retiring

[KennyG]

The 25x guideline will never dip into the principal if you can maintain a 4% return AND (and this is the rub) your expenses don't increase with inflation. However, today it's pretty hard to find 4% without some risk to the capital (even bonds have some risk of capital loss). Assuming you have a mix of investments, it will probably exceed 4% over time but you need some margin and some of that gain is just keeping up with inflation.

 

[kenmac]

when finished buying things bought for this farm. And I began to take SS. I'm going to cut back on taking out of my IRA.
I think I can live pretty good off $3500.00 per mo. If I can't ,I can always tell my money manager to send me a few $$ more

 

[Travelover]

The 25x guideline will never dip into the principal if you can maintain a 4% return AND (and this is the rub) your expenses don't increase with inflation. However, today it's pretty hard to find 4% without some risk to the capital (even bonds have some risk of capital loss). Assuming you have a mix of investments, it will probably exceed 4% over time but you need some margin and some of that gain is just keeping up with inflation.

Correct in general. Inflation is a major risk that is easy to overlook. Since I retired 12 years ago, what cost a dollar then costs $1.24 now. Over a 30+ year retirement that erosion is significant. The second big risk is sequence of events. If there is a major crash early in your retirement, like 2009, you have to sell more shares of stock to meet your needs. The effect of that loss negatively compounds over the rest of your retirement. If there is the same level of crash late in your retirement, it doesn't affect you nearly as much.

Holding enough cash and bonds to allow not selling stocks helps mitigate a bad sequence of events, but holding too much cash and bonds won't allow you to keep up with inflation.

 

[Travelover]

when finished buying things bought for this farm. And I began to take SS. I'm going to cut back on taking out of my IRA.
I think I can live pretty good off $3500.00 per mo. If I can't ,I can always tell my money manager to send me a few $$ more

One thing to plan for is RMDs (required minimum distributions) when you are age 70 1/2 and older. It might make sense to take from the IRAs now so the additional tax hit is smaller once you have to start the RMDs. You can also do Roth conversions to get that money out of the IRAs, if you are in a lower bracket right now. Hopefully your money manager has discussed this with you.

 

[kenmac]

One thing to plan for is RMDs (required minimum distributions) when you are age 70 1/2 and older. It might make sense to take from the IRAs now so the additional tax hit is smaller once you have to start the RMDs. You can also do Roth conversions to get that money out of the IRAs, if you are in a lower bracket right now. Hopefully your money manager has discussed this with you.

we have discussed this. I have a little more than 10 more years to go.
My hope is they will raise the age, or perhaps do away with RDM's all together, which I doubt they will. At some point, my government wants their fair share of my money.

 

[Jstpssng]

we have discussed this. I have a little more than 10 more years to go.
My hope is they will raise the age, or perhaps do away with RDM's all together, which I doubt they will. At some point, my government wants their fair share of my money.

Unfortunately as we get deeper and deeper in debt, I fear that their "fair share" is going to get bigger and bigger, as they eye the assets of those who worked hard and saved wisely.

 

[RickB]

My short term plan is to maximize the tax bracket we are in by converting traditional IRA funds to Roth up to the threshold of the next bracket. Federal income tax rates for most of us are low historically speaking and I will gamble that they will rise sooner than later. The 0% rate on capital gain is another current advantage that might not last forever.

 

[zzvyb6]

Count on and plan for this: Socialism is coming. The IRS will confiscate ALL your IRA's, bonds, SPIAs and pensions. Then hand all of us our 'fair share' per month. Open your eyes to the campaign slogans.

You're gonna need a BIGGER mattress...

 

[buckeyefarmer]

Americans think $1M is enough for retirement, here are top 1 cities where it'''ll go furthest | Fox Business

 

[kenmac]

Count on and plan for this: Socialism is coming. The IRS will confiscate ALL your IRA's, bonds, SPIAs and pensions. Then hand all of us our 'fair share' per month. Open your eyes to the campaign slogans.

You're gonna need a BIGGER mattress...

