Retirement age / $$$$

[Deleted]

Have you ever thought about the age you retire and what difference it would make in the total dollar amount you have available to you.

I know you can't really plan that far ahead since alot of other things might come into play (death, health, unemployment, market, etc) but just saying...

Anyway, I always said that I wanted to be financially able to retire at 55 if I had to but hope to be healthy and capable to hang in there till 65 or later.

Based on the calculations, if I retire at 65 it will double it.

I am thinking if I am healthy, capable of doing it and enjoying my job I would not mind sticking it out 10 more years for that increase.

You?

[phil5185]

Your dollar amount at retirement also depends on when you shift from wealth building to wealth preservation. Say that you have $1M in the 401k at age 55. Using the rule of 72, it would double to $2M by age 62 if you stay the course. But if you transition to wealth preservation mode (move into 5% bonds) then it will take about 15 yrs to get to $2M. Many of us do something near the middle.

[txengineer]

Good reminder, Phil!

cawiau, if 5 years will double your retirement investment, it must have assumed a pretty high return. However, your stock/bond ratio will definitely shift more towards bond as you age, thus a consistent % return is not quite realistic.

[Deleted]

sorry wrong calculations will update in next post

[bobbysgirl]

Currently retired there are a couple things I would offer.

1. We downsized and do not need the resources we did when we were in a more active stage in life. ( I don't need)

2. Prepare for 55, but stay to 60-62. So many variables are out there, it's impossible to see all of them coming your way.

3. Don't stay working too long. There won't be an enjoyable retirement for you. I think you can guess what the alternatives are.

4. Take care of your health, so ailments don't start surfacing. Genetics can't be changed, but other things can be controlled. This isn't even a sure thing, but puts you ahead of the game.

5. Make effort to keep your marriage healthy. Divorce is extremely expensive, in more ways than one.

Other than that, Phil knows all of the figures.

[shooter47]

Apr 7, 2011 20:54:09 GMT -5 TheHaitian said:

Based on the calculations, if I retire at 60 instead of 55 I will would double the amount available... push it back to 65 it will triple it. quote]

Here you say you would double the amount in 5 years. The quick rule of 72 says that your money will double when rate of return*years=72. So for your money to double in 5 years your rate of return would be 72/5= 14.4%. For someone who is over the age of 55 this rate of return seems very unreasonable and would take a portfolio with a high degree of risk.

[txengineer]

Apr 7, 2011 21:55:16 GMT -5 shooter47 said:

Apr 7, 2011 20:54:09 GMT -5 TheHaitian said:

Based on the calculations, if I retire at 60 instead of 55 I will would double the amount available... push it back to 65 it will triple it. quote]

Here you say you would double the amount in 5 years. The quick rule of 72 says that your money will double when rate of return*years=72. So for your money to double in 5 years your rate of return would be 72/5= 14.4%. For someone who is over the age of 55 this rate of return seems very unreasonable and would take a portfolio with a high degree of risk.

This is what I was trying to say, though it's not strictly the growth of existing portfolio, if you continue to work, you will add to existing portfolio and thus part of growth is due to the "new" money and its compounding. However, I still feel for the investment to double in 5 years, the assumed growth rate would have to be more than 7%....

[Deleted]

Apr 7, 2011 21:55:16 GMT -5 shooter47 said:

Here you say you would double the amount in 5 years. The quick rule of 72 says that your money will double when rate of return*years=72. So for your money to double in 5 years your rate of return would be 72/5= 14.4%. For someone who is over the age of 55 this rate of return seems very unreasonable and would take a portfolio with a high degree of risk.

Sorry, I will double it by the time I am 65, actually it will be 1.5 by 55 if I don't change anything.

[shooter47]

Apr 7, 2011 22:10:44 GMT -5 txengineer said:

This is what I was trying to say, though it's not strictly the growth of existing portfolio, if you continue to work, you will add to existing portfolio and thus part of growth is due to the "new" money and its compounding. However, I still feel for the investment to double in 5 years, the assumed growth rate would have to be more than 7%....

