At what age do you hope to retire/Personal Finance and Investing Thread

[OldSchoolSnapper]

Yeah, I also think that figure is a little low, but there is really no point to continue spinning wheels other than to say I think cable is one of the absolute worst consumer products on the market and quabbling over the fee is missing the bigger point here.

 

The claim that a monthly expenditure of $60-100 isn't significant just flies right in the face of FIRE and I'm not doing a good job of explaining why. That community is about betterment and enrichment and hippie stuff, etc, and that is not a byproduct of cable.

 

It isn't just the fee. It's that you're paying a fee to sit on your rear and watch TV. Its the opposite of efficiency, which is what FIRE actually is about, maximizing efficiency. Going to Lambeau with your college buddies or fine dining with your wife once a year isn't comparable because it enriched you in a way plodding down to watch TV doesn't.

[nodakfan17]

No matter how frugal we are, we all splurge. For some people, it’s dining. For others, it’s cable. Me personally, I just spent $600 on my kid’s epi-pen.

[pacopete4]

No matter how frugal we are, we all splurge. For some people, it’s dining. For others, it’s cable. Me personally, I just spent $600 on my kid’s epi-pen.

 

This makes me so angry it's sickening. And obviously not at you, at the corrupt system that allows this type of thing to happen. It is simply gross.

[nodakfan17]

It counts toward our annual out-of-pocket max of $6,000, so we just treat it like any other health care expense. We’ve been fortunate to have been able to slowly build $500 in health care expenses into our monthly budget. Obviously, that’s easier said than done for some folks. And yeah, $600 is crazy, but other families with children have drawn far worse hands than us.

[PlayerHader]

I'm not nearly as frugal as I should be considering my wife and I make pretty modest money (~85k combined). We manage to do alright, though, including putting money away into a 401(k), 403(b), and my state pension account.

 

That said, there's no way I'm living a shelled life at 33 so I can maybe enjoy life at 45 a bit more...

[nodakfan17]

You can do pretty much whatever you want with 90% of your money as long as you save the remaining 10%.

[OldSchoolSnapper]

Does either of you have an HSA offered through work? It's ridiculous any way you slice it, but that would help a little bit.

[nodakfan17]

Does either of you have an HSA offered through work? It's ridiculous any way you slice it, but that would help a little bit.

Yes, my wife does. We fund to the max. Whatever is left over after a year of relatively good health is rolled to what we consider our ‘retirement health care fund.’ We continue to fund to the max, regardless of balance.

[OldSchoolSnapper]

I still can't believe they can get away with that. Utter insanity.

[MrTPlush]

You can do pretty much whatever you want with 90% of your money as long as you save the remaining 10%.

 

Isn't the actual recommendation these days 15% not taking into consideration a potential employer match? That is only for retirement too most times I see that thrown around. Realistically you probably want to be saving an extra 5% for emergencies.

[OldSchoolSnapper]

The actual recommendation is all over the place, but it is a dumb thing to get into, really. 10 is conventional, reality is more like 15, shooting between those two is most people's realistic target. But I have seen it as high as 25% for millennials but that is typically from doomsday outlets.

 

It's a general guideline, and like most general guidelines it ignores a ton of nuance. It's better than 0, but why would a a household with a $150k income next door to one with a $90k income save the same % for retirement? That's a very common scenario.

 

A more useful metric would be to pin down your annual spending to the penny and go from there. Minimize cost as practically as you can for the life you want to live, and see what's left over. If it's more than 10% you can do yourself a favor, but I wouldn't want to set aside 10% for saving and call it a day.

 

I think the 10% target is useful for Dave Ramsey type followers, people that won't save a dime if they aren't given an explicit target like that.

[nodakfan17]

You can do pretty much whatever you want with 90% of your money as long as you save the remaining 10%.

 

Isn't the actual recommendation these days 15% not taking into consideration a potential employer match? That is only for retirement too most times I see that thrown around. Realistically you probably want to be saving an extra 5% for emergencies.

You’re probably right.

 

The point I intended to make was that you can spend your money on whatever you like (Brewers tickets, cable TV, $5 coffees, etc.) as long as you’re spending less than you earn. If your savings goals are more ambitious, spend a lot less than you earn.

