Author Topic: Wow, $15,542 per month.  (Read 9124 times)

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Wow, $15,542 per month.
« on: January 05, 2016, 04:10:07 PM »
I looked at my employer sponsored 401k site today which is provided by a large financial company.  I just wanted to check on my contributions and make sure everything is going where its supposed to go etc.

Wow!  It opens up to the "account dashboard" and in big red letters it tells me I "need" $15,542/month in retirement and I am screwed because at my maxed out contribution I am way behind!  I am not going to be able to even handle that level of international partying at the age they plan on me retiring - 67!

Based on my RE plan I am going to be like $13,500 per month short according to them.

This is comical.  But on the flip side I know there are people working around me that believe this crap and it's reinforced by the yearly personal planner meetings with the financial company reps.  I would be freaked out if I believed this!  Sad.
« Last Edit: January 05, 2016, 04:14:39 PM by forward »

Zamboni

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Re: Wow, $15,542 per month.
« Reply #1 on: January 05, 2016, 04:15:36 PM »
Aw man, I wish the dashboard was telling me that.

So jealous.

JZinCO

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Re: Wow, $15,542 per month.
« Reply #2 on: January 05, 2016, 04:30:11 PM »

Based on my RE plan I am going to be like $13,500 per month short according to them.
Inflation adj?
Probably using % of income as a rule for spending, right?

GuitarStv

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Re: Wow, $15,542 per month.
« Reply #3 on: January 05, 2016, 05:27:55 PM »
Jesus . . . how do you spend 13 grand a month in retirement?

nobodyspecial

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Re: Wow, $15,542 per month.
« Reply #4 on: January 05, 2016, 10:05:54 PM »
Jesus . . . how do you spend 13 grand a month in retirement?
Same as you would spend it now but you have more time to do it.

cawiau

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Re: Wow, $15,542 per month.
« Reply #5 on: January 05, 2016, 10:48:46 PM »
The 15 grand is not in today's dollar but more so 30-40 years down the line depending on OP's age.

Looking at my dashboard on wellsfargo it states I will need $13,520/month when I retire or 80% income replacement.

It uses my current age (30) retirement age 65 and life expectancy to 95, my current base salary. You can edit your dashboard by the way OP, at least I can

Because when I change my retirement age from 65 to 55 it drops to $10,060.

Now looking at inflation calculators $1.00 in 1980 had the same buying power as $3.06 in 2015, annual inflation over this period was 3.25%

While the past does not predict the future, you can use it as a baseline. So it is logical for them to deduct the following 2 assumptions:
- I will need more $$$ in the future to maintain the same standards (price of things going UP not down, inflation, etc)
- I will need 80% of my current income to maintain the same lifestyle (mortgage payment replaced by health insurance, medical etc).

So current base income of ~$6,000/month... 80% being ~$4,000 and with inflation needing about 3 times = ~$12,000/month

There you go. While yes you can argue that in retirement I may spend less than 80% of my current income (way less if you take out our $2,300/month mortgage and $1,500/month student loan payments) ... One thing remain certain: $1,000 today will NOT have the same buying power as $1,000 in 35 years.

Sorry just the math geek in me.



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JrDoctor

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Re: Wow, $15,542 per month.
« Reply #6 on: January 06, 2016, 01:04:05 AM »
As above, inflation might make $10,000 not seem like alot of money.

frugalnacho

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Re: Wow, $15,542 per month.
« Reply #7 on: January 06, 2016, 10:17:38 AM »
My 401k is telling me i'm on track for $17k/mo in retirment. 

JR

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Re: Wow, $15,542 per month.
« Reply #8 on: January 06, 2016, 10:46:17 AM »
The retirement calculator provided in my Fidelity 401k at least uses real dollars. The information it provides is pretty reasonable as well.

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Re: Wow, $15,542 per month.
« Reply #9 on: January 06, 2016, 11:59:35 AM »


Yes, looking closer it is inflation adjusted.  That said, they are planning on me livin large.  I'm not planning on that.

cawiau

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Re: Wow, $15,542 per month.
« Reply #10 on: January 06, 2016, 12:24:33 PM »



Yes, looking closer it is inflation adjusted.  That said, they are planning on me livin large.  I'm not planning on that.

No they are planning on you maintaining somewhat the same lifestyle you have now based on your income and general ideas of how human act.

Mustachian a represent a small percentage of the population at large. Most people on average spend 100% of what they make if not more (debt).

So they are assuming if you are not working you will be spending time and money on other things to fill out the time or give or take 80% of your previous income.

