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5 Retirement Myths

geekette

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I'm not sure I'll ever quit working, but do look forward to withdrawing from the rat race. I'd like to try some of those jobs that always sounded fun but wouldn't pay enuf to make a career of. Part-time, of course, and probably not for 6 months or so. Won't have to take any crap from anyone. Don't like the boss or the direction the company is going? leave. no worrying about having to have another job. Don't need a good reference, don't have to explain gaps in employment.

FREEDOM is what retirement means to me.

I have more interests than I can fit into my life now. My retirement will be filled with a lot of things I just don't have time to do now.

My biggest fear is being old and poor (after experiencing how much Young and Poor sucked) so I am squirrelling away all I can while I can. I have friends about my same age who spend everything that comes in, and some years they do REALLY WELL. I don't think they will ever be able to retire but they are Live For Today people, so, not like it will dawn on them that someday it's not going to be so easy to just pick up a second job.

Those that don't contribute enuf to get full match on their 401ks are simply foolish. "I can't afford it" is crap, how can anyone afford to bypass FREE MONEY!? I've also been fortunate to have 2 employers that not only matched, but a couple times a year threw in an additional percentage of my salary. Wonderful benefit: more free money!

The 401k is what's gonna save my butt when I'm old and I've got another long while to collect free money and grow it.
 

Conan

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Tuggers I imagine are mostly middle-class, and I'm surprised to see so many able to retire early, especially in the US.

Do your former jobs give you medical coverage until age 65 when Medicare begins? Do you have sufficient savings to live without Social Security until age 62/66/70?

Maximum social security benefits are approx $24,000/yr for age 62 retirees, $30,000/yr for age 66 retirees, and $39,000/yr for age 70 retirees (for one worker, plus 50% for the spouse).

In round numbers, if it takes $90,000/yr to be comfortable (of which about $25,000 goes for income and property taxes), and allowing for future inflation and reasonable investment returns, don't you need about $2,000,000 of savings to retire at age 60?

[I figure $2,000,000 because if that's your sole source of income from age 60 to age 70, the ten year draw-down of $90,000/yr will consume about half the pot, after which you'll still need to draw about $50,000/year to supplement the social security checks.]
 

MuranoJo

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Tuggers I imagine are mostly middle-class, and I'm surprised to see so many able to retire early, especially in the US.

Do your former jobs give you medical coverage until age 65 when Medicare begins? Do you have sufficient savings to live without Social Security until age 62/66/70?

Maximum social security benefits are approx $24,000/yr for age 62 retirees, $30,000/yr for age 66 retirees, and $39,000/yr for age 70 retirees (for one worker, plus 50% for the spouse).

In round numbers, if it takes $90,000/yr to be comfortable (of which about $25,000 goes for income and property taxes), and allowing for future inflation and reasonable investment returns, don't you need about $2,000,000 of savings to retire at age 60?

[I figure $2,000,000 because if that's your sole source of income from age 60 to age 70, the ten year draw-down of $90,000/yr will consume about half the pot, after which you'll still need to draw about $50,000/year to supplement the social security checks.]


In our earlier married years, we were not even concerned about retirement. How I wish we had plopped down another $100 or more per month in the 401K--and we even borrowed against it once. OMG! :D

But throughout the years, I've always at least deposited enough into 401K to get full employer contributions. (This should be a no-brainer.) And I will have retirement med to fill the gap before Medicare, but will have to pick up future price increases.

We think I can take early retirement and maintain a fairly similar standard of living. But who knows about the future of SS and investments. I continue to play the lottery. :)
 
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tompalm

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I'm only 30 so just now starting to think of retirement...my assumption was 67 1/2...At what ages did you guys retire?

I'm putting the Maximum in my 401k now and HOPE to be able to continue that so money isn't a worry in my 60's...but does 67 1/2 seem too old?

Hope for the best. Plan for the worse. The future is uncertain. So many things can happen before you reach 67. I had a couple jobs that I couldn't stand and didn't think that I would stay there until age 60. Then I had a great job and wanted to stay there for ever. The company went bankrupt and shut down and I will be lucky if I get another job at 54 years old (unless it is something that I don't enjoy doing). So now it appears my retirement age is a lot younger than I ever planned for. I am glad that I saved for a rainy day.

Other people have injury or health problems and things change. Keep maxing out your 401k and good luck with the future.
 

John Cummings

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In round numbers, if it takes $90,000/yr to be comfortable (of which about $25,000 goes for income and property taxes), and allowing for future inflation and reasonable investment returns, don't you need about $2,000,000 of savings to retire at age 60?

