easy to forget that you were thinking about 2010 dollars or something.

[Metalcat]

@NorthernBlitz it depends on what you mean by "skinny fire", lean FIRE usually refers to having just enough to cover your bare bones expenses, it's not exactly an amount.

For someone whose bare bones expenses are only 17K/yr, 600K may be quite a generous FI number, but it might be extremely lean for someone else.

No one advocates trying to live forever with thin margins. What people here do advocate is questioning how much you really need to live on, if your goal is to retire early.

It's really, really, really hard to save multiple millions in a short period of time. That's why so many people aim for lower numbers because the alternative is to continue working, and being a FIRE forum, a lot of people don't want to do that.

It's simple math, in order to accomplish the truly extraordinary feat of retiring very young, you must be willing to do the extraordinary.

Also, your argument about difficulty finding work in downtimes isn't valid because people who are FIREd don't need to find great lucrative jobs in downtimes, they often only need a little bit of supplemental money or they can often even just wait until the worst of it is over.

Having a large cash amount available makes that pretty easy. In addition, they're ideally positioned to retrain/respond to changing markets, because again, they don't depend on uninterrupted large income.

Now, that said, I'm not someone to scoff at a 2M number, that's the bare minimum of what I plan to save, probably more in the 3-5 range depending on what kind of work I feel like doing. But I'm not aiming to permanently leave the workforce early, and that's the big difference.

The early retiree people here tend to really know what they're doing, we don't need to worry about them. They're at a hell of a lot less risk than the really high spenders who lock in a lot of very high fixed expenses and don't have a lot of room to pivot if shit really hits the fan.

Someone who can be very comfortable spending under 20K/year may actually be far more resilient in the face of major economic disruption than someone who has a few million invested.

What I find is that people tend to look at others through their own lense. So someone who lives very comfortably on 60K/yr might not even be able to fathom how some of my colleagues are stressed out of their minds because despite saving over 300K/yr and working into their 60s, they worry they won't be able to support their lifestyles.

Likewise, that same 60K person may look at someone with a sub 20K budget and think that their level of risk and sacrifice is unsustainable.

Personally, I am infinitely more comforted by my ability to keep my fixed costs low and my capacity to generate paid work in such a broad range of markets and under almost any circumstance, It would take a lot for me to ever be at real risk, even if I only had a small stache. That reassures me in a changing world far more than the millions I'll have in the bank.

Luckily for me, I can have both, but again, that's only because I'm not actually aiming for FIRE.

Also, to address your asterisk, I don't believe anyone in this community gets fixated on an old number and then retires early on too little because they forgot to continue caring about the math. The overwhelming majority of people who actually accomplish FIRE are far more financially informed than Gen Pop.

I think that's an infinitely higher risk for people working to full retirement who never gave their savings much thought and closing in on a million think "wow, that sounds like plenty" and don't realize how constrained their retirement will be because they've never ever tracked their expenses.

ETA: this is my parents, my mom thinks her sister has a modestly comfortable retirement, and she does, she has a pension that provides her 40K/yr. What shocked my mom is that that pension was worth a million, she assumed it was about 300K because that's what she learned would provide a modestly comfortable retirement when she last looked into planning her retirement...back in the 80s.

I easily believe those people exist. I have a hard time believing many FIREes pull the trigger without thinking it to death. At least, that's what the bajillion OMY threads on here would suggest.

*Edited for grammar and clarity

[rmorris50]

As someone who is 46, married to a 51 YO, and NW of $2.4m, we are borderline close to retirement. I’ve run the projections, and the riskiest part is the next three years, depending on how markets do and how much more we can sock away.

But I’m pretty conservative, I am assuming only a 5% return going forward and 1.25% inflation. I also have a fat pad in my projected expenses of 10% as well as a nice vacation allowance. If I assumed 6.5% return and cut the expense pad and reduce the vacation, we could retire today.

So 2m seems roughly right maybe for an early retiree with a “reasonable” budget, but probably overkill for someone retiring at a more normal age.


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[flyingaway]

As someone who is 46, married to a 51 YO, and NW of $2.4m, we are borderline close to retirement. I’ve run the projections, and the riskiest part is the next three years, depending on how markets do and how much more we can sock away.