Your right my calculation was rough and did not include any new money being added but with an income of 90,000 and 25% being put away for 30+ years the balance of the retirement savings is going to be very large. The subsequent rate of return on that balance is going to be significantly larger then any contributions made by that time. Therefore any contributions at that point will be very negligible to the balance doubling in 5 years. Therefore I agree with you the rate of return won't be exactly 14.4% but will be considerably more than 7%.

[Deleted]

Apr 7, 2011 22:19:47 GMT -5 shooter47 said:

Apr 7, 2011 22:10:44 GMT -5 txengineer said:

This is what I was trying to say, though it's not strictly the growth of existing portfolio, if you continue to work, you will add to existing portfolio and thus part of growth is due to the "new" money and its compounding. However, I still feel for the investment to double in 5 years, the assumed growth rate would have to be more than 7%....

Your right my calculation was rough and did not include any new money being added but with an income of 90,000 and 25% being put away for 30+ years the balance of the retirement savings is going to be very large. The subsequent rate of return on that balance is going to be significantly larger then any contributions made by that time. Therefore any contributions at that point will be very negligible to the balance doubling in 5 years. Therefore I agree with you the rate of return won't be exactly 14.4% but will be considerably more than 7%.

ok am I missing something?

Using www.bankrate.com/calculators/retirement/401-k-retirement-calculator.aspx

and only using 401K (we do have ROTH IRA's)
- 90K salary
- 25% contributions
- 10k balance
- 7% rate of return
- Age : 25
- I put no salary increases and no employer contributions

At 55 I have a balance of $1,726,027
At 65 I have a balance of $3,710,725

[2kids10horses]

I "retired" at 47. I got my real estate license, but I only make a minimal commission income on it. I mainly use it to defray the cost of buying/selling on my own account.

I have about 10 paid for rental houses that generate my monthly cash flow. I'll buy and flip a couple of houses per year. I've also sold a few houses using owner financing, and the payments add to the monthly income.

I still have my 401k money (now an IRA) from when I used to be a wage slave continuing to grow, even though I can't add to that. I also have a separate Roth IRA I add to each year.

Phil, for the purposes of calculating my net worth, should I just include the market value of the houses, or should I include the net present value of the flow of income I expect to receive over the years in net rent? (and cash flow from owned first mortgages.)

[Deleted]

Apr 7, 2011 22:39:36 GMT -5 2kids10horses said:

I "retired" at 47. I got my real estate license, but I only make a minimal commission income on it. I mainly use it to defray the cost of buying/selling on my own account.

I have about 10 paid for rental houses that generate my monthly cash flow. I'll buy and flip a couple of houses per year. I've also sold a few houses using owner financing, and the payments add to the monthly income.

I still have my 401k money (now an IRA) from when I used to be a wage slave continuing to grow, even though I can't add to that. I also have a separate Roth IRA I add to each year.

Phil, for the purposes of calculating my net worth, should I just include the market value of the houses, or should I include the net present value of the flow of income I expect to receive over the years in net rent? (and cash flow from owned first mortgages.)

So in your case do you ever plan on retiring as in stop buying/selling/flipping houses and just laying back enjoy life?
Or do you plan do still do it but less actively to generate some extra cash from time to time?
Do you plan to sell some of the homes or keep them to generate monthly income?

Side note: would love to be in your position in 20 years... except I might still be a slave worker but have 10 houses on the side ;D

[txengineer]

Apr 7, 2011 22:15:03 GMT -5 TheHaitian said:

Apr 7, 2011 21:55:16 GMT -5 shooter47 said:

Here you say you would double the amount in 5 years. The quick rule of 72 says that your money will double when rate of return*years=72. So for your money to double in 5 years your rate of return would be 72/5= 14.4%. For someone who is over the age of 55 this rate of return seems very unreasonable and would take a portfolio with a high degree of risk.

Sorry, I will double it by the time I am 65, actually it will be 1.5 by 55 if I don't change anything.

That makes sense.

[cronewitch]

I am turning 63 this month and while an extra year or two of work won't double my investments it is still of value. If I earn 55K and spend 30K I am saving 25K but I am also not starting to deplete savings. If I took 20K of SS instead of 55K of wages I am behind 35K which would mean using 10K of savings but also not saving 25K putting me 35K behind. I have about 550K saved so it might earn money or it might lose money. I made 34.6% on the 401K the last year but some years lose more than that. Waiting a year or two means I might have a lot more or be glad I waited.