[I figure $2,000,000 because if that's your sole source of income from age 60 to age 70, the ten year draw-down of $90,000/yr will consume about half the pot, after which you'll still need to draw about $50,000/year to supplement the social security checks.]

Your calculations are very negative. You are assuming that your $2,000,000 is not going to earn anything. You can withdraw $90,000 /year without reducing your capital assuming you have invested it and not stuck it under the mattress.

My income tax plus property tax doesn't even come close to $25,000 and my retirement income exceeds $90,000 /yr.
 

Conan

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Here's $1 million at age 60. Investments yield 3.5%. Withdrawals are 90,000/yr for 10 years (inflation is 2.5%), then starting year 11 because social security becomes available, withdrawals are reduced by half.

After about 14 years, the money's all gone

1 1,000,000 35,000 (90,000)
2 945,000 33,075 (92,250)
3 885,825 31,004 (94,556)
4 822,273 28,780 (96,920)
5 754,132 26,395 (99,343)
6 681,183 23,841 (101,827)
7 603,198 21,112 (104,372)
8 519,938 18,198 (106,982)
9 431,154 15,090 (109,656)
10 336,588 11,781 (112,398)
11 235,971 8,259 (57,604)
12 186,626 6,532 (59,044)
13 134,114 4,694 (60,520)
14 78,288 2,740 (62,033)

Or if you'd rather use the actual return of the S&P 500 over the past 10 years, $1,000,000 would have been insufficient to fund 9 years of retirement:

2000 1,000,000 -9.10% (91,000) (90,000)
2001 819,000 -11.90% (97,461) (92,250)
2002 629,289 -22.10% (139,073) (94,556)
2003 395,660 28.70% 113,554 (96,920)
2004 412,294 10.90% 44,940 (99,343)
2005 357,891 4.90% 17,537 (101,827)
2006 273,601 15.80% 43,229 (104,372)
2007 212,457 5.50% 11,685 (106,982)
2008 117,161 -37% (43,350) (73,811)
2009 0
 
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zinger1457

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In round numbers, if it takes $90,000/yr to be comfortable (of which about $25,000 goes for income and property taxes), and allowing for future inflation and reasonable investment returns, don't you need about $2,000,000 of savings to retire at age 60?

One of the keys to retire early is to have your expenses under control (mortgage paid off, no loans, no credit card debt). If that is the case one can live very comfortably with much less than $90K/year.
 

Conan

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One of the keys to retire early is to have your expenses under control (mortgage paid off, no loans, no credit card debt). If that is the case one can live very comfortably with much less than $90K/year.

I've been using mint.com for a year so I can (finally!) keep track of income and expenses

Here's a budget for $65,000 (which does not include anything for income tax or tax on social security/IRA/401k withdrawals)

10,000 food shopping, restaurants, fast food, wine and liquor
10,000 t&e (airfare, car rent, timeshare maint/exchange, theatre, movie and museums)
8,000 property tax (real estate and personal property)
8,000 home insurance, maintenance, lawn and garden
8,000 Walmart, Macys, TJ Maxx, Target, Marshalls, Amazon
8,000 car insurance, fuel, maintenance and replacement
6,000 electricity, oil, telephone, cable TV, internet
5,000 medical and dental, insurance supplement and out-of-pocket
2,000 gifts
 
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Lawlar

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I retired at 57 (five years ago) and love it. No stress!!! I hang out at the Santa Barbara beach and enjoy life.

Spouse: Don't show my wife this post. I keep telling her how much I miss my work. I need to keep her working until we're 65 (Medicare)!!!

Social Security: I remember discussing in high school civics class (a long time ago) how retired Americans were moving to Paris and living the good life on their Social Security checks. My, how times have changed. That sounded so good (but Santa Barbara is nice).

ZINGER: Thank you for the great website info.
 

geekette

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I've been using mint.com for a year so I can (finally!) keep track of income and expenses

Here's a budget for $65,000 (which does not include anything for income tax or tax on social security/IRA/401k withdrawals)

10,000 food shopping, restaurants, fast food, wine and liquor
10,000 t&e (airfare, car rent, timeshare maint/exchange, theatre, movie and museums)
8,000 property tax (real estate and personal property)
8,000 home insurance, maintenance, lawn and garden
8,000 Walmart, Macys, TJ Maxx, Target, Marshalls, Amazon
8,000 car insurance, fuel, maintenance and replacement
6,000 electricity, oil, telephone, cable TV, internet
5,000 medical and dental, insurance supplement and out-of-pocket
2,000 gifts

I appreciate your running numbers as I also do not need $90k annually. But, holy crap, I cannot imagine spending these amounts! good thing I don't have The Shopping Gene as I'm not about to budget 8k for retail therapy! Med, well, who knows, but the other items are many (and in some cases MANY MANY) times more than we spend today. Inflation is of course a major consideration.

