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Post by exafchick on Mar 18, 2011 10:17:20 GMT -5
Hello all! I have been a fan of these boards for years and would love opinions. I am a single 42yo female with no kids. i retired from the military in 2007 so receive a pension. my civilian job pays $40000/yr and I contribute 7% each payday to 401k (current balance of $16600). while active duty i participated in the Thrift Savings Plan and currently have $24000 invested in the lifecycle 2040 fund. my ira has $16669 and I plan to put in $5000 this year. My ING EF has $4000 and my goal is to bring that to $25000. I have no consumer debt except my mortgage which is $207000 at 6.125% for 30 yrs (26 years left).
I have played with an online calculator and looks like i'd be able to retire with $500000 since I have a pension. Even if i retire before mortgage paid off, i would only need to generate $2000/mo from investments. I also have medical care through military (Tricare).
does this sound right or am i missing something?
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zibazinski
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Post by zibazinski on Mar 18, 2011 10:20:08 GMT -5
Will you have a paid off place to live in a LOCL area? Do you have long term care? Will/does the military care for you long term? I know you have health isnurance thru them forever but if you need nursing home care, do they cover it or care for you?
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Post by exafchick on Mar 18, 2011 10:24:23 GMT -5
I do have long term care insurance. i live in upstate ny so probably not very low cost, but property/school taxes are $8000/yr and use propane for heating/cooking so those expenses are variable.
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Deleted
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Post by Deleted on Mar 18, 2011 10:28:21 GMT -5
If you want $2000/month you should have $600,000 not $500,000. Is your pension indexed to inflation?
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Post by exafchick on Mar 18, 2011 10:32:34 GMT -5
pension does receive increases annually, but probably not at the rate of inflation. i have assumed i won't get any increases that way if i do it's a bonus!
Gin: what calculator did you use to find out i need $600000 for $2000 income? i used the one on bankrate and it projected taking $2000/mo for 35 years would make money last forever! i could actually take out $2500/mo.
Thank you for replies!
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Tiny
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Post by Tiny on Mar 18, 2011 10:43:08 GMT -5
exafchick, I did the generic 'rule of thumb' that goes something like you can withdraw 4% of your investment money every year without touching the principle. So 500,000 * .04 = 20,0000/12 = 1,600 a month. I bet the Bankrate calculator was using 5%... The variable in all of this is how much income your principle will generate - there's no gaurentee it will be 5% or more... right now 500,000 in CDs wouldn't generate 5% (as interest rates are well below 5%). Not sure how it would work out with 500K in bonds or TSPs... Of course, since you've got a steady pension you might not need (or want) to keep all your 500K in such conservative investments.... but that's something to explore/be concerned about when you actually get closer to retiring...
Not that you probably couldn't make your retirement budget work with 500K - but you might want to shoot for more moeny. I suspect very very very few people ever say "Gosh Darn! I saved too much money".
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cronewitch
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Post by cronewitch on Mar 18, 2011 10:47:42 GMT -5
Those calculators assume nothing goes wrong. A safe withdrawal rate is said to be 4% so that if you earn 7% and inflation is 3% it would work great. Life isn't like that inflation can be 10-15% some years and deflation other years and your return will vary just as much. If you retire with 500K then the markets tank you might lose 75K the first year while pulling out 20K and be down to 405K then it might grow 10% to 445K but you take out 20K so how would you feel then?
I projected the same for myself and have my 500K already and it was growing like crazy the first two months this year but this month is down so my YTD is only $300. I lost over 20K so far this month but might make 10K today you never know.
So I am making sure I have a nice cushion and might wait for 700K to have 200K extra to handle down turns in the markets.
If I were you I would look at refinancing the mortgage your interest rate is pretty high. If you can't then plan to pay it off sooner. Don't send extra payments since it limits flexibility in your budget but save to pay it off in 15-20 years instead of 26.
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Post by exafchick on Mar 18, 2011 10:52:44 GMT -5
Cronewitch: you are absolutely right that life sometimes doesn't go as expected. i had thought i'd have the $500000 by the time i'm 60, but might wait until i'm 65 so i do have that cusion in case of market fluctuations.
i also love the idea of paying house off early! i tried to refinance but market value is less than what i owe.
it is better to have too much saved than not enough! Thank you for your insights!
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phil5185
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Post by phil5185 on Mar 18, 2011 10:55:39 GMT -5
what calculator did you use to find out i need $600000 for $2000 income? i used the one on bankrate and it projected taking $2000/mo for 35 years would make money last forever! i could actually take out $2500/mo. If you use a 4.8% return you will get your $2000/m. If you use 6% you get $2500/m. So it comes down to estimating what return you will be able to get on your $500,000. A big part of your equation is your pension size - it probably is indexed to inflation, similar to a SS pension.