[wallus]

Anything from 10-15% on savings is recommended after you have an emergency fund setup. I generally recommend at least 6 months to my students but realistically it depends on what type of job/household you have.

[OldSchoolSnapper]

Here's my problem with %s:

 

Let’s just say for the sake of argument two families of 4 live next to each other. Same schools, roughly same house, both drive an Rav4 and a Civic.

 

Family A makes $90k. Family B $135k.

 

Family A sets aside 10% gross = $9k.

 

Family B does the same = $13.5k

 

You can quickly see the problem here. If they stop at 10, family B is spending a ton of money on probably some not really useful stuff. Chances are if they are doing that, their lifestyle is a lot less sustainable than A’s once the money stops rolling in during the golden years.

 

This is why the spending figures are much more useful to you than a gross % for retirement. Only once you’ve locked in your spending do you have a guess at what you need to retire. It may be a lot more than 10 and could be less.

 

I get why it exists, because some people benefit from having that hard number to plan around, but once your income starts creeping into the 6 figures I think you need to re-evaluate things.

[wallus]

Here's my problem with %s:

 

Let’s just say for the sake of argument two families of 4 live next to each other. Same schools, roughly same house, both drive an Rav4 and a Civic.

 

Family A makes $90k. Family B $135k.

 

Family A sets aside 10% gross = $9k.

 

Family B does the same = $13.5k

 

You can quickly see the problem here. If they stop at 10, family B is spending a ton of money on probably some not really useful stuff. Chances are if they are doing that, their lifestyle is a lot less sustainable than A’s once the money stops rolling in during the golden years.

 

This is why the spending figures are much more useful to you than a gross % for retirement. Only once you’ve locked in your spending do you have a guess at what you need to retire. It may be a lot more than 10 and could be less.

 

I get why it exists, because some people benefit from having that hard number to plan around, but once your income starts creeping into the 6 figures I think you need to re-evaluate things.

 

Obviously there are always tons of variables with personal finance, that is nothing new. However, in a country with so much debt and overspending, simple percentages are a good place to start for most people.

[MrTPlush]

Right, the general percentages assume you want to live a similar lifestyle to before you retired...maybe slightly less of course as that is how it usually works. People should obviously sit down and think about what they are going to do in retirement. Still have their big house, luxury cars, travel, etc. Then they will have a better idea for their personal case. I know some people (rural Wisconsin) who will retire on some acreage and really not spend much money at all in retirement outside of the minimum. They are happy to just sit out on the porch and cut some wood.

 

I think the general percentage can be a really useful tool for someone in their 20s or maybe early 30s who is likely too young to really know/think about what they want in retirement. That way you know you are on track for a solid retirement cushion, maybe too much, or still have time to adjust for more.

[homer]

FYI - I think we had an investing thread somewhere but I changed the title of this one to more closely reflect the discussion as it's gone off in several interesting directions related to personal finance.

[FVBrewerFan]

Couple other thoughts on this subject. I've noticed the concept of inheritance is largely gone by the wayside. My father is in his 80s and takes pride that he still has something to pass down to us kids. That's after a life of working a blue collar job. It's not a lot, but it is to him.

 

I don't have the same feelings about it. I joke with my kids, but also tell them I'm serious not to expect anything left for them. Maybe there will be something left, maybe not, but I don't feel any pride or urge to do so.

 

The other thing I'm curious about, what are your thoughts about when to start taking SS? The way I understand it there's the earliest age (for me 62) then full retirement (67) and then I can wait until I think 71/72 and get an even higher amount. I did the math a long time ago but don't remember how it turned out.

[homer]

I've heard two arguments on SS; first is that you wait until you are 70 because the payments will be much higher and with life expectancy longer and longer it means you will still have 10 - 15 years or more with that money. Second argument is that you may not make it to 70 and if you don't take any payments the government gets to keep that money so start taking your payouts right away. I can see both sides of the argument and I have a ways to go before I have to worry about it but I see myself waiting assuming I don't need the income.

