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Doesn't seem so bad. 4% rule + social security. And you'll pay very low tax rates. Really depends on your standard of living and expectations. (The first guy in the article built a $1.4 million house...)
If you've managed to pay down your mortgage by the time you've retired, I see no problem to stress on a $1m nest egg. The most important part of senior planning in my opinion is buying a LTC insurance plan ahead of time. I've seen people run down huge retirement accounts paying $6000 a month for those places.
FYI 4% rule is probably too aggressive because it’s based on historical U.S. stock market data for a 30 year retirement. People are living longer and it’s a better assumption to use global stock market returns (because there’s no reason to think U.S. stocks will continue to outperform the global average - they very well may revert to the mean).
3% is a better bet for people retiring today.
Cant you just guarantee your ability to do the 4% rule by buying some 30 year treasuries (the current interest rate is ~4%)? If you're worried that interest rates will be lower if that matures and you're still alive, you could even look at annuities (not that an annuity is necessarily the right move)
> The first guy in the article built a $1.4 million house...
The article also notes that he doesn't have a mortgage. So that's $1.4M in assets. Not liquid assets, sure, but a lot of folks here are being snarky about it.
If you're already retired, you could do a lot worse than having $1.4M in home equity on top of your existing million dollar retirement savings. There are ways to get at that money, not the least of which is selling the home when the time comes (as it will come for all of us).
Did you have trouble finding an LTC plan that was reasonably priced to provide enough coverage? As expensive as care is and premiums are, I didn't see pricing that made sense vs. saving for it myself.
(I do have a tiny life insurance plan with a LTC rider so I could get exempted from the payroll tax in WA state.)
Non-JS readable version [1]
[1] - https://archive.ph/RERIk
Wait until they find out that the United States has way more debt that it can service over the coming decades, and that the way out is persistent inflation combined with gaming the inflation metric used for Social Security cost-of-living increases.
The US can service essentially any level of debt, and has far lower levels of debt than, most notably, Japan, which continues to function entirely normally.
Certainly, there are countries in a worse place than the United States. Japan or Italy are the first to be likely to blow up in a big way. Greece is a good candidate for blowing up first, but it is small enough to be backstopped by the ECB. Italy is too big to be backstopped. The USA may fall, but it probably won't be the first major economy to do so.
Historically, governments have been prone to currency crises when their debt-to-GDP ratio exceeds 100%. The USA is just slightly above that now, and interest rates have remained low here (and in other countries) because central banks are monetizing the debt. But that can't be sustained forever.
It's true that the country will be fine for a while but savers are getting decimated in the process.
That $1M nestegg will feel like $250k in a few years.
Not for long. Just as long as the Dollar is the world reserve currency. Something that seems to be coming to an end in the next one or two decades.
Even worse... the 4% rule is only tested over 30 years. If you're retiring at 55 you should probably be looking at a withdrawal rate of 2.5 - 3%, so 35-40 times your desired retirement income
Spends tends to go down with age though. If you live to 90 you aren’t going to be jetsetting around, you’ll just be resting at home all day.
If I retire at 55, I'm more likely to be dead at 85 than broke.
That should cheer you up!
First bear market in over a decade and suddenly the entire FIRE community capitulates to a decision that keeps them working for another decade. What a joke.
That's only if you plan to leave your stock portfolio to your children when you die. You can take out more than 4% if your plan is to use up your savings while you are alive.
Use cfiresim or any other retirement calculator and you can choose your length and mix. We don't have to rely on the calculations of someone from 1993...
Despite being well off income-wise, my expenses are under $20k/yr on average. This is with owning a home, buying a car every 5 yrs, and basically buying anything else I might want. I could go as low as $5k/yr in fixed expenses if I had to.
I could spend more, but can't think of any additional products I'd want to clutter up my house with.
Not doing anything too special/weird here (I grow some of my own food and try to repair things myself, but that's about it), so seems strange you'd need so much in retirement.
$20K/yr is ridiculously low spend. Do you opt out of health insurance or something? I don't know how you could do that unless you are in extreme VLCOL area.
