This is a thing I adore:
http://www.firecalc.com/
Why? Because it asks the question: if the great depression were to happen, would I have enough money to not need to work?
Which may not be the right question, but it is amazing that we have the data to ask it.
http://www.firecalc.com/
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I am disappointed this system wasn't about "Does my retirement plan need to involve someone dying in a fire?"
ReplyDeleteAlso... is that Tom Cruise in the picture? Cause it looks like Tom Cruise to me...
The answer for everyone who isn't a Baby Boomer will be the same: NOPE.
ReplyDeleteMatt Johnson I don't think so ....... But yes, retirement plans effectively involving people dying. Indirectly.
ReplyDeleteLex Larson Maybe!
William Nichols I'm serious! I worked in financial services for 8 years. I've had actuaries and financial advisers (mine included) tell me if anyone Gen X and younger doesn't have at least $3 million in retirement savings, we will have to sacrifice standard of living or work longer before retirement, if we get to retire at all. Many of us will be retiring into new careers because we won't be able to afford to be truly retired.
ReplyDeleteI've heard that, too. I do not know what it is based on. When we spoke to a financial adviser, we heard the exact opposite. I do not know where the 3 million comes from. Do you?
ReplyDeleteWilliam Nichols The magic number used to be $1M, but the revised number of $3M is based on projected inflation, projected health care cost increases and projected decline in social security benefits and the wholesale elimination of pensions for most of the workers of younger generations. That means increased reliance on personal savings to meet increased cost-of-living in order to just maintain one's standard of living in retirement.
ReplyDeleteHuh, I just save 30% of my income in retirement accounts. This means I will only need to replace about 55% of my income in retirement. The other 15% is fica and work wardrobe and commute costs, that I will not have anymore. That is a lot lower than 3 million dollars for me and most people. I think the retirement industry is banking on scare mongering to get money out of people.
ReplyDeleteDianne Harris , I don't think most people can do that!
ReplyDeleteLex Larson The safe withdrawl rate on $3 million is 120,000! That's 4 times my yearly living expenses, which sounds really high!
But, how many years does one need to work to generate sufficient wealth to live on if one saves 30%?
ReplyDeleteWell, I don't feel like doing the math, so I ask the internet.
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
According to this, 30% means 28 years until retirement. If you start working when you are 25, then you can retire at 53. Not bad!
There is, of course, some variation: call it 50 to 55. Still not bad!
Yeah, most people can't put away a third of their income for retirement; they need to use the money for their current cost of living!
ReplyDeleteWilliam Nichols that amount would keep me in my current standard of living. Just par.
... Wait, for serious?
ReplyDelete30% just seems insane... I barely manage to do my work place's matching 6%. Which has a lot to do with my wife's health issues but still... Often I wonder why I am even bothering...
ReplyDeleteAnd as for how much you need, to some degree location will have a lot to do with that, differing costs of living and what not.
I've a feeling Dianne Harris is counting workplace matching to get to 30%
ReplyDeleteI know not everyone can do 30% but many younger people can do 15% and get to retire. It takes commitment to do it while you are younger to get ahead with compounding returns, with a rate that low. I wasn't as diligent as I ought to have been in my 20's but I still am aiming for retirement before 55. Getting to retirement is hard work, but possible.
ReplyDeleteMany younger people can't even get jobs, let alone jobs that have a) retirement benefits and b) pay enough to put any of that money away in retirement accounts.
ReplyDeleteThis isn't about commitment, it's about younger workers graduating with crushing debt (if they're able to get higher education), employers underpaying younger workers, dodging benefits wherever they can and the erosion of the social safety net.
William Nichols Yup. IT Consultant salary, remember?
30% isn't a doable figure for most folks I know, never has been. My folks (who are from the real boomers generation) didn't manage that. My sister, who is in the 6 figure income bracket doesn't manage that, she doesn't even have the ability to put anything aside thanks to her mortgage.
ReplyDeleteMy wife and I have not managed 30% over the past 20 years. The high cost of living and the tight wage market has never managed that.
Insurance and medical costs will suck most of that retirement money down long before the average person can live long on their retirement (which most calculations fail - those costs will exceed your rent/property taxes and maintenance costs by far).
Lex Larson If your standard of living is 120k -- especially if that is spending rather than incoming! -- then I posit an ought: You ought to be saving a ridiculous amount for retirement. Say, maxxing out a 401(k) and an IRA.
ReplyDeleteI'm a 30 something professional in the second highest cost of living area in the country. I don't even get close to earning in the 6 figure range. To save 30% or 15% choices need to be made. Priorities set. Sacrifices made. But once you save for a while, you don't notice it any more, and you get to retire.
ReplyDeleteLet's go back to the original:
ReplyDeleteMe: This thing is neat! Figure out when you can retire.
Lex Larson : If not a boomer, then never.
Dianne Harris : I'm a millennial, and I'll be retired well before 60! I save 30%
I think it is clear that Lex's original position -- a universal declaration of everyone under the age of Boomer's -- is untrue, by virtue of an exception. Would you like to clarify it?
Here's the thing: people of all ages should not have to choose between living comfortably now and living comfortably in their dotage. We shouldn't have to "sacrifice" in order to survive long enough to croak of old age or medical expenses.
ReplyDeleteSo this notion that we all need to just tighten our belts is letting folks like employers, insurance providers and politicians off the hook for their anti-social, worker-hostile policies.
The ability for younger generations to retire in the way Boomers and older generations did in the past is significantly eroded. That is a fact. We've higher costs and lower relative incomes. We've got less benefits and social security isn't all that secure -- and less so for each successive generation.
One person saving 30% of their income doesn't change that, and it's intellectually dishonest to claim I need to revise my position because you want to take a glib comment as gospel, William.
I am living very comfortably now, I have traveled to Hawaii and Australia in the last 6 months. I live in a luxury apartment building, I eat out at least 5 times a week. In the last two years I have spent thousands of dollars out of pocket on medical expenses insurance didn't cover. All on an income way less than 6 figures. I have no idea how other people choose to spend their money. But I feel like more people could choose to be responsible and live in what situation we have now, in case we can't change it for the better soon enough.
ReplyDelete... and I'm not talking specifically about you, Dianne. Sheesh.
ReplyDeleteI'm out; this is going nowhere.
Lex Larson On the contrary, I take universal qualified pretty seriously! That is what I think you may need to amend: As Dianne Harris has shown that the universal is not true.
ReplyDeleteNow, what I think you mean -- and this is me reading with a very charitable interpretation, is this: (Many) Boomers were able to retire without consciously saving for retirement, something that is impossible for non-boomers.
That is, of course, true. But it is also not something easily argued with: it is self-evidently true. Of course those with a pension that pays 2% per year worked and who now pull down their salary without any conscious intervention at all throughout their lives live a different lifestyle than those of us who are working now.
But then, so what? I've never assumed I would have a pension, and have always known my retirement was on me. That it behooves me to encouraged my employer to have a matched 401(k) plan.
This was originally about how cool it is that we have data on the stock market for the last upteen years. That's really cool.