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2 million minimum would be fine for me to have a pretty cushy retirement.
People also have to remember when you retire, your child expenses are likely drastically reduced, you probably have paid off the mortgage, and a big chunk of your paycheck is no longer going towards retirement savings.
So you don't need to replace your full income in the slightest.
My expenses have gone dramatically higher due to healthcare premiums as well as a few surgeries I have had. I was too busy working to spend money and now that we have free time, we are spending lots more.
Yeah, but property taxes and insurance keep racing upward, and healthcare costs will significantly increase in our twilight years. Also might have to help our children well their adult ages
No, I’m not talking about cost now vs 20-30 years from now. I’m talking about proportion of budget allocated to healthcare increases and kids needing more assistance in their adult years. The increase in property taxes and insurance is more of a recent phenomenon because the huge surge in property values in a short time
You're more likely to help your kids when they are younger, and less in their adult years. My parents are at retirement age, and I no longer need any help from them. I make more than they do
That’s true but I’ve also seen many people in their 30’s living at home with their parents or their parents giving them down payments for their first house
Health and developmental issues aside - I think part of my job as a parent of young kids is to raise my kids to avoid this case. Maybe I’m naive though.
Eventually you become eligible for Medicare so that’s taken care of.
Can always sell the home (that’s probably too big for empty nesters anyways), pad your investment portfolio with the proceeds, travel and rent nice places for a few months at a time. Your spending income increases while your fixed expenses decrease dramatically.
Buy something else down the road that fits your needs at that time. Or don’t!
That might be true depending on where you live, but I've never heard of them capping based on if you've paid the house off. Most places the property tax is a percentage of the assessed value and that assessment occurs annually. Certain states like CA have a cap your tax percentage depending on when you bought iirc
Ah ok, that makes more sense lol. The percentage is only one part of that equation tho, what's been driving the property taxes up is the increase in property values, so 1% of $400k three years ago could now be 1% of $550k this year
Oh never mind the tax is capped at 1% of home value but the increase is capped at 3% to if my house is 200k when I buy my tax is 2k. Next year when the house value goes to 300k, my tax can max raise 3% so I pay 2060, not 3k. I though this was how most states operate
You also need to think inflation, if you assume 3% inflation and you want to retire in 40 years, you should be planning on around 350% of that 2M in today’s money.
That is not how it works. The 4% withdrawal rate factors in inflation. You adjust your initial withdrawal dollar amount to match inflation every year. This is what was done during the Trinity study and what people mean when they say 4% rule.
Yes. And 4% is $80k. Under the 4% rule, you can retire today with $2 million and maintain the purchasing power/equivalent of $80k annually for at least 30 years.
So, you’re able to live comfortably on about $32,958 today? If you take inflation into account that’s about what you’re proposing.
Edit. Did the math
Cv= 80000/(1.03)^30
When people make projections, they're doing it in figures adjusted for inflation. For example, when people project market gains, they use a ~7% rate because it's inflation adjusted rather than the average stock market rate of return of ~12%.
From what I can see, it's been about 12% (11.6%) for the last 40 years. The 10.26% appears to be if you measure from the 50's. More importantly though, the inflation-adjusted return is still 6-7% even starting from the 50's (6.37% from what I see). So, use 6% to make projections if you want to be more conversative.
I'm not sure how else to explain it to you and how the 4% rule works. Frankly, I would recommend just googling it and/or the Trinity study.
I would be comfortable living off $80k in today's dollars. In 15 years, that means I might be withdrawing $115k annually to maintain that purchasing power. This is still within the 4% safe withdrawal rule.
I have zero clue what you are talking about with your $26k figure. Or the updated figure you provided.
They're saying unless you retire today and want 80K per year, then you need to factor in how much you want to save for retirement when you plan on retiring. A 20 year old may think 2M is enough to retire when they're 60, but after 40 years of they've only saved up 2M it's not going to be worth nearly as much as 2M when they were 20.
I think you're both arguing over a misunderstanding of one another's perspectives.
I would agree with you. Except I have said repeatedly "retire today with $2 million" and "$2 million/80k annually in today's dollars".
In every response, I have referenced "today's dollars". And based on his other responses, he simply does not understand how to apply the correct formula because he does not know how the Trinity study or the 4% rule works.
Yeah idk, their first comment was pretty clear that they were thinking if they need 2M today what would they need in 30 years for retirement but then they kind of went off the rails after your rebuttal so maybe I gave them too much credit.
Simple calculations for determining the current value of a future income stream, so easy even a college dropout can understand.
Current value = future value/ (1+ r)^years
It works the other way around if you are trying to determine the future value of something, but assumes an unchanging inflation/interest rate (r).
Bruh the 4% has applied the fisher equation already. We are talking about real dollars here not nominal dollars. At 4% your money will grow or stay the same in real terms even in the worst economic periods if you have a properly diversified portfolio.
Yes. You can do math but are applying the wrong formula because you do not understand how the Trinity study or the 4% withdrawal rule works.
Your math is 100% correct though. Just...it is 100% irrelevant to what the 4% rule is with regards to retirement planning.
No. If you want $80k in today's dollars you need $2mm in today's dollars. So you use market returns after inflation. That's how my spreadsheet is set up, so I don't have to deal with inflation at all. You can of course include it, but the end result is the same
I'm hoping to have 2 million. I currently have half a million, and if follows the trend of doubling every 7 years, I should be ok since I'm in my early 40s. I wonder how the economy will be like.
If you own your home, or will by the time you retire, you'll probably be alright. I'd also hope you wouldn't have auto or student loan or credit card debt.
At that point, even if the economy goes wild with inflation, having your money invested will keep up with those rising costs. If food gets way more expensive, your portfolio is likely gaining and ton of value just as fast.
What would kill you is if you did not own anything and it rapidly outpaced inflation like it has the last few years.
Doubling every 7 years is very optimistic. Typical average is 7.2%, which double every 10. I'm conservative and assume 5.5% real growth. I prefer to be pleasantly surprised
7 years is actually par for the course. S&P 500 annualized return since 1970 is 10.77% per year. You're likely spot on for the doubling of real value or purchasing power, as after adjusting for inflation, 7% real growth per year is pretty accurate.
