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#14176 | |
(Sir/Yes Sir/Aye Aye Sir)
Join Date: Oct 2009
Location: Diving
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Posts: 117,743
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#14177 | |
(Sir/Yes Sir/Aye Aye Sir)
Join Date: Oct 2009
Location: Diving
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I certainly did exactly that didn't really allow myself to need "great gains" in the retirement account to keep my travel life going for a couple of decades. After that, when I can't dive, they can put me in a nice retirement community and let me eat pudding.. ![]() ANd last, be weary of the hordes of "retirement planners" who want to work with you, I found that most of them just want your nest-egg to invest. While that's not bad, I found it rather annoying that I could Google and learn about as much as any of them could offer in terms of ideas and concepts. Once you've studied-up on retirement concepts I suspect you'll find the meetings boring. Start with Googling the "4% rule, that might start some poop around here, and it should give you an idea to start with, then it can branch into a lot of other areas to learn. But start with a number you'll need to be able to live, then a number for what you'll need to live well, doing the stuff you're passionate about. |
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Posts: 117,743
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#14178 | |
NFL's #1 Ermines Fan
Join Date: Jul 2001
Location: My house
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For my entire career, I put money into retirement accounts every year. I never did the math on whether it was enough. I just put in the minimum amounts to get benefits in my younger years (e.g., matching, tax breaks), and then one I got to a measure of financial security I started putting more in, again never calculating whether it was enough. As I got older, I always had a little rule of thumb in my mind that I needed 25 times my (and my wife's) annual salary in savings to afford retirement. That was a really simple formula that I'd read in a few places, and it seemed kind of reasonable. But I always wondered how good an estimate it was. The Covid shutdown was a pivotal point for me. My work slowed down dramatically and we weren't going out, so I suddenly had some free time. I was binge-watching King of Queens and suddenly thought, "Maybe I should do a little work to get a better retirement number." I went out and looked at some retirement planning calculators, and I didn't like how they worked. They seemed too simplistic, and the results were all over the place. So I decided to build a custom calculator for myself. I got into Excel and thought I'd take 15 minutes to come up with an estimate. I realized that there were a few key variables: my savings, how long I would work, my investment return rates, inflation, and my spending. Then I realized that another key factor was how long I was planning for - age 85, age 90, age 100? Social Security was also an issue. I ended up building a pretty complex financial model where I could change these assumptions and play around with them and see how my savings would change over time. I learned a whole bunch of things in the process. 1. Savings is obviously important, but the more important thing is how long it'll last. Years of funding are the measure to keep in mind more than just money. 2. Some things are under my control (savings, career length, spending), and some aren't (inflation and rate of return). 3. Taxes make a big difference, and there are some things like Roth Conversions that really help. 4. I've got a lot of home equity. Initially, I concluded that I might be better off moving to a cheaper market, but since my house produces income (it has an attached apartment), I'm better off staying put. But for most people, it might make sense to move if you have a ton of home equity. You want your money to be producing income, not just non-liquid wealth accumulation. After putting all of this together, I concluded that it was pretty safe for me to retire. There are some scenarios where I won't have enough money at some point, but those are mostly due to improbable events outside my control. While I'll always worry a bit about those scenarios, there's nothing I can do about them so they don't affect my thinking. My wife and I talked it over and decided we could retire as soon as we could figure out an endgame for our company (which we ended up transferring to an employee group). But in the meantime the stock market tanked badly (was that 2022?). I kept updating the model regularly and saw that we could survive that, though it wasn't fun to worry about it. We worked another year, which saw the stock market skyrocket, and all of a sudden we'd overshot our needs by a large margin. I learned from this that I can't fret about stock market moves because we're in good shape in all probable scenarios. Therefore, we're retiring. |
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Posts: 142,181
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#14179 | |
Starter
Join Date: Aug 2019
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I had never heard the 25x salary rule of thumb though it does seem right around the minimum target I kind of have in the back of my mind. Out of curiosity, how close was that estimate to the detailed spreadsheet you worked out? Seems like 25x salary saved should allow one to live pretty comfortably on interest/growth alone without ever touching much of the principal? |
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Posts: 444
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#14180 | |
NFL's #1 Ermines Fan
Join Date: Jul 2001
Location: My house
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Posts: 142,181
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