Worry about future

[disneysteve]

nobody knows how long they're actually going to live.

"I know when I'm going to die. My birth certificate has an expiration date." - Stephen Wright

[ua_guy]

Yes, 25x should be fine for somebody retiring in their 60s. I have 30x stuck in my mind because we'll be retiring early, so we need a larger nest egg.

Of course, this number will vary from person to person, depending on how much risk they are willing to take. Running out of money before death would be bad, and nobody knows how long they're actually going to live.

I can't remember where i heard it (I'd like to research it more) but another rule of thumb is 8x your annual salary, with at least 1x saved by the time you are 35, with target retirement age at 67, I believe. Does that resonate with, or make any sense to anyone?

[feh]

I can't remember where i heard it (I'd like to research it more) but another rule of thumb is 8x your annual salary, with at least 1x saved by the time you are 35, with target retirement age at 67, I believe. Does that resonate with, or make any sense to anyone?

No. Nothing based on salary makes sense.

If you encounter any online calculators that ask you for your salary but not your expected expenses in retirement, it is fatally flawed.

[ua_guy]

No. Nothing based on salary makes sense.

If you encounter any online calculators that ask you for your salary but not your expected expenses in retirement, it is fatally flawed.

Oh, I agree. Expenses need to be considered in projections, and it's one of my biggest points of contention about the mass of "online calculators" that try to scare people into socking their entire incomes into retirement funds.

But for the average American, many who can't even begin to put a thumb on their actual expenses (because for many, expenses = salary), this is a cheap litmus test to establish a baseline.

[Wino]

I have never understood the people who say, "You need to keep your same income when you retire so you can keep the same standard of living."

But I'm saving (at least) 15% of that income, so why do I not need 85%, since that's what I'm spending? Also, I spend a lot of money to go to work and to be prepared for work. I need work clothes, tools, transportation, two cars for DW and I, annual training and university courses to keep my edge, and a slew of other things. That's at least another 15% of my income counting everything work-related and semi-work-related.

Also, I'm paying off my mortgage now. That will be gone when I retire. Why do I need that income?

So, the way I see it, you need to maintain no more than 60% of your income to maintain your lifestyle. In my case, I have no intention of spending even 30% of my present income during retirement. I just don't have such needs. Unless I'm planning to fly around the US visiting anyone and anywhere at anytime, taking a lot of cruises, and generally living way above the level I'm living at now, I really don't need that kind of income during retirement.

I am planning to spend about 20 to 25% of my present income during retirement. Will I have more to spend? Unless everything goes the way of Zimbabwe, I hope so. Will I spend it? I doubt it.

[scfr]

I
Can people who are late 40s and older weigh in? Do you think you have enough for retirement? Have you saved the millions we'll supposedly need? Do you have a pension? Is that the difference?

Sure - I'll weigh in.
DH & I are both 50-ish.
No pension (we have 401Ks and every type of IRA there is).

If we overlook the big "what would we do about health insurance?" question, we have enough to retire now ... but we don't want to. Why not? In order to feel confident that our money would last for the rest of our lives, it would mean paring our lifestyle down to a level that we really don't want to: sell the house & move in to a 1BR apartment or condo, no more golf for DH, no more pets, no more travel, no more contributions to the niece & nephew's college funds. It would be a subsistence lifestyle. Could we live like that if we had to? Of course we could. But we'd prefer to stay in our house, have pets, do some traveling, golf, and help the family youngsters with college. So, we both continue to work. We don't have a set retirement age. I plug in 60 when I run retirement calculators, and we are on track to be able to retire then.

Regarding worrying about the future: LAL, no one can tell another person how to feel, so I won't tell you not to worry. I believe that some worry is a good thing, if it's a motivator. Better to worry a bit about your retirement than to take an "everything will work out somehow, lalalalala" approach and not save anything. But worry can be a problem if it causes you to become paralyzed.

Paralyzed was how I felt the first time I ran a retirement calculator in my 20's. Looking at a number that seemed impossible, I just wanted to throw my hands up in despair.

What helped me was only looking at retirement numbers every few years, and then turning my focus to short & intermediate term goals. Examples of short term goals included gradually increasing 401K contributions, contributing to IRAs, and finding places to pare the budget so we could make those 401K & IRA contributions. Example of medium term goals included saving up so DH could start his own business and relocating to a lower cost part of the country. A medium-long term goal we had was working towards saving $xx by the time we hit 50 (this goal is related both to retirement and to a long-time dream my DH has had). We are about to hit that number, literally any day now.

The retirement goal has always been there, but not at the forefront.
Now running a retirement calculator makes me feel fine, not panicky.

P.S. - The closer we get to retirement, the more frequently I will run retirement calculators. In fact, I'm starting to think about purchasing ESPlanner software.

[feh]

In fact, I'm starting to think about purchasing ESPlanner software.

I've considered this also.

If anybody here has used ESPlanner, I'd like to hear a review.

[LivingAlmostLarge]

scfr that's exactly how I feel. I look at 30x my expenses or what I think my expenses will be and I need $2.5M conservatively more than I spend yes but then I just want extra. Then I think how will I reach that number?

It's very difficult to wrap my head around having so much just for retirement and thinking about college, our home, etc. It feels like we had to work like 10 years to save our first $500k and so another 10 years it might double? I don't know. I am just overwhelmed.

[scfr]

scfr that's exactly how I feel. I look at 30x my expenses or what I think my expenses will be and I need $2.5M conservatively more than I spend yes but then I just want extra. Then I think how will I reach that number?

It's very difficult to wrap my head around having so much just for retirement and thinking about college, our home, etc. It feels like we had to work like 10 years to save our first $500k and so another 10 years it might double? I don't know. I am just overwhelmed.