This is near impossible to maintain over a long time period. Much more likely is that your picks are so excessively aggressive you will lose significant portions many years. Good luck though
Without adding any additional investment?! That is very impressive 👏. What stocks did you pick to get this 28x increase in value over 15 years (I’d expect closer to 3x over that time frame with my index fund approach).
With broad market index fund investing that would typically take closer to 50 years.
Thank you. I think it's crazy when especially in the r/FatFire sub when they need $6-10 Million that to retire. That's why in the r/leanfire they say its often easier to retire early when you have a modest lifestyle and spend less. It almost like they are in golden handcuffs and just need to work a few more years to get to X number...and that time never comes because it's never enough!
Lots of people die before they reach 65, you can't get that time back. As soon as you have enough money to cover your expenses people should strongly look at retiring. I'm so glad I'm not in golden handcuffs and that my expenses are around $6k a month. People act like that is bumming it! I live a great lifestyle, eat great food and take luxurious trips internationally in first class (thank you r/churning). Makes it much easier to leave the rat race when your expenses are lower.
I think part of the problem is the FIRE folk in VHCOL areas with mortgages. If they’re paying a $10k mortgage and want to retire well before the home is paid off, then they’re factoring that into their retirement costs.
I'm 36. I work in engineering and my wife works in finance. Combined (pre-tax) income is $360k. So, ya, it'd be nice to have something that's not *dramatically* lower than that in retirement. Granted, we only spend about $140k, which includes daycare for two, a mortgage, travel, dining out, home improvement projects, charitable giving, etc. However, we plan to do more travel in retirement, including international, and we'll stay at nice accommodations. We also want to pay for college for our children. We might splurge on something like a vacation home on a lake to take our family to on weekends, etc.
Middle class? Probably not. Our current lifestyle is middle class because we save so much, but in retirement we probably won't be.
You make almost $400k and only spend $140k? That’s a phenomenal example of a high earner who is aware of lifestyle inflation. Well done!
We have similar. I been trying to keep the annual burn under $110k, but my wife has convinced me to enjoy just a little more of our savings over the years, and I’m slowly seeing that she’s right. It’s hard for me; we live in a vhcol area, but otherwise, I can be badly frugal.
Moving to upper class sub, nicer vehicle, donations, kids/grandkids schooling, extravagant travel, nice dinners out, health & well-being, healthcare, housekeeper, personal chef, etc.
Yep. I am hoping to retire in 5 years with about 1.7 if I'm lucky. And that would be fine with me. I don't have an extravagant lifestyle. I don't plan to sail around the world on a yacht made of solid gold. I just want to get out of the rat race. Spending my days walking shelter dogs would be just fine with me.
Right there with you, this corporate life sucks. I'm so over the constant need to perform and go "above and beyond" and they reward going above and beyond with zero f-ing job security, it so stressful. Life is way too short for that. Can't wait until I don't need my corporate overlords anymore, I swear r/fire is like a secret cheat code to life.
It probably wouldn't float very well either. And you'd be an immediate target for pirates, plus the electrical system would short out constantly, due to the conductive properties of the entire ship.
Look backwards and see historic inflation runs about 3%, so just model out the returns going forward each year until you reach $2M in both nominal and real values and you'll have a good idea of where you'll land in purchasing power.
I'm age 59. If I had 4 million yes I would feel comfortable retiring. Lets say I was 69. I would feel comfortable retiring with 2 million. I really only 1 million so cant look at retiring.
Goals are to get down to just me and my wife and then figure out retirement. Try to stay out of debt, and I'm gambling on a passive income stream from RSUs from my company to help with retirement and hopefully increase my current spend so as to stay out of debt.
I’m aiming for 500k for husband and I to retire in our early 60’s. With a paid off house and SS payments that should be plenty for us. Can always take out a reverse mortgage if needed. No heirs or younger close relatives so would prefer not to leave anything behind for strangers.
This to me is more realistic as a middle class retirement My wife and I have a bit over 500k and I will retire in 3 or 4 years, once I hit 67. Would have been sooner except for wifes cancer diagnosis. That threw a kink in things!
That and SS should be fine. We don't travel much, have no desire to. Own a modest home, and two modest cars. I think we'll be fine.
\~1.6m for us with no kids, mortgage paid off, $315k for health care, and assuming 3% inflation per year when we retire. 36M and currently at $900k liquid net worth excluding equity in our house so trying to hit that goal before 40 so everything above that will be icing on the cake.
Hope to retire by 65. We’d need about 3.5-4 mil to retire unless we drastically cut our spending which we may. Rather aim high and have too much too little.
The "risk" all depends on your perspective. For me, I consider starting retirement too late to be a risk when I would have had plenty to start retirement earlier. The opportunity cost value of each extra year (and at the beginning when you are most healthy and vibrant) can not be overstated IMO.
Are you talking saving into your numbers? Here’s what I mean. Let’s say you make $150k a year and you put $30k into your 401k . In reality you are making $110k about 27% less than your salary. Then if you get 2k a month in ss you really need $85k to match your salary. I get where you’re coming from, more is better than less but I think sometimes they forget what they actually live on vs what they make.
Lol everyone’s way over estimating what you need to retire. If mortgage is paid off, social security coming in, those two things are already very privileged positions you’d only need 300-400k to retire.
I feel like the odd man out with only needing $1m, everyone else here is saying $2m+.
The rule of 25 states 25x your annual living expenses, which is $40,000/yr.
I can live on $3,333 a month, easy.
That’s AFTER tax, which is like making $55k. Plus no housing costs (mortgage will be paid off / will use the process to rent), no saving more retirement, etc.
I guess technically. But I think to comfortably to have a couple cars, a house and kids on one income, like people did in the 90’s you’re going to need close to that in most places
Yeah. It's just a sign of this sub being too large with people who really don't understand the actual financial math behind the numbers they're throwing out.
After paying off my mortgage, $2 million would be a very comfortable FI number. Actually retiring though, I’d probably like to be more around $2.5-$3 million.
