Whew, what a relief, my wife and I don't need to save anymore. How do I know this? Well I plugged our numbers into a retirement calculator on Yahoo Finance and according to the calculator if we wait until I am 70 to draw social security we will take in $97, 197 and our income need will only be $79, 181 (we live quite a ways below our means). This really is a load off my mind because we "spend" a lot of money funding our various retirement accounts and now with this news we can just spend the money on fun stuff. For that matter we can spend what we have already saved because our social security will always be more than our income need.
What could go wrong?
It seems like anytime I look at one of these calculators it tells me we will have a gajillion dollars leftover if I die at 110. I'm not one for relying on this sort of thing. I have written before about whether brokerage firms tell people to save too much, not that I have an answer to that but the idea of saving too much seems silly, the sellside's motivation notwithstanding.
Barry Ritholtz had a link to a post on a blog called The Float that warned about inflation, more specifically purchasing power risk, being the biggest risk to a successful retirement. Within that post was a link to a WSJ article on the subject that included a profile on what seemed like a financially normal retired couple that spend $11,640 per year on various medical coverages including long-term care insurance. They also set aside another $3000 for "uncovered costs."
My wife and I spend about $2400 on insurance and maybe another few hundred on checkups (high deductible HSA) so $11,000 seems high to me but obviously I don't have the right perspective. The point is that medical expenses are high now for retired people and should be expected to take up more of people's budgets in the future. As a 41 year old trying to save I have no clue what my medical expenses will be in 30 or 40 years. What is your time horizon for retiring? Do you have a clue as to what your medical expenses will be?
Given the variable nature of this, the need to save as much as possible seems fairly obvious. There are, reasonably speaking, several big unknowns but, recurring theme, you still need to map something out if you have not already done so.
What do your numbers look like with social security? How about without? Are you counting on an inheritance? What if it somehow falls through? Are you planning to work forever? What if you can't?
These are questions we all have to factor in and ask again every so often.
Wikinvest Wire
5 comments:
As a 35 yo Gen Xer, I never run my numbers including SS. I save for retirements based upon the assumption that SS will long be defunct by the time I need it.
This assumption does not bother me, until the end of the year when I see how much SS tax has been stolen from me, knowing that I won't see a dime of it.
I have to work a few more years till my US social security even begins to "vest" so I've always thought of it as just a tax. I won't get any benefits out of the Australian government unless things go really wrong and I end up destitute (it's means tested and pays little anyway). Main plans are saving and investing (at about $430k so far at age 42) and inheriting (a lot more than that assuming it doesn't blow up or something). Good to have backup plans.
Interesting how 401ks were originally thought of as supplemental retirement funds and now most younger people think of social security as a possible supplemental.
Roger:
As a 52 yr. old, I have figured my wife and I will need a nest egg of at least 2.4 million to be able to retire. I have based it on a conservative annual portfolio return of 7.5% =$180,000. withdrawing 4% per year of the total return per year to end up around $96,000. If the return is greater all the better.
I have come up with this figure by polling my friends and associates on how much the need in their already retired lives in 2007.
I have been given figures ranging from $56,000 up through $77,000.
All of these retirees have comp lifestyles to ours... all homes are payed for. The high range ($77,000) includes a couple with 2 homes in NJ, one being on the ocean. (NJ has very high property taxes) So, your location from a property tax liability can vary widely.
In addition to this amount I have factored another $250,000. savings will be need for healthcare costs. Again 7.5% for a total return of $18,750.00.
I have been self employed with a SEP and recently a individual 401k. We both contribute the max everywhere we can but both still enjoy taking time off and traveling.
I believe that one cannot count on anyone other then themselves, so this approach is to me prudent.
I have not based my future on inheriting any money, winning the lottery, or any help from my Uncle Sam.
Retirement planning to me is about managing your lifestyle choices both while working and once you stop.
Nothing is guaranteed, and health should be not taken for granted. A good friend and his wife recently retired from their own business only to have one of them become terminally ill at 67.
All of us should try to also take advantage and enjoy our current lives as well as managing for the future.
Its all a question of balance.
JimP
JimP
great post. Good grief though, property tax in some places really can be a kick in the stomach.
you can only save what you can save and you can be prudent in your decision making.
Your grasp of 4% may make you unqiue based on some recent conversations I have had so good for you.
I would add the concept of different streams of income to assemble a retirement paycheck. part time work, eBay, pension, SS, portfolio, inheritance. Here I am talking generally not specifically to you. These things all gain visibility at different times.
If your mom is 105, has $6 million and likes you, well you see where I am headed.
thanks again
I mostly could not get the calculator to work.
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