How much $ to retire and how to fund your lifestyle in retirement

[adiggs]

Keep us posted on how that goes please! There's also the 5-year IRA ladder that you can utilize. The big question is how to handle health insurance.

This is the wildcard for me as well. When I retire, I'll continue to have access to the retiree version of my company's health plan. The good news is that it caps my annual health expenditures (which makes for good insurance - a medical disaster won't change how much I spend on medical that year).

The bad news is that the cap, and pretty close to the minimum as well, works out to around $36k / year for medical insurance plus the copays.

Another great resource on the topic is Mr. Money Moustache, although probably most people here will not subsribe to their ideology of rather extreme frugality. For me, there's a ton of things I would like to do myself that will occupy my time and save me money, but I don't do because I got my day job. So I suspect I'll spend quite a bit less if I stop working.

Working backward through your response . I've encountered Mr. Money Moustache before, but haven't been reading recently. The general idea of living frugally isn't foreign to my wife and I. Our pattern for most of my career was closer to "live on 1/2 of what you make" which has made for many avenues of saving, paying off home mortgage early; that sort of thing. Thanks for the pointer - time to go visit!

So far, I think we'll do ok at spending money in retirement. We've known people that kept on saving, even into their 80s or 90s, rather than spending their money on themselves. We all make our own choices in life, but I prefer to aim for spending nearly my last $ on my last day. We'll see if I can actually do anything like that in practice or not

 

[dakh]

This is the wildcard for me as well. When I retire, I'll continue to have access to the retiree version of my company's health plan. The good news is that it caps my annual health expenditures (which makes for good insurance - a medical disaster won't change how much I spend on medical that year).

The bad news is that the cap, and pretty close to the minimum as well, works out to around $36k / year for medical insurance plus the copays.



Working backward through your response . I've encountered Mr. Money Moustache before, but haven't been reading recently. The general idea of living frugally isn't foreign to my wife and I. Our pattern for most of my career was closer to "live on 1/2 of what you make" which has made for many avenues of saving, paying off home mortgage early; that sort of thing. Thanks for the pointer - time to go visit!

So far, I think we'll do ok at spending money in retirement. We've known people that kept on saving, even into their 80s or 90s, rather than spending their money on themselves. We all make our own choices in life, but I prefer to aim for spending nearly my last $ on my last day. We'll see if I can actually do anything like that in practice or not

This article is of particular interest:
When Your Shitty Health Insurance Doubles in Price

It's great you have some stability in your health insurance situation. In my case I am not concerned by on-going pill popping and such, but I do a lot of extreme sports and have to have good coverage for injury treatment.

Ironically, going with essentialist motto when it comes to possessions and spending has been my desire for a while and I wasn't particularly bad in that respect.. We're moving in that direction but it takes time to make happen! So again, not having to show up for work I think would free up resources to really question what needs to stay and what can go.

Biggest "issue" with retirement for me is just that what I do for money is pretty rad already. Coming up with something even more valuable to contribute is definitely possible but a pretty tall order.

Edit/PS: I don't think for a minute that retiring or not will make me more or less happy. Maybe a tiny bit. Happiness is determined mostly by internal factors

 

[adiggs]

Edit/PS: I don't think for a minute that retiring or not will make me more or less happy. Maybe a tiny bit. Happiness is determined mostly by internal factors

Based on the people I know that have retired, this won't be true (retiring or not won't have much impact on happiness).

If nothing else, retiring from a full time job will provide more time to think.


Or as numerous people have put it to me, after they retired: "where the heck did I ever find the time to go to work 5 days a week, 9 hours a day?" If nothing else, you will acquire this unit of happiness.

I know I've got a honey-do list that's at least 6 months long - that'll be another source of happiness (I'm pretty sure it will be for me).


And yeah - I also agree that happiness is primarily a function of internal factors.

 

[dakh]

Based on the people I know that have retired, this won't be true (retiring or not won't have much impact on happiness).

If nothing else, retiring from a full time job will provide more time to think.


Or as numerous people have put it to me, after they retired: "where the heck did I ever find the time to go to work 5 days a week, 9 hours a day?" If nothing else, you will acquire this unit of happiness.

I know I've got a honey-do list that's at least 6 months long - that'll be another source of happiness (I'm pretty sure it will be for me).


And yeah - I also agree that happiness is primarily a function of internal factors.

You're kidding, right? If I think more, my happiness for sure will go down, retired or not! I get it about time allocation, it's like buying a bigger place to live and all of a sudden you're back to having just a little more crap that fits into it

What made the retired people you know become happier once they retired? I can understand if they had an unsatisfying job, not the case with me though.

 

[adiggs]

You're kidding, right? If I think more, my happiness for sure will go down, retired or not! I get it about time allocation, it's like buying a bigger place to live and all of a sudden you're back to having just a little more crap that fits into it

What made the retired people you know become happier once they retired? I can understand if they had an unsatisfying job, not the case with me though.