But I’m pretty conservative, I am assuming only a 5% return going forward and 1.25% inflation. I also have a fat pad in my projected expenses of 10% as well as a nice vacation allowance. If I assumed 6.5% return and cut the expense pad and reduce the vacation, we could retire today.

So 2m seems roughly right maybe for an early retiree with a “reasonable” budget, but probably overkill for someone retiring at a more normal age.


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I cannot believe that you consider future inflation of 1.25% as conservative. Didn't notice that gold is at all time high?

[rmorris50]

As someone who is 46, married to a 51 YO, and NW of $2.4m, we are borderline close to retirement. I’ve run the projections, and the riskiest part is the next three years, depending on how markets do and how much more we can sock away.

But I’m pretty conservative, I am assuming only a 5% return going forward and 1.25% inflation. I also have a fat pad in my projected expenses of 10% as well as a nice vacation allowance. If I assumed 6.5% return and cut the expense pad and reduce the vacation, we could retire today.

So 2m seems roughly right maybe for an early retiree with a “reasonable” budget, but probably overkill for someone retiring at a more normal age.


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I cannot believe that you consider future inflation of 1.25% as conservative. Didn't notice that gold is at all time high?

Inflation varies significantly by expense category. Healthcare and college cost have experienced high inflation. Food is flat to moderate, and electronics, cars, and clothes have been flat. Spending also decreases as you age esp past 80. So inflating expenses in retirement projections is actually very tricky. Another hedge I have I assume we don’t touch our Roth’s and pass them to our heirs. That’s for the break in case of emergency like a health event, high inflation, etc. But like all of us I’m not going to be able to retire early and have 100 percent of all possible scenarios hedged. Worse case scenario pension and Social security will let us at least eat cat food.


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[Villanelle]

As someone who is 46, married to a 51 YO, and NW of $2.4m, we are borderline close to retirement. I’ve run the projections, and the riskiest part is the next three years, depending on how markets do and how much more we can sock away.

But I’m pretty conservative, I am assuming only a 5% return going forward and 1.25% inflation. I also have a fat pad in my projected expenses of 10% as well as a nice vacation allowance. If I assumed 6.5% return and cut the expense pad and reduce the vacation, we could retire today.

So 2m seems roughly right maybe for an early retiree with a “reasonable” budget, but probably overkill for someone retiring at a more normal age.


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I wonder if part of the disagreement about this is "net worth" vs. "Stache".  One's net worth matter surprisingly little.  If one plans to live in their $1m house, then suddenly they've cut a $2m networth down to a $1m stache on which to live. 

[rmorris50]

As someone who is 46, married to a 51 YO, and NW of $2.4m, we are borderline close to retirement. I’ve run the projections, and the riskiest part is the next three years, depending on how markets do and how much more we can sock away.

But I’m pretty conservative, I am assuming only a 5% return going forward and 1.25% inflation. I also have a fat pad in my projected expenses of 10% as well as a nice vacation allowance. If I assumed 6.5% return and cut the expense pad and reduce the vacation, we could retire today.

So 2m seems roughly right maybe for an early retiree with a “reasonable” budget, but probably overkill for someone retiring at a more normal age.


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I wonder if part of the disagreement about this is "net worth" vs. "Stache".  One's net worth matter surprisingly little.  If one plans to live in their $1m house, then suddenly they've cut a $2m networth down to a $1m stache on which to live.

Completely agree. I am not using my NW to determine when we can retire. I project out cash coming into the house and cash leaving the house over the next 45 years, and see how that difference each year impacts cash savings. As long as cash savings stays above a certain level, say 50k, I feel comfortable.

Coincidentally our NW is 100 percent financial assets at the moment since we are renting until our house is done being built and we have no debt :-)


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[American GenX]

It looks like that person is referring to a multi person household since they said, "we".  If you're just a single person, you shouldn't need as much.  Be careful using net worth in your drawdown calculations unless you are planning on selling the house, assuming you have one.  I always just use the stash figure for my calculations since I plan to keep the home.  I'm not quite to $2M, either, but I really don't need to be.  That's a ridiculous figure.  I could live comfortably on half that.  Heck, if I waited until FRA of age 67, I should be able to get by without any stash.  lol  Not planning to wait - 50's is long enough.

Well, for my part, that time span started out as an "I" and turned into a "we".
I exclude the value of a (paid off) primary residence for the purpose of SWR calculations.
$2M might be ridiculous for you... But we have special considerations that make it not-quite-so-ridiculous for our case.

