Author Topic: How Much Money Does One Need to Have Saved in Order to Retire??????  (Read 5794 times)

detroital

  • 5 O'Clock Shadow
  • *
  • Posts: 39
I am a 55 year old single man who owns his house, has around $270 in 401k and $100 in savings, a new car and an old truck and zero debt.  I'd like to retire ASAP.  The media will say I need a couple million to retire.  I'm looking for badass opinions on what the real number is.

davisgang90

  • Handlebar Stache
  • *****
  • Posts: 1264
  • Location: Roanoke, VA
    • Photography by Rich Davis
This is a great calculator to try out.   Looks like you'll be fine to retire on about $14,000 a year ignoring social security.

http://financialmentor.com/calculator/best-retirement-calculator

jp

  • Stubble
  • **
  • Posts: 129
You have $370,000.  At a safe withdrawal rate of 4%, you can retire if your monthly expenses are less than $1233. 

The whole key here is your monthly expenses.  You will probably need to put that $100k to work too. 


Done by Forty

  • Stubble
  • **
  • Posts: 211
  • Location: Tempe, AZ
    • Done by Forty
A quick and dirty method is to multiply your annual expenses by 25.  That's your number (in today's dollars).

GreenGuava

  • Stubble
  • **
  • Posts: 230
  • Location: Los Angeles
I am a 55 year old single man who owns his house, has around $270 in 401k and $100 in savings

In actual dollars or thousands of dollars?

Any other investments, such as an IRA or taxable accounts?

What are your annual expenses?

detroital

  • 5 O'Clock Shadow
  • *
  • Posts: 39
Come on, thousands.  I have about 6k in a roth.  I some DRIP stocks, probably about $10K or so worth.  I have no idea what my expenses are.  I guess I can look at my annual totals for credit cards (which I always pay in full at the end of the month) and make some guesstimates for annual cash spending.  Haven't done that yet.
« Last Edit: May 24, 2013, 11:15:44 PM by detroital »

GreenGuava

  • Stubble
  • **
  • Posts: 230
  • Location: Los Angeles
Come on, thousands. 

I didn't mean any offense, but I do know people who have asked similar questions where it was just that amount, not thousands.  Not sure what their line of thinking was.


I have about 6k in a roth.  I some DRIP stocks, probably about $10K or so worth.  I have no idea what my expenses are.  I guess I can look at my annual totals for credit cards (which I always pay in full at the end of the month) and make some guesstimates for annual cash spending.  Haven't done that yet.

Go ahead and figure out your annual expenses.  If you need to err, do so on the high side.  Keep also in mind that anything you currently get as a perk at work - such as health coverage - that you want to still have, you'll need to include as an expense, even if you aren't paying for it out of pocket while employed.

If your $100k in savings is in a reasonable mix of investments, and so is your $270k in your 401(k), then if your annual expenses are around $15,000, you should be good to go.   If your expenses are higher, or you want a lower risk set of investments, you'll need to work a bit longer to accumulate the necessary savings.

Koshka

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Do you have any sort of pension?

Will you be eligible for SS?  If so, how much of your expenses will that cover?

Historically if you looked at your portfolio at the time you retired and you took out 4% of that portfolio and then each year inflation adjusted that 4% you would have a safe withdrawal rate to last for a 30 year retirement.

So, someone with a $1,000,000 portfolio could withdraw $40,000 in year 1 and then that $40,000 would be inflation adjusted each year after that.

Now, let's say you have $40,000 a year in expenses, but you have $500,000 in a portfolio.  If you were receiving $20k a year in SS then you might feel $500k in the portfolio was enough.

Obviously there are many variables that affect this.  You need to know what your after retirement expenses will be.  Some will go down (don't have to save for retirement, lower commuting costs for many, lower taxes for many, and so on), while others may go up (health insurance and health care).

Also, in the current environment some people feel that 4% is too aggressive.  Further 4% is based upon someone with a reasonable mix of equities and bonds.  Someone who doesn't have any equities would need a much, much lower withdrawal rate.

Also, how long will your retirement be?  Someone who retires early may need to plan for longer than 30 years.


Hamster

  • Pencil Stache
  • ****
  • Posts: 623
Come on, thousands.  I have about 6k in a roth.  I some DRIP stocks, probably about $10K or so worth.  I have no idea what my expenses are.  I guess I can look at my annual totals for credit cards (which I always pay in full at the end of the month) and make some guesstimates for annual cash spending.  Haven't done that yet.
Annual spending is the most important part of this equation. It is your spending/expenses that determines how much you need to be able to retire.
The next item is the return on your investments (and social security/pension) projections, but first you need to figure out your expenses.

nktokyo

  • Bristles
  • ***
  • Posts: 370
I have no idea what my expenses are.  I guess I can look at my annual totals for credit cards (which I always pay in full at the end of the month) and make some guesstimates for annual cash spending.  Haven't done that yet.

Do that. Why do you use credit cards? Points?

MMMdude

  • Bristles
  • ***
  • Posts: 322
Re: How Much Money Does One Need to Have Saved in Order to Retire??????
« Reply #10 on: June 01, 2013, 01:32:32 PM »
Yes, go ahead and account for your CC transactions last year in the absence of a better tracking method such as Mint or Excel.  Don't forget about non recurring expenses either though.  That truck won't run forever so determine what it costs on an annual basis for replacement.  Same for home maintenance.  Decent rule of thumb is 1% of your home's value annually - if you are handy, less than that.  Vacations, health care, long term care for aging parents, ?????