For comparison I'm in MCOL US and my spend this year will probably be about $28K. Taxes, healthcare, groceries, eat up a huge chunk of that. And I buy nothing but essentials (no TV, no streaming, no vacations, drive an old car, no restaurants, starvation level food consumption).
You don't really need $70K, the idea is to keep up with inflation (by investing) and overprovision enough to protect yourself from market volatility (big cash buffer, bond ladders, etc)
Most people right now will probably be considering annuities to offload some of the risk
Medical insurance alone would be $20k per year for most people in the US.
"In 2017, the couple sold their vacation home and built a $1.4 million house in Newport with views of the water. Mr. McKinney tiled the kitchen and bathrooms himself."
It sounds like they could have much less house and have had closer to $2M in retirement savings.
They tiled the kitchens themselves though so really it was quite frugal
Not in Newport with a view.
"When she was in her mid 50s, Connie Gores got a wake-up call from a financial adviser.
At the time, Ms. Gores had saved about $250,000. The adviser told her that unless she started saving more, she would likely have to live on Social Security alone when she retired.
The conversation shook her into action. By the time she did retire as a university president, she was socking away about 26% of her roughly $250,000 salary."
She had 15 years of saving 26% of $250k to only have $250k??? Yikes. Should have been able to save more, that is insane, because the numbers don't match up.
Age 55 (says "mid 50s")
Savings $250k
Age 65 (retirement "about 3 years ago", now age 68)
Savings $1m
10 years working while saving 26% of $250k = $650k
$250k + $650k = $900k
Add another 10% for investment returns.
No, she had $250k and was told it wouldn't be enough. So she then started saving more (up to 26% of her annual pay by the time she did retire).
She began with $250k and after 15 years of saving 26% ended up with somewhere over a million.
> $1 million nest egg can replace about 85% of a $70,000 median household income.
While property taxes depend on zip code, if the mortgage is paid, why does a couple need this much income?
Paying for enjoyment. Most people don’t live near their kids or grandchildren in retirement and want to travel to see them and otherwise. The popular idea of retirement is about leisure which has a cost. On top of this, most money goes to medical costs due to age.
Long term care is incredibly expensive (much more than those college bills) and medicare doesn't cover all of that. They recently started offering long term care insurance so you can sign up for that when you're younger and get the cheaper rates (of course you have to determine how long you want to save vs how much you'll be saving).
No one needs this much, but lots of people want this much or even a lot more. Some folks have expensive tastes while others are content with reading library books in a cabin in the woods.
Medical costs keep growing as you get older.
Property taxes in Texas are large enough to be half a mortgage payment, but the appraisal can be stopped when someone hits 65
"With interest rates rising, Mr. McKinney believes bonds are a bad bet and has all of the couple’s portfolio—now worth $700,000, due to withdrawals—in stocks. He favors stocks with high dividends and trades ETFs that rise when the market falls."
Seems bold.
Probably took losses on the bond portfolio when he saw rates rising. Should’ve just held steady.
personally my retirement strategy is a triplex (multi-family home with 3 units). for better or for worse multi-family owner occupied housing in the united states is too lucrative. especially if you bought before covid.
the problem with equities or bonds alone is that even with a good allocation it's hard to protect yourself completely from retiring into a recession.
if the usa allowed multi families by right this would be something that could help lower housing costs and help retirees.
regarding the article, it's crazy how people making 6 figures don't properly save for retirement. Americans truly have a spending problem. based on the professions of some of the people in the article, I would expect them to have more money but it's hard to say without knowing when and how much they made.
The problem with real estate is your retirement plan for a triplex may not materialize if you own in Detroit, and it's the 1970s and car manufacturing won't ever decline. It's putting a lot of eggs in one basket. You have no way of knowing if the location will fall out of favor. At least with the stock market, there are many other actors who have a shared interest in its success.