OK, but your earlier post said "I", not "we", which is why I suggested you may need less if you're single.  And if you're excluding primary residence, that's your stash, not "net worth", as you had stated, which is why I pointed that part out in my previous reply.

But what I tried to make very clear in a previous comment was that $2M is ridiculous for "I", not a "we", in my case of living in a LCOL area with low expenses.  As pointed out previously in the thread, this figure is going to be different for everyone, which is why it's ridiculous to say that any figure such as $2M is the magic number that everyone should shoot for to retire.

Reference:

$2M for a single person in a LCOL area who has a generous government pension and a paid off house?   LOL.   Pure comedy.  And they are talking typical retirement age, which is 67 years old, so pure comedy gold.

My barebones retirement expenses are expected to be $22K/yr.   $2M stash?  LOL.   

[flyingaway]

I used to think $2M is enough, but I was wrong. I like travel, visit casinos, sleep well, and probably leave something to my children, so I need at least $4M to have an enjoyable lifestyle. I know people here want to retire with $0.5M, that is their choices.

Hey, if you want to be a monk to pursue purity, you need $0M and can live on donations in an Asian temple. Never worry about money and never worry about anything.

What is your projected/desired annual spending?  Because with the exception of casinos (and with wanting to leave money to my favorite charitable causes), what you listed is what I want, too.  You think you can't do that on anything close to $100k/yr?   You need at least $160k year to do that?  How????  Will you not have a paid off or mostly paid off house?

Things and tastes can change in a long retirement life. One can make money easily when they are 40~50s. It would be much more difficult to make good money if you want to come back after 10 years in retirement. 

[American GenX]

I wonder if part of the disagreement about this is "net worth" vs. "Stache".  One's net worth matter surprisingly little.  If one plans to live in their $1m house, then suddenly they've cut a $2m networth down to a $1m stache on which to live.

Yeah, I pointed out the net worth vs. stash difference earlier in the thread as well.  Then there's the single vs. married, cost of living, health care costs, and various other thing all kicking in.

[American GenX]

Things and tastes can change in a long retirement life. One can make money easily when they are 40~50s. It would be much more difficult to make good money if you want to come back after 10 years in retirement.

A lot of people in that age group who thought they would be making money "easily" for some time to come are now unemployed and can't find work.  Never ASS-U-ME.

[American GenX]

If you assume no SS, I bet $2M is probably a decent approximation of what lots of upper middle class people who aren't that frugal would want to maintain their lifestyle*.

If you assume no SS for that person, it sounds like mostly a work of fiction, not a guideline to use for giving people advice as to how much stash they should have.  And it wasn't just for upper middle class people that want to spend a lot of money, either.

If we're going to assume no SS, we could assume no investments, no pensions, no savings at all, that you're single and saddled with debt, and that you can never retire.  So, it's best to be realistic and not apply any single dollar amount as a recommended goal for retirement.  That is what is ridiculous.

[American GenX]

As someone who is 46, married to a 51 YO, and NW of $2.4m, we are borderline close to retirement. I’ve run the projections, and the riskiest part is the next three years, depending on how markets do and how much more we can sock away.

But I’m pretty conservative, I am assuming only a 5% return going forward and 1.25% inflation. I also have a fat pad in my projected expenses of 10% as well as a nice vacation allowance. If I assumed 6.5% return and cut the expense pad and reduce the vacation, we could retire today.

So 2m seems roughly right maybe for an early retiree with a “reasonable” budget, but probably overkill for someone retiring at a more normal age.


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I cannot believe that you consider future inflation of 1.25% as conservative. Didn't notice that gold is at all time high?

I thought that was good for a laugh also.  The Fed appears set to bring inflation up to 2% and won't increase interest rates until it does.  But in reality, inflation in terms of real costs seems to actually be much higher.   My property taxes, homeowner's insurance, and food costs are some of my biggest bills, and they are all up 6% to 10% over the last year.   This seems to be the norm with property taxes in my state with high property taxes.  Food is really up there year, hopefully it will stabilize after the pandemic.  Another is health care insurance, which is through my employer.  My premium is up 62% this year and an increase in out of pocket costs as well.  So, even 2% inflation sounds artificially way too low.

[NorthernBlitz]

If you assume no SS, I bet $2M is probably a decent approximation of what lots of upper middle class people who aren't that frugal would want to maintain their lifestyle*.

