Money needed to retire - poll

[shalab]

I am assuming a low to moderate withdrawal rate of 2-4% per year for living expenses

[Guest misterstockwell]

Impossible to answer without knowing all the variables--interest rates, living expenses, age, etc. I used to think a million would do it, then 2, then 3, ....... It is very difficult to pull the plug and retire with your own money as your sole source of income. That fear drives the "how much do I need" bar much higher than you expect.

[hyten1]

personally i think 10mil is the right # for me, with a decent mount of margin of safety

[dcollon]

Why retire?  Even if you aren't in the financial services industry right now, start a new career in the business when you decide to leave your current career.  The fun never has to stop or at least doesn't have to stop until our brains get too soft.

 

[Guest broxburnboy]

The better question is how much free cash flow do I need to generate from my investments to retire in the minimum style I wish to maintain. Take that income stream and capitalize it with your proven long term average annual return and you will come up with a present value. That would be the minimum number.

And incidentally there is no such thing as retirement. There is only forced redundancy on minimum and decreasing real income or voluntarily dropping out of the system with the tools to assure ongoing financial security (including the cash equivalent of your personal number). There is no standing still..you are either going forward or backward.

[hyten1]

for me its not about retirement its about getting out of the corporate rat race.

 

i don't intend to retire (meaning do nothing) i just want the freedom to get out of the corporate rat race

[FFHWatcher]

I love hearing those $5M and $10M numbers. lol 

 

I was a financial advisor for almost 15 years.  I never had any clients with over $2M. Over 100 were retired and managing just fine.  Yes, many had other sources of income, which many of us won't have in the future but most were earning $2-5k/mo in pension/retirement income.  Not a ton of money.  Many of my friends have $5M-10M and they are retired.  Many are older than me.  Most are in their 50's and some in their 60's.  Everyone that I know of who retires with $5M or so, retire and then die with $5M or more.  Those with $10M and retire, die with >$10M.  One friend retired with about $5M and will die with >$15M.  They are all over 55.

 

I look back at the financial industry and they convince everyone using charts and inflation and stuff like 2-4% rates of return that everyone needs millions and millions of dollars to retire.  Bull&*it!!  They just want you to pour more money into your investments, which isn't a bad thing because it forces you to live on less and accumulate more.  People will live on what they have.

 

Why doesn't anyone ask an 80 year old who has been retired for 20 years what their personal experience has been?  Good luck finding one who's net worth has fallen in retirement.  Nobody I know of, who was moderately well off when they retired had their net worth decline during retirement.  I can not think of one, especially one that retired with more than $1M.  I have had family members live on less than $1,500/mo in retirement and managed just fine and were happy.  They had hundreds of thousands in investments but they didn't want to spend it.  Saved for 40 years and never spent $1. of their savings in retirement.  Good luck telling people over 60 to spend their savings.

 

Personally, at 37 years of age I retired with $1M-2M, a nice house, no debt, young kids and wife who works p/t.  While she is bitter that I am retired, she slugs out her 15-20 hours/week :-)  We are managing just fine.  Net Worth is increasing, not decreasing.  Lifestyle is maybe $100k/yr (spouse is $30k/yr, I am maybe $70k or whatever I need). Because I retired so young, there is certainly a much greater chance that if my investments turn sour than I will have to find some earned income but only as a supplement to my investment income.  Even if I have to work 20 hrs/week or 4-6 months/yr, it still beats the real world.  I have always said, that it is much better to retire from 40-60 and then work from 60-80.  Why wreck your best years working?  Dumb if you have other options. 

 

Before people chime in with $1M, 2M, 5-10M and 2-4% hypothetical returns, 3% inflation, charts, graphs, etc.  Do your homework and go out and ask some questions to the people you know who are 70-80 years old and ask them what their personal experience has been in retirement.  Don't rely on the financial industry to do your work for you.  Their interests aren't necessarily aligned with yours, unless you are an advisor :-) 

[cwericb]

Asking this question is something like asking, "How long is a piece of string?"

 

There are so many variables; what is your lifestyle, how old are you, what region do you live in, etc, etc.

 

The Royal Bank website has a page somewhere (for Canadians) where you can plug in your numbers and and it factors in CPP, OAS, etc. Can't remember if it includes taxes or not. There must be numerous sites like this, get some numbers there and that might provide a starting point. But if say, a certain amount of savings is good for someone at age 65-70 its probably not enough for someone at 40. The other factor is how confident are you that you can achieve a decent return on your investments on an ongoing basis - a lot of people didn't do so well a couple of years ago - and being over confident here might not bode well for your future. Who was it that used to advertise the "Freedom 55" plan? Personally sometimes I think I'm on the "Freedom 95" plan.