I don't mind my job at all and waiting two years isn't an issue. Retiring doesn't sound like much fun when I don't have anyone to travel with since DBF isn't retiring.

[morrisr2d2]

Assuming current salary and savings rate and 6% return, I'll have a net worth of:

Age 47 $1M
Age 56 $2M
Age 62 $3M

I just hope by 55 I'll feel secure enough that if I wanna tell work to suck it I can. But if I am happy with my job and partner continues to work, I will too.

Another part of our retirement plan is to move from NYC area to a LCOL area to be closer to family/friends. That could make retirement at 55 more than possible, and hopefully offset the impact of any inflation.

[Deleted]

My calcs work out at about the same as cawiau's; I'm 58 and if I keep working till age 65 I'll have 1.5X what I have now. That's assuming a 6% annual return (which is what I've gotten from 2003 to date) and an increase of 3% in what I save every year. We're in a LCOL area and we're putting a lot away.

I'm in an interesting quandary- with the money we're able to save every month, I feel like I have to work to 65. How could I not work when the money is so good? I should mention that we're also enjoying life- we leave for Spain next month and have a good life here at home. I also like the idea of having company health insurance.

But. I've definitely reached the point morrisr2d2 aspires to reach- if I decided to sing "Take This Job and Shove It" to my employer (or they dumped me out on teh street), we'd be fine. That's a good feeling.

[morrisr2d2]

Athena makes a good point. I am starting to see more and more "targeted" layoffs, a lot of who are people in their upper 50's that the company has told to go retire. And then younger, cheaper employees get hired/move up. I want to be prepared should that happen to me!

[Deleted]

Apr 8, 2011 7:09:08 GMT -5 morrisr2d2 said:

Athena makes a good point. I am starting to see more and more "targeted" layoffs, a lot of who are people in their upper 50's that the company has told to go retire. And then younger, cheaper employees get hired/move up. I want to be prepared should that happen to me!

Those past two years have opend my eyes to that possibility and I hope I never forget that. And alot of those folks (55 and older) are finding it really hard to find jobs and I don't want to be in that situation.

So in my head when I play around with my numbers, I always think I am going to get laid off at 55, but fingers crossed for 65 so I can double that sucker

[2kids10horses]

In my case, I plan on keeping some rentals for a while. Usually, I sell them after I've owned them about 5 years or so. Reason? Renters are harder on houses than an owner. (Usually. I've seen some incredibly beat up foreclosures!) But, I like to buy 5 year old houses and use as rentals. Their systems are pretty modern and don't require much maintenance. Once a house gets a dozen years on it, roofs require replaceing, water heaters give out, A/C units start to leak, etc. So, I'll sell and move on.

Also, right now, the deals are so good, if there was ever a time to buy houses for rentals, this is it.

How long will I do it? I've got two kids in high school, and they're going to be going to college. I have enough saved already to pay for that. So, I don't need the income from the rentals for that. I guess I'll do it as long as it's lucrative. I do a lot of the work myself. It gives me something to do. Maybe once the kids graduate from college, we'll downsize the house and horses.

I do flips, again, because it's easy and profitable. Ya know, right now it's kinda on autopilot.

[phil5185]

and only using 401K (we do have ROTH IRA's)
- 90K salary
- 25% contributions
- 10k balance
- 7% rate of return
- Age : 25
- I put no salary increases and no employer contributions

At 55 I have a balance of $1,726,027
At 65 I have a balance of $3,710,725

Carl, that calculator defaults to $16,500/yr - if you invested your full $22,500/yr (excess in a taxable account) the answer is almost $5M.
But a better(?) plan would be to use products that provide higher than 7% while you are young and not affected by volatility, and at age 55 transition to less volatile products.

3.7M for a 40-yr, $22.5k/yr plan is an extremely low goal - remember almost a million of that is your own contribution, you should try to earn way more than that over a 40 yr period.