If you assume no SS for that person, it sounds like mostly a work of fiction, not a guideline to use for giving people advice as to how much stash they should have.  And it wasn't just for upper middle class people that want to spend a lot of money, either.

If we're going to assume no SS, we could assume no investments, no pensions, no savings at all, that you're single and saddled with debt, and that you can never retire.  So, it's best to be realistic and not apply any single dollar amount as a recommended goal for retirement.  That is what is ridiculous.

I think SS will be around for me (currently early 40s). To much political cost to get rid of it.

But I think it will start later and be means tested. I also think my SS contributions will be increased sometime in the medium term. When these changes happen, I think they'll be dramatic because politicians keep kicking the problem down the road because they don't want to pay the political price to make the necessary changes.

I don't include SS in my own calculations because retirement is still a while off and I don't feel like running a bunch of different simulations with different SS options.

And given how healthcare in the US works, is rather oversave than undersave.

To each their own though.

[TomTX]

One should be mindful of how early retirement impacts the size of the social security benefit too...

Not as much as you might think. The social security formula has a couple of "bend points" where, past that point, any further earnings contribute less to your future benefits than previous earnings did. The formula is explained here.

In a nutshell, you take the amount you earned and paid social security tax on each year, scale them up to current year dollars, pick the top 35 years (using zeroes for some years if you worked less than 35), and add it up. The formula then divides by 420 (the number of months in 35 years) to get a monthly earnings figure. For this purpose I find it more useful to look at your lifetime earnings.

The first bend point is at $960/month ($403,200 lifetime). Up to this point, your average monthly dollar earned will be replaced 90% by social security.

Once you hit that first bend point the returns really start to diminish.

The second bend point is at $5,785/month ($2.43 million lifetime). Between the bend points your monthly income will be replaced 32%, and above the top bend point the figure is just 15%.

Someone who earns right up to the top bend point ($403,200) will get $864/month if collecting benefits at their full retirement age. Someone who earns twice as much ($806,400) will get $1,171/month. That's a 35% benefit increase in exchange for a 100% earnings increase.

To get twice the social security benefit of someone who earned $403,200, you need to earn a total of $1,537,200. Doubling the benefits again isn't even possible; someone who earned the social security wage cap every year from ages 22-66 would get $3,011/month.

Thanks to the SSA mySocialSecurity set-up in the US its pretty easy to see the difference early retirement makes at different ages.  Given I had just passed over the second bend point (which I learned about later when trying to understand the results), I was shocked at how little difference there was between me retiring at 48 as opposed to 62, so it basically became a non-factor in my FIRE decisions as just a few years here and there made too little difference to even notice.

So this got me to look up my lifetime earnings - adding an estimate for year to date 2020, it looks like I am halfway to the second bend point (halfway from zero, not halfway from the first bend point). Hmmmn. Spent far too many years at low wages.

[mathlete]

It's a survey of 401k participants, so we're already talking about the universe of aggressive savers. Also, Schwab is probably motivated to release results that encourage getting more AUM for Schwab.

Encouraging savings is ultimately pro social though so whatever. The social security trust will run out in just 15 years. It's likely to be sooner if this payroll tax holiday happens. I'll still be decades out from SS age by that point.

[American GenX]

The social security trust will run out in just 15 years. It's likely to be sooner if this payroll tax holiday happens. I'll still be decades out from SS age by that point.

If you're talking about Trump's executive order, that is only a "delay" in payment of payroll taxes.  They would still be due later.  I don't see a permanent cut - more likely they will be increased in the coming years to make up for the shortfall.

[American GenX]

I don't include SS in my own calculations because retirement is still a while off and I don't feel like running a bunch of different simulations with different SS options.

And given how healthcare in the US works, is rather oversave than undersave.

To each their own though.

That is fair / reasonable at a younger age.  I'm already into my 50's, so I'll be able to collect SS in 15 years if I want, and it makes a pretty big difference in my calculations

Saving extra is better than not saving enough, especially if you don't want to have to return to work or make further cutbacks in the budget down the road.  I feel like I've already saved more than I needed, albeit less than the $2M amount suggested, so maybe I worked too long.

[mathlete]

The social security trust will run out in just 15 years. It's likely to be sooner if this payroll tax holiday happens. I'll still be decades out from SS age by that point.