[KeithStone53151]

You can probably look online and find the breakeven point on SS, if it isn't online then any financial advisor can certainly help. I talked to my parents about this recently and they are both planning to take it right away at 62 despite not really needing to. I think they said the break even would be 76 but don't quote me on that. There certainly isn't a singular correct answer, every situation is different.

[reillymcshane]

Regarding when to start drawing social security, most financial advisors seem to say wait until age 70. The reason is you ultimately get a bigger payout if you live long enough (which is a big 'if').

 

I saw this rough example:

 

Retires at 62: $1500/month = $324,000 at age 80

Retires at 67: $2000/month = $312,000 at age 80

Retires at 70: $2600/month = $312,000 at age 80

 

As you can see, by the time you reach age 80 or 81, they all end up roughly netting you the same payout.

 

The reason financial advisors like waiting until age 70 to draw on SS is that it pays out more as you move into the 80s. This means more money in the long run. You live to age 90 and you can net $130,000 more than if you had started at 62. Also, this can be critical as other savings may be dwindling as you get into your 80s - and the extra $1,100/month could be really helpful.

 

That said, the decision on when to take social security is also really dependent on your health and financial situations. A person might not be able to wait to take social security due to financial needs. And even more critical is a person's health. A person with health issues may not expect to live past age 80 - so why not just take social security as soon as possible.

 

By the way, the average life expectancy in the USA is 76 for men and 81 for women.

 

Of course, all this is one scenario. How much you make, marital status, etc., etc. all come into play. Each person's situation is unique and should be treated as such.

 

And we have recognize that social security benefits (and the age they are available) may change in the future.

[MrTPlush]

How much do you honestly care about money at 80+? If my medical bills overwhelm me at 80+ oh well if that is the argument.

[nodakfan17]

I think I recently read the break even age on SS was 78.5.

 

If SS is still around in the same form, I plan on taking it early because none of my male relatives have made it to 80. I might encourage my wife to delay her benefit, provided she’s still in good health at the time.

[OldSchoolSnapper]

Couple other thoughts on this subject. I've noticed the concept of inheritance is largely gone by the wayside. My father is in his 80s and takes pride that he still has something to pass down to us kids. That's after a life of working a blue collar job. It's not a lot, but it is to him.

 

I don't have the same feelings about it. I joke with my kids, but also tell them I'm serious not to expect anything left for them. Maybe there will be something left, maybe not, but I don't feel any pride or urge to do so.

 

The other thing I'm curious about, what are your thoughts about when to start taking SS? The way I understand it there's the earliest age (for me 62) then full retirement (67) and then I can wait until I think 71/72 and get an even higher amount. I did the math a long time ago but don't remember how it turned out.

 

I go back and forth on the inheritance stuff. Really, whether or not there is significant money to pass on depends on how early I wish to stop working. I'm fairly certain I could stop in the early 50s, but that assumes I am only helping with college a little bit, and likely not helping a ton with houses, extended education, weddings, etc. I was married in a backyard, but if I had the option I may choose to help them out more.

 

But the prospect of working and basically pocketing my entire salary every year with no debts to pay any longer and no children to take care of, and being able to help family so freely with my work money sounds extremely nice.

 

Of course, I got zero help with school and made it work. I go back and forth between thinking it's better to make them figure it out and wanting to provide help I did not get. I don't think there is a good or bad way to go about it, and maybe it depends a lot on what the child grows up to be. If it's some burnout stoner who constantly disappoints you, you probably feel less enthusiastic about handing them boat loads of cash.

 

As far as SS, my parents took it early out of necessity. My mom's health declined badly and she stopped working in the early 60s. My Dad makes good money but they were always terrible planners. What came in, went right out. He still works, but collects SS, I believe he took the benefit at 66. They needed it or my mom would not have been able to stop so early. My Mom is extremely not likely to live to 70 which would be August of 2019; I think SS is a play it by ear thing. If you don't have to take it, don't.

[nodakfan17]

I hope to receive a small inheritance, but I won’t plan on it - too many variables. I also hope to pay for my son’s education, but will take him off the payroll immediately after he graduates. I still see leaving an inheritance to your descendants as a point of pride; however, if I do my job as a father well enough, my son will have everything he needs to be successful by the time he finishes college. I view an inheritance as a way to sustain your descendants in the event of death or disability.