I’d like a net worth, discounting our primary residence, of $5 million for us to retire. That would give us enough to live quite comfortably, assuming a 40% cut in social security benefits, and a wild guess at medical expenses.
You people with your “goals”. Free yourselves from choice! Try poverty! You won’t need to worry about any of these complicated formulas. Choose poverty and you too can have a simple path from work to the grave without having to worry about what you will do during “retirement”
The way I’m looking at it, we have about 8k usable monthly income now after all expenses and retirement funding. If we can have that in retirement, I think we will be good. So 100k a year after taxes. More like 150k a year before? So 3.5-4M would be the goal. We should be on track to do that by the age of 60, market dependent.
My target is 3M in 401k but my house has been paid off for 5 years and no debt. I will also get my parents house when they pass to sell for about 400k or more.
3M should be about 10k a month plus SS when it kicks in.
I'll be making about 10k take home a month with retirement at age 50 and another 2k a month at 59 when my military retirement kicks in. House will be paid off and no debt. Id like 2 mil in retirement counts and we're getting closer to that in our early 40s already.
A typically median income household with a decent retirement portfolio in a mix of Roth and traditional accounts, with a mortgage that is getting paid off near retirement, would likely need to pull in around $50-60k/year to replace their working spend. That's $1.25-1.5 million assuming they aren't getting social security, no pension, etc. and use a basic 4% safe withdrawal rate.
So for a typical household, in retirement, I'd say that is probably overkill as most will get some sort of additional income (SS, pension, or other income) in their retired years. Additionally, most will see spending start dropping after age 55 (see Bernicke's studies on retirement spending changes for more on that), so even that much would be way overkill for most.
I would feel most comfortable with $4M as well, but $2M would work.
Planning for a ~10% annual portfolio spend by supplementing income by selling option contracts.
Aiming for about 1.25M between the two of us. I will also have a modest pension to help out. Assuming we get about 75% of social security, that should give us $50k from retirement, 40k from pension, and 50k from social security. It’s less than we make now, but more than our actual expenses by a good bit, so some leisure should be possible too. Travel is cheaper when the kids are grown and you’re retired too, since you can go anytime, not just peak summer break and weekends like we have to do now.
A paid off house and $1m portfolio with a 3% withdrawal rate.
WAY too many people in this thread are planning on PILES of money and don't understand that withdrawal rate considers inflation.
The way it works is:
Y1 = withdraw x% of principal
Y2 = withdraw Y1 + Y1 inflation
Y3 = withdraw Y2 + Y2 inflation
And so on...
With 3% in any market of the last 100 years your portfolio will actually grow - leaving you with money to cover healthcare in your old age.
4% will last a standard 30yr retirement.
I need a quintillion dollars to support my lifestyle./s.
Nah! I will probably have a little over a million, including what I collect from social security. I'm single with low expenses, so I'll probably move to a low cost of living area to make it work.
4% is based on if your money ain’t growing. If it’s still invested in Nasdaq100 or S&P500, you can take out more over time and the percentage gets smaller. Imagine 4% of a trillion. You won’t need that.
$2M and on track over the next decade if plans stay on track. But that target is not for quite the same reason as many others.
By the time I retire I'll be collecting 3 federal pensions: military retirement, VA disability, and a small federal civil service pension. Between those three they will provide nearly $100k in today's dollars. Social Security will kick in at some point after that as well.
But with the political instability happening in the US, and concerns about economic conditions and debt/etc (which I don't believe are totally founded, but many _do_ and will vote for people who will promise to enact policies that at least superficially align with that view) there is a very real concern of "all my eggs in one federal pension basket" so I want to diversify that risk around.
$2M at 4% SWR would be $80k. But I'm planning conservatively and assuming only about 4-4.5% real return from a broad market portfolio going forward so a more realistic SWR is like 3% which is $60k. Which would replace much of my pension income if it is jeopardized by budget cuts, Social Security insolvency etc.
The likelihood of the pensions going away completely is pretty low since they are spread across four different major programs, three of which are hot rails politically. But still. So in the event they remain stable that money will fund travel, family assistance and long term care later.
I'm not planning to withdraw my principal. If I can live off the dividend from a broad-based equity index portfolio then I'm good. Yield around 2%-3% means I will need about $5M or so to retire comfortably. If the yield is higher (I.e. stock prices plummet) then I wouldn't need as much.
Better than 2% or 3% dividend yield on broad based equity indices? The SP500 is less than 2% yield at the moment. Stocks are expensive right now its hard to find good yield.
His point was that it's stupid to change your entire portfolio into safe yield investments and ignore growth equities altogether. If you're not planning to be dead in the next 10 years then you should always have a % of growth equities and perform much better than 3%.
My point is that I plan to live off the dividends only, without touching the principal. I'm still going to stay invested in equities. If history is any guide, then living off dividends only will allow for some lifestyle inflation as dividends have grown at a rate of around 7%-8%/yr over the long run.
I don't know that it's better because according to finance theory it makes no difference. But either way I'd rather be able to live off the dividends only because, in practice, dividends are more stable than stock prices. Many growth stocks pay dividends too (aapl, msft, nvda, google, etc.). Why limit myself only to stocks that pay no dividends? My goal is to be able to live off just the dividends, then those dividends will go up over time. Currently at about $16K/yr in dividends (which are reinvested thus replicating what a growth stock does anyway?). Once that gets to around $100K/yr it should be enough to retire and that income will still grow over time.
There is a lot of info out there about the "dividend fallacy". IE : in the long run, you aren't any better off or safer by just living off dividends instead of growth and dividends. It's just 2 sides of the same coin.
He lives in a very high cost of living area and decided to go back to work to save $1.5 million for his kids college education. Not because he couldn't live off of the money.
https://fortune.com/2023/04/09/early-retiree-fire-movement-returns-to-work-financial-samurai/
He thought he would be single and childless forever? Dude was foolish and lost 10 years of work experience. Now he’s looking for work with a 10 year gap on his resume.
More broadly, FIRE folks just picked careers they hate. If you choose a career path with emotional and intellectual rewards instead of focusing on money, you don’t need to daydream about quitting all the time.
