How the hell are we supposed to retire?

Cassinonorth said:
Uh, no?

How can you possibly assert that conclusion? The math is shockingly simple. There's about 1000 factors that go into that calculation. Unless the theoretical person is not investing at all and just saving cash, then yeah....not gonna happen. Plus the fact you can easily have a paid off house making spending drop way down in retirement.

I've softened my goal of ER being I'm now in a company I enjoy going to work for but I'm still aiming in the 50-55 range. Having a pension now make saving for that goal stupid easy too. Probably going to max my wife's 403b when she finishes grad school too. The math says we'll have too much money in retirement after 25 years. Our withdrawal rate will be in the 2.5-3% range which the trinity study confirms is all but a lock to survive. We own our cars, have a crazy low interest rate on our mortgage and don't spend frivolously on stuff we don't care about. We're the millennials everyone blames for killing industries and it's great.
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i'm having trouble with their post retirement numbers.

your gains need to way more than outpace inflation....unless you are starting with so much that the excess income can prevent inflation from ever touching the principal.
(which might be the point - but then are we under living/over saving?)

Say you spend all of your investment returns (the average) - then your investments would not grow, then your income would not grow,
and trail the inflation.

You could be cash flow positive - but you'd need to bank way more than the the inflation rate to keep up

simple math example of what it might take:

say you have $1,000, and it throws off $100 which is perfect (10% return) - the inflation is 3% - for your income to keep you need to save enough to cover that 3% -
so $30 of your $100 has to be reinvested so that you have $1030 paying 10%. (where did it come from? you just said you needed all $100 to live)
- next year 3% inflation, you needed to invest another $30+ - next year......
the investment part to keep up slowly becomes overwhelming.

Now the compounding is working against you. you'll never keep up about 10 years later, so to keep, ya gotta start pulling part of the principal.
which means you take more than the gains.

You stop compounding - inflation keeps compounding.

and that is the magic of compounding!!
 
Patrick said:
your gains need to way more than outpace inflation....unless you are starting with so much that the excess income can prevent inflation from ever touching the principal.
(which might be the point - but then are we under living/over saving?)
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Correct. It's based off the Trinity study.


"under living" screams don't be a mindless consumer to me. I save about 50% of what I make currently....and still ride hilariously expensive bikes so there's balance.

“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don't.” ― Ramit Sethi, I Will Teach You To Be Rich.
 
Cassinonorth said:
Correct. It's based off the Trinity study.


"under living" screams don't be a mindless consumer to me. I save about 50% of what I make currently....and still ride hilariously expensive bikes so there's balance.

“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don't.” ― Ramit Sethi, I Will Teach You To Be Rich.
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"Under living". I like that term. However, for me, I lived just fine, but maybe not up to others' standards. I got the same inflation and same compounding all my peers got, but I saved and invested at a rate few did. I guess I am attributing a larger part of the result to saving and investing (and asset allocation!) than compounding.
 
Fire Lord Jim said:
Using a rule of thumb with prices doubling approximately every ten years, inflation eats away purchasing power. Easier to afford for five years than for 45 years.
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Depends what you spend money on. If most of your monthly spending is on food, gas, utilities, taxes - your inflation is way off. Unless current inflation stays where it's currently at for the next 20 years. Doubtful.
 
Cassinonorth said:
Correct. It's based off the Trinity study.


"under living" screams don't be a mindless consumer to me. I save about 50% of what I make currently....and still ride hilariously expensive bikes so there's balance.

“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don't.” ― Ramit Sethi, I Will Teach You To Be Rich.
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no idea what you make, but let’s say 300k. If you're able to save 150k a year for 20 years, you’ll have what, 4-5 million? If yiur 45, can you make that last another 40 years, when you been spending 150k/year already. I don’t know? Maybe, maybe not. if you had 5 mil invested in January of this year, you’d only have 3.5 now less yiur 12.5k/month. The down cycles do happen.

Early retirement when you have 10’s of millions sounds pretty good, anything less than thar, I think you;l need some income, until you get a little older.
 
roc said:
no idea what you make, but let’s say 300k. If you're able to save 150k a year for 20 years, you’ll have what, 4-5 million? If yiur 45, can you make that last another 40 years, when you been spending 150k/year already. I don’t know? Maybe, maybe not. if you had 5 mil invested in January of this year, you’d only have 3.5 now less yiur 12.5k/month. The down cycles do happen.

