Money needed to retire - poll

[onyx1]

I retired when I was able to live comfortably on less than 2% of my investable assets.  :D It all depends on your definition of 'comfortable'?

[oec2000]

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.

 

Alternatively, "I would much rather be rich and unhappy than be poor and unhappy."

 

I think the maxim about how "becoming rich doesn't really change people; it just allows them to reveal their true character" is very true. People who are predisposed to being unhappy will be unhappy whether they are rich or poor. So, all things being equal, it's obviously better to have more money rather than less.

 

I latched on to the concept of "drop dead money" after reading James Clavell's Noble House in which a character talks about her desire to have enough money so that she could ask anyone to drop dead if she so fancied. As a young man working in an office with many superiors to report to, this was a thoroughly inspiring objective.

 

 

[FFHWatcher]

The 30% or so who voted for >$5M to retire, assuming that will happen within the next 10 years (yes, a 25 year old will likely need millions and millions to retire on), will make all your kids really, really happy one day.

 

Stop throwing out the numbers, the 2% on treasury bills needs $4.5M, etc.,  and get out there and talk to people who retired with $1-2M in the last 10-15 years.  Stop basing your financial future on some financial calculator and go find some real life examples.  I do appreciate and know of a few retires that now have less than when they started out.  None of them share any characteristics with anyone on this board, IMO.

 

What do you guys need hundreds of thousands of dollars of year of personal income to live on for?  and who has 100% of their retirement income in treasuries, aside from Greenspan? 

[oec2000]

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 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.   

 

It is true that the vast majority of people retire with less than $1-2m (not counting the house) and somehow manage. You are right that most people will live within their means.

 

On the other hand, it is nice if you can retire comfortably - by which I mean being able to enjoy the things you like without having to worry whether you can afford it. What is comfortable obviously varies from person to person but I would imagine that $250K pretax (no mortgage) would be enough for most "reasonable" folk (many will be comfortable with much less).

 

Members of this board should be able to manage an annual withdrawal rate of 4% (8% total return less 3-4% allowance for inflation) implying a MAGIC NUMBER of $6,251,123.24.  :) So, the $5-10m number is actually not too far off.

 

Some may feel that these numbers are not worth killing yourself for (I agree) but I think they are within reach of the younger members of this board who have a long slope to start rolling their snowball from. It's a good aspirational goal imo. (E.g. start with $100k, double every 4 years for 16 years and then every 5 years for 15 years. This gets you to $12.8m after 31 years - after tax and inflation, this should be enough to reach the magic number.)

[ERICOPOLY]

What do you guys need hundreds of thousands of dollars of year of personal income to live on for? 

 

I worry about inflation a lot.  I worry about this and that.  So for me I just want the bridge to be 2x or 3x strong.  A higher beginning income is margin of safety against unexpected disruptions.

 

I used to think about this in terms of going to the moon.  You need enough velocity to escape all these gravitational forces that might suck you back down to ground level.

 

My three year anniversary of independence is coming up in January.  Three years is a long time in the labor market -- my skills are getting out of date, my resume dusty...  This has to work or it's really going to suck.

 

[twacowfca]

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.

 

That's a very good one!  :D

[Guest dealraker]

You can easily see...right in your own connections...couples or individuals who live great and happy who have very little - yet they do so much!  Then right beside you on the other flank is a couple that makes good and is on the edge of disaster ---- continually.

 

It is only 25% "what you have" or "what you make" and 75% "what you do with it" that counts.  There are people who are wise financially and there are people (often who make a shit loat of money) who are unwise.

[twacowfca]

"When the one great scorer comes

to mark against your name,

it matters not who won or lost,

But how you played the game."

 

-- G. R.

 

[Guest broxburnboy]

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 :-) 

 

Great Post FFHW..The best observation on retirement planning I've read. I assume I can forward it to others outside this forum. I have several long time friends on the cusp of retirement, who should retire and have the resources to do so who could benefit by your observations.

