Slightly off topic but it was funny today on msn.com they profiled this 33 y/o guy who retired on 1.3M. The next article detailed on how $1M wasn't enough to retire on at a retirement age. Too many young people think $1M is a lot of money in terms of retirement.
Millennials Want To Retire By 61, One Problem...
- Thread starter IowaHawkeyeFBnBB4Life
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It is a lot of money if you don't spend a ton.
1.3M while withdrawing 4% each year would give you around 52k per year. That is very doable.
Doable, if you retire at 65+. Not enough to retire well before that. The guy retiring at 33 with 1.3M will likely go broke as in 40 years that 52k wont cut it.
He could start out withdrawing only 3% and occasionally work his way up. Also, it's highly likely he will work in some form again. Finally, if a person can figure out how to accumulate over $1M by the time he/she is 33, there is a good chance they will be fine.
I suggest this link to you. Actually, it's this one.
Thank you for the links. This guy has a few kids and a whole life of what-if's in front of him. If it was me, I would work until 40 and have 2-3x as much and have a much better retirement.
Here is a little case study for those of you who don't like the idea of social security and want it privatized. Purely hypothetical for reasons of simplicity.
Brunomars is 30 years old. So is his wife, srams 21. Both make 130k/year, putting them over the 128,700 threshold for social security each and every year. Meaning they cap out at the $7940/year in social security. Because they are both high earners and reaching their social security limits, when they reach 65 they will be able to receive about $7415 EACH. This is from my estimation models. Also, I used a 35 year timeframe because that is how SSA derives your social security. Your 35 best years of income, and average them out. This is what you will receive from social security at age 65. More if you wait until you are older, but that is another story and makes things more complex.
Should your social security become privatized:
Your $7940/12= $662/mo DCA into your retirement account. You following me here???
35 years of this DCA and at a modest rate of return of 6.5% and you will have accumulated.... Wait for it........$654,351
Please, I beg you to go out and find any sort of investment vehicle, annuity, etc.... that will guarantee you an income of $7415/mo. for the rest of your life including COLA increases. When you find it, please let me know what it is so I can start hooking my clients up with it. In fact, let me save you the trouble. It doesn't exist.
So, while social security isn't perfect, it is a pretty excellent and additional source for peoples financial plans and retirement. I didn't like it either when I was 30. Now that I am older and get it, I am happy to have it there as a security blanket for me.
Brunomars is 30 years old. So is his wife, srams 21. Both make 130k/year, putting them over the 128,700 threshold for social security each and every year. Meaning they cap out at the $7940/year in social security. Because they are both high earners and reaching their social security limits, when they reach 65 they will be able to receive about $7415 EACH. This is from my estimation models. Also, I used a 35 year timeframe because that is how SSA derives your social security. Your 35 best years of income, and average them out. This is what you will receive from social security at age 65. More if you wait until you are older, but that is another story and makes things more complex.
Should your social security become privatized:
Your $7940/12= $662/mo DCA into your retirement account. You following me here???
35 years of this DCA and at a modest rate of return of 6.5% and you will have accumulated.... Wait for it........$654,351
Please, I beg you to go out and find any sort of investment vehicle, annuity, etc.... that will guarantee you an income of $7415/mo. for the rest of your life including COLA increases. When you find it, please let me know what it is so I can start hooking my clients up with it. In fact, let me save you the trouble. It doesn't exist.
So, while social security isn't perfect, it is a pretty excellent and additional source for peoples financial plans and retirement. I didn't like it either when I was 30. Now that I am older and get it, I am happy to have it there as a security blanket for me.
not everybody should go to college. not every job should require a 4 year degree when some on job training would get a person up to speed to perform the tasks for that job in a short period of time....but what better way to keep the worker bees in line and make them ask "how high" when you say JUMP when you require them to go into debt for a four year degree for a job that pays $13.00/hr.
Maybe I missed it in the link, but it states that taking only 4% and your money should last forever. If you take 4% each year to cover your cost now, how do yo account for the fact that you will likely need more than 4% in the future if you retire at an earlier age? In other words, If I retire the day that 4% of my investment is equal to my yearly expenses, what happens in 20 years when my expenses are 15-20% higher due to inflation of goods and services?
Well a couple things. First i would recommend starting your withdrawal rate as low as possible to start. 2% if possible. 3% otherwise. Then up it after a few years.
Next, and this is partial timing but overall it often works out, your returns will typically be more than what you are taking out. If we assume on average an 8% return and we also assume a 3% withdrawal then we are still gaining on average 5%.
In other words, we are bet positive and the account grows so that each year we are taking 3% of a higher balance. Inflation is baked in.