If you're talking about Trump's executive order, that is only a "delay" in payment of payroll taxes.  They would still be due later.  I don't see a permanent cut - more likely they will be increased in the coming years to make up for the shortfall.

Gotcha. Didn't realize that.

[Villanelle]

I used to think $2M is enough, but I was wrong. I like travel, visit casinos, sleep well, and probably leave something to my children, so I need at least $4M to have an enjoyable lifestyle. I know people here want to retire with $0.5M, that is their choices.

Hey, if you want to be a monk to pursue purity, you need $0M and can live on donations in an Asian temple. Never worry about money and never worry about anything.

What is your projected/desired annual spending?  Because with the exception of casinos (and with wanting to leave money to my favorite charitable causes), what you listed is what I want, too.  You think you can't do that on anything close to $100k/yr?   You need at least $160k year to do that?  How????  Will you not have a paid off or mostly paid off house?

Things and tastes can change in a long retirement life. One can make money easily when they are 40~50s. It would be much more difficult to make good money if you want to come back after 10 years in retirement.

Okay.  So does that men you don't have a projected or desired annual spending and "at least $4m" is a number that just sounds good?  Or do you plan so spend $$125k+ per year, adjusted for inflation and with a LOT of room for "changing tastes"? 

And yes, it's harder to make more money when you are 60 and have been out of the workforce for 15 years than when you are 45 and have a good job.  It's also hard to enjoy life and spend money on things that bring you happiness when you are dead.   I'd wager that the latter is significantly more difficult than the former, in fact. 

[moof]

I used to think $2M is enough, but I was wrong. I like travel, visit casinos, sleep well, and probably leave something to my children, so I need at least $4M to have an enjoyable lifestyle. I know people here want to retire with $0.5M, that is their choices.

Hey, if you want to be a monk to pursue purity, you need $0M and can live on donations in an Asian temple. Never worry about money and never worry about anything.

What is your projected/desired annual spending?  Because with the exception of casinos (and with wanting to leave money to my favorite charitable causes), what you listed is what I want, too.  You think you can't do that on anything close to $100k/yr?   You need at least $160k year to do that?  How????  Will you not have a paid off or mostly paid off house?

Things and tastes can change in a long retirement life. One can make money easily when they are 40~50s. It would be much more difficult to make good money if you want to come back after 10 years in retirement.

Knees and backs can change in a long working life. One can go on adventures easily when they are 40~50s. It would be much more difficult to get your health back if you want to get moving after yet another 10 years in a cubicle.

Life is full of trade-offs.  We will all die.  Nothing else in guaranteed.  Would you rather die while still working an office job in your 60's like my mom did, or retire in your 40's and still get a decade or three of adventuring and living on your own terms before easing back and hopefully having some semi-healthy 70's and 80's thanks to your more active, lower stress, and healthier living while retired early?  The choice is up to you, part of FIRE is shedding the security blanket that is a corporate job and trading that semi-secure salary for vastly more time and freedom.

[American GenX]

One can go on adventures easily when they are 40~50s.

That's not always true.  There are people in their 40's or 50's that either have health problems, don't have the financial capability, or are too busy to easily go on adventuers.

It would be much more difficult to get your health back if you want to get moving after yet another 10 years in a cubicle.

Not everyone works in a cubicle.  I have never worked in a cubicle, let alone "10 years".  And not everyone works an office job.  While I haven't FIREd yet, my job is low stress and enjoyable, and I get plenty of exercise, as I'm not working 24/7.  And again, never in a cubicle.

The choice is up to you, part of FIRE is shedding the security blanket that is a corporate job and trading that semi-secure salary for vastly more time and freedom.

Not everyone works a corporate job.  I never have.  Some of us have jobs we actually enjoy and still have plenty of free time to be active.

[NorthernBlitz]

One can go on adventures easily when they are 40~50s.

That's not always true.  There are people in their 40's or 50's that either have health problems, don't have the financial capability, or are too busy to easily go on adventuers.

It would be much more difficult to get your health back if you want to get moving after yet another 10 years in a cubicle.

Not everyone works in a cubicle.  I have never worked in a cubicle, let alone "10 years".  And not everyone works an office job.  While I haven't FIREd yet, my job is low stress and enjoyable, and I get plenty of exercise, as I'm not working 24/7.  And again, never in a cubicle.