It may not be right for you or me because personally we are already living on less than 50% of our gross income and we are pretty comfortable so I don't see that increasing in retirement but just within my immediate family I can pick 10 people that probably will spend more than that and some (while I love them dearly) that had to go back to work because they were spending so large the first 5 years of their retirement.

Unless YOU built a calculator with the specific that applies to you, most calculators found on line or available will make general assumptions and deliver a number based on those assumptions.

It is not wrong, it's just not tune to your specific situation:
- spend way less than you make
- intend to retire early
- live on bare minimum

To you it might be living large, to others it might be maintaining the same lifestyle they are used too... More and more retirees have a mortgage, credit card debt than ever before.

Not having one of your biggest expense in retirement (mortgage) was one way to secure a sound retirement.


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frugalnacho

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Re: Wow, $15,542 per month.
« Reply #11 on: January 06, 2016, 12:40:16 PM »



Yes, looking closer it is inflation adjusted.  That said, they are planning on me livin large.  I'm not planning on that.

No they are planning on you maintaining somewhat the same lifestyle you have now based on your income and general ideas of how human act.

Mustachian a represent a small percentage of the population at large. Most people on average spend 100% of what they make if not more (debt).

So they are assuming if you are not working you will be spending time and money on other things to fill out the time or give or take 80% of your previous income.

It may not be right for you or me because personally we are already living on less than 50% of our gross income and we are pretty comfortable so I don't see that increasing in retirement but just within my immediate family I can pick 10 people that probably will spend more than that and some (while I love them dearly) that had to go back to work because they were spending so large the first 5 years of their retirement.

Unless YOU built a calculator with the specific that applies to you, most calculators found on line or available will make general assumptions and deliver a number based on those assumptions.

It is not wrong, it's just not tune to your specific situation:
- spend way less than you make
- intend to retire early
- live on bare minimum

To you it might be living large, to others it might be maintaining the same lifestyle they are used too... More and more retirees have a mortgage, credit card debt than ever before.

Not having one of your biggest expense in retirement (mortgage) was one way to secure a sound retirement.


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I think they are planning that he will continue to save the same percentage of salary, get modest raises each year, work until age 67, retire and withdraw until the average age of death, all while receiving average market returns (less their cut) because that's the predefined schedule of how you're supposed to live your life according to the 401k administrator.  Using those assumptions everyone on this site should have ridiculously high withdraw "estimations".

JZinCO

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Re: Wow, $15,542 per month.
« Reply #12 on: January 06, 2016, 01:22:00 PM »



Yes, looking closer it is inflation adjusted.  That said, they are planning on me livin large.  I'm not planning on that.

No they are planning on you maintaining somewhat the same lifestyle you have now based on your income and general ideas of how human act.

Mustachian a represent a small percentage of the population at large. Most people on average spend 100% of what they make if not more (debt).

So they are assuming if you are not working you will be spending time and money on other things to fill out the time or give or take 80% of your previous income.

It may not be right for you or me because personally we are already living on less than 50% of our gross income and we are pretty comfortable so I don't see that increasing in retirement but just within my immediate family I can pick 10 people that probably will spend more than that and some (while I love them dearly) that had to go back to work because they were spending so large the first 5 years of their retirement.

Unless YOU built a calculator with the specific that applies to you, most calculators found on line or available will make general assumptions and deliver a number based on those assumptions.

It is not wrong, it's just not tune to your specific situation:
- spend way less than you make
- intend to retire early
- live on bare minimum

To you it might be living large, to others it might be maintaining the same lifestyle they are used too... More and more retirees have a mortgage, credit card debt than ever before.

Not having one of your biggest expense in retirement (mortgage) was one way to secure a sound retirement.


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I think they are planning that he will continue to save the same percentage of salary, get modest raises each year, work until age 67, retire and withdraw until the average age of death, all while receiving average market returns (less their cut) because that's the predefined schedule of how you're supposed to live your life according to the 401k administrator.  Using those assumptions everyone on this site should have ridiculously high withdraw "estimations".
Yeah. I'm intrigued at the strategy to actually calculate all the retirement needs and desires to arrive at an income replacement rate required. But budgeting retirement expenses sounds too uncertain for me.
In my case I do plan on that 80% replacement rate even though I current live on <30% because I want to live large :)

That said, I love personal capital's retirement calculator because it's that much harder to fool yourself when you are using actual expenses and savings values.

cautiouspessimist

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Re: Wow, $15,542 per month.
« Reply #13 on: January 06, 2016, 01:59:23 PM »
The only interesting thing my 401k dashboard did was let me set it up to tell me "Welcome, Overlord" rather than my name.

cloudsail

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Re: Wow, $15,542 per month.
« Reply #14 on: January 06, 2016, 02:31:50 PM »
Hehe, I was chatting about this with my dad (who is in his 50s and retired) when I went to visit my parents over new years. He said every retirement planner he ever talked to based his income needs in retirement on his current income. Since a large portion of his current income went toward retirement savings, this made zero sense to him. Surely he wouldn't need to continue socking away money for retirement when he is already retired! Also he would've paid off his home, put both his kids through college, etc. So eventually he learned to ignore them.

