### Author Topic: Fool article (posted on Fox Business) on Retirement - Math is NUTS  (Read 1937 times)

#### ingrownstudentloans

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##### Fool article (posted on Fox Business) on Retirement - Math is NUTS
« on: April 21, 2017, 09:16:46 AM »

I love how arbitrary the article seems to make it.  Like, ehhh, who knows, it's not really in your control, so let's throw some numbers out there and see what happens.

Their premise is that an average retirement costs \$738,400.

They say, and I quote, "If you plan to settle down in your (paid off) home, living simply, then 70% of your current income is probably enough." (emphasis mine)  And "most retirees can expect to see their expenses drop when they retire, hence the standard recommendation that retirees will need 70% to 80% of their pre-retirement income."

They then go on to give some examples I guess to show why their approach is totally like safe.  They say a 30 year old who makes \$50,000/year can get to their \$738,400 amount by they time they are 70 by saving 11%/year assuming a return of 7%/year.

If the 30 year old making \$50,000/year the article references "tucks away" 11% like they recommend into a tax-deferred account to get to their magic \$738,400 (AT 70 YEARS OLD!!!!), that means they will be spending \$44,500/year (pre tax).  Using the widely accepted (though often debated) 4% rule, they should be drawing \$29,536/year (pre-tax) at most.  BUT, 70% of \$50,000 is \$35,000, and 70% of the pre-tax pay less retirement "tuckings" is \$31,150.

It is crazy how this passes as financial advice.  Math exists and can be used to figure out what you need within a reasonable range of estimation.  We don't need to just kind of wing it and hope it works out sometime in the future maybe if we cross our fingers and pray.

#### Werthless

• Posts: 18
##### Re: Fool article (posted on Fox Business) on Retirement - Math is NUTS
« Reply #1 on: April 21, 2017, 09:39:35 AM »
If retiring at 70, social security for that hypothetical worker would more than bridge the gap.

#### ingrownstudentloans

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##### Re: Fool article (posted on Fox Business) on Retirement - Math is NUTS
« Reply #2 on: April 21, 2017, 09:43:18 AM »
If retiring at 70, social security for that hypothetical worker would more than bridge the gap.

true, but do you want to wait 40 years to find out whether you actually get it?

#### Prairie Stash

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##### Re: Fool article (posted on Fox Business) on Retirement - Math is NUTS
« Reply #3 on: April 21, 2017, 09:47:30 AM »
Old age checks. Social Security covers \$16,112.

Using your math that's 29,536+16112=\$45648 for income, pretty much their working life income.

Assuming that a 70 year old is okay with leaving nothing; most 70 year olds have under 30 years to live, a 4-5% withdrawal is not overly risky. They don't need the money to last more than 30 years, the grim reaper doesn't care how much money you have left to spend. Plus the couple still has a house to sell.

If anything, once you factor in SS, they may have over saved. The point of the article was to emphasize the potential value of SS.

#### Ayanka

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##### Re: Fool article (posted on Fox Business) on Retirement - Math is NUTS
« Reply #4 on: April 21, 2017, 12:12:21 PM »
Honestly, this isn't too insensible in my opinion. The math is only a small portion, and I would suspect that is used to point out that it isn't actually impossible to save for retirement, which a lot of people might believe. I wouldn't call it excellent advice, but I do think it needs to be put into context and have a look for what audience it is.