Terry Castle wrote:
- quote -

I think that you should try to have enough savings and income to
finance an extended stay in a nursing home. The alternative is to buy
insurance and hope that the insurance company will pay off without
finding a loophole. At the current time, that means about $60,000 per
year or $120,000 for a couple.

--
Ron

I think the amount needed for retirement varies based on a person's
expenses.
I think withdraw rate depends on "how much" has been saved prior to the
first withdraw

Making generalizations that a $1 million nest egg is needed with a 4%
withdraw rate is misleading. Suggesting one needs 80% of their income
is also misleading.

I want a $2 million nest egg and plan on withdrawing only 3% with
special expceptions for vacations early in retirement.
I am sure others could suggest a $300,000 nest egg with 3% withdraw
rate is enough (if expenses are kept to a minimum).
If one spends all that one makes, then the 80% of income paradigm is
probably accurate. I put around 30% of what I make into my house, and
close to 25% of what I make into savings. I sure hope I can retire on
50% of my current income.

"Terry Castle" <castlegate100[at]hotmail.com> wrote in message
news:432708d6.1353556[at]news.vt.edu...
- quote -

Working backwards, the figure I've heard is that you should be able to live
on a 4-5% withdrawal from your retirement account each year. So if you have
$1m saved, that means your annual withdrawal would be 40-50k. Of course, if
you have pensions to supplement, you'd be able to reduce your annual
withdrawals (social security may be negligible by then, who knows). You
also have to take into account whether or not you'll stilil have a mortgage
payment. I think that's one of the factors in figuring you can live on 80%.

As for what to do with the 20% that you're currently saving, you wouldn't be
able to put it into any kind of tax advantaged investment (401k, IRA)
without having earned income (although if your spouse has earned income you
may qualify to continue contibuting to your IRA).

Depending on when you retire and how healthy you are, you may find yourself
spending more on either travel or medical expenses (or spoiling
grandchildren) but some of your work related expenses would go down
(commuting costs, work attire, dry cleaning, lunches out, etc).

Leigh

castlegate100[at]hotmail.com (Terry Castle) wrote:

- quote -

Not exactly to the point. It is not what percentage one needs, but how much
money one needs. Living simply, in a shack in Montana, costs a whole lot
less than living high on the hog in Cape Cod.

To live comfortably, choose a medium-sized city, say over 250k population.
That will ensure you get the necessary amenities of quality hospitals,
movies/theaters, night life, restaurants and the like. Buy as much house as
you can afford, or live in a trailer if rude and noisy neighbors do not
concern you. Assume you will have (say) $12,000.00 per year from Social
Security, with Medicare benefits. You will then need another $15,000.00 or
so from investments or a part-time job to be reasonably secure. At, say, 5%
interest (from ultra-safe investments), you will need $300k in savings to
invest wisely.

Sure, cancer or other health disasters could wipe you out, but that could
happen even with higher amounts in the bank. Don't worry about it. When you
can buy the house free and clear and have another $300k, quit. And enjoy.

Alex

anoop wrote:
- quote -

To me, saving as much as you can for later and enjoying life now do not
necessarily tend to be mutually exclusive. Many of the things that suck
up a significant percentage of household income don't provide much
marginal gain in the actual enjoyment of life. I see nothing to
indicate that people who drive $40,000 SUV's enjoy life any more than
me. Same with 200 channels on cable TV, eating out every night, full
service cell phone plans, big screen TVs, etc. Sure those things can
be fun, but the net effect on total enjoyment of life is pretty minor
for most people as far as I can tell. Enjoyment of life seems to be
much more dependent on attitude than luxuries.

As far as I can tell, a lot of purchases are simply motivated by
restlessness; there is some money sitting in the bank account or credit
card limit, the person is bored and wants something to do, and so they
go buy something new. These people are not maximizing their enjoyment
of life by careful purchases of items and services that significantly
enhance their enjoyment of life, they are just spending money as a
recreational activity.

With regard to making assumptions, if you look back over the last 200
years or so, just about every generation has lived through a major
societal disruption by the time it hits old age; either a serious war,
a serious infationary episode, a serious depression, etc. For long
term planning, the only sound assumption to make is that something will
go wildly wrong at some point; always has, always will.

And yes, even penny pinchers can fall on hard times when things beyond
their contol go bad, but all other things being equal, the cheapskates
are almost always better off than a spendthrift in the exact same
circumstances. The only exception to this is hyperinflation, which
rewards people heavily in debt and punishes savers.

Andy

Andy wrote:

...

- quote -

Great advice (and I really mean it). However, saving *as much as you
can*
for later and enjoying life now tend to be mutually exclusive.

- quote -

In the absence of making some assumptions, it's hard to decide whether
one can afford a certain luxury now without jeopardizing one's future
financial position. One has to make reasonable assumptions and hope
for the best. Even penny pinchers have been known to fall on hard
times because of circumstances beyond their control.

Anoop

Terry Castle -

Part of it also depends on how much you currently spend to earn your
income - that amount would not be one of your expenses in retirement.
If you live in a city now, and plan to retire in the country, some
other costs of living might drop also (auto, home, taxes). I think a
principal factor is how you pay for medical expenses when you retire.
The closer you are to retirement age, the more predictable your
retirement choices are; the longer you live, of course, the more things
can change.

In article <432708d6.1353556[at]news.vt.edu> , castlegate100[at]hotmail.com (Terry Castle) wrote:
- quote -

Just curious - if you are retired, what is the income source to be used to
make retirement contributions ? Will you receive a pension or take other
employment ?

Terry Castle wrote:
- quote -

Here's a pretty good article.

http://moneycentral.msn.com/content/...an/P121553.asp

Also, although the cost of living will be higher when you retire
[depending on how many years you have left to retirement], you will
hopefully have your home paid for, your dependents will be out of the
house, etc. So, your budget may be less as these big ticket items drop
out of your budget.

Terry Castle wrote:
- quote -

It all depends on the kind of lifestyle you want to have in retirement.
If you had to you could live in a cheap apartment, eat every meal at
home, drive a 15 year old car, and never travel, and probably live on
30% of your current salary.

The other thing to take into consideration is that if you are younger
than 50 so many things are going to change between now and your
retirement age that any predictions about what costs will be when you
retire are going to be nothing more than wild guesses. The cost of
food, housing, or medical care, or whatever, could rise much faster
than the overall inflation rate. Or fall dramatically. The stock
market could be flat for 20 years or it could see 18% annual growth for
20 years. Also, your tastes and desires could easily change; you may
want a frugal retirement now, but then change your mind later, or vice
versa. My point is that calculating how much you should save every
month based on a retirement income goal is probably not a good idea.
Instead, I would suggest saving as much money as you can while still
having a reasonably enjoyable life now. That way you will have the
greatest possible range of options as you get older instead of finding
yourself trapped in a dead end because some fundamental assumption of
your savings plan didn't work out.

Andy

Current wisdom is that it depends on whether you would
spend your retirement gardening or racing sports cars.

You might want to continue contributing to retirement
if it is benficial to have more money tax-sheltered and
you have sufficient earned income to make the contribution
legal.
Joe

Does anyone know what the current wisdom is on what percentage of
salary you need to have as an income stream after retirement I've
seen from around 80% to 100%. Obviously, the difference between the
two can be quite large. My problem with the 100% is that I'm
contributing enough to retirement plans so I'm currently living on 80%
of my salary. Why would that go up after retirement? Am I supposed
to keep contributing that amount to my retirement after retirement?
Or are medical expenses going to be so high to make up the difference?
Thoughts?