Author Topic: All of the retirement guidance based on my salary was scary  (Read 12302 times)

blue_green_sparks

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All of the retirement guidance based on my salary was scary
« on: October 15, 2019, 09:06:07 AM »
I did my own spreadsheets but I kept thinking I was missing something. With zero debt and a beautiful home in a park-like setting, we want for nothing. The online guidance is off if you are applying your money wisely.

PhilB

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Re: All of the retirement guidance based on my salary was scary
« Reply #1 on: October 15, 2019, 09:18:24 AM »
That's because it assumes you were spending your salary - not saving it to buy your freedom!

ysette9

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Re: All of the retirement guidance based on my salary was scary
« Reply #2 on: October 15, 2019, 10:04:24 AM »
No kidding. Done of those online calculators are ridiculous. I remember one telling me I couldnít retire yet because I was nowhere near saving the $10M I would clearly need to continue my current lifestyle.

BlueHouse

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Re: All of the retirement guidance based on my salary was scary
« Reply #3 on: October 15, 2019, 10:10:41 AM »
That's because it assumes you were spending your salary - not saving it to buy your freedom!
Yeah, how hard could it be to add a line that says "how much of your salary do you NOT spend?"

GuitarStv

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Re: All of the retirement guidance based on my salary was scary
« Reply #4 on: October 15, 2019, 10:11:39 AM »
That's because it assumes you were spending your salary - not saving it to buy your freedom!
Yeah, how hard could it be to add a line that says "how much of your salary do you NOT spend?"

Why add a line that nobody ever uses?

reeshau

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Re: All of the retirement guidance based on my salary was scary
« Reply #5 on: October 15, 2019, 01:35:47 PM »
That's because it assumes you were spending your salary - not saving it to buy your freedom!
Yeah, how hard could it be to add a line that says "how much of your salary do you NOT spend?"

Why add a line that nobody ever uses?

Maybe they used to have it, but too many people complained about the ridiculous question.

markbike528CBX

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Re: All of the retirement guidance based on my salary was scary
« Reply #6 on: October 15, 2019, 02:14:07 PM »
No kidding. Done of those online calculators are ridiculous. I remember one telling me I couldnít retire yet because I was nowhere near saving the $10M I would clearly need to continue my current lifestyle.
Do you remember which one?  I'd like to see what I should have saved up for, before I FIREd a year ago :-)

G-dog

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Re: All of the retirement guidance based on my salary was scary
« Reply #7 on: October 15, 2019, 02:32:05 PM »
This actually kept me from retiring for awhile, because when I would search for (or ask for) guidelines this was the nonsense I would get! You need enough to cover at least 80% of your salary. Umm, I donít spend 80% of my salary now... this doesnít make sense.

Finally I found the expense based guideline, which set me free 4.5 years ago.

ysette9

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Re: All of the retirement guidance based on my salary was scary
« Reply #8 on: October 15, 2019, 03:34:40 PM »
No kidding. Done of those online calculators are ridiculous. I remember one telling me I couldnít retire yet because I was nowhere near saving the $10M I would clearly need to continue my current lifestyle.
Do you remember which one?  I'd like to see what I should have saved up for, before I FIREd a year ago :-)
It was USAAís internal tool for members once you are logged in. The sad thing is their previous iteration of the tool used to have a custom retirement spending option (because I had specifically asked for it) so you could put in reality instead of just estimating 70% of your salary or whatnot. At some point if I am on the phone with them again Iíll complain.

2sk22

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Re: All of the retirement guidance based on my salary was scary
« Reply #9 on: October 15, 2019, 03:48:18 PM »
This actually kept me from retiring for awhile, because when I would search for (or ask for) guidelines this was the nonsense I would get! You need enough to cover at least 80% of your salary. Umm, I donít spend 80% of my salary now... this doesnít make sense.

Finally I found the expense based guideline, which set me free 4.5 years ago.

Similar story: I read similar advice many years ago and as a result, I simply did not think I'd ever be able to retire. Earlier this year, I had an incredible moment of joy when I realized I was already financially independent by any reasonable reckoning :-)

G-dog

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Re: All of the retirement guidance based on my salary was scary
« Reply #10 on: October 15, 2019, 04:04:32 PM »
This actually kept me from retiring for awhile, because when I would search for (or ask for) guidelines this was the nonsense I would get! You need enough to cover at least 80% of your salary. Umm, I donít spend 80% of my salary now... this doesnít make sense.

Finally I found the expense based guideline, which set me free 4.5 years ago.

Similar story: I read similar advice many years ago and as a result, I simply did not think I'd ever be able to retire. Earlier this year, I had an incredible moment of joy when I realized I was already financially independent by any reasonable reckoning :-)

I KNOW, RIGHT?  I left my job within about 15 months!  I was close to the minimum age to technically retire, so I waited until then and used the time to better position myself, get some things set up, and capture my retirement benefits.   But it is like it all fell into my lap.