I saw the same kind of thing while managing my husband's 401k recently, and thinking I don't even know how to spend that kind of money.

arebelspy

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Re: Wow, $15,542 per month.
« Reply #15 on: January 07, 2016, 02:34:00 AM »
The only interesting thing my 401k dashboard did was let me set it up to tell me "Welcome, Overlord" rather than my name.

We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

GuitarStv

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Re: Wow, $15,542 per month.
« Reply #16 on: January 07, 2016, 07:55:44 AM »
The only interesting thing my 401k dashboard did was let me set it up to tell me "Welcome, Overlord" rather than my name.

That's pretty awesome!

justajane

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Re: Wow, $15,542 per month.
« Reply #17 on: January 07, 2016, 08:45:02 AM »
My mother in law told me that she and her (now late) husband drew 100K from their retirement last year. They had a gardener, a pool guy, ate out everyday, went on multiple vacations, both international and domestic, had a leased car, etc. Kind of like the average working American in their income bracket.

Now that he has passed away in his early 60s, I'm glad they lived large for the 2-3 years of retirement and that he was able to enjoy his money. It was a second marriage for my MIL and his investment accounts far surpass hers. I don't know the real numbers, but there's no doubt he had way, way more. I think we all knew that he wasn't going to live to 90. His health just wasn't that good. I'm sure he knew it too and did as much as possible in the years he had left. In hindsight, though, why didn't he retire at 55 instead of 60? He certainly had a large enough stash to retire early.   

lisahi

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Re: Wow, $15,542 per month.
« Reply #18 on: January 07, 2016, 09:39:53 AM »
My retirement account from the U.S. government (called Thrift Savings Plan or TSP) says I'm on track to have around 92% of my current income in retirement, although that was before I set my TSP to max out, so I'm doing better than that now. They used 2015 dollars, though, and calculated accordingly to estimates using Social Security and my government pension (which is calculated based on how many years I work). I suppose I should go back and ask how I would do if I retired before 65.

RetiredAt63

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Re: Wow, $15,542 per month.
« Reply #19 on: January 10, 2016, 04:22:30 PM »
Thinking about this - on the forums we plan for 4% SWR assuming an average 7% return, to account for inflation.  And it is real, my first full-time job paid just over $9000/year, and that was REALLY GOOD MONEY!  Of course that was back in 1975  ;-)  Forty years later, not so great.  So if, say, a good before tax retirement income is $50,000 now, what will it be in 2055?

arebelspy

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Re: Wow, $15,542 per month.
« Reply #20 on: January 10, 2016, 05:22:51 PM »
Thinking about this - on the forums we plan for 4% SWR assuming an average 7% return, to account for inflation.

No, we don't.  The 4% rule has nothing to do with that.

The Trinity study was about a historical safemax, not predicting returns and inflation.

Quote
And it is real, my first full-time job paid just over $9000/year, and that was REALLY GOOD MONEY!  Of course that was back in 1975  ;-)  Forty years later, not so great.  So if, say, a good before tax retirement income is $50,000 now, what will it be in 2055?

Mostly irrelevant, because your stache, properly invested, should grow to cover whatever it is.  In other words, hedge against inflation.

It's important to do that, because inflation is the number one enemy of the early retiree (much more so than market crashes), so plan for it, but what the actual number turns out to be is mostly academic beyond that.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

nobodyspecial

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Re: Wow, $15,542 per month.
« Reply #21 on: January 10, 2016, 05:58:55 PM »
It's important to do that, because inflation is the number one enemy of the early retiree (much more so than market crashes),
Is it ?
Hyper-inflation aside, small amounts of inflation go with rising markets.
The real worry would be decades of zero growth or shrinkage - as in Japan.
 

arebelspy

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Re: Wow, $15,542 per month.
« Reply #22 on: January 10, 2016, 11:36:26 PM »
It's important to do that, because inflation is the number one enemy of the early retiree (much more so than market crashes),
Is it ?
Hyper-inflation aside, small amounts of inflation go with rising markets.