[Viking]

Great question. Sounds really simple.

 

Simple answer is... lots.

 

More realistic answer is it depends... probably the two biggest factors are what is your lifestyle (expenses) and how good are you at managing your investments (rate of return going forward).

 

If you have reasonable expenses and above average financial savvy $1.5 million should do it.

If you like expensive things and are a terrible investor then you likely do not want to quit your day job...

[ragnarisapirate]

for me its not about retirement its about getting out of the corporate rat race.

 

i don't intend to retire (meaning do nothing) i just want the freedom to get out of the corporate rat race

 

If that is really what you want, and you have yet to do that, you should just quit... NOW.

 

If you are on this board, you are probably smart enough to make something work. Virtually anyone can start with 10K and start something that will do well for them.

 

Not bring in the rat race is one of the better decisions that I made.

[Myth465]

FFHWatcher - Do you hold FI to generate your annual requirements. I figure I can earn 8% - 10% in FI so I would want about $1 million to think about quitting my job.

[Guest Bronco]

You need at least $49 million in LVLT stock and another $1 million in cash if you want to have a NPV of $1m.

[BargainValueHunter]

Anybody who thinks money will make you happy, hasn't got money. - David Geffen

[Uccmal]

You need at least $49 million in LVLT stock and another $1 million in cash if you want to have a NPV of $1m.

 

that's rich... or 20 million in fbk stock and 1m cash.

 

This is a very philosophical question along the lines of What is the Meaning of Life or Why do we work?  I am at the stage where I dont particularly need to work for money any longer, probably, so I want to work for something that is meaningful to me.  I have taken an extended parental leave that will be ending soon and I am having trouble imagining returning to my old job.  I may go back long enough to pay a few bills collect my vacation and go on to something else.  

 

Last week at a dinner party I was talking to a fellow who retired from his job will a full pension a few years ago, who was already a millionaire back then.  He now works 50 hour weeks running a seniors center, for a decent paycheck, and loves every minute of it.  Before he left his job he spent the last few years doing secondements all over the place to find what he would like to do "when he grew up".

[FFHWatcher]

FFHWatcher - Do you hold FI to generate your annual requirements. I figure I can earn 8% - 10% in FI so I would want about $1 million to think about quitting my job.

 

Hmmm?  FI?  Fixed Income? Fixed Income in portfolio = 0%

Dividend generating investments, perhaps 40-50% and increasing.

Capital gain for the remainder and falling.

Future target is 60-75% are high yielding, lower growth type of investments.

Tax rate is dreadfully low if almost all of your income is from dividends in Canada.

Capital gains tax is dreadfully low too...50% the tax rate of regular earned income. (perhaps 20% instead of 40%, depending on total income).

[Guest Bronco]

BargainValueHunter... from the Boiler Room...

 

"They say money can't buy you happiness.  Well looking at the f'ing smile on my face.  Ear to f'ing ear baby".

 

 

 

Great line.

[Myth465]

You need at least $49 million in LVLT stock and another $1 million in cash if you want to have a NPV of $1m.

 

LOL

 

Thanks FFHWatcher, I figure I can do well with distressed bonds, but you have a good point. Dividend stocks are just as good and can grow overtime. Right now I am going for capital gains but that will change should I get to a certain point.

[ubuy2wron]

I have figure a personal bogey which is enough to retire on. My plan is when I have double that I will sell my business and find something else to fill up my day.2 times enough is my margin of safety in case those pesky black swans want to attack my nest egg.

[ERICOPOLY]

BargainValueHunter... from the Boiler Room...

 

"They say money can't buy you happiness.  Well looking at the f'ing smile on my face.  Ear to f'ing ear baby".

 

Great line.

 

A quote from my grandmother:

 

Money doesn't make you happy, but you can be miserable in comfort.

[Guest longinvestor]

Before people chime in with $1M, 2M, 5-10M and 2-4% hypothetical returns, 3% inflation, charts, graphs, etc.  Do your homework and go out and ask some questions to the people you know who are 70-80 years old and ask them what their personal experience has been in retirement.  Don't rely on the financial industry to do your work for you.  Their interests aren't necessarily aligned with yours, unless you are an advisor :-) 

Great post FFHwatcher. The financial industry is too attached to the teats of fees and your money is their milk. I have over a million right now and am 51. The thought of pulling the plug on working full time is coming to me again and again. Drawing down thru a SEPP with assets growing 10% to 15% looks like a great idea or else I will leave too much behind. You are right 51 feels "older" than 37 and how should 65 feel then? or 80?