I think if that happens, you can forget about a mattress. They will need to ramp up the number of body bags, because this would cause a war from within.
There is no doubt the your elected officials would love to get their hands on more of your money though

 

[ericm979]

The 25x guideline will never dip into the principal if you can maintain a 4% return AND (and this is the rub) your expenses don't increase with inflation. However, today it's pretty hard to find 4% without some risk to the capital (even bonds have some risk of capital loss). Assuming you have a mix of investments, it will probably exceed 4% over time but you need some margin and some of that gain is just keeping up with inflation.

4% is commonly used because the long term average return on the market is about 7%, and when you subtract an expected inflation of 3% you get 4%. Some people assume 2% inflation and use 5%, but while 2% is the fed's current inflation target it's lower than the 3.2% long term average and is probably optimistic.
But you're correct that if you move some money into lower return investments as many people do, you'll probably be getting less than 4% after inflation.

The 4% thing is just a handy rule of thumb. I'm not confident using a rule of thumb to plan my retirement, I use more accurate models.

 

[goeduck]

Count on and plan for this: Socialism is coming. The IRS will confiscate ALL your IRA's, bonds, SPIAs and pensions. Then hand all of us our 'fair share' per month. Open your eyes to the campaign slogans.

You're gonna need a BIGGER mattress...

The candidates on the far left and the population that supports them scare the carp out of me.

 

[Steppenwolfe]

I want to retire at 60, but will probably wait till 62.

I work for health insurance.

I'm 61, planning on MAYBE retiring at 68 to 70. Health Insurance for me and wifey is $2400 per month. Of course we write that off as a business expense, but will be glad to hit medicare at 65. Health care will be a priority in upcoming elections.

 

[Steppenwolfe]

Count on and plan for this: Socialism is coming. The IRS will confiscate ALL your IRA's, bonds, SPIAs and pensions. Then hand all of us our 'fair share' per month. Open your eyes to the campaign slogans.

You're gonna need a BIGGER mattress...

BS... Socialism is already here. Don't kid yourself.

 

[Steppenwolfe]

The candidates on the far left and the population that supports them scare the carp out of me.

Be more scared of the rising federal deficit we are experiencing right now...

 

[Chris616]

If pure Capitalism and pure Communism are the two ends of the scale and socialism being any position in between, then sure, the US is somewhat socialist. That's not a bad thing. You all pay school taxes along with the people who don't have kids in return for public schools, as opposed to writing a cheque to your local school business when you wanted to have your child educated.

Chris

 

[Steppenwolfe]

If pure Capitalism and pure Communism are the two ends of the scale and socialism being any position in between, then sure, the US is somewhat socialist. That's not a bad thing. You all pay school taxes along with the people who don't have kids in return for public schools, as opposed to writing a cheque to your local school business when you wanted to have your child educated.

Chris

Exactly... We have a plethora of socialist programs in America, NOW. I think what we are all afraid of is the free ride scenario where takers have no obligation to pay back.

 

[Chris616]

The OP's question has been answered, so I'll do my bit to further derail his thread. Further to the "socialism" theme, I've put on my Nomex coveralls from a job earlier in my career in anticipation of some of the responses.

Before I worked in the US for a few years earlier this decade I had wondered why it was that the US ranks poorly in average life expectancy (37th in the world in 2019) yet overspends every other country. Here's my take on it.

In countries with universal healthcare, healthcare is a service funded by taxpayers. Erase that image in your head about some bleak East German communist era building. The health care facilities in Canada, Norway, Australia, etc. look the same as those in the US (except for those servicing the very rich) and provide the same excellent care. There are problems, just different ones to the US model.

In the US, healthcare is an industry. A really big, but inefficient industry, without the normal capitalist market forces of supply and demand to drive prices down. Not many people shop around to get the best deal on their chemotherapy.

The "user pay" model seems to be great for the rich, who can use their money to fund their healthcare. For everyone else, not so much. For those of you in the US, why is there such a dislike of socialized medicine, the model used in all countries that consistently rank as the best to live in?

Chris

 

[coobie]

Wondered how long it would take for this post to turn into politics.

 

[Steppenwolfe]

Wondered how long it would take for this post to turn into politics.

How is what we have now vs what could be better, (or not) political? It won't be political unless you take it there. Social Security is the prime example; good, bad or indifferent it is socialism. Once you take more than you have paid in you are enjoying socialism. I have been paying in for 46 years and haven't taken a dime, yet. Hopefully there will be some left when I chose to.