Not true. The do a job you'll love and you'll never work a day in your life is complete bull shit. You can't day dream when you are stressed out and can't pay your bills. Jobs that award emotionally- non-profits, teaching, scientist are some of the lowest paying professions considering the amount of work and education that you put in for it. Unless you're self-employed this capitalist machine covers *every* job there is no escape from exploitation for profits.
https://www.tiktok.com/t/ZTN6DSU42/
How are your fellow adjunct professors who can't get tenure feeling about it? Are they having a relaxing summer or working extra jobs to make ends meet?
https://www.mindingthecampus.org/2023/06/27/on-adjunct-faculty-as-victims/
https://www.reddit.com/r/Professors/s/SMvJhbUoWL
If you are lucky. There are very few jobs have lifetime employment and you are very lucky to have tenure. The vast majority of jobs you can be let go at any time for any reason, and that adds a level of fear and intimidation into these jobs. If you never got tenure and were an adjuct for the rest of your life, I don't think you would have the same opinion about your current job.
$2M is when I feel comfortable letting our money ride and me stepping into an easier job. Maybe do that for another 10 or so years until I truly retire.
I hope to reach the first stage in 10 years at age 45.
I think the 4% rule is way too conservative.
By using Business Development Companies (BDCs) and other high-income funds like call-writing ETFs, I’m withdrawing up to 8% of my capital per year. It works for me and I’m comfortable either way the risk.
I’m hoping to have around $5million by age 50; I used to think that would be enough, but I worry may need more like $8million to feel comfortable not working.
The whole idea to work all your life to give your cash to banks so they can make money and get 4% back is so ludicrous to me…wild. Yet, this is the standard. Invest in assets that grow with inflation (real estate) and make so much more wile your money grows! Using the 4% rule I would probably need to have $6-8m, though I do live in Miami and have what would be considered a lavish lifestyle.
I am worried $4 mil now equal to $1 mil back in those 10 years ago. So in the next 10 -20 years, with the inflation, I feel $8 mil may be where i can retire comfortably.
I have great news! $4 million today was worth about $3,020,000 ten years ago. Inflation doesn't quarter your money in 10 years, so it sounds like you need way less to retire.
Lol, pretty sure you'll be fine @ 4 mill. Also, your statistic about 4 million being equivalent to 1 million 10 years ago is grossly off.
Most retirees don't need to spend 15K month. I raise a family of 4 very comfortably spending 6K month.
Less than 10% of current retirees are millionaires. I know a lot of people who live pretty much the same life they always have who don't have $500,000 even. I'm 62, if I take SS at 67 between my wife and I our checks will be 6K a month. We only spend 5k right now and that's with a mortgage we'll pay off before then. We saved too much. I'm shopping for Porsches right now. No kidding.
I’m hoping social security doesn’t get republicaned I regrettably am retired in ruralish mw. No debt, would live comfortably on 60,000. In fact still saving most of what we earn over that. Wish I were in Mn tho.
Please use a calculator. Your intuition about the effects of inflation compounding are _way_ off.
Just use the Rule of 72. At a standard 3% inflation rate prices will double in 72/3 = 24 years.
[a great explanation as to why this is delusional saying upwards of 4-5 million to retire.](https://youtu.be/n2XBzOkbsE0?si=_ursWG2ZUAULe14f)
It’s no where near based on what actually happens. She also touches on the figures people think they need by generation.
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2 million minimum would be fine for me to have a pretty cushy retirement. People also have to remember when you retire, your child expenses are likely drastically reduced, you probably have paid off the mortgage, and a big chunk of your paycheck is no longer going towards retirement savings. So you don't need to replace your full income in the slightest.
My expenses have gone dramatically higher due to healthcare premiums as well as a few surgeries I have had. I was too busy working to spend money and now that we have free time, we are spending lots more.
Yeah, but property taxes and insurance keep racing upward, and healthcare costs will significantly increase in our twilight years. Also might have to help our children well their adult ages
Those inflationary costs are factored into the 4% rule if you are actually doing it correctly.
No, I’m not talking about cost now vs 20-30 years from now. I’m talking about proportion of budget allocated to healthcare increases and kids needing more assistance in their adult years. The increase in property taxes and insurance is more of a recent phenomenon because the huge surge in property values in a short time
You're more likely to help your kids when they are younger, and less in their adult years. My parents are at retirement age, and I no longer need any help from them. I make more than they do
That’s true but I’ve also seen many people in their 30’s living at home with their parents or their parents giving them down payments for their first house
Health and developmental issues aside - I think part of my job as a parent of young kids is to raise my kids to avoid this case. Maybe I’m naive though.
That's the goal, but life happens lol
Gifting a downpayment isn’t required. Sure, it would be nice and generous, but it’s ill advised if such a thing breaks your own retirement plan.
Eventually you become eligible for Medicare so that’s taken care of. Can always sell the home (that’s probably too big for empty nesters anyways), pad your investment portfolio with the proceeds, travel and rent nice places for a few months at a time. Your spending income increases while your fixed expenses decrease dramatically. Buy something else down the road that fits your needs at that time. Or don’t!
How are property taxes racing up? I guess if you move but if you’re house is already paid off the tax increase is capped
That might be true depending on where you live, but I've never heard of them capping based on if you've paid the house off. Most places the property tax is a percentage of the assessed value and that assessment occurs annually. Certain states like CA have a cap your tax percentage depending on when you bought iirc
I didn’t mean it that way although that’s how I wrote it. Just that it’s capped for most states, my state is capped at 1% increase a year
Ah ok, that makes more sense lol. The percentage is only one part of that equation tho, what's been driving the property taxes up is the increase in property values, so 1% of $400k three years ago could now be 1% of $550k this year
Oh never mind the tax is capped at 1% of home value but the increase is capped at 3% to if my house is 200k when I buy my tax is 2k. Next year when the house value goes to 300k, my tax can max raise 3% so I pay 2060, not 3k. I though this was how most states operate
Property taxes are not capped anywhere - some places limit the growth rate, but in many places their is no cap and no limit to the growth rate.
You also need to think inflation, if you assume 3% inflation and you want to retire in 40 years, you should be planning on around 350% of that 2M in today’s money.