[Guest misterstockwell]

I love hearing those $5M and $10M numbers. lol 

 

I was a financial advisor for almost 15 years.  I never had any clients with over $2M. Over 100 were retired and managing just fine.

 

I love hearing stories of people doing so well with so little savings. LOL

 

Yes, many had other sources of income, which many of us won't have in the future but most were earning $2-5k/mo in pension/retirement income.  Not a ton of money.

 

Not a ton of money? How much in treasuries would someone need today to make $5k/month? If it is something like the 5 year, that is $4.5 million in equivalent assets. I call them phantom assets, and they are worth their weight in gold.

 

  

I look back at the financial industry and they convince everyone using charts and inflation and stuff like 2-4% rates of return that everyone needs millions and millions of dollars to retire.  Bull&*it!!  They just want you to pour more money into your investments, which isn't a bad thing because it forces you to live on less and accumulate more.  People will live on what they have.

 

Sure they will live on what they have, but is it enough? What kind of lifestyle?

 

Why doesn't anyone ask an 80 year old who has been retired for 20 years what their personal experience has been?  Good luck finding one who's net worth has fallen in retirement.  Nobody I know of, who was moderately well off when they retired had their net worth decline during retirement.  I can not think of one, especially one that retired with more than $1M.  I have had family members live on less than $1,500/mo in retirement and managed just fine and were happy.  They had hundreds of thousands in investments but they didn't want to spend it.  Saved for 40 years and never spent $1. of their savings in retirement.  Good luck telling people over 60 to spend their savings.

 

Personally, at 37 years of age I retired with $1M-2M, a nice house, no debt, young kids and wife who works p/t.  While she is bitter that I am retired, she slugs out her 15-20 hours/week :-)   We are managing just fine.  Net Worth is increasing, not decreasing.  Lifestyle is maybe $100k/yr (spouse is $30k/yr, I am maybe $70k or whatever I need). Because I retired so young, there is certainly a much greater chance that if my investments turn sour than I will have to find some earned income but only as a supplement to my investment income.  Even if I have to work 20 hrs/week or 4-6 months/yr, it still beats the real world.  I have always said, that it is much better to retire from 40-60 and then work from 60-80.  Why wreck your best years working?  Dumb if you have other options.   

 

Before people chime in with $1M, 2M, 5-10M and 2-4% hypothetical returns, 3% inflation, charts, graphs, etc.  Do your homework and go out and ask some questions to the people you know who are 70-80 years old and ask them what their personal experience has been in retirement.  Don't rely on the financial industry to do your work for you.  Their interests aren't necessarily aligned with yours, unless you are an advisor :-) 

 

I can think of several 80 year olds right now who retired years ago and are near destitute. They will run out. They will have nothing. I know two who are bumming off their kids because the wife thought owning GE was safe and would provide for them forever. My own in-laws sold everything in the early 60's when they were 40 or so, moved to Barbados, and had a great time. They had lots of money. They they didn't, and had to move back to the USA and start working in crappy jobs to save for a meager retirement.

 

Everyone is different. 

[ERICOPOLY]

Would like to hear from Eric - I am certain he has thought this through from ten different angles with an engineer's precision.

 

cheers!

 

 

I generally agree with what Broxburnboy said.  It really boils down to how much income you need.

 

I think if you are happy living off of $150,000 and you want a AAA rated income with some inflation protection then you'd probably sleep well with stocks like KO, KFT and JNJ.  But due to the yields you'll need somewhere in the ballpark of $5,000,000 if you are 100% invested. If working people can live on $150,000 without huge piles of cash sitting around then why can't you?  If the market dips 30% it doesn't really matter -- did KO/JNJ/KFT ever cut their dividend in 2008/2009?  Just watch the income -- stop watching the net worth.  If your stocks are down 30% during a depression but your dividend payers raise your dividend by 5% then why should you feel stressed out?  Just watch the income.  For some of you, your talents can generate an income of equivalent risk with far less invested... or so you believe anyhow (maybe it's true, maybe it's luck).

 

I have young children so the idea of being idle really doesn't apply.  It's idle empty-nesters who have issues with the lack of routine.  You have the time to start new hobbies.  I've been thinking of applying for a license with the ATF -- distilling my own alcohol sounds like a fun thing to try.  Maybe it will become a business, maybe it will just be holiday gifts to friends.  Doesn't matter, no pressure.

 

 

[ragnarisapirate]

Would like to hear from Eric - I am certain he has thought this through from ten different angles with an engineer's precision.

 

cheers!

 

 

I generally agree with what Broxburnboy said.  It really boils down to how much income you need.