[phil5185]

So in my head when I play around with my numbers, I always think I am going to get laid off at 55, but fingers crossed for 65 so I can double that sucker

Keep in mind that your 401k (or rollover IRA) doesn't quit growing just because you retire. You can retire at 55 and still 2X the IRA by 65. Mix 11% index/6% bond funds to get 7%/yr - probably about a low risk 20%/80% mix.

(I've been retired for 13 yrs, the bond portion of my IRA has returned >6.5%/yr over that time).

[ilovedolphins]

I am aiming at 55 but would work longer if I had to. You just never know about health care. But I want to retire young enough to be able to babysit my grandkids (if I get some) and help my parents out in their golden years. So that gives me 6 years to get that accomplished or work longer.

And I was aiming for $200,000 by the age of 55 and at the age of 49 am at $137,000. Hope to be to $150,000 by the end of the year.

[Sum Dum Gai]

I have a spreadsheet on my computer that lets me run different retirement scenarios. Currently, I use 3% inflation, and 10% market return during my working years, which gives me 3.066 million at 55, and 5.168 million if I wait until 60.

Keep in mind I'm only 29 though, so right now the spreadsheet says I should have $64,450, which means I'm on track, but who knows how accurate the modeling will turn out to be.

[MN-Investor]

My DH was mentioning this just the other day. He will be turning 57 this summer and talks about retiring when he turns 65. He'd like our current investments to double in those 8 years. I'll be happy with a steady increase, but doubling it certainly is a possibility. We're contributing the max to our retirement accounts each year and living well within our means. Most of our investments are in stocks.

[azphx1972]

Interesting topic, I was playing around with this retirement calculator earlier this week:

money.msn.com/retirement/retirement-calculator.aspx

My numbers change dramatically depending on my desired retirement age and whether I choose to include social security, but at my current savings rate and aiming for 50% income replacement, it appears that the soonest I will be able to retire is at age 49 and still have sufficient funds to last me until I'm 90-100 years old. In reality, I think what it means is that I can quit my corporate job in the next 10 years and do something else until I'm truly ready to quit working altogether. I wouldn't want to completely stop working at 49 and do nothing anyway, so I guess I'm pretty happy with where I'm at.

[Deleted]

That retirement calculator does a much better job than many I've seen; some are so simplistic that you don't know what unreasonable assumptions are buried in it.

Still, I don't trust it. It says I could retire right now (age 58) and live on 75% of our current income, which is 6.5% of our invested assets if I take DH's SS out of the annual withdrawal amount. Financial planners say you shouldn't withdraw more than 4%. At the height of the financial crisis they said maybe it shouldn't be more than 2%.

[Deleted]

Apr 9, 2011 7:32:49 GMT -5 @athena53 said:

That retirement calculator does a much better job than many I've seen; some are so simplistic that you don't know what unreasonable assumptions are buried in it.

Still, I don't trust it. It says I could retire right now (age 58) and live on 75% of our current income, which is 6.5% of our invested assets if I take DH's SS out of the annual withdrawal amount. Financial planners say you shouldn't withdraw more than 4%. At the height of the financial crisis they said maybe it shouldn't be more than 2%.

I don't trust it either. It says I'll have millions left over at 95 even without SS and I'm 42 with only 140K saved.

[morrisr2d2]

That's the result of compound interest, assuming a level return over the years. Once your portfolio hits critical mass, it takes off. That's why the last few years before you retire are critical, and you'll hear that "working a few more years" makes a huge difference. The hard part is getting the portfolio to critical mass.

[Deleted]

Apr 9, 2011 9:13:09 GMT -5 morrisr2d2 said:

That's the result of compound interest, assuming a level return over the years. Once your portfolio hits critical mass, it takes off. That's why the last few years before you retire are critical, and you'll hear that "working a few more years" makes a huge difference. The hard part is getting the portfolio to critical mass.

Yep... if I reach my goal of retiring with 7M at age 65, when I die at 95 (age I used), the money will actually increase to about 15M .

So even while not contributing to it for over 30 years and withdrawing 100% of my current income, my savings will keep on growing ;D ;D

Like Albert Einstein once declared : coumpound interest is the "most powerful force in the universe.