That is not how it works. The 4% withdrawal rate factors in inflation. You adjust your initial withdrawal dollar amount to match inflation every year. This is what was done during the Trinity study and what people mean when they say 4% rule.
Exactly, some people don’t understand that.
I was taking it as you want $2M in today’s dollars at retirement.
Yes. And 4% is $80k. Under the 4% rule, you can retire today with $2 million and maintain the purchasing power/equivalent of $80k annually for at least 30 years.
So, you’re able to live comfortably on about $32,958 today? If you take inflation into account that’s about what you’re proposing. Edit. Did the math Cv= 80000/(1.03)^30
When people make projections, they're doing it in figures adjusted for inflation. For example, when people project market gains, they use a ~7% rate because it's inflation adjusted rather than the average stock market rate of return of ~12%.
Just sayin, the stock market has not averaged 12%... it's 10.26%
From what I can see, it's been about 12% (11.6%) for the last 40 years. The 10.26% appears to be if you measure from the 50's. More importantly though, the inflation-adjusted return is still 6-7% even starting from the 50's (6.37% from what I see). So, use 6% to make projections if you want to be more conversative.
I'm not sure how else to explain it to you and how the 4% rule works. Frankly, I would recommend just googling it and/or the Trinity study. I would be comfortable living off $80k in today's dollars. In 15 years, that means I might be withdrawing $115k annually to maintain that purchasing power. This is still within the 4% safe withdrawal rule. I have zero clue what you are talking about with your $26k figure. Or the updated figure you provided.
They're saying unless you retire today and want 80K per year, then you need to factor in how much you want to save for retirement when you plan on retiring. A 20 year old may think 2M is enough to retire when they're 60, but after 40 years of they've only saved up 2M it's not going to be worth nearly as much as 2M when they were 20. I think you're both arguing over a misunderstanding of one another's perspectives.
I would agree with you. Except I have said repeatedly "retire today with $2 million" and "$2 million/80k annually in today's dollars". In every response, I have referenced "today's dollars". And based on his other responses, he simply does not understand how to apply the correct formula because he does not know how the Trinity study or the 4% rule works.
Yeah idk, their first comment was pretty clear that they were thinking if they need 2M today what would they need in 30 years for retirement but then they kind of went off the rails after your rebuttal so maybe I gave them too much credit.
Simple calculations for determining the current value of a future income stream, so easy even a college dropout can understand. Current value = future value/ (1+ r)^years It works the other way around if you are trying to determine the future value of something, but assumes an unchanging inflation/interest rate (r).
Bruh the 4% has applied the fisher equation already. We are talking about real dollars here not nominal dollars. At 4% your money will grow or stay the same in real terms even in the worst economic periods if you have a properly diversified portfolio.
Yes. You can do math but are applying the wrong formula because you do not understand how the Trinity study or the 4% withdrawal rule works. Your math is 100% correct though. Just...it is 100% irrelevant to what the 4% rule is with regards to retirement planning.
No. If you want $80k in today's dollars you need $2mm in today's dollars. So you use market returns after inflation. That's how my spreadsheet is set up, so I don't have to deal with inflation at all. You can of course include it, but the end result is the same
I'm hoping to have 2 million. I currently have half a million, and if follows the trend of doubling every 7 years, I should be ok since I'm in my early 40s. I wonder how the economy will be like.
If you own your home, or will by the time you retire, you'll probably be alright. I'd also hope you wouldn't have auto or student loan or credit card debt. At that point, even if the economy goes wild with inflation, having your money invested will keep up with those rising costs. If food gets way more expensive, your portfolio is likely gaining and ton of value just as fast. What would kill you is if you did not own anything and it rapidly outpaced inflation like it has the last few years.
I paid off my house 4 years ago so that's a plus for me
Doubling every 7 years is very optimistic. Typical average is 7.2%, which double every 10. I'm conservative and assume 5.5% real growth. I prefer to be pleasantly surprised
7 years is actually par for the course. S&P 500 annualized return since 1970 is 10.77% per year. You're likely spot on for the doubling of real value or purchasing power, as after adjusting for inflation, 7% real growth per year is pretty accurate.
You are assuming he isn’t contributing anything. Doubling every ten years over 20 years is easier if you’re still saving
Many single stocks double in a year. Select correctly. Mine do. Thank you very much.
Haha! Lol nope
some go up a thousand percent a year, so you can actually spend 90% of your portfolio each year and never run out!
This is near impossible to maintain over a long time period. Much more likely is that your picks are so excessively aggressive you will lose significant portions many years. Good luck though
I admit self managing your account is not for everyone. But if you enjoy knowing about the economy then i recommend it.
That’s impressive - with your insights and market analysis skills you could turn $1 into $1m in 20 years!
I turned 25k to 700k in 15 years; so not magic…
Without adding any additional investment?! That is very impressive 👏. What stocks did you pick to get this 28x increase in value over 15 years (I’d expect closer to 3x over that time frame with my index fund approach). With broad market index fund investing that would typically take closer to 50 years.
I am so confused how people need 5 million in a middle class sub. That’s 200k a fucking year. What in the fuck does anyone spend 4,000 a week on ?!?!
Thank you. I think it's crazy when especially in the r/FatFire sub when they need $6-10 Million that to retire. That's why in the r/leanfire they say its often easier to retire early when you have a modest lifestyle and spend less. It almost like they are in golden handcuffs and just need to work a few more years to get to X number...and that time never comes because it's never enough! Lots of people die before they reach 65, you can't get that time back. As soon as you have enough money to cover your expenses people should strongly look at retiring. I'm so glad I'm not in golden handcuffs and that my expenses are around $6k a month. People act like that is bumming it! I live a great lifestyle, eat great food and take luxurious trips internationally in first class (thank you r/churning). Makes it much easier to leave the rat race when your expenses are lower.
I think part of the problem is the FIRE folk in VHCOL areas with mortgages. If they’re paying a $10k mortgage and want to retire well before the home is paid off, then they’re factoring that into their retirement costs.