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Post by exafchick on Mar 18, 2011 11:04:03 GMT -5
Phil: Currently pension is $1800/month
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Clifford
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Post by Clifford on Mar 18, 2011 11:34:31 GMT -5
My retirement plans include income generation. My retired FIL made $6000 last year at the farmer's market. My DW sells crafts online. I am sure there is something I can make/grow to bring in a little, even in retirement. Also, there is always the option of part-time work. A no-real-responsibility job at $10/hr gets you an extra $400/month working just one week per month. With your military background I am sure there are organizations you could work for that you might like while making a little extra. If you need a break, quit, then pick up again whenever you want. Might just help you stay active and alert as well. That said, target $$ for this type of "mostly-retirement" can be lower than you might think.
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Gardening Grandma
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Post by Gardening Grandma on Mar 18, 2011 11:58:11 GMT -5
If you use a 4.8% return you will get your $2000/m. If you use 6% you get $2500/m. So it comes down to estimating what return you will be able to get on your $500,000.
You will need to keep in mind that if you raise your expected return, you have to be willing to raise your risk acceptance accordingly.
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Post by The Walk of the Penguin Mich on Mar 18, 2011 13:07:00 GMT -5
If you are single why such an expensive house that you have to pay on 26 more years and such high taxes? We have a very nice home in a decent area but its 30 years old. Taxes, $800 a year, insurance of about $1250, includes flood though we have never flooded, and no HOA dues. We also have a waterwell and septic so no bills for that, trash pickup, utilities, cable, phone. We can live very well and very inexpensively.
Not everyone wants to live where you live, Stablest. The OP is employed and collecting a pension. You think she should quit her job just so she could live some place where she doesn't want to live?
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Post by exafchick on Mar 18, 2011 13:21:04 GMT -5
patstab: although my taxes are pretty high compared to some locations, it is not unaffordable. since the mortgage (with taxes escrowed) is my biggest expense and i'm still able to save and invest, i figure i'm not doing too badly. i knew it would be more expensive than other locations, but i had spent 21 years away from family that when i retired I wanted to be near them. my elderly mom also lives with me so want to keep her near family and grandchildren. maybe when she passes on i might think of moving where the winters are less harsh!
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april47
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Post by april47 on Mar 18, 2011 15:40:17 GMT -5
Does anybody here remember that most people do not have $500,000 when they retire? We don't spend or need $8000 a month. We don't always have the choice to retire. I am doing just fine on a whole lot less. Sorry, I am so tired of hearing you HAVE to have a million dollars to retire.
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Gardening Grandma
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Post by Gardening Grandma on Mar 18, 2011 15:43:07 GMT -5
How do you get $8000/mo from $500,000? Unless you get a heck of a return, your money would last 5 years.
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Tiny
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Post by Tiny on Mar 18, 2011 16:00:46 GMT -5
I think there the 1 million in savings is mostly for the youngun's who aren't gonna retire for another 30 years ... Retiring now or in the next 5 years will require less money saved than some one retiring in 15 or 20 years, thanks to inflation. The other thing is if retirement income is coming from a variety of places, say a pension, SS, 401(K)/Roth, and some taxable accounts... You might not need so much in a retirement account if you've got a great pension/health care benefit. On the other hand... if you do have a great pension/healthcare benefit - stuffing as much as possible into other retirement vehicles might make 'early retirement' feasible - my brother and his wife did this - they are alittle over 50 and 'retired'.
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cronewitch
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Post by cronewitch on Mar 18, 2011 16:10:56 GMT -5
I don't need any money to retire, I can live on SS alone. I can't live on it in my own house, I can't own cars or boats. I could live in a small apartment or rent a room, get a bus pass, get food stamps and be just fine.
But I don't want to, I like having space and stuff, keeping boats, going places when I want and not pinching pennies.
Current lifestyle cost about 35K and I will get about half that in SS so need about 20K income or 500K invested. If I couldn't I would make other plans but not going to quit working before I have to unless I can live the way I want with a house, car, truck and boat. I don't want to work in retirement unless I want to.
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april47
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Post by april47 on Mar 18, 2011 16:39:04 GMT -5
How do you get $8000/mo from $500,000? Unless you get a heck of a return, your money would last 5 years. A previous poster said they would have about $8000 a month and it could get a little "tight".
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Gardening Grandma
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Post by Gardening Grandma on Mar 18, 2011 16:51:24 GMT -5
I don't recall anyone saying $8000 mo would be tight. Someone said they didn't need $8000/mo......
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april47
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Post by april47 on Mar 18, 2011 17:27:26 GMT -5
I don't recall anyone saying $8000 mo would be tight. Someone said they didn't need $8000/mo...... Reply #12 at the end.
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Gardening Grandma
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Post by Gardening Grandma on Mar 18, 2011 17:54:59 GMT -5
Thanks April. I missed that. Right now $8k/ is probably a fairly comfortable retirement income ( unless you live in a HCOLA), but I imagine the poster is looking ahead to what that $8K might be over a long retirement....20 or 30 years out, yes, it could get tight. Someone who retired in the mid 80's probably thought $1000/mo would be enough....but it wouldn't go very far now. Even if you own your home, the annual taxes could become as much as your annual mortgage was. Food, gas, and medical care tend to go up more than other costs. And those are necessities.
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Plain Old Petunia
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Post by Plain Old Petunia on Mar 18, 2011 18:16:36 GMT -5
When people say that they "lost everything" or got "wiped out", I always strongly suspect they are exaggerating. Even in the crash of 1929, the stock market did not go to zero. Also, you don't keep money you will need in the next 5 years in stocks, you move it to high quality bonds and/or cash.