Imagine if your children spent all their time thinking about their SAT exams and getting in to the college of their choice ... their poor little heads might explode. Instead they focus on whatever skill they are learning at the moment, whether it's counting to 10 or learning their ABCs or learning to read or tie their shoes or whatever stage they are at. All of those things are building up to the day they take the SAT and apply to college. And they'll get there, they just don't have to focus on it right now. As they get in to middle school, they'll start to think about it a bit more, and they will focus on it with more intensity as they move through high school.

Are you able to come up with financial goals for your family for the next 3-5 years, and promise yourself that you will re-visit the retirement number when that time is up? I PROMISE YOU (and tell you from personal experience) that it won't mean you are neglecting retirement; it will just mean that you are shifting your focus to goals that you can wrap your head around.

I don't know what would be reasonable short-and-medium-term goals for your family ... that's up to you and your husband. They could include things like cutting holiday spending in half and putting the other half in the college fund, asking family members to contribute to the college fund instead of buying gifts, increasing contributions to the 401K (or whatever) by 1% of income, studying how to maximize the space in the place where you currently live so you don't have to move up as the kids grow, etc, etc, etc.

You have a saver mentality. Honestly, I think you'll be fine.

[Gailete]

I'll be 58 next month and hubby turns 49 this month so we are in that age range. I'm on SSD as is my ex-husband and I also get a less than $100 month from his work pension that was negotiated in our divorce. So basically I know what I get for 'retirement' already and I already am very well acquainted with Medicare and its costs and supplements costs. We still have 5 years to pay on a rental property that should bring in some income during retirement ~$300 month, and we have about 7-8 years on our mortgage I think. I know if it were just me, I would be eligible for a 'poor' senior citizen housing where they take I think 1/3 of your income for the rent and utilities and you get the rest. Obviously a tough but not undoable situation.

Because my husband has just about always been self-employed and has through legal ways had his income as little as possible, he didn't have much contributed towards SS so his benefit wouldn't be much. That has changed since he met me as we started the business that I work on as well as his other piano related things. So his reportable pay to SS is higher and his assumed SS benefits for later on will be higher than they would have been pre-me. We have been able to put some into an IRA for both of us and I started a Roth IRA last year that I contribute to on a monthly basis based on a percentage of what our on-line business does as well as contributing to a stock fund that is not an official retirement plan, but it is there as needed also done by a percentage of income. Certainly not a lot and as I've mentioned before, we are finally getting to the place where we can make ends meet monthly and with some left over. I stash what I can where I can.

I look at retirement needs as figured after our house and the rental property is paid off. We currently live on less than $30K a year. We certainly won't need millions stashed away but would take it if possible I look at what we know will come in yearly and what we need yearly to supplement that to cover the rest of our expenses. We have enough for just about 2 years of retirement currently. I know with my physical problems, I will need more help throughout the years. As it is I finally had to hire a cleaning girl twice a month. We don't go on fancy vacations. For us a fun night out is dinner at Max Erma's and reading books at Barnes & Noble every couple months. We live a quiet cheap life and I can't see that changing especially has my physical problems make it difficult to do much and I prefer by little nest in the living room where I'm comfortable. So when I see articles talking about what you need for retirement, those same articles aren't talking about my kind of retirement. I can't say how much we will stash away, but I do stash away by percentages. I have found that it generally takes about 6 months of regularly stashing before your budget accepts the fact and you are used to living without it. Hoping with in the next month to start the stashing for those regularly occurring bills which would be them all added together divided by 52. Also want to start a Roth IRA for hubby. As we get more and more paid down, and more stashed into savings and retirement plans, the more we seem to have to save. Magic of some sort!

We also don't plan to retire! As long as he can work hubby plans to continue working and I work on the pattern business as part of my daily therapy and I enjoy it. Why quit just because I have arbitrarily hit some number on the calendar? I also have other little ways of bringing in income. Those little bits add up. a couple of months ago I put $110 into my Roth Ira from Google adsense. Those things add up over time.

[97guns]

http://amateurassetallocator.com/2009/01/14/the-best-income-generating-assets/

The key to financial independence (or “findependence” if you hate two-word phrases), is not a high-paying job or even a high net worth. Sure, having a high-paying job will help you obtain a high net worth quicker, which in turn will allow you to invest more in income-generating assets to fuel future spending (sans job). But it is those income-generating assets, not the high-paying job, that will secure your financial future

[LivingAlmostLarge]

3-5 year goals move to a bigger home. Mostly so I can fit the kids. I would like to maintain the lifestyle we have now in retirement.

I always think that about generating income. All I can seem to focus on is saving to generate income in retirement. I'm not sure I can take the risk of real estate and the expectation of living off the rent.

[Gailete]

I'm not sure I can take the risk of real estate and the expectation of living off the rent.

I'm not hugely into wanting to do rental income in my retirement either, but with hubby younger and able to make most repairs, once it is paid off in a few years, we can set aside the net profit for the future and then even if we sell the place we will get the full value of it and all the money we had invested would have been paid off by others (renters).

I too think about other ways to generate income, even if small amounts. Or ways to not spend money such as signing up our IRA's for no paperwork which saves both accounts $25 a year, year after year that money isn't being spent, same with automatic payments to my one Medicare supplement, a savings of $25 each year, paying bills on line instead of using stamps is another $25 or more a year. It adds up after awhile, although not necessarily into directly into savings.

[LivingAlmostLarge]

I've started doing more surveys for extra money here and there. I also am looking hard for an at home part-time job. I think it would help my sanity more than the money itself.

[Gailete]

I think it would help my sanity more than the money itself.

Part of why I started selling on line. It gave me a reason to get out of bed when my body didn't want to.