Trudie

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Re: All of the retirement guidance based on my salary was scary
« Reply #11 on: November 11, 2019, 11:38:08 PM »
I ignored online calculators and did my own spreadsheets to calculate an expense based approach.  So, I had plenty of left brain analysis to support our decision.  But, it was truly an emotional and physical reckoning with how miserable we were at our jobs that pushed us to make the decision when we did.

Now, almost six months after both of us quitting we seem to be weathering the transition pretty well.  We own our home outright, have no other debts, and using a 3% WR have more than we know what to do with.  We probably eat out more than we should and we donít track expenses, but our lifestyle isnít more expensive than it used to be.  But, how we spend our money has changed.  We spend way less on cars and gas and use buses or walk many places.  We buy tickets to lots of plays, concerts, and classes.  We go to many free events at the state university nearby as well.  We are staying active and curious and feel like we live like royalty.  As long as we stay within bounds of our WR I really donít pay attention to where it goes.  I feel pretty damn free.

soccerluvof4

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Re: All of the retirement guidance based on my salary was scary
« Reply #12 on: November 13, 2019, 04:17:26 AM »
I ignored online calculators and did my own spreadsheets to calculate an expense based approach.  So, I had plenty of left brain analysis to support our decision.  But, it was truly an emotional and physical reckoning with how miserable we were at our jobs that pushed us to make the decision when we did.

Now, almost six months after both of us quitting we seem to be weathering the transition pretty well.  We own our home outright, have no other debts, and using a 3% WR have more than we know what to do with.  We probably eat out more than we should and we donít track expenses, but our lifestyle isnít more expensive than it used to be.  But, how we spend our money has changed.  We spend way less on cars and gas and use buses or walk many places.  We buy tickets to lots of plays, concerts, and classes.  We go to many free events at the state university nearby as well.  We are staying active and curious and feel like we live like royalty.  As long as we stay within bounds of our WR I really donít pay attention to where it goes.  I feel pretty damn free.


Thats the way to do it.

Hikester

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Re: All of the retirement guidance based on my salary was scary
« Reply #13 on: November 21, 2019, 09:06:45 PM »
That's because it assumes you were spending your salary - not saving it to buy your freedom!
Yeah, how hard could it be to add a line that says "how much of your salary do you NOT spend?"

I think those calculators are trying to scare people into actually not retiring.

moof

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Re: All of the retirement guidance based on my salary was scary
« Reply #14 on: November 22, 2019, 04:04:53 PM »
The example I use on folks to point out the absurdity of these things is getting a large raise.  Will it help or hurt you in getting to retire?

Common sense* says that if you maintain lifestyle and save the rest you racing towards your number much faster.

However a 20% raise means wage based calculators will report your savings are now 20% further away from your "number", and therefore you are more years away from retirement.

No online calculators I have run across has actually offered up their formula/methodology in a way I can cross check, which makes the results pretty useless even if they were accurate.  Are they using "check point" numbers? Historical data?  Monte Carlo?  Monte Carlo with reversion to mean?  Monte Carlo with inflated sigma?  We all know that nothing can truly predict the future, and the 4% rule does not make you immune to the plague or an apocalypse, but many of these calculators are so flipping conservative that you'd think that was a requirement before you can retire.

*common sense is not very common
« Last Edit: November 22, 2019, 04:12:41 PM by moof »

HenryDavid

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Re: All of the retirement guidance based on my salary was scary
« Reply #15 on: November 28, 2019, 09:15:25 AM »
It's truly shocking how little genuine thought people devote to retirement (or financial independence) planning.

The university I worked at had a online retirement calculator--based on percentage of salary.
When I mentioned that of course it was useless until you actually tracked your real expenses, all my colleagues--smart people--would say "well obviously you need 80% of your salary at least."
They had read this someplace. And never questioned it. And it was the default when you used the online calculator.

So anyhow I retired on an income equal to exactly 50% of highest salary, which turns out to be over 60% of my previous take-home. And it's pretty deluxe.

In terms of time, that means many more years of freedom. Fit and active years, not old and slowing-down years.
Worth a lot to me.

Cassie

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Re: All of the retirement guidance based on my salary was scary
« Reply #16 on: December 01, 2019, 03:36:02 PM »
We found many expenses go down after retiring because they were related to work. Others went up like travel, experiences, etc because we had the time and werenít exhausted.

oldtoyota

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Re: All of the retirement guidance based on my salary was scary
« Reply #17 on: December 01, 2019, 07:40:45 PM »
No kidding. Done of those online calculators are ridiculous. I remember one telling me I couldnít retire yet because I was nowhere near saving the $10M I would clearly need to continue my current lifestyle.
Do you remember which one?  I'd like to see what I should have saved up for, before I FIREd a year ago :-)
It was USAAís internal tool for members once you are logged in. The sad thing is their previous iteration of the tool used to have a custom retirement spending option (because I had specifically asked for it) so you could put in reality instead of just estimating 70% of your salary or whatnot. At some point if I am on the phone with them again Iíll complain.