I think the core of it was an increased ability to make their own choices about how they spent their time. Which could include continuing to work - the happiness comes from that additional flexibility. Maybe your own job already affords you that flexibility - mine is kind of stuck on the 40h a week thing, and I'm increasingly finding that impinges on how I'd like to spend my time.

 

[MR-MY]

Happiness vs Age curve. Not strictly based on retirement, but related.

 

[ggr]

A good estimate of the amount you need to retire is to find out how much a lifetime annuity (preferably one with some inflation rider if possible) would cost to buy for the age you want to retire. Obviously, you are paying the insurance company whatever profit they make, but they are taking the actuarial risk if you live beyond your projected lifetime. However, if the insurance company is top rated, you will never outlive your annuity payments. You can then determine whether you think your investment (in TSLA) will grow faster than the actuarial projections of the insurance company and self fund your annuity so there will be plenty of money left when you die.

One thing to consider. Do you want to leave anything to anyone when you die? If not, then an annuity might be the safest approach, since you will never outlive it. There are also variations on this, like an annuity with a guaranteed minimum number of payments, in case you drop dead the next day, or one that pays until the death of your spouse. These cost more. You can also donate to a charity and buy a charitable remainder trust or a charitable gift annuity which provides lifetime income with a partial tax deduction for the value of the donation. This also has the benefit of doing good for a charity of your choosing.

I, too, looked up Charitable Remainder Trusts, and I too have had my mind blown. Thanks for this most excellent lead.

I am heavily invested in short- to medium- term TSLA call options, many well into the money. Every trade racks up tax. We can move them into a CRT (a NIMCRUT to be more exact), get a tax deduction now, and get income for the rest of our lives... then when we're done, the charities we were going to give the money to anyway will get what's left. Fabulous!

 

[Nate the Great]

That blog (Financial Samurai) always made me feel inadequate with sky high "averages" but then I invested in TSLA and quickly joined the top 5% of my age bracket
But 0.5% withdrawal rate though? That can't be reasonable for most people, especially those of us who still want to and can earn money while doing things we love, right?
Looking at 4%, I can probably quit next year to take an unpaid intern job at Giga Austin

It is called F I R E. Finacial Independent Retire Early. One idea is to take a less stressful position, that may have health care in it (part-time). In general, the rule is 4 percent. If you had one million that would be 40K. 2 million 80K. This also depends on your lifestyle. Fancy vs. lean.

 

[MABMAB]

I don’t think there is a general rule. People talk all kinds of numbers on the internet and in studies. Read up on the basics of different strategies and ponder what could work for you in your situation.

even with a 4 percent rule there are many things to consider, keep $ constant, use 4 percent of ongoing savings, adjust for inflation, start at 4 and adjust? So much to evaluate

 

[Stretch2727]

I don’t think there is a general rule. People talk all kinds of numbers on the internet and in studies. Read up on the basics of different strategies and ponder what could work for you in your situation.

even with a 4 percent rule there are many things to consider, keep $ constant, use 4 percent of ongoing savings, adjust for inflation, start at 4 and adjust? So much to evaluate

Agreed many things to consider including taxes as well. A few comments on this.

-Low/no debt (i.e. no mortgage.) could allow you to live at a level to avoid taxes on your social security benefits. The calculation is highly complex and allows for more income than it first appears. Not sure I will be able to avoid SS taxes but I am trying to build up the Roth side so maybe I can avoid some years.

-I was researching my state taxes. There is an income exclusion for retirement income up to $100K. But if you take out $100,001 you pay taxes on the entire amount. Also, highly complex. Again, a Roth could help here.

-Although I don't plan to pull more than 4% from my investments in any year the general plan is 3 buckets.

-Bucket 1 - Enough to cover 18-24 months expenses in a money market. (8-10%)
-Bucket 2 - More stable mutual funds with a mix of stock/bonds. (10-20%)
-Bucket 3 - High growth funds and individual stocks. (70-80%)

The idea is to sell bucket 3 into bucket 2 and into 1 as the market is doing well. The 18-24 months in a money market are to cover dips in the market and avoid selling at the lows. In theory you sell about 5% of the high growth bucket per year which should sustain this investment if you can avoid selling when it is down.

 

[outdoors]

Didn't read anything but the title.

I never will retire. I am to the point where I am done monetarily for what my family needs. Wants can be fulfilled in many ways. Depends on what makes you happy. Needs I find very basic.

Just want to find more ways in my life to enrich others that I know or who I have never met that are in need. That will be my work till the day I die. Very personal thing for me, that pays its rewards not in dollars or gold, but with a smile and a hug(when we could do that).

I find the word retirement a little dated. Hey to each his/her own.

 

[Erleichda]

The biggest question for me (over two decades to go before Medicare kicks in) is health insurance (since the US is a nightmare for non-employer-provided healthcare). If we were to retire anytime soon, we'd both likely continue working half-time in a job we enjoy in order to maintain insurance for some period of time.