My original target savings goal was $2 mil and hope I'd have at least $1 mil if I go out disabled. Depending on what assumptions are used for returns, inflation, tax rate, I'm on target but will not take my foot off the pedal.

To the just-starting-to-think about it - educate yourself and assess your overall portfolio at least annually. Money must be managed carefully to achieve your goals.
 

pgnewarkboy

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Since retirement, I have come to the realization that work is a myth. :) I also realize that there are many more myths about work than there are about retirement. Now that I am retired I have more time to think about myths. :)
 

Conan

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John Cummings

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All these tables etc. don't tell the true picture. I have been retired for some time and live pretty well. I do agree that those spending amounts are out of whack in many categories for most folks. Our spending is much lower for many of the categories but much higher for entertainment and travel

I have a very diverse investment portfolio. When I retired, I shifted from capital appreciation to income stream with some appreciation. I have several income sources averaging 6.8% return.
 

geekette

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Try mint.com for a year, you might be surprised!

nah, we're terrible consumers, living simply. we watched our money long before mint existed.

don't have the latest whatnot cuz we don't need it. grow food, cook food, DIY house stuff, drive cars until they die. I'm a bargain shopper, too. Used to be an avid coupon clipper, saving 10-20% on grocery bills. We save and live cheap so maybe I can retire before I'm old, and then when I'm old, be able to afford luxuries like yard guy and housekeeper. and a lot more travel!

I live in the midwest so my prop taxes are nothing like that (I'd have to own a lot more than I do), and other expenses would be a lot less here, too, on an apples-to-apples basis. Assuming we were to partake in a more economically stimuating lifestyle.
 

Tia

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One of the keys to retire early is to have your expenses under control (mortgage paid off, no loans, no credit card debt). If that is the case one can live very comfortably with much less than $90K/year.

Sure hope so cause many including self are not going to be able to retire as jobs don't provide a retirement plan and savings got killed along with a job loss 1 1/2 years ago. Right when oldest was starting college in the fall, and qualified for little FAFSA as it's based on year prior numbers.

Actually people I work with joke about retirement as a myth that we will need to be working with our walkers there instead.... but we know that won't happen cause they will lay us off for younger cheaper workers. :ignore:
 

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Me too

I started planning 27 years ago when I would retire! Seven more years to go. I think the original statement about dying and retireing confuses retiring and doing nothing with retiring and enjoying life! How many people retire at 57 while they can still travel and enjoy life? :ponder:

ROTFL -- From day one (of my employment) to the end, I was planning my retirement. I retired at age 58 (1999), and have not regretted it one bit. Have been A timeshare owner for 26 years, love to travel.

Did a lot of volunteering while working (Smithsonian; Shelter for Abused Women), thought I would continue after retiirement (did for 5 years, but the lure of the road took over).

Hubby and I both retired at the same time (some say this is not a good idea, but it worked for us -- celebrated 50th wedding anniversary in June)
 

rapmarks

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I don't believe we spend $90,000 a year, and we own two homes and three cars, eat out a lot and play golf a lot we have always been careful with our money, always saved, and we still save money from our pension.
I do think that $5000 number for medical is too low, we spnd more than that on premiums and then have eye and dental and hearing and deductible and c.opays.
 

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This is a great thread! Fabulous discussion.

My dream had been to retire by 40 but by end of 20s knew it was shot and didn't even goalpost 50, figured I'd keep the dayjob as long as I needed to. Will refine plan after another 10 years of working, and hope I'm within 10 years of retiring! SIGH.

come on, stock market! Mommy needs fat divvies!

Anyone here live my dream and retire by 40?!?!? :whoopie: :cheer:
 

Passepartout

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We don't live all that high-on-the-hog, but are certainly not suffering. I know that we don't spend anywhere close to $90K. The house still has 3ish years of mortgage left, though either LOML or I could write a check for the payoff. I retired, not entirely voluntarily at 62 last year, and am thrilled beyond belief that I did.

We are both children of children of the depression. Our parents impressed upon us to live frugally and pay ourselves first. We continue to live by these principles. A lifetime of being a saver isn't easily abandoned by a detail like no further paychecks. I still save almost as much as I spend.

DW insists on continuing gainful work until she reaches both Medicare and FRA age in 2-3 years. She's slowed down some, but increased her volunteer and civic activities. Our biggest expense by far is travel. So far we go away about 2 weeks every other month or so.

Jim Ricks
 
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