Buiness Insider: How much money you need to retire at every age...

[XC1984]

I saw this article and thought many here would find it very interesting.

https://www.businessinsider.com/how-much-money-need-to-retire-early-on-investment-income-2019-8

Personally, I think it's pretty misleading. I think they are assuming you never sell principal, but rather live on interest income and dividends alone.  They are also looking at after-tax income.

Interested in hearing people's thoughts...

[rantk81]

The numbers they suggest for a 35 year old is assuming about a 2% SWR.  Garbage/useless article.

[XC1984]

Yes, I agree. It just points out the conventional thinking that you have to have a ridiculous amount of money stashed to retire (the Suze Orman approach).

[RWD]

Wow, completely crazy numbers in that article. And not even a passing mention of the well documented Trinity study. Instead they used a Monte Carlo simulation which is always very pessimistic (e.g. the 1929 crash followed immediately by the 2008 crash without recovery in between is considered as a possibility). Also assumes all investments will be in a taxable account and not in retirement accounts because they claim you can't touch retirement accounts until age 59.5 (no mention of  Roth conversion ladder or SEPP 72(t)) which is weird because they also assume you'll need money until age 90, well past age 59.5...

Practically nothing in that article is correct.

[YttriumNitrate]

A 25 year old with six million dollars who put their money with the guy who did these crazy calculations would be paying almost $40k a year in fees to the advisor while living off $100k. That's ludicrous.

https://safelandingfinancial.com/financial-planning-services/

[Much Fishing to Do]

Looks like they basically gave the numbers required if your money were to grow at the rate of inflation and you lived a long life (so being fully invested in TIPs or the like).  Given this I'm not sure why they'd take the risks they suggest in investing (80% in equities, etc)

[simonsez]

The article says it depends on your lifestyle how much you need but then arbitrarily assigns after-tax numbers way higher than what the median/average retiree spends.  I mean, have high numbers, sure - but why not then run the gamut and have say, 20k, 30k, 40k, 50k in addition?  2017 U.S. annual household spending for those under 55 averages 57k, for 55-64 is 59k, for 65-74 is 46k, and for 75+ is 38k.  Not everyone has a household of 2 while in retirement but I think those lower after tax numbers would be better to use and cover many more situations.  If you plan on spending 100k per person in retirement, I don't think taking time reading what businessinsider has to say makes the most sense because you've got to make that tee time with your financial advisor who should be pulling up in the 60k car you helped purchase any moment.

I have a hard time imagining how the hell my wife and I would spend 130k (of post tax 2019 dollars) even if we tried to, let alone 200k, and we are by no means all that Mustachian.

Also, this is picking nits but I thought the adjective 'conservative' was annoying when assuming 3% for inflation.  It hasn't been higher than 3% since 2007.  Was this article written in 1989 rather than 2019 by chance?  I'm fine with using 3% as an assumption but I would think that would be on the aggressive side given recent history (I don't think our government wants flirting with double digit inflation to really exist again if it can be helped) and is more of a worse-than-average scenario.

[SugarMountain]

Also, this is picking nits but I thought the adjective 'conservative' was annoying when assuming 3% for inflation.  It hasn't been higher than 3% since 2007.  Was this article written in 1989 rather than 2019 by chance?  I'm fine with using 3% as an assumption but I would think that would be on the aggressive side given recent history (I don't think our government wants flirting with double digit inflation to really exist again if it can be helped) and is more of a worse-than-average scenario.

We are at a unique time in history where for 10 years we've had very low interest rates and inflation, with a 10 year bull run in the stock market.  At some point we'll pay the piper (likely when the federal debt gets too big and they decide to inflate their way out of it) and have high inflation again.  Will we have 10%+ like the 70s?  I hope not, but it's not out of the question.  Just because we've been around 2% for a number of years now, doesn't mean that 3% is conservative. 

The thing about these articles is they are written to for situations to have basically 95%+ success rates.  Most of the models here on MMM are going to be much more aggressive.  In some cases much, much more aggressive, both on limiting spending and % of stache needed.  A 25 year old retiring after a grueling 4 years of work (ok, maybe they got a paper route at 12 like I did) is going to need to survive for maybe 65 years on their money (maybe 85+ if we start having longevity breakthroughs in that 65 years).  There just aren't enough 65 year periods in modern history to really model what it takes and what is going to happen.  Fiat currencies have only been heavily used for about twice that (and really in the US less than that as the currency was tied to gold until ~50 years ago).

So the reality is nobody know if we're going have hyper inflation or other issues in the next 65 years. Or the next 45 years.  Or the next 30 years.  All you can do is be prepared and flexible.