New Magic Number for Retirement

[srblanco7]

Retirement anxiety is totally normal and it probably results in a lot of people working years longer than they really need to.

I'm retiring June 8 and I’m definitely anxious about it even though every calculator, our CFP, and our CPA say we are just fine. Still until we are actually living without my work income for a while and I see it in action, I’ll be a little uneasy. And that’s with $3.5M.

Retirement anxiety was certainly a factor in my electing to initially transition to RPT (next month) rather than pulling a full retirement exit. There are other work related factors, but on a personal note, the RPT transition will also give us a bit of practice in living off our retirement budget - since we'll be generating income (with both of us at RPT) that'll be similar to our initial retirement budget.

[Jluke]

Here’s another calc site. I think this is (still) popular with bogleheads.

https://firecalc.com

a lot of industries make their money on FUD (fear, uncertainty and doubt) so yet another thing to be aware of when running numbers on certain sites.

[Fishindude77]

The ACA has been a godsend for early retirees. It's given us an affordable option to bridge the gap before Medicare.

I don't know that that is true.
My only exposure to private health insurance is ACA, however my buddy who has always been self employed and purchased private insurance for himself and spouse said there were more options and it was considerably cheaper pre-ACA.
Said he was paying around $600 / month before ACA for similar insurance.

For low income folks, you can get on ACA for nearly nothing so I'm sure it's helped a lot of them.
For higher income folks, probably not so much.

[disneysteve]

I don't know that that is true.
My only exposure to private health insurance is ACA, however my buddy who has always been self employed and purchased private insurance for himself and spouse said there were more options and it was considerably cheaper pre-ACA.
Said he was paying around $600 / month before ACA for similar insurance.

For low income folks, you can get on ACA for nearly nothing so I'm sure it's helped a lot of them.
For higher income folks, probably not so much.

If your income is too high to qualify for any subsidy, you may be right, but that’s a very small percentage of the population. For everyone else, it’s fine. With the subsidy we are paying nearly $1,000/month less than when we were on COBRA and only a little more than when I was insured through work for very similar coverage. Now that I’m retiring, our ACA premium will be even lower because we’ll qualify for a larger subsidy due to lower income.

[Fishindude77]

If your income is too high to qualify for any subsidy, you may be right, but that's a very small percentage of the population. For everyone else, it's fine. With the subsidy we are paying nearly $1,000/month less than when we were on COBRA and only a little more than when I was insured through work for very similar coverage. Now that I'm retiring, our ACA premium will be even lower because we'll qualify for a larger subsidy due to lower income.

In my state the subsidies started at around $70k when we first started so we paid full price. Sometime during covid they raised subsidy threshold to around $200k which got us some subsidies and lowered costs considerably, went from roughly $1800 to $800 per month.
For us, COBRA was $800 per month and much better insurance than ACA, included some dental & vision, lower deductibles, etc.

From what I've heard, ACA coverage is very cheap if you're for instance in the $40-50k income range. I assume the higher income ACA customers and / or all taxpayers are picking up the tab and paying the difference to insure lower income folks?

[riverwed070707]

I've found retirement calculators are a great way to induce retirement anxiety.

Here's one from Bankrate:
https://www.bankrate.com/retirement/...an-calculator/

And here's another (I like the format) from Vanguard:
https://investor.vanguard.com/tools-...ome-calculator

Specifically, the factors of anxiety inducement are the expected rate of return (look at the difference between 5 and 7%, especially if you are younger). Also, look at the percentage of current income needed for retirement and what effect that has.

Be sure to run the numbers at least once with "include social security" unchecked - as I believe that could vaporize in the next 20 years.

This is a weird limitation of the calculator... my income required at retirement can't be less than 40% of my current household income? But I make more than I need and I save a lot. Also don't like that it doesn't let me account for other sources of income.