But certainly, if you don't want to own stocks then there is no reason you should. There are other alternatives to grow your money.
Patstab, you've done a good job setting yourself up for a comfortable retirement. That's fabulous, enjoy it!
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DVM gone riding
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Post by DVM gone riding on Mar 18, 2011 21:00:44 GMT -5
oh patstab you just made me jealous!! We had freezing rain today mixed with snow! I told someone it felt more like fall then spring. in two weeks I am supposed to work on the roof of our rental and I am not sure the weather is going to cooperate.
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Post by movester on Mar 19, 2011 9:44:16 GMT -5
A lot of people have this irrational fear that they will outlive their money. Retire as late as possible and you won't have that problem.
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Gardening Grandma
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Post by Gardening Grandma on Mar 19, 2011 12:38:16 GMT -5
A lot of people have this irrational fear that they will outlive their money. Retire as late as possible and you won't have that problem. I would not call the fear of outliving your money "irrational". If you retire at 70 with no savings or a paid off home, and earned very little in your lifetime, you may well outlive whatever savings you have. And if you develop health issues, working til you are 70 may not be an option.
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cronewitch
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Post by cronewitch on Mar 19, 2011 13:32:40 GMT -5
A lot of people have this irrational fear that they will outlive their money. Retire as late as possible and you won't have that problem. Read more: notmsnmoney.proboards.com/index.cgi?board=finance&action=display&thread=4976&page=2#ixzz1H4QYLFKARetiring later helps but most won't be earning much past 70 or 80 or don't want to work until they are too old to work. Some want to retire so they can do things like my grandmother retired at 57 because her husband was 65 and had to retire. They wanted to buy a small farm outside their home town. She was retired 41 years so even if she had worked until he needed full time care when she was 70 she still would have had 28 years of retirement. That is a long time to make money last. This outliving money is more a problem for women than men since we live longer and marry older men so end up with long stretches of being widowed. My grandfather died at 80 and dad at 79, grandma was widowed 25 years because she was 7 years younger and lived to 98. Mom has been widowed 18 years at 84 because she was 12 years younger. She is in good health at 84 so could live longer than her mother 98 and grandmother 97 so might have more than 20 years left to out live money. She retired at 61 and was only had a few years before dad needed full time care. Retiring later would have not helped much to make it less likely to outlive money. Many people need to retire to be caregivers to parents, spouse or siblings before they are 70 so can't work, some lose jobs and can't find new ones, some lose abilty to work. My brother had to retire at 58 because work hurt too much, dad at about the same, I have a desk job but I am feeling my age more every day. My knee has hurt about two weeks, one ankle for 30 years and the knee is causing my hip to hurt, my eyesight is bothering me they say just dry eyes but it bothers me. I am only 62 but don't think I can work to 70 but might live to more than 100. I am already single but my roommate will be like my dad and grandpa and die at 80 or so and is older but only 1 year so I expect in 10 years to be alone, over 70 and unemployed. I don't see worry about outliving my savings as irrational. Another thing is women are often married to men with pensions that die with them or are reduced
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lynnerself
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Post by lynnerself on Mar 19, 2011 13:46:10 GMT -5
I always expected to live into my late 80's or 90's. All of my grandparents did. Then my parents went and both died at age 73, within six month of each other. (different cancers) So now I want to retire as soon as reasonably possible. Right now it looks like age 62. But you still have to plan as if you will live to 100. The interesting choices are how to take DH pension? We have many options as too how much I would get if I outlive him or he survives longer. Both of us are in great health now. He has chronic diseases on his side. Do we plan based on the statics that I will out live him by 10 years or by more personal, but random experience?
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ysi
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Post by ysi on Mar 20, 2011 20:53:26 GMT -5
[Sorry, I am so tired of hearing you HAVE to have a million dollars to retire.]
Amen to that-I just want to sit and watch the grass grow-the last 10yrs of work have wrecked me. (My mother reminded me I would need to mow that grass LOL) I have heard that 4% figure before but I don't know if soc security is figured in to it or would be separate extra money? My current pension accumulation grew $9,000 in 3mos. I realize I can't rely on that rate of return but I could live on $3,000 a month today, and if you add a social security check to that amount, I would actually live better than I do today!
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Gardening Grandma
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Post by Gardening Grandma on Mar 20, 2011 21:11:43 GMT -5
[Sorry, I am so tired of hearing you HAVE to have a million dollars to retire.] Amen to that-I just want to sit and watch the grass grow-the last 10yrs of work have wrecked me. (My mother reminded me I would need to mow that grass LOL) I have heard that 4% figure before but I don't know if soc security is figured in to it or would be separate extra money? My current pension accumulation grew $9,000 in 3mos. I realize I can't reply on that rate of return but I could live on $3,000 a month today, and if you add a social security check to that amount, I would actually live better than I do today! Well, to have an income of $3000/mo, you'd need to have $900,000 if the plan is to draw 4%. Unless you had another source of income- like a pension.
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