I've come to believe that for those prepared to do so, retirement is actually a promotion... you discover your highest and best use.. that of a successful allocator of ever accumulating cash flow. You start with positive cash flow, prepay as much of your expenses as you can (house, car etc)  and trim your expenses as needed to reflect the inevitable ebb and flow in the economy.

[bargainman]

Speaking of retirement if you have time you should pick up a copy of the book "the 4 hour workweek".  The guy comes of as rather full of himself but it's a brilliant book.  He basically talks about taking mini retirements throughout life, outsourcing parts of your life to cheaper places, taking time to do things where you push your self and learn.  He's also got a blog which is interesting reading.

 

I don't remember the details but there was some guy who asked his friend in the rat race what his dream vacation/getaway mini retirement that he was saving and toiling for would be.  He said he'd like to go to Thailand and check out the beaches and hang out for a few months.  Well it's dirt cheap over there, you can live a very luxurious lifestyle for not a lot of green.  Basically his 'dream vacation' would have cost a couple of grand.  I guess it comes down to applying value investing to other areas of life :-)  Price is what you pay, value is what you get.  You can probably retire quite comfortably off in some other part of the world if you have 200K in investments and can earn 10% a year...

[ERICOPOLY]

Thanks Shalab.

 

I probably spend more than I expected, but my money has a bit more than doubled (after taxes and expenses) these past 3 years.

 

My vacation time was limited when I had a full time job, so now we're taking more vacations -- that's led to the higher expenses.  We're doing it now before our oldest is in school.

 

[tengen]

I like this "retirement planner" calculator (includes Canadian CPP, OAS, etc.):

 

https://www.vancity.com/Planning/RetirementPlanning/RRSPs/RetirementPlanner/

[twacowfca]

Speaking of retirement if you have time you should pick up a copy of the book "the 4 hour workweek".  The guy comes of as rather full of himself but it's a brilliant book.  He basically talks about taking mini retirements throughout life, outsourcing parts of your life to cheaper places, taking time to do things where you push your self and learn.  He's also got a blog which is interesting reading.

 

I don't remember the details but there was some guy who asked his friend in the rat race what his dream vacation/getaway mini retirement that he was saving and toiling for would be.  He said he'd like to go to Thailand and check out the beaches and hang out for a few months.  Well it's dirt cheap over there, you can live a very luxurious lifestyle for not a lot of green.  Basically his 'dream vacation' would have cost a couple of grand.  I guess it comes down to applying value investing to other areas of life :-)  Price is what you pay, value is what you get.  You can probably retire quite comfortably off in some other part of the world if you have 200K in investments and can earn 10% a year...

 

Met an interesting couple last summer.  She was a NZ hippie expat in Cambodia in the 1980's.  He was a US Army Intelligence Officer who spent most of his time leading expeditions to locate the remains of MIA US servicemen in the jungles of SE Asia.  She had a house and servants and whatever that cost next to nothing and ran marathons.

 

He and she got married, had kids, retired in the US.  They bought a horse farm and Bed and Breakfast in the middle of nowhere.  Remodeled the house, converted the huge old barn into living quarters, and now spend their days cooking meals and cleaning rooms for other people.   :)

[Baoxiaodao]

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 :-) 

 

I was impressed by your post. Thank you for the education!

[Myth465]

I am a fan of Tim Ferris. Here is another interesting video on taking 1 year off every 7 years.

 

[twacowfca]

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 :-) 

 

I was impressed by your post. Thank you for the education!

 

I second Fan's compliment. 

 

It's good to hear that people are generally as happy with modest means in retirement or more so than people with great wealth.  :)

[Packer16]

You are correct about the pension but what is best way to develop a pension equivalent with a lump sum?  Invest for growth and income outside a pension plan and save the transaction fees of annuities.  If enough folks do this they wont need a pension.