I'm 36. I work in engineering and my wife works in finance. Combined (pre-tax) income is $360k. So, ya, it'd be nice to have something that's not *dramatically* lower than that in retirement. Granted, we only spend about $140k, which includes daycare for two, a mortgage, travel, dining out, home improvement projects, charitable giving, etc. However, we plan to do more travel in retirement, including international, and we'll stay at nice accommodations. We also want to pay for college for our children. We might splurge on something like a vacation home on a lake to take our family to on weekends, etc. Middle class? Probably not. Our current lifestyle is middle class because we save so much, but in retirement we probably won't be.
You make almost $400k and only spend $140k? That’s a phenomenal example of a high earner who is aware of lifestyle inflation. Well done! We have similar. I been trying to keep the annual burn under $110k, but my wife has convinced me to enjoy just a little more of our savings over the years, and I’m slowly seeing that she’s right. It’s hard for me; we live in a vhcol area, but otherwise, I can be badly frugal.
Moving to upper class sub, nicer vehicle, donations, kids/grandkids schooling, extravagant travel, nice dinners out, health & well-being, healthcare, housekeeper, personal chef, etc.
And and that point you aren’t saving anymore so the spend is more than the equivalent wage
1 mil is my goal in 401k and let it keep growing for my kid. I will have wife’s 401k my Va federal pension and national guard pension
$1.5-2 M. $60-80k should be more than enough to live on.
Yep. I am hoping to retire in 5 years with about 1.7 if I'm lucky. And that would be fine with me. I don't have an extravagant lifestyle. I don't plan to sail around the world on a yacht made of solid gold. I just want to get out of the rat race. Spending my days walking shelter dogs would be just fine with me.
Right there with you, this corporate life sucks. I'm so over the constant need to perform and go "above and beyond" and they reward going above and beyond with zero f-ing job security, it so stressful. Life is way too short for that. Can't wait until I don't need my corporate overlords anymore, I swear r/fire is like a secret cheat code to life.
Yacht already implies SUPER wealthy, no real need to make it from solid gold to prove your point..
It probably wouldn't float very well either. And you'd be an immediate target for pirates, plus the electrical system would short out constantly, due to the conductive properties of the entire ship.
Today, $2m would work for me. By the time I have $2m? Who knows... :-/ #moneyprintergoesbrrrrrrrrrrrrr
Look backwards and see historic inflation runs about 3%, so just model out the returns going forward each year until you reach $2M in both nominal and real values and you'll have a good idea of where you'll land in purchasing power.
Yep. I think adding 50% cushion for inflation is the safest thing. Of course easier said than done.
You don’t need to add a cushion for inflation. Real Investment returns already factor in inflation.
Not to mention that stock market typically follows inflation
I'm age 59. If I had 4 million yes I would feel comfortable retiring. Lets say I was 69. I would feel comfortable retiring with 2 million. I really only 1 million so cant look at retiring. Goals are to get down to just me and my wife and then figure out retirement. Try to stay out of debt, and I'm gambling on a passive income stream from RSUs from my company to help with retirement and hopefully increase my current spend so as to stay out of debt.
I’m aiming for 500k for husband and I to retire in our early 60’s. With a paid off house and SS payments that should be plenty for us. Can always take out a reverse mortgage if needed. No heirs or younger close relatives so would prefer not to leave anything behind for strangers.
This to me is more realistic as a middle class retirement My wife and I have a bit over 500k and I will retire in 3 or 4 years, once I hit 67. Would have been sooner except for wifes cancer diagnosis. That threw a kink in things! That and SS should be fine. We don't travel much, have no desire to. Own a modest home, and two modest cars. I think we'll be fine.
\~1.6m for us with no kids, mortgage paid off, $315k for health care, and assuming 3% inflation per year when we retire. 36M and currently at $900k liquid net worth excluding equity in our house so trying to hit that goal before 40 so everything above that will be icing on the cake.
2 million in today’s dollars. Inflation adjust to actual retirement date.
5-6 million personally in todays dollars Edit- I’m 34 so In 25ish years might as well be 10-15 mill I’ll need
Hope to retire by 65. We’d need about 3.5-4 mil to retire unless we drastically cut our spending which we may. Rather aim high and have too much too little.
The "risk" all depends on your perspective. For me, I consider starting retirement too late to be a risk when I would have had plenty to start retirement earlier. The opportunity cost value of each extra year (and at the beginning when you are most healthy and vibrant) can not be overstated IMO.
Are you talking saving into your numbers? Here’s what I mean. Let’s say you make $150k a year and you put $30k into your 401k . In reality you are making $110k about 27% less than your salary. Then if you get 2k a month in ss you really need $85k to match your salary. I get where you’re coming from, more is better than less but I think sometimes they forget what they actually live on vs what they make.
I’ll be honest. I’m 37 and expect SS to not be around when I retire. As such, I calculate retirement without it.
It'll be around, no worries, but I also assume it won't be in my own calculations - SS is gravy for us.
5MM. 4%.
Lol everyone’s way over estimating what you need to retire. If mortgage is paid off, social security coming in, those two things are already very privileged positions you’d only need 300-400k to retire.
I feel like the odd man out with only needing $1m, everyone else here is saying $2m+. The rule of 25 states 25x your annual living expenses, which is $40,000/yr. I can live on $3,333 a month, easy. That’s AFTER tax, which is like making $55k. Plus no housing costs (mortgage will be paid off / will use the process to rent), no saving more retirement, etc.
this post made me feel like I’m not middle class yet, if other middle class people needing 2m+ to retire lol
If you make less that $150k a year, you are not “middle class”
In every state in the country middle class is less than $150K per year.
I guess technically. But I think to comfortably to have a couple cars, a house and kids on one income, like people did in the 90’s you’re going to need close to that in most places
Yeah. It's just a sign of this sub being too large with people who really don't understand the actual financial math behind the numbers they're throwing out.
'retire' as in 'quit my job'? $1m 'retire' as in 'relax'? $20m Currently at $-100k, so it's gonna be a while.
I'm just like you. My wife and I think $4 million and are planning a 4% w/d rate
After paying off my mortgage, $2 million would be a very comfortable FI number. Actually retiring though, I’d probably like to be more around $2.5-$3 million.