 

I think if you are happy living off of $150,000 and you want a AAA rated income with some inflation protection then you'd probably sleep well with stocks like KO, KFT and JNJ.  But due to the yields you'll need somewhere in the ballpark of $5,000,000 if you are 100% invested. If working people can live on $150,000 without huge piles of cash sitting around then why can't you?  If the market dips 30% it doesn't really matter -- did KO/JNJ/KFT ever cut their dividend in 2008/2009?  Just watch the income -- stop watching the net worth.  If your stocks are down 30% during a depression but your dividend payers raise your dividend by 5% then why should you feel stressed out?  Just watch the income.  For some of you, your talents can generate an income of equivalent risk with far less invested... or so you believe anyhow (maybe it's true, maybe it's luck).

 

I have young children so the idea of being idle really doesn't apply.  It's idle empty-nesters who have issues with the lack of routine.  You have the time to start new hobbies.  I've been thinking of applying for a license with the ATF -- distilling my own alcohol sounds like a fun thing to try.  Maybe it will become a business, maybe it will just be holiday gifts to friends.  Doesn't matter, no pressure.

 

 

 

You forget about black swan events in a person's life. What happens if a person decides that they really can't stand being around their wife with your all the new found free time? What if you mess up with your distilling and blow up your house and are severely burned, resulting in health expenses? What if you have a heart attack and need a bunch of money for surgery?

 

One would care about market value of an investment then.

 

Granted, I agree with your point, but, being the contrarian that I am, I just had to throw that out there... :)

 

But seriously, why wouldn't a person still manage their investments a bit more actively (especially if they are members of this board)? It doesn't take a rocket scientist to find cheap securities.

[ERICOPOLY]

Would like to hear from Eric - I am certain he has thought this through from ten different angles with an engineer's precision.

 

cheers!

 

 

I generally agree with what Broxburnboy said.  It really boils down to how much income you need.

 

I think if you are happy living off of $150,000 and you want a AAA rated income with some inflation protection then you'd probably sleep well with stocks like KO, KFT and JNJ.  But due to the yields you'll need somewhere in the ballpark of $5,000,000 if you are 100% invested. If working people can live on $150,000 without huge piles of cash sitting around then why can't you?  If the market dips 30% it doesn't really matter -- did KO/JNJ/KFT ever cut their dividend in 2008/2009?  Just watch the income -- stop watching the net worth.  If your stocks are down 30% during a depression but your dividend payers raise your dividend by 5% then why should you feel stressed out?  Just watch the income.  For some of you, your talents can generate an income of equivalent risk with far less invested... or so you believe anyhow (maybe it's true, maybe it's luck).

 

I have young children so the idea of being idle really doesn't apply.  It's idle empty-nesters who have issues with the lack of routine.  You have the time to start new hobbies.  I've been thinking of applying for a license with the ATF -- distilling my own alcohol sounds like a fun thing to try.  Maybe it will become a business, maybe it will just be holiday gifts to friends.  Doesn't matter, no pressure.

 

 

 

You forget about black swan events in a person's life. What happens if a person decides that they really can't stand being around their wife with your all the new found free time? What if you mess up with your distilling and blow up your house and are severely burned, resulting in health expenses? What if you have a heart attack and need a bunch of money for surgery?

 

One would care about market value of an investment then.

 

Granted, I agree with your point, but, being the contrarian that I am, I just had to throw that out there... :)

 

But seriously, why wouldn't a person still manage their investments a bit more actively (especially if they are members of this board)? It doesn't take a rocket scientist to find cheap securities.

 

One more word about work...

 

Make sure you aren't subordinate -- this National Geographic documentary on stress is very interesting:

 

http://movies.netflix.com/Movie/National-Geographic-Stress-Portrait-of-a-Killer/70107420?strackid=7e9a1a85e29aac3a_0_srl&strkid=947337335_0_0&trkid=222336#height1601

 

According to this video:

Unless you are in the alpha male role at work, work stress will decrease your health and feeling of well being.  The stress of being in a subordinate role will lead to a build up of plaques in the arteries and a deterioration of your immune system.

 

So you might want to adjust your life expectancy upwards if you retire young from a stressful job you hated.  There is no question in my mind that I made the right choice for me.

[ERICOPOLY]

But seriously, why wouldn't a person still manage their investments a bit more actively (especially if they are members of this board)? It doesn't take a rocket scientist to find cheap securities.

 

It's a starting point for discussion.  If you need $5,000,000 to generate $150,000 from no brainer AAA stocks with international income diversification and reasonable inflation protection (perhaps reasonable hope of real income gains), then that is the upper bound of what you need.