Vanguard one is a little better but not great. I have the added complexity that few calculators take into account which is I will rely on my rental income until I reach the age I can access my retirement accounts. Then I will sell the rentals, have that additional cash + start taking retirement distributions when needed. I've found a few calcs that will get into that level of complexity but I can't recall what they are at the moment. Even though I know not everyone here has real estate, I assume several have a similar situation where there is plan to bridge the gap between early retirement and retirement age.

[disneysteve]

Firecalc.com is the main one used on the ER forum. It lets you play with a lot of variables including additional income sources, age for SS, etc.

[disneysteve]

In my state the subsidies started at around $70k when we first started so we paid full price. Sometime during covid they raised subsidy threshold to around $200k which got us some subsidies and lowered costs considerably, went from roughly $1800 to $800 per month.
For us, COBRA was $800 per month and much better insurance than ACA, included some dental & vision, lower deductibles, etc.

We were paying just under $2,000 for COBRA. Our ACA plan is just under $1,000. Higher deductible and OOP costs but $12,000 less for the year so it offsets that. And as I said, our true premium will be less once we file our 2024 taxes next year. It’ll probably be more like $800.

[QuarterMillionMan]

At 62 this guy is retired w/$500,000 net worth. To me that is cutting it too close for comfort.

I’m an Average Middle-Class Retiree: Here’s How Much Savings I Have (msn.com)

[ua_guy]

I have appreciation for the fact that "saving for retirement" is a relatively new concept. I try to remind myself of that when I feel stupid or inadequate either in knowledge or actual retirement savings.

Older generations could fall on social security, and that still meant something. It was originally meant to be a safety net which would support a basic lifestyle in retirement. Pensions generally provided retirement income, and savings went a lot farther towards living expenses. A pension was earned on top of wages, and they encouraged longevity and loyalty. Typically a pension was earned by the male or primary income earner of the household and it provided enough benefit to support a non-working spouse in retirement too.

Pensions are now much less common, and are disappearing. The new norm is to use wages and nominal employer contribution matching to save for retirement in self-directed plans where the employee bears all the risk, and does all the work. Things like homes and healthcare costs have exploded, adding to the risk and uncertainty, as well as stunting retirement savings growth. Both partners in a marriage now need to work and save. I really wonder if so many of the problems in developed countries are because...we work too much and are too busy for other things like really spending time raising our kids, and so few people are able to feel financially secure and stable that it makes them stressed, irate, divisive, hateful. But I digress. This new reality is here to stay and either save everything you can, or still be working full time and eating cat food when you're 70.

I take solace in the fact that someday I'll just be...dead. None of this will matter. Until then, retirement is a total crapshoot and depends on so many things outside of my own control - apart from saving aggressively and crossing my fingers that markets will perform - that I just hope to have a few non-working years to pursue things in life that aren't work-related.

[Fishindude77]

I have appreciation for the fact that "saving for retirement" is a relatively new concept. I try to remind myself of that when I feel stupid or inadequate either in knowledge or actual retirement savings.

Older generations could fall on social security, and that still meant something. It was originally meant to be a safety net which would support a basic lifestyle in retirement. Pensions generally provided retirement income, and savings went a lot farther towards living expenses. A pension was earned on top of wages, and they encouraged longevity and loyalty. Typically a pension was earned by the male or primary income earner of the household and it provided enough benefit to support a non-working spouse in retirement too.

Pensions are now much less common, and are disappearing. The new norm is to use wages and nominal employer contribution matching to save for retirement in self-directed plans where the employee bears all the risk, and does all the work. Things like homes and healthcare costs have exploded, adding to the risk and uncertainty, as well as stunting retirement savings growth. Both partners in a marriage now need to work and save. I really wonder if so many of the problems in developed countries are because...we work too much and are too busy for other things like really spending time raising our kids, and so few people are able to feel financially secure and stable that it makes them stressed, irate, divisive, hateful. But I digress. This new reality is here to stay and either save everything you can, or still be working full time and eating cat food when you're 70.

I take solace in the fact that someday I'll just be...dead. None of this will matter. Until then, retirement is a total crapshoot and depends on so many things outside of my own control - apart from saving aggressively and crossing my fingers that markets will perform - that I just hope to have a few non-working years to pursue things in life that aren't work-related.