I adjusted the salary number to attempt to reach a true number. Then I started to use the FIRE simulators instead.=-D

Sandi_k

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Re: All of the retirement guidance based on my salary was scary
« Reply #18 on: December 01, 2019, 09:26:35 PM »
This actually kept me from retiring for awhile, because when I would search for (or ask for) guidelines this was the nonsense I would get! You need enough to cover at least 80% of your salary.

I decided that this rule of thumb was BS long ago. Things I won't be paying for once I'm retired:

1) FICA and OASDI - 8% of my check
2) Mandatory pension contribution: 7.85%
3) Voluntary retirement savings: 14%
4) Parking, FSA, ST disability, LT Disability: 4%
5) Commute costs, currently $250 in gas, plus depreciation of add'l 15k miles per year - 7%

So 40%+ will be done once I FIRE. Add in an additional increase in discretionary funds once the mortgage is paid off, and we will be living luxuriously.

Trudie

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Re: All of the retirement guidance based on my salary was scary
« Reply #19 on: December 10, 2019, 11:19:54 PM »
It's truly shocking how little genuine thought people devote to retirement (or financial independence) planning.

The university I worked at had a online retirement calculator--based on percentage of salary.
When I mentioned that of course it was useless until you actually tracked your real expenses, all my colleagues--smart people--would say "well obviously you need 80% of your salary at least."
They had read this someplace. And never questioned it. And it was the default when you used the online calculator.

So anyhow I retired on an income equal to exactly 50% of highest salary, which turns out to be over 60% of my previous take-home. And it's pretty deluxe.

In terms of time, that means many more years of freedom. Fit and active years, not old and slowing-down years.
Worth a lot to me.

My partner worked at a university and I was always surprised at how many independent thinkers didnít apply the same rigor to their retirement finances.

TVRodriguez

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Re: All of the retirement guidance based on my salary was scary
« Reply #20 on: December 11, 2019, 07:02:41 AM »
No kidding. Done of those online calculators are ridiculous. I remember one telling me I couldnít retire yet because I was nowhere near saving the $10M I would clearly need to continue my current lifestyle.
Do you remember which one?  I'd like to see what I should have saved up for, before I FIREd a year ago :-)
It was USAAís internal tool for members once you are logged in. The sad thing is their previous iteration of the tool used to have a custom retirement spending option (because I had specifically asked for it) so you could put in reality instead of just estimating 70% of your salary or whatnot. At some point if I am on the phone with them again Iíll complain.

I adjusted the salary number to attempt to reach a true number. Then I started to use the FIRE simulators instead.=-D

That's what I do when I happen to run one of those income-based retirement calculators. 

Current (or forecast) spending = 70%.  Income = 100%.  Solve for Income.  Insert Income number into calculator.

StarBright

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Re: All of the retirement guidance based on my salary was scary
« Reply #21 on: December 11, 2019, 07:43:00 AM »
For those who have T Rowe Price, it actually has a great little internal calculator tool (I think they call it Life Path).

It asks you how much you have, how old you are, what age you want to start drawing down retirement funds and how much money you will want to draw down annually (it does not assume salary replacement! and lets you set a goal as low as 10k a year). Then it gives you a score on if your current contributions will be able to reach that goal.

I currently have it set to have me ending contributions when I'm 43, and start drawing down 40k a year when I'm 62. The only thing I haven't been able to factor in so far is taking dividends when I'm 59.5 instead of reinvesting them.

I find it a very fun tool to play around with.

grantmeaname

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Re: All of the retirement guidance based on my salary was scary
« Reply #22 on: December 11, 2019, 08:42:01 AM »
Fidelity has something similar. It's nice that these calculators now let you put in any retirement age, even if it's 32. That has come a really long way from just a couple years ago.

Cassie

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Re: All of the retirement guidance based on my salary was scary
« Reply #23 on: December 11, 2019, 09:09:03 AM »
We are living on a third of our previous income.  This doesnít include travel. That money comes from a separate pot.

GettingClose

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Re: All of the retirement guidance based on my salary was scary
« Reply #24 on: December 11, 2019, 11:39:20 AM »
Quicken has a very nice Life Planner tool, which is expense-based (allowing you to use the spending data you've recorded in Quicken), allows a different retirement age for each spouse and accounts for different lifespans, allows you to include pensions, and several other useful things.  I've used it for guidance, but we've only made decisions after also consulting Firecalc, etc.