The choice is up to you, part of FIRE is shedding the security blanket that is a corporate job and trading that semi-secure salary for vastly more time and freedom.

Not everyone works a corporate job.  I never have.  Some of us have jobs we actually enjoy and still have plenty of free time to be active.

I think this part is the key to where you fall on this issue.

If you like your job and feel like you have enough freedom to do the amount of "adventuring" you want to do, it's not much hardship to work a couple years to go from something like a 4% to a 3.5% withdrawal rate.

Not everyone dreams of extravagant trips or backpacking through Nepal or something. I'm fine going camping with my kids on the weekends. I can do that when I'm working. And since my job gives me great flexibility in the summer, it's not hard to do that on weekdays too.

[MrThatsDifferent]

The social security trust will run out in just 15 years. It's likely to be sooner if this payroll tax holiday happens. I'll still be decades out from SS age by that point.

If you're talking about Trump's executive order, that is only a "delay" in payment of payroll taxes.  They would still be due later.  I don't see a permanent cut - more likely they will be increased in the coming years to make up for the shortfall.

Gotcha. Didn't realize that.

My understanding was the delay is for 6 months, so companies and individuals will get a big hit in 6 months. Nightmare.

[American GenX]

The social security trust will run out in just 15 years. It's likely to be sooner if this payroll tax holiday happens. I'll still be decades out from SS age by that point.

If you're talking about Trump's executive order, that is only a "delay" in payment of payroll taxes.  They would still be due later.  I don't see a permanent cut - more likely they will be increased in the coming years to make up for the shortfall.

Gotcha. Didn't realize that.

My understanding was the delay is for 6 months, so companies and individuals will get a big hit in 6 months. Nightmare.

Yes, they would be due next year unless additional action is taken by Congress.  And to clarify my comment about increases in coming years, I was referring to SS not being funded enough to pay 100% of the promised benefits in another 12 years or so, not related to the delay here.

[big_owl]

I feel like $2M is a pretty good number.  Allows you $60-$80k/yr income so you aren't dumpster diving in retirement and you can afford healthcare costs too.  For the average American this seems legit.

[Bird In Hand]

For us $2M seems reasonable as well.  Our projected spending in our MCOL area is about $60k, and this doesn't include income taxes or healthcare.  We are more frugal than almost anyone else we know IRL, don't have expensive hobbies, and don't travel much.  But our planned spending includes some ongoing child-related (and eventually perhaps grandchild-related) expenses -- gifts, help with college, etc.  And we feel more comfortable with a 3.5% SWR.

[American GenX]

I feel like $2M is a pretty good number.  Allows you $60-$80k/yr income so you aren't dumpster diving in retirement and you can afford healthcare costs too.  For the average American this seems legit.

Good for a select few, but way off for many, which is why these "one size fits all" recommendations are really bad advice.

e.g.:

$2M for a single person in a LCOL area who has a generous government pension and a paid off house?   LOL.   Pure comedy.  And they are talking typical retirement age, which is 67 years old, so pure comedy gold.

My barebones retirement expenses are expected to be $22K/yr.   $2M stash?  LOL.   

[Metalcat]

I feel like $2M is a pretty good number.  Allows you $60-$80k/yr income so you aren't dumpster diving in retirement and you can afford healthcare costs too.  For the average American this seems legit.

Good for a select few, but way off for many, which is why these "one size fits all" recommendations are really bad advice.

e.g.:

$2M for a single person in a LCOL area who has a generous government pension and a paid off house?   LOL.   Pure comedy.  And they are talking typical retirement age, which is 67 years old, so pure comedy gold.

My barebones retirement expenses are expected to be $22K/yr.   $2M stash?  LOL.   

And it's not even advice, it's what people self reported that they *think* they will need.

[rmorris50]

This is why I don’t use NW but household CF projections to see when I will be able to retire.


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[Car Jack]

This was a survey to ask what savers thought.  https://www.businesswire.com/news/home/20200804005292/en/Schwab-401-Survey-Finds-Savings-Goals-Stress

It wasn't Schwab saying "Oh, you need $1.9MM in order to consider retiring".

It was also not stated....or I missed it....if they were talking about an individual or a couple.  I mean....one spouse working and the other taking care of kids.....the working one, taking the survey is going to assume he has to have enough to take care of the family....right?  A single 27 year old might just be looking for themselves.  I looked at the actual questions and they are not clear what they assume here.