Back in the day everybody smoked, we didn't have much preventative healthcare, etc. so people didn't live as long. A pension might only need to last 5-10 years, where now 30 years retired is fairly common.
It's simply not economically feasible for most businesses to provide a pension. The majority of surviving pensions are found in jobs for public institutions or union environments where the employer has a captive client base and doesn't have to compete for business.

A lot gets said about how tough it is for young folks to get ahead these days but I'm not so sure that is true. I don't think it's ever been cheap or easy to buy a home, automobiles and raise a family. Seems like a lot of what runs the costs up so far on things like homes and lifestyles are "perceived needs" which in reality are "wants" that one could live without. The families I grew up around where dad was the single earner didn't have two cars, had small homes, didn't have AC, no cable, no internet, no cell phones, rarely ate out, didn't take elaborate vacations, etc. They also didn't earn very much $$ per hour or have the options of freebies like; free public transportation, free school meals, or very few other social safety nets.

[QuarterMillionMan]

I work for big government w/21 yrs of service and can retire anytime after 55 (I'm 58). This is a non-contributory pension. As you can see if I retire today (which I'm not), I'd get 20% of my final salary which is peanuts hence if I can make it to 65 (God willing), I'll have to keep chugging along.

[LivingAlmostLarge]

Back in the day everybody smoked, we didn't have much preventative healthcare, etc. so people didn't live as long. A pension might only need to last 5-10 years, where now 30 years retired is fairly common.
It's simply not economically feasible for most businesses to provide a pension. The majority of surviving pensions are found in jobs for public institutions or union environments where the employer has a captive client base and doesn't have to compete for business.

A lot gets said about how tough it is for young folks to get ahead these days but I'm not so sure that is true. I don't think it's ever been cheap or easy to buy a home, automobiles and raise a family. Seems like a lot of what runs the costs up so far on things like homes and lifestyles are "perceived needs" which in reality are "wants" that one could live without. The families I grew up around where dad was the single earner didn't have two cars, had small homes, didn't have AC, no cable, no internet, no cell phones, rarely ate out, didn't take elaborate vacations, etc. They also didn't earn very much $$ per hour or have the options of freebies like; free public transportation, free school meals, or very few other social safety nets.

No i agree about perceived needs. But I don't agree about pensions. Before a lot of jobs I noticed doing people's tax returns had pensions. Lots of average private jobs like flight attendents, private paper pusher, the average finance person, hr, IT, office manager, marketing, etc in company all had pensions. Just normal everyday jobs. No way is that the case now. Now you barely get it with government jobs.

So while people defintiely are more spoiled about "needing"money they also have less of a safety net as before.

[james.hendrickson]

Well..at least everyone gets Social Security.

[srblanco7]

A lot gets said about how tough it is for young folks to get ahead these days but I'm not so sure that is true. I don't think it's ever been cheap or easy to buy a home, automobiles and raise a family. Seems like a lot of what runs the costs up so far on things like homes and lifestyles are "perceived needs" which in reality are "wants" that one could live without. The families I grew up around where dad was the single earner didn't have two cars, had small homes, didn't have AC, no cable, no internet, no cell phones, rarely ate out, didn't take elaborate vacations, etc. They also didn't earn very much $$ per hour or have the options of freebies like; free public transportation, free school meals, or very few other social safety nets.

I think this is a fair assessment. Grew up in a one car family, no cable tv, a/c was a window unit, no elaborate vacations etc. Expectations regarding what's "normal" have escalated.

That being said, WSJ indicated that "home buying affordability fell last year to the lowest level since 1985...the median household now needs more than 40% of its income to cover payments on a median priced home". The generational "wealth gap" also continues to grow. Those age 55+ account for nearly 70% of all households' assets which is up from 51% three decades earlier.

Could be a case of cherry picking statistics to fit a narrative but it seems to align with what we can all observe (e.g., hot housing market, record stock market, etc).