Threshkin

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Re: All of the retirement guidance based on my salary was scary
« Reply #25 on: December 17, 2019, 03:27:39 PM »
A couple of good calculators are:

http://cfiresim.com/

and

://firecalc.com/

Both are designed for the FIRE crowd.

Edit:  Looks like Firecalc isn't as robust as I remember it.  Still interesting but cfiresim is much more detailed.
(I haven't used either of these for a while but found them very useful when I was still planning for FIRE.)
« Last Edit: December 17, 2019, 03:36:05 PM by Threshkin »

BlueHouse

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Re: All of the retirement guidance based on my salary was scary
« Reply #26 on: January 19, 2020, 07:59:12 AM »
Quicken has a very nice Life Planner tool, which is expense-based (allowing you to use the spending data you've recorded in Quicken), allows a different retirement age for each spouse and accounts for different lifespans, allows you to include pensions, and several other useful things.  I've used it for guidance, but we've only made decisions after also consulting Firecalc, etc.
I don't know about this tool.  Is it Windows only?   I'm on mac.  Or is it online somewhere?


BlueHouse

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Re: All of the retirement guidance based on my salary was scary
« Reply #27 on: January 19, 2020, 07:59:23 AM »
Quicken has a very nice Life Planner tool, which is expense-based (allowing you to use the spending data you've recorded in Quicken), allows a different retirement age for each spouse and accounts for different lifespans, allows you to include pensions, and several other useful things.  I've used it for guidance, but we've only made decisions after also consulting Firecalc, etc.
I don't know about this tool.  Is it Windows only?   I'm on mac.  Or is it online somewhere?


grantmeaname

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Re: All of the retirement guidance based on my salary was scary
« Reply #28 on: January 19, 2020, 08:25:54 AM »
A quick google says it's windows only.

bluebelle

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Re: All of the retirement guidance based on my salary was scary
« Reply #29 on: January 19, 2020, 10:25:55 AM »
even as a youngun' I thought the 80% of income was a dumb estimate.....My net was never 80% of gross even then....now, after the government gets its cut and I pay for insurance (life, health, disability), and EI (unemployment insurance ), CPP (Canadian Pension plan - so I guess force d savings), I get to 'keep' just less than 60% of my pay.....

I've used those calculators, but I always put in a fake salary that had the 80% come out to be the number I wanted my spend to be.

But I am amazed at how many people out in the 'real world' don't have a clue what their yearly spend is.   I don't track my expenses as closely as some here, and my buckets are rough (ie if I bought it in a grocery - it's grocery even if it was laundry soap, if I bought it at walmart it's home even if it was bread)....95% of our spending is via credit cards, so I just down load the transactions each month, dump them into rough buckets based on 'where' and track that way.   I spend maybe 10 minutes a month doing this, and I have over 5 years of expenses tracked that way....I add in the one-offs or yearly costs and it gives me a pretty good idea of what our spend will be....and my retirement budget has a generous (for me) travel line item, if the market is off or we have an unexpected cost, we don't travel that year.

Hunny156

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Re: All of the retirement guidance based on my salary was scary
« Reply #30 on: January 27, 2020, 01:15:45 PM »
My 401 estimator won't let you retire before 62, and won't let you live on less than 50% of pay, but it will allow you to add in current savings from various sources, SSA estimates and annual income from other sources, so I updated the numbers and added in what I expect annually in rental income.  I'm nearly 44 years old, and while it's fun to see the arrow basically turn to 300% of income replacement, I have a hard time understanding why I would plan to earn $23K/MONTH of retirement income, just to retire at 62!

evanc

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Re: All of the retirement guidance based on my salary was scary
« Reply #31 on: February 13, 2020, 12:13:28 PM »
No kidding. Done of those online calculators are ridiculous. I remember one telling me I couldnít retire yet because I was nowhere near saving the $10M I would clearly need to continue my current lifestyle.
Do you remember which one?  I'd like to see what I should have saved up for, before I FIREd a year ago :-)
It was USAAís internal tool for members once you are logged in. The sad thing is their previous iteration of the tool used to have a custom retirement spending option (because I had specifically asked for it) so you could put in reality instead of just estimating 70% of your salary or whatnot. At some point if I am on the phone with them again Iíll complain.

I adjusted the salary number to attempt to reach a true number. Then I started to use the FIRE simulators instead.=-D

That's what I do when I happen to run one of those income-based retirement calculators. 

Current (or forecast) spending = 70%.  Income = 100%.  Solve for Income.  Insert Income number into calculator.

I think the "traditional" logic goes something like: you currently spent 100% of your income, but by the time you are retired, your house will be paid off (and should approximately be costing you 30% of your income), so therefore you will need 70% of current expenses after retirement.

As so many have said, they obviously overlooked the possibility of NOT spending everything you make. What a concept :)