$1.9MM for a single person to retire?  Well, duh.  For a couple?  Not quite as duh.  Or maybe still duh.  Depends on the percentage you're planning to take out and *for how many years*.  Plenty of people don't understand the Trinity study and say that 4% can be taken out forever and ever.  The study said no such thing.  It took all 30 year periods and found that in nearly all cases, taking out 4% FOR 30 YEARS meant you would likely not run out of money.  That does not mean that Mr. FIRE, calling it quits at 28 with a family history of living into their 90's is not going to run out of money, ever.

At least it's not Suze saying that nobody should retire without $10MM.  ....then she went back to her private island....

[Sandi_k]

Really?

Spending $80k/year would actually allow me and SO to eat out for dinner every night of the year, in a HCOL city, with a mortgage, and not at a burger joint either. And maybe a few $600 shoes, too. But we don't have expensive hobbies and my formerly expensive car can now vote.

Sorry, then you don't live in a HCOL. The median house sold in CA is $525k. Assume:

- A 20% DP and
- A 15 year mortgage on the remaining $420k at 3% = P&I alone is $2800 per month
- 1.25% property tax = $546 per month
- Insurance ~ $100 per month.

That's $3446 x 12 = $41,352 on HOUSING ALONE.

[Metalcat]

Really?

Spending $80k/year would actually allow me and SO to eat out for dinner every night of the year, in a HCOL city, with a mortgage, and not at a burger joint either. And maybe a few $600 shoes, too. But we don't have expensive hobbies and my formerly expensive car can now vote.

Sorry, then you don't live in a HCOL. The median house sold in CA is $525k. Assume:

- A 20% DP and
- A 15 year mortgage on the remaining $420k at 3% = P&I alone is $2800 per month
- 1.25% property tax = $546 per month
- Insurance ~ $100 per month.

That's $3446 x 12 = $41,352 on HOUSING ALONE.

Or they do live in an HCOL area and don't own average priced housing, or they already paid off their house, or rent, or...

I live in a city with that same average housing cost and our household expenses, including a housing costs, for two aren't anywhere near 80K.

[sherr]

Sorry, then you don't live in a HCOL. The median house sold in CA is $525k. Assume:

- A 20% DP and
- A 15 year mortgage on the remaining $420k at 3% = P&I alone is $2800 per month
- 1.25% property tax = $546 per month
- Insurance ~ $100 per month.

That's $3446 x 12 = $41,352 on HOUSING ALONE.

By the time most people retire they will either have already paid off the house, or have built up significant equity and be close to paying it off. Or if you're moving / doing a cash-out refi you'd still have all that money somewhere, probably invested, so its the same difference. Here's an article warning that more people are retiring with mortgages, where "more people" is a whole 35% of 65-74 year-olds.

[American GenX]

....more people are retiring with mortgages[/url], where "more people" is a whole 35% of 65-74 year-olds.

Yes, that's a lot of people in that age group, more than a 1/3 of them.  Not good.  You would think they would be getting those mortgages paid off.  I paid off a couple before I was 40.

[wenchsenior]

....more people are retiring with mortgages[/url], where "more people" is a whole 35% of 65-74 year-olds.

Yes, that's a lot of people in that age group, more than a 1/3 of them.  Not good.  You would think they would be getting those mortgages paid off.  I paid off a couple before I was 40.

Given the low interest rates, I really question the wisdom of paying off the mortgage in time for retirement if it ties up investable cash. I'm certainly anticipating carrying a mortgage into retirement; there's no compelling reason I can see to pay one off as long as interest rates are so low (we could have paid our mortgage off a decade ago, but instead we have re-upped it twice at lower interest rates to leverage more cash flow). 

We also may very well need a larger home in retirement than we live in now; our current houses are in a very LCOL location..when we (pleasepleaseplease) eventually get to move, we fully expect to pay a LOT more for housing.  If I want the cash to cover that extra housing cost, I sure am not going to get it by building equity in the homes we own now, I'm much more likely to get it via investments.

And even once I buy another house, I'd rather carry a mortgage (at low interest rate) than lock up a fuck ton of cash, so we just build mortgage/rent into our retirement budget. 

If interest rates take a big jump before the next time we buy a house, I'd reconsider, but not until then.