 

Packer

[bookie71]

BUT they might have to give up the new boat, car or other toy.  Uncle Sugar will take care of us.  ;)

[20ppy]

For the folks who have already retired at a relative young age(< 50), how you people are dealing with health insurance?

 

I face this issue while I am still deciding. I have no doubt that retirement to me means more time for family and investment and traveling, but what are the reasonable health care options without a big corporation? This is of course a worry more for the US residents. One option is of course to move to Canada.

[StubbleJumper]

For the folks who have already retired at a relative young age(< 50), how you people are dealing with health insurance?

 

I face this issue while I am still deciding. I have no doubt that retirement to me means more time for family and investment and traveling, but what are the reasonable health care options without a big corporation? This is of course a worry more for the US residents. One option is of course to move to Canada.

 

 

Lots of luck on moving to Canada.  Instead of accepting immigrants who are well educated, are familiar with the culture, speak perfect English, and have a significant nest-egg of capital, we instead prefer to select refugees and family-class immigrants who often have no education, speak neither English nor French, find the culture alien, have no money and have no prospect of economic success. But, it does make us feel morally superior to select these inferior immigrants...

 

Perhaps you should rather think of Mexico or Thailand?

 

SJ

[oec2000]

Instead of accepting immigrants who are well educated, are familiar with the culture, speak perfect English, and have a significant nest-egg of capital, we instead prefer to select refugees and family-class immigrants who often have no education, speak neither English nor French, find the culture alien, have no money and have no prospect of economic success.

SJ

 

This is only part of the problem. When we do accept immigrants who are well educated (doctors, accountants, etc) we make them jump hoops before they can use their skills here. Then we complain about the shortage of healthcare workers. I know of someone who has practised medicine as a doctor in Saskatchewan for some 30 years with qualifications from the UK but he can't move to BC to practise because the rules are different here. They want him to go back to school at 60+ years of age!

 

We also take in immigrants who dump their non-working dependents here to benefit from the cheap/free services and benefits while they return to their home country to work without paying taxes here.

 

Compare the situation in Singapore where despite having no shortage of highly educated locals, they continue to scour the world for talent and encourage them to take up residence.

 

I'm an immigrant myself so I am certainly not anti-immigration. I just feel, like you, that we can be so much more sensible about it. Why do not more Canadians complain about this silliness to their MPs? Btw, SJ, aren't you discouraging an intelligent (if he lurks on this board, he has to be smart) guy from moving to Canada? :)

[Parsad]

Lots of luck on moving to Canada.  Instead of accepting immigrants who are well educated, are familiar with the culture, speak perfect English, and have a significant nest-egg of capital, we instead prefer to select refugees and family-class immigrants who often have no education, speak neither English nor French, find the culture alien, have no money and have no prospect of economic success. But, it does make us feel morally superior to select these inferior immigrants...

 

Perhaps you should rather think of Mexico or Thailand?

 

Wait a sec!  That would probably be appropriate if you were building a country based on non-egalitarian values, but I sure as hell hope we aren't.  We had a large influx of immigrants come into BC in the late 90's from Hong Kong, and while most have immensely added and built upon what was already here, there were many who brought along their spoilt brats who had no idea what the value of a dollar was or what hard work is.  Many of these brats were living in monster houses, driving Ferraris and weren't working.  Did they consume and drive business?  Sure.  Many left Hong Kong because they were concerned about the handover to China.  Now that business is good and the Chinese have embraced free-market economics, many have repatriated back.  Bye-bye Canada...hello China!  I'm not sure there is much generational longevity in this type of immigrant.

 

Many of the poor refugees with less than perfect English you speak of, who are eagerly optimistic about their future here when compared to where they came from, have and will continue to contribute back to society...my grandparents did, so did my parents...as well as most of the other immigrants I know of who have come here.  For them, this isn't a pit-stop or a marriage of convenience.  They are truly looking for a better life for themselves and their children.  Usually the first generation are the ones who come here and struggle...the ones with less than stellar English and a small amount of money.  The 2nd and 3rd generations usually receive higher levels of education and give back to the country far more than the first generation ever consumed. 