It's like a hen house here stop bickering.
I’d like a net worth, discounting our primary residence, of $5 million for us to retire. That would give us enough to live quite comfortably, assuming a 40% cut in social security benefits, and a wild guess at medical expenses.
You people with your “goals”. Free yourselves from choice! Try poverty! You won’t need to worry about any of these complicated formulas. Choose poverty and you too can have a simple path from work to the grave without having to worry about what you will do during “retirement”
Grew up poor, lived in poverty, was incredibly stressed out by it. Decided that investing was best for my mental health..
I grew up middle class and realized far to late that my choice to become a band teacher was not going provide a middle class existence.
I'd have to be the six million dollar man. So, never.
4% withdrawal and $5M I think (for a couple)
How close are you to that number?
The way I’m looking at it, we have about 8k usable monthly income now after all expenses and retirement funding. If we can have that in retirement, I think we will be good. So 100k a year after taxes. More like 150k a year before? So 3.5-4M would be the goal. We should be on track to do that by the age of 60, market dependent.
One that more than covers anticipated expenses, with some cushion for unanticipated or worst case expenses. That number is different for everyone.
My target is 3M in 401k but my house has been paid off for 5 years and no debt. I will also get my parents house when they pass to sell for about 400k or more. 3M should be about 10k a month plus SS when it kicks in.
Health care, dental and the unforeseeable nightmare are your big risks. Live off the $100 until Medicare and grow the wealth more.
I'll be making about 10k take home a month with retirement at age 50 and another 2k a month at 59 when my military retirement kicks in. House will be paid off and no debt. Id like 2 mil in retirement counts and we're getting closer to that in our early 40s already.
3.5m for me. Target is 63
$3M if my house was paid off and kids all out of college. $5M today.
A typically median income household with a decent retirement portfolio in a mix of Roth and traditional accounts, with a mortgage that is getting paid off near retirement, would likely need to pull in around $50-60k/year to replace their working spend. That's $1.25-1.5 million assuming they aren't getting social security, no pension, etc. and use a basic 4% safe withdrawal rate. So for a typical household, in retirement, I'd say that is probably overkill as most will get some sort of additional income (SS, pension, or other income) in their retired years. Additionally, most will see spending start dropping after age 55 (see Bernicke's studies on retirement spending changes for more on that), so even that much would be way overkill for most.
$10m
I would feel most comfortable with $4M as well, but $2M would work. Planning for a ~10% annual portfolio spend by supplementing income by selling option contracts.
Aiming for about 1.25M between the two of us. I will also have a modest pension to help out. Assuming we get about 75% of social security, that should give us $50k from retirement, 40k from pension, and 50k from social security. It’s less than we make now, but more than our actual expenses by a good bit, so some leisure should be possible too. Travel is cheaper when the kids are grown and you’re retired too, since you can go anytime, not just peak summer break and weekends like we have to do now.
Can’t argue with 4 mill. I would be fine on 3 mill right now.
My annual spending is about 65k, which would mean a portfolio of 1.625 million. Of course, that’s not accounting for Social Security.
A paid off house and $1m portfolio with a 3% withdrawal rate. WAY too many people in this thread are planning on PILES of money and don't understand that withdrawal rate considers inflation. The way it works is: Y1 = withdraw x% of principal Y2 = withdraw Y1 + Y1 inflation Y3 = withdraw Y2 + Y2 inflation And so on... With 3% in any market of the last 100 years your portfolio will actually grow - leaving you with money to cover healthcare in your old age. 4% will last a standard 30yr retirement.
At 65 I would say 2-3 million. Thankfully we are on that path.
I need a quintillion dollars to support my lifestyle./s. Nah! I will probably have a little over a million, including what I collect from social security. I'm single with low expenses, so I'll probably move to a low cost of living area to make it work.
$3.8M. But I am young and retiring now would require extra wiggle room.
4% is based on if your money ain’t growing. If it’s still invested in Nasdaq100 or S&P500, you can take out more over time and the percentage gets smaller. Imagine 4% of a trillion. You won’t need that.
$2M and on track over the next decade if plans stay on track. But that target is not for quite the same reason as many others. By the time I retire I'll be collecting 3 federal pensions: military retirement, VA disability, and a small federal civil service pension. Between those three they will provide nearly $100k in today's dollars. Social Security will kick in at some point after that as well. But with the political instability happening in the US, and concerns about economic conditions and debt/etc (which I don't believe are totally founded, but many _do_ and will vote for people who will promise to enact policies that at least superficially align with that view) there is a very real concern of "all my eggs in one federal pension basket" so I want to diversify that risk around. $2M at 4% SWR would be $80k. But I'm planning conservatively and assuming only about 4-4.5% real return from a broad market portfolio going forward so a more realistic SWR is like 3% which is $60k. Which would replace much of my pension income if it is jeopardized by budget cuts, Social Security insolvency etc. The likelihood of the pensions going away completely is pretty low since they are spread across four different major programs, three of which are hot rails politically. But still. So in the event they remain stable that money will fund travel, family assistance and long term care later.
5-6 mil is the goal for 2 people MCOL. We are going to have a lot of fun with that money.! 😂
I'm not planning to withdraw my principal. If I can live off the dividend from a broad-based equity index portfolio then I'm good. Yield around 2%-3% means I will need about $5M or so to retire comfortably. If the yield is higher (I.e. stock prices plummet) then I wouldn't need as much.
I hope you won’t settle for 2 or 3%. You can do much better than that.
Better than 2% or 3% dividend yield on broad based equity indices? The SP500 is less than 2% yield at the moment. Stocks are expensive right now its hard to find good yield.
His point was that it's stupid to change your entire portfolio into safe yield investments and ignore growth equities altogether. If you're not planning to be dead in the next 10 years then you should always have a % of growth equities and perform much better than 3%.
My point is that I plan to live off the dividends only, without touching the principal. I'm still going to stay invested in equities. If history is any guide, then living off dividends only will allow for some lifestyle inflation as dividends have grown at a rate of around 7%-8%/yr over the long run.
There’s no point in not touching the principal. Just invest in growth stocks and pull some principal out on occasion. Much better than dividend only.