As for number, I've always eyeballed $5M and a 3% withdrawal rate to be conservative. Realistically could likely do with a lower # if we continue working for several years part-time.

Great idea for a thread, as there's no perfect answer so reading everyone's thoughts is enlightening.

Ditto, 50yo here. We will be messing around for the next 5 years to see if we are ready at 55 but will continue to work part time and live part time in lower COL areas. Our spending will go down over 70% once kids gone too.

 

[Erleichda]

When my dad first retired, he calculated what it costs to live and he was able to retire at 62. What he didn’t account for is the expense of entertaining himself those extra 10 hours per day when he used to be working. He assumed his spending would be the same after retirement, but he quickly realized that entertainment was becoming expensive. Ten extra hours is a lot of time to kill daily and boredom promotes spending. He wound up going back to work. He did say that going back to work was nice in a way because he wasn’t really there because HAD to be. Rather, he was there because he WANTED to be and that makes the job much less stressful.

Start your curiosities now. Between outdoor activities, astronomy, music, computers, woodworking, travel and climate advocacy I already have too full of a schedule to work BEFORE I've retired! Those who fail at retirement have a lack of creativity really.

 

[Snerruc]

Going back to the original topic, I retired 33 years ago with a little over a million. I now have roughly 5 times that. Half tax free munis half income stocks. Typical bond rate at the time was 8-10%. As rates drifted down, I moved towards stocks. Always lived off the income, put 2 kids through college did without medical insurance until Medicare. Nowadays you smart guys would probably use derivatives rather than interest. 8 million dollars is plenty if you live in a state with a reasonable cost of living. You should never need to touch principal.

 

[Nate the Great]

@Snerruc

What do you mean derivatives?

Are you referring to stock splits?

 

[Snerruc]

@Snerruc

What do you mean derivatives?

Are you referring to stock splits?

People using things like puts, calls, leaps. Much riskier for most of us in my opinion and a lot more work. I admit, I was lucky to retire when interest rates were high. I have a friend who uses mortgage securities for income, bu to he is smarter than me and very careful.

 

[Oil4AsphaultOnly]

Going back to the original topic, I retired 33 years ago with a little over a million. I now have roughly 5 times that. Half tax free munis half income stocks. Typical bond rate at the time was 8-10%. As rates drifted down, I moved towards stocks. Always lived off the income, put 2 kids through college did without medical insurance until Medicare. Nowadays you smart guys would probably use derivatives rather than interest. 8 million dollars is plenty if you live in a state with a reasonable cost of living. You should never need to touch principal.

Thanks Snerruc for first hand experience!

In these 33 years, I'm assuming you drew down less than your investment's growth rates? I'm also assuming your investments aren't in any sort of tax-deferred account? In which case, wouldn't the dividends from your income stocks mean a higher tax bill each year? Did you do any pre-planning to minimizing the tax hit before retiring?

 

[Snerruc]

Thanks Snerruc for first hand experience!

In these 33 years, I'm assuming you drew down less than your investment's growth rates? I'm also assuming your investments aren't in any sort of tax-deferred account? In which case, wouldn't the dividends from your income stocks mean a higher tax bill each year? Did you do any pre-planning to minimizing the tax hit before retiring?

I never drew down capital. Most of the income in the early years was from tax free muni’s. They often paid better than corporate bonds and no tax. Most years I paid almost no tax. If you pick income stocks well, you get surprisingly good growth. Today this wouldn’t work. I would probably pick a group of high dividend stocks with not a lot of money in any one. Preferably ones with a record of growing dividends. 2-3 stocks like Microsoft and Apple, probably not Tesla early on. I know this isn’t a popular way to do things on TMC, but it works for me. It helps big time to live in a low cost state and have modest wants. Most years when kids weren’t in school, we didn’t spend all the income. Nowadays it lets me pay my wife’s care bill without invading capital and guarantee her care after I’m gone.

 

[Oil4AsphaultOnly]

I never drew down capital. Most of the income in the early years was from tax free muni’s. They often paid better than corporate bonds and no tax. Most years I paid almost no tax. If you pick income stocks well, you get surprisingly good growth. Today this wouldn’t work. I would probably pick a group of high dividend stocks with not a lot of money in any one. Preferably ones with a record of growing dividends. 2-3 stocks like Microsoft and Apple, probably not Tesla early on. I know this isn’t a popular way to do things on TMC, but it works for me. It helps big time to live in a low cost state and have modest wants. Most years when kids weren’t in school, we didn’t spend all the income. Nowadays it lets me pay my wife’s care bill without invading capital and guarantee her care after I’m gone.

Sounds nice! Thanks for sharing! I live poor (high cost of living area for work and the kid's schooling), so my only available capital are locked up in my IRA that I can't touch without incurring some sort of penalty. So investing in growth stocks made the most sense there.

 

[juanmedina]

A good visual of safe withdrawal rates:

Will 50% in Tesla and the rest in bonds counts ?