[rantk81]

....more people are retiring with mortgages[/url], where "more people" is a whole 35% of 65-74 year-olds.

Yes, that's a lot of people in that age group, more than a 1/3 of them.  Not good.  You would think they would be getting those mortgages paid off.  I paid off a couple before I was 40.

Given the low interest rates, I really question the wisdom of paying off the mortgage in time for retirement if it ties up investable cash. I'm certainly anticipating carrying a mortgage into retirement; there's no compelling reason I can see to pay one off as long as interest rates are so low (we could have paid our mortgage off a decade ago, but instead we have re-upped it twice at lower interest rates to leverage more cash flow). 

We also may very well need a larger home in retirement than we live in now; our current houses are in a very LCOL location..when we (pleasepleaseplease) eventually get to move, we fully expect to pay a LOT more for housing.  If I want the cash to cover that extra housing cost, I sure am not going to get it by building equity in the homes we own now, I'm much more likely to get it via investments.

And even once I buy another house, I'd rather carry a mortgage (at low interest rate) than lock up a fuck ton of cash, so we just build mortgage/rent into our retirement budget. 

If interest rates take a big jump before the next time we buy a house, I'd reconsider, but not until then.

This may be opening a can of worms, to be carrying on this sub-thread-topic :) 

The way I look at it is, a paid-off primary residence kind of serves as a replacement for a "bond" position in a portfolio.  It pays a 'fixed coupon' of providing me a place to live, free of cost (other than taxes and up-keep.)  I'd much prefer this, instead of buying actual treasuries or even corporate bonds, which pay miserably these days.

[TomTX]

This may be opening a can of worms, to be carrying on this sub-thread-topic :) 

The way I look at it is, a paid-off primary residence kind of serves as a replacement for a "bond" position in a portfolio.  It pays a 'fixed coupon' of providing me a place to live, free of cost (other than taxes and up-keep.)  I'd much prefer this, instead of buying actual treasuries or even corporate bonds, which pay miserably these days.

And you're welcome to that position. Neither carrying a low-interest long-term mortgage nor paying it off is inherently "wrong" - it depends on your scenario.

While not retired yet, I feel that I am in a better position* because I did a refi to a new low-interest 30 year mortgage last year. Cash flow is improved considerably - to the point where my property tax + interest is actually more than the mortgage.

Keeping the mortgage is a good tool to let me retire earlier - I can use the freed up cash as part of a "bridge" to get me to my pension.

*Still annoyed at Texas nanny-state laws which won't let me refi again until the prior refi is 1 year old. Would have already done it again - I can do a nearly-no-cost refi and still drop the rate further.

[rmorris50]

....more people are retiring with mortgages[/url], where "more people" is a whole 35% of 65-74 year-olds.

Yes, that's a lot of people in that age group, more than a 1/3 of them.  Not good.  You would think they would be getting those mortgages paid off.  I paid off a couple before I was 40.

Given the low interest rates, I really question the wisdom of paying off the mortgage in time for retirement if it ties up investable cash. I'm certainly anticipating carrying a mortgage into retirement; there's no compelling reason I can see to pay one off as long as interest rates are so low (we could have paid our mortgage off a decade ago, but instead we have re-upped it twice at lower interest rates to leverage more cash flow). 

We also may very well need a larger home in retirement than we live in now; our current houses are in a very LCOL location..when we (pleasepleaseplease) eventually get to move, we fully expect to pay a LOT more for housing.  If I want the cash to cover that extra housing cost, I sure am not going to get it by building equity in the homes we own now, I'm much more likely to get it via investments.

And even once I buy another house, I'd rather carry a mortgage (at low interest rate) than lock up a fuck ton of cash, so we just build mortgage/rent into our retirement budget. 

If interest rates take a big jump before the next time we buy a house, I'd reconsider, but not until then.

This may be opening a can of worms, to be carrying on this sub-thread-topic :) 

The way I look at it is, a paid-off primary residence kind of serves as a replacement for a "bond" position in a portfolio.  It pays a 'fixed coupon' of providing me a place to live, free of cost (other than taxes and up-keep.)  I'd much prefer this, instead of buying actual treasuries or even corporate bonds, which pay miserably these days.

Many other threads on this forum debate this ad-nauseam. At the end of the day it’s a very personal situation/decision.


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[ixtap]

Pretty sure that is the first time I have seen Texas and nanny state in the same sentence.