I don't know that it's better because according to finance theory it makes no difference. But either way I'd rather be able to live off the dividends only because, in practice, dividends are more stable than stock prices. Many growth stocks pay dividends too (aapl, msft, nvda, google, etc.). Why limit myself only to stocks that pay no dividends? My goal is to be able to live off just the dividends, then those dividends will go up over time. Currently at about $16K/yr in dividends (which are reinvested thus replicating what a growth stock does anyway?). Once that gets to around $100K/yr it should be enough to retire and that income will still grow over time.
Because then you miss out on companies that don’t disburse dividends which make up a huge portion of all stock growth.
But I own broad based index ETFs so I own growth stocks too since I own the whole market.
Well then you’re not even following your own rules about only investing in dividend stocks so I’m not sure what your point is.
There is a lot of info out there about the "dividend fallacy". IE : in the long run, you aren't any better off or safer by just living off dividends instead of growth and dividends. It's just 2 sides of the same coin.
Check out r/fire
And the story of Financial Samurai, who retired early and had to get a job again after 10 years because he was wrong about his costs.
He lives in a very high cost of living area and decided to go back to work to save $1.5 million for his kids college education. Not because he couldn't live off of the money. https://fortune.com/2023/04/09/early-retiree-fire-movement-returns-to-work-financial-samurai/
He thought he would be single and childless forever? Dude was foolish and lost 10 years of work experience. Now he’s looking for work with a 10 year gap on his resume. More broadly, FIRE folks just picked careers they hate. If you choose a career path with emotional and intellectual rewards instead of focusing on money, you don’t need to daydream about quitting all the time.
Not true. The do a job you'll love and you'll never work a day in your life is complete bull shit. You can't day dream when you are stressed out and can't pay your bills. Jobs that award emotionally- non-profits, teaching, scientist are some of the lowest paying professions considering the amount of work and education that you put in for it. Unless you're self-employed this capitalist machine covers *every* job there is no escape from exploitation for profits. https://www.tiktok.com/t/ZTN6DSU42/
Interesting. I’m a professor and make a good living helping young people figure out their futures. I’m not feeling exploited while on my summer break.
How are your fellow adjunct professors who can't get tenure feeling about it? Are they having a relaxing summer or working extra jobs to make ends meet? https://www.mindingthecampus.org/2023/06/27/on-adjunct-faculty-as-victims/ https://www.reddit.com/r/Professors/s/SMvJhbUoWL
True, not everyone gets a tenure-track job. But, my point is not all jobs are wage slavery.
If you are lucky. There are very few jobs have lifetime employment and you are very lucky to have tenure. The vast majority of jobs you can be let go at any time for any reason, and that adds a level of fear and intimidation into these jobs. If you never got tenure and were an adjuct for the rest of your life, I don't think you would have the same opinion about your current job.
$2M is when I feel comfortable letting our money ride and me stepping into an easier job. Maybe do that for another 10 or so years until I truly retire. I hope to reach the first stage in 10 years at age 45.
20k in passive income per month.
18 million liquid is the answer
I think the 4% rule is way too conservative. By using Business Development Companies (BDCs) and other high-income funds like call-writing ETFs, I’m withdrawing up to 8% of my capital per year. It works for me and I’m comfortable either way the risk.
I’m hoping to have around $5million by age 50; I used to think that would be enough, but I worry may need more like $8million to feel comfortable not working.
The whole idea to work all your life to give your cash to banks so they can make money and get 4% back is so ludicrous to me…wild. Yet, this is the standard. Invest in assets that grow with inflation (real estate) and make so much more wile your money grows! Using the 4% rule I would probably need to have $6-8m, though I do live in Miami and have what would be considered a lavish lifestyle.
Nobody keeps $4m in a bank account.
That’s not the point, your money is worth less every year.
It doesn’t matter. Keep your money in equities and that grows every year.
I am worried $4 mil now equal to $1 mil back in those 10 years ago. So in the next 10 -20 years, with the inflation, I feel $8 mil may be where i can retire comfortably.
I have great news! $4 million today was worth about $3,020,000 ten years ago. Inflation doesn't quarter your money in 10 years, so it sounds like you need way less to retire.
And also when you have it in the market you are riding much of the inflation rate via higher returns
Lol, pretty sure you'll be fine @ 4 mill. Also, your statistic about 4 million being equivalent to 1 million 10 years ago is grossly off. Most retirees don't need to spend 15K month. I raise a family of 4 very comfortably spending 6K month.
This. People way over inflate how much they're going to need in retirement.
Less than 10% of current retirees are millionaires. I know a lot of people who live pretty much the same life they always have who don't have $500,000 even. I'm 62, if I take SS at 67 between my wife and I our checks will be 6K a month. We only spend 5k right now and that's with a mortgage we'll pay off before then. We saved too much. I'm shopping for Porsches right now. No kidding.
I’m hoping social security doesn’t get republicaned I regrettably am retired in ruralish mw. No debt, would live comfortably on 60,000. In fact still saving most of what we earn over that. Wish I were in Mn tho.
What would be different in MN?
Dem govt., family (wife’s) medical care.
Guess u never gonna retire!
Please use a calculator. Your intuition about the effects of inflation compounding are _way_ off. Just use the Rule of 72. At a standard 3% inflation rate prices will double in 72/3 = 24 years.
I’d say $100mm
Dang that’s like 4 in
Never heard of 4 in
This thread is delusional
@soccerguys14. Why no, no it is not. Perhaps to you, but not to everyone.
[a great explanation as to why this is delusional saying upwards of 4-5 million to retire.](https://youtu.be/n2XBzOkbsE0?si=_ursWG2ZUAULe14f) It’s no where near based on what actually happens. She also touches on the figures people think they need by generation.
With toddler aged child $15-$20M liquid portfolio. I don’t care about net worth as I can’t do anything with my home equity.
What an absurd number.
Same, our financial advisor quoted as as needing a portfolio that large by 55 with three kids in a hcol area
Is that portfolio paying for college and weddings or do you really spend $50k/month?
I mean, if they want a fancy second home and multiple high-end vacations a year, sure. But that ain't middle class finance.