Yes.  Inflation, even steady low growth inflation, erodes your buying power.  A market crash you can recover from.  Having much less in real terms a few decades later, not nearly as easily.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

RetiredAt63

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Re: Wow, $15,542 per month.
« Reply #23 on: January 11, 2016, 03:16:05 PM »
OK, that was my take on the 4%, I thought the "rule of thumb" (of course adjusting for reality) was an average return of 7%, of which some has to go to cover inflation and taxes, so the real return is roughly 4% and that can grow the stash or be taken in income after retirement.  Since I am retired on pension, not investment, it is irrelevant to me and I haven't paid much attention.

My point about my starting salary was that back then, an annual income of $70,00 (my end salary 34 years later) would have looked huge (almost 8 times as much), but when I retired it was not a big deal.  So the $15,542/month the OP quoted (don't know present salary so can't compare) looks equally huge from here.  Really, both demonstrate the impact slow (and some not so slow in my case) inflation can have.  What anyone's investments can do over the same time period wasn't what I was looking at.  And of course how many of OP's coworkers have outside investments?  Most will probably be depending on that pension.



Thinking about this - on the forums we plan for 4% SWR assuming an average 7% return, to account for inflation.

No, we don't.  The 4% rule has nothing to do with that.

The Trinity study was about a historical safemax, not predicting returns and inflation.

Quote
And it is real, my first full-time job paid just over $9000/year, and that was REALLY GOOD MONEY!  Of course that was back in 1975  ;-)  Forty years later, not so great.  So if, say, a good before tax retirement income is $50,000 now, what will it be in 2055?

Mostly irrelevant, because your stache, properly invested, should grow to cover whatever it is.  In other words, hedge against inflation.

It's important to do that, because inflation is the number one enemy of the early retiree (much more so than market crashes), so plan for it, but what the actual number turns out to be is mostly academic beyond that.

JZinCO

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Re: Wow, $15,542 per month.
« Reply #24 on: January 11, 2016, 03:59:47 PM »
OK, that was my take on the 4%, I thought the "rule of thumb" (of course adjusting for reality) was an average return of 7%, of which some has to go to cover inflation and taxes, so the real return is roughly 4% and that can grow the stash or be taken in income after retirement.  Since I am retired on pension, not investment, it is irrelevant to me and I haven't paid much attention.

My point about my starting salary was that back then, an annual income of $70,00 (my end salary 34 years later) would have looked huge (almost 8 times as much), but when I retired it was not a big deal.  So the $15,542/month the OP quoted (don't know present salary so can't compare) looks equally huge from here.  Really, both demonstrate the impact slow (and some not so slow in my case) inflation can have.  What anyone's investments can do over the same time period wasn't what I was looking at.  And of course how many of OP's coworkers have outside investments?  Most will probably be depending on that pension.



Thinking about this - on the forums we plan for 4% SWR assuming an average 7% return, to account for inflation.

No, we don't.  The 4% rule has nothing to do with that.

The Trinity study was about a historical safemax, not predicting returns and inflation.

Quote
And it is real, my first full-time job paid just over $9000/year, and that was REALLY GOOD MONEY!  Of course that was back in 1975  ;-)  Forty years later, not so great.  So if, say, a good before tax retirement income is $50,000 now, what will it be in 2055?

Mostly irrelevant, because your stache, properly invested, should grow to cover whatever it is.  In other words, hedge against inflation.

It's important to do that, because inflation is the number one enemy of the early retiree (much more so than market crashes), so plan for it, but what the actual number turns out to be is mostly academic beyond that.
A little more depth.
From the trinity study:
Quote
This analytical approach (what you referred to) provides useful insights, but it
ignores the critical short-term variations in rates of return.
For an investor withdrawing assets from a portfolio, these
short-term variations can have an impact on the ultimate
outcome that is not reflected using long-term averages.
This impact is especially significant for portfolios of common
stocks, since their returns are highly variable.
Their data had 10.5% and 5.7% CAGR for their 60/40 portfolio and taxes were not included.

arebelspy

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Re: Wow, $15,542 per month.
« Reply #25 on: January 12, 2016, 12:43:37 AM »
My point about my starting salary was that back then, an annual income of $70,00 (my end salary 34 years later) would have looked huge (almost 8 times as much), but when I retired it was not a big deal.  So the $15,542/month the OP quoted (don't know present salary so can't compare) looks equally huge from here.  Really, both demonstrate the impact slow (and some not so slow in my case) inflation can have.  What anyone's investments can do over the same time period wasn't what I was looking at.  And of course how many of OP's coworkers have outside investments?  Most will probably be depending on that pension.

I agree.  Future numbers for decades from now always sound huge when put in nominal instead of real dollars.  We're bad at estimating that stuff.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.