Early retirement when you have 10’s of millions sounds pretty good, anything less than thar, I think you;l need some income, until you get a little older.
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I’d love to know which jobs make $300k right out of the gate, without taking on debt to get that job. Doctors if med school was covered…?

I can say accounting doesn’t work that way. Gotta climb the caterpillar pile.
 
clarkenstein said:
I’d love to know which jobs make $300k right out of the gate, without taking on debt to get that job. Doctors if med school was covered…?

I can say accounting doesn’t work that way. Gotta climb the caterpillar pile.
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@roc was saying in prime earning years (45+) for 20 years.
Still a very tough number for a couple to hit.
Esp if the rugrats are entering college right around then.

My wife has been working on retirement budget for a couple years now.
she says i have to get a real job just for health insurance......
Or do i just need enough to add onto her retiree benefits?
 
Patrick said:
@roc was saying in prime earning years (45+) for 20 years.
Still a very tough number for a couple to hit.
Esp if the rugrats are entering college right around then.

My wife has been working on retirement budget for a couple years now.
she says i have to get a real job just for health insurance......
Or do i just need enough to add onto her retiree benefits?
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We are single income here in the clarkenstein household. Life is what happens when you’re planning things, right?

I’m in peak earning years now biologically and financially is maybe or maybe not, but once the kiddos get through school (if that’s what they choose) I don’t want to keep this up. Time > money.

There are other ways than just salary. In fact, that’s one piece of advice I got as soon as I started this path. A CFO I worked for at a small tech company said “you don’t get rich off your salary”. I agree with that. Stock options or other equity benefits are very important to the equation.

Find that start up, or better yet, that company that’s been public for 30 years that finally has something going on, where they may finally take off. That’s where the equity comes in. And you don’t have to work there if you gamble a bit with your own money. I just prefer to put in my time and see if it works out, not having to pay for the equity. If it doesn’t work out, move on. If it does work, booyah.
 
roc said:
no idea what you make, but let’s say 300k. If you're able to save 150k a year for 20 years, you’ll have what, 4-5 million? If yiur 45, can you make that last another 40 years, when you been spending 150k/year already. I don’t know? Maybe, maybe not. if you had 5 mil invested in January of this year, you’d only have 3.5 now less yiur 12.5k/month. The down cycles do happen.

Early retirement when you have 10’s of millions sounds pretty good, anything less than thar, I think you;l need some income, until you get a little older.
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I do not spend $150k a year lol good God. Nor do we make $300k a year unfortunately.

Your calculation isn't accounting for taxes. In that scenario the person making $300k and saving $150k a year is living on $70k a year. 4 million withdrawn at a 3% rate is $120k annually so that's a huge window.

And again... Based on the Trinity study that's basically guaranteed to last your entire retirement.
 
Patrick said:
My wife has been working on retirement budget for a couple years now.
she says i have to get a real job just for health insurance......
Or do i just need enough to add onto her retiree benefits?
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Aren't you covered under her insurance now? My wife has always been covered under my plan. At 65 you get Medicare, and then need supplemental. Our plan transitions automatically from full coverage to supplemental.
 
rick81721 said:
Aren't you covered under her insurance now? My wife has always been covered under my plan. At 65 you get Medicare, and then need supplemental. Our plan transitions automatically from full coverage to supplemental.
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The gap between her retiring and me hitting 65. probably 4 years.

She is an AT&T retiree. SXM is her second career. She separated from AT&T so long ago, there was still a pension & benefits for her.
They just aren't as lucrative as current SXM offering.
I can get spouse coverage on her retiree benefits - less than open market, but still not cheap.

How u bridging 58->65 ?
 
Patrick said:
The gap between her retiring and me hitting 65. probably 4 years.

She is an AT&T retiree. SXM is her second career. She separated from AT&T so long ago, there was still a pension & benefits for her.
They just aren't as lucrative as current SXM offering.
I can get spouse coverage on her retiree benefits - less than open market, but still not cheap.