> the problem with equities or bonds alone is that even with a good allocation it's hard to protect yourself completely from retiring into a recession
I've never understood this logic... Even if I retire in a recession, I only draw down say 5% of my equities each year. Recession lasts say two years. So only 10% of my holding is liquidated when valuations are low.
The beauty of real estate is that you can live off the income rather than having to draw down the principal like in a traditional stock/bond portfolio which doesn’t have a very strong current yield. But, as you age you need a manager and that takes a bite out of it.
Wonder how much expats in retirement will increase when people realize they have no chance at living with their savings here.
It’s already happening with retirees moving to Mexico, Portugal, and Southeast Asia. Agree you’ll see it pickup as more folks retire and can’t make ends meet in the US.
Half of retirees over 55 have no retirement savings whatsoever, and will rely solely on Social Security income.
https://www.cnbc.com/2022/11/02/retire-abroad-in-these-10-ci...
https://www.aarp.org/retirement/retirement-savings/info-2019...
It's kind of wild to think about that these people are portrayed as living somewhat frugally (although so are the ones from the $2m article linked inside).
Most people couldn't dream of accumulating that much money over their lifetime and would be considered crazy rich in most countries.
Costs a lot to expatriate though. Deemed disposition on exit = capital gains.
Needing $1M has not been needed to retire comfortably for a great many people. While Canadian-focused, book The Sleep-Easy Retirement Guide has good numerical examples:
* https://findependencehub.com/qa-with-author-david-aston-abou...
In Table 5-1, he lists some real-life example of couples spending, with the average basics (shelter, groceries, vehicles, etc) totalling CA$ 42K and with average extras (entertainment, travel, etc) going to CA$ 72K. A "modest" couple spends CA$ 56K per year, and an "affluent" example couple spends $112K. In Table 5-2 he does the same thing for single retirees: the average single retiree spends $27K on basics and with extras $42K total; an "affluent" single retiree spends $90K.
Then in Table 12-1 he lists what nest egg is needed for each of those: a couple with a modest income needs of $42K needs to have $420K saved to retire at age 60 and $150K to retire at age 67. A deluxe lifestyle couple ($100K) needs $2M saved to retire at 60, and $1.3M to retire at 67. For singles, an average lifestyle ($43K) needs $810K to retire at 60 and $510K to retire at 67; a deluxe single ($80K) needs $1.8M to retire at 60 and $1.4M to retire at 67.
The book gives the arithmetic supporting these conclusions. But for a quick example, for the 'basic' lifestyle ($42K) couple: the author assumes each person gets $18K/year in CPP (Social Security) and OAS, which totals $36K just from government benefits. This is a pretty reasonable assumption, as the average OAS is $600/mo and the average CPP is $700/mo, for $1300/mo ($15,600/year):
* https://www.qtrade.ca/en/investor/education/investing-articl...
* https://www.wealthsimple.com/en-ca/learn/how-much-cpp-retire...
Getting to $18K is not a stretch, if (a) you get a little above average, and (b) get more by delay taking the benefit to >65. For a couple, that is $36K per year, so getting to the desired $42K is "just" another $6K per year. With the common "safe withdrawal rate" of 4% we get $6K÷4% = $150K retirement nest egg.
A summary by the author is in:
* https://pmac.org/wp-content/uploads/2014/05/07-02-series-ari...
* https://www.macleans.ca/economy/money-economy/heres-the-real...
Fred Vettese, a now-retired actuary, also has two good books with similar conclusions:
* https://lifeworks.com/en/resource/essential-retirement-guide...
* https://lifeworks.com/en/resource/retirement-income-life
* https://rationalreminder.ca/podcast/104
* https://en.wikipedia.org/wiki/Frederick_Vettese
A lot of folks also use the (supposed) rule of needing 70% of your pre-retirement income: in fact as little as 40% may be needed, per Vettesse:
* https://www.theglobeandmail.com/globe-investor/retirement/re...
I'm 33 and planning ahead for my retirement, thanks for the input. Is 1.3M figure intended as 2022 money? That's a lot of saving that need to happen!
HN still needs a [paywall] for posts that are "on the internet, but not really".