 

Are there bad apples?  Sure.  Can we do better?  You betcha!  But I don't want to base that decision on the dollars in their bank account or the sound of their accent.  My favorite movie of all time is "It's a Wonderful Life"...how fitting, since it's shown regularly at Christmas!  ;D 

 

Anyway, there is one sequence in the movie that I absolutely love, and covers what I'm discussing.  The scene revolves around the protagonist, George Bailey, whose father runs the town's savings and loan.  George's father has died and the town's wealthiest individual, who also happens to own the bank, says that they should close the Bailey Savings and Loan due to all of the "riff-raff" it lends to:

 

George:  Just a minute –– just a minute.  Now, hold on, Mr. Potter.  You're right when you say my father was no business man.  I know that.  Why he ever started this cheap, penny-ante Building and Loan, I'll never know.  But neither you nor anybody else can say anything against his character, because his whole life was...Why, in the twenty-five years since he and Uncle Billy started this thing, he never once thought of himself.  Isn't that right, Uncle Billy?  He didn't save enough money to send Harry to school, let alone me.  But he did help a few people get out of your slums, Mr. Potter.

 

And what's wrong with that? Why...Here, you're all businessmen here.  Doesn't it make them better citizens?  Doesn't it make them better customers?  You...you said...What'd you say just a minute ago?...They had to wait and save their money before they even ought to think of a decent home.  Wait!  Wait for what?  Until their children grow up and leave them?  Until they're so old and broken down that they...Do you know how long it takes a working man to save five thousand dollars?  Just remember this, Mr. Potter, that this rabble you're talking about...they do most of the working and paying and living and dying in this community." 

 

Cheers!

[alwaysinvert]

Many of the poor refugees with less than perfect English you speak of, who are eagerly optimistic about their future here when compared to where they came from, have and will continue to contribute back to society...my grandparents did, so did my parents...as well as most of the other immigrants I know of who have come here.  For them, this isn't a pit-stop or a marriage of convenience.  They are truly looking for a better life for themselves and their children.  Usually the first generation are the ones who come here and struggle...the ones with less than stellar English and a small amount of money.  The 2nd and 3rd generations usually receive higher levels of education and give back to the country far more than the first generation ever consumed. 

That effect is lost if you practise social egalitarianism, and ambition and hard work, for the most part, get replaced by extremism, separatism and social unrest (if you haven't experienced these problems in a big way yet, you need only take a look at the ghetto suburbs of France where curfews are not uncommon or Muslim communities in Britain who are demanding Sharia laws etc). I take it your ancestors had to depend on themselves and their own ability, and thus did not get stuck in entitlement thinking. I don't think an immigration policy designed to be charitable is advisable.

 

I'd like to see completely opened boarders, though.

[Hawk4value]

Immigration Policy should not be based on charity, or political correctness.  The existing citizens of a country deserve to have its government properly vet every potential legal immigrant to make sure they will not be a burden on society. If the immigrant is not skilled and has no money they will become a financial burden. Who pays the bills: free healthcare, free education, food stamps, etc, etc???  The productive citizens of the country pay the tab.  How is this morally correct??? 

[Parsad]

Immigration Policy should not be based on charity, or political correctness.  The existing citizens of a country deserve to have its government properly vet every potential legal immigrant to make sure they will not be a burden on society. If the immigrant is not skilled and has no money they will become a financial burden. Who pays the bills: free healthcare, free education, food stamps, etc, etc???  The productive citizens of the country pay the tab.  How is this morally correct??? 

 

It didn't hurt the United States over the last 100 years...in fact it probably helped foster the United States' growth.  It certainly hasn't hurt Canada either over the last 20-30 years, let alone the last 100.  Cheers!