How u bridging 58->65 ?
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We are both covered for life at the same cost as working. It'll go down when we are both 65 - she turns 65 in Nov, me next May.
 
rick81721 said:
We are both covered for life at the same cost as working. It'll go down when we are both 65 - she turns 65 in Nov, me next May.
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Is that a government benefit or work benefits that you pay into?

I have zero idea how to navigate this side of things. Thankfully don’t have to worry about it for a bit.
 
Patrick said:
How u bridging 58->65 ?
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I thought bridging meant financing health insurance between leaving my employer and reaching age 65. I was wrong. It means getting insurance, but not financing the insurance. The financing continues after age 65.

I covered age 55-65 gap with about of $35k out of pocket. Ouch. And that was retiree-subsidized.

I started Medicare four days ago. I'm done bridging, right? Well... there is the Medicare Part B premium that starts at $170 a month, but grows to $463 a month if income exceeds $163k. If you will be living off of IRAs, 401Ks, 403Bs, you will draw down, pay tax, and live on the net. If you need $163k gross, to pay tax and live off the rest, (or do some Roth conversions) you get that $463 Medicare Part B premium, which is 133% of what I was paying before age 65. So I viewed it as bridging, but all I bridged was coverage, not costs. Costs, in fact, increase unless I keep my income down by spending corpus instead.

This was less obvious when Social Security full retirement age was age 65, and you could trigger Social Security income and Medicare cost, and get a net check, just like you did before you retired. But now I will have to finance Medicare costs until age 70, when I can then let Social Security net the two out. But waiting until age 70 increases the Social Security check by more than enough to cover the entire Medicare bill (on my numbers.)
 
Fire Lord Jim said:
I thought bridging meant financing health insurance between leaving my employer and reaching age 65. I was wrong. It means getting insurance, but not financing the insurance. The financing continues after age 65.

I covered age 55-65 gap with about of $35k out of pocket. Ouch. And that was retiree-subsidized.

I started Medicare four days ago. I'm done bridging, right? Well... there is the Medicare Part B premium that starts at $170 a month, but grows to $463 a month if income exceeds $163k. If you will be living off of IRAs, 401Ks, 403Bs, you will draw down, pay tax, and live on the net. If you need $163k gross, to pay tax and live off the rest, (or do some Roth conversions) you get that $463 Medicare Part B premium, which is 133% of what I was paying before age 65. So I viewed it as bridging, but all I bridged was coverage, not costs. Costs, in fact, increase unless I keep my income down by spending corpus instead.

This was less obvious when Social Security full retirement age was age 65, and you could trigger Social Security income and Medicare cost, and get a net check, just like you did before you retired. But now I will have to finance Medicare costs until age 70, when I can then let Social Security net the two out. But waiting until age 70 increases the Social Security check by more than enough to cover the entire Medicare bill (on my numbers.)
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There is more than Medicare parts A and B, unless you want to foot significant amounts of your medical and drug costs. You also need Part D and supplemental.
 
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Fire Lord Jim said:
I thought bridging meant financing health insurance between leaving my employer and reaching age 65. I was wrong. It means getting insurance, but not financing the insurance. The financing continues after age 65.

I covered age 55-65 gap with about of $35k out of pocket. Ouch. And that was retiree-subsidized.

I started Medicare four days ago. I'm done bridging, right? Well... there is the Medicare Part B premium that starts at $170 a month, but grows to $463 a month if income exceeds $163k. If you will be living off of IRAs, 401Ks, 403Bs, you will draw down, pay tax, and live on the net. If you need $163k gross, to pay tax and live off the rest, (or do some Roth conversions) you get that $463 Medicare Part B premium, which is 133% of what I was paying before age 65. So I viewed it as bridging, but all I bridged was coverage, not costs. Costs, in fact, increase unless I keep my income down by spending corpus instead.

This was less obvious when Social Security full retirement age was age 65, and you could trigger Social Security income and Medicare cost, and get a net check, just like you did before you retired. But now I will have to finance Medicare costs until age 70, when I can then let Social Security net the two out. But waiting until age 70 increases the Social Security check by more than enough to cover the entire Medicare bill (on my numbers.)
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PS just checked, MGAI limit for 2023 is $194K. And for less than that, part B actually goes down a little to $166/month.
 
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