retiring

[3Ts]

There is one thing I have not seen in all these comments and that is the effect of inflation. That can eat you alive. So when you do your math, remember that the cost of things will be more next year than the current year. Also, keep in mind that the government can redefine what goes into the cost of living figure to manipulate it as well, it would be best for you to determine your own inflation factor by monitoring the cost of what you buy from year to year and apply that to your calculations.

Using a 3% inflation rate:
cost of something this year = $1,000
cost next year = $1030
2nd year = $1061
3rd year = $1093
4th year = $1125
5th year = $1159
10th year = $1344
20th year = $1806
30th year = $2427

 

[3Ts]

I ran the numbers for SSI break even point for my situation. For me, that is age 83. There is no single factor that can be used to determine what is best for a person. I took SSI at 62. Some of the things that I considered:

My defined benefits pension
Likely hood of my company going out of business and what happens to my defined benefits pension (anything over $xx would go away)
SSI income
Amount saved in readily accessible accounts
amount in various IRAs
amount in 401K
predicted ROI on investments
anticipated inflation rate
Wife's savings, pension, SSI, investments
Health care costs after retirement

 

[Steppenwolfe]

Unless you qualify for disability, medicare starts the month of your birth of your 65th year. So for most medicare starts at 65. Mine started November 1st.

Happy Birthday :thumbsup:... I'm 4 years away. No immediate plans to retire anytime soon.

 

[Chris616]

There is one thing I have not seen in all these comments and that is the effect of inflation. That can eat you alive. <snip>

Absolutely, inflation is a factor that everyone has to consider in their retirement planning.

A few of the people on this thread have written about planning their retirement spending to only use the return on their investments, leaving the principal intact. I was curious was impact that would have for me, since I plan to use everything up (with a cushion).

I may be misinterpreting "not touching the capital" though. Are those guys considering inflation, or not? As an example, let's say inflation will average 2% over the course of an optimistic 35 year retirement plan and theyr'e starting with, say $500K in assets. Are they saying that at the end they want to still have $500K, or that amount inflated at 2% per year, which would be $1MM? If the answer is $500K, then they're actually spending half of their principal.

The planning software that I use calculates a sustainable yearly after-tax spending amount. I was a bit surprised by how much the rate of return on investments impacts the ability to "not spend the principal". If I put in a unrealistically optimistic 10% as the return on investments above inflation I'd have to cut back my yearly spending by less than 1% to have the same inflation adjusted amount available at the end as at the beginning.

I wonder what rate of return on investments people on this thread are using in their planning, or if they are even consciously thinking about that. I use 5% because the inflation adjusted return on the S&P 500 is about 7%, both historically and throughout my working/investing time. I have money sitting in essentially cash that I can spend when (not if) the next market crash happens. The mix of stocks at 7% and liquid investments getting negative 1-2% (after inflation) gives me about 5% for an average inflation adjusted number. If you're using anything above 7%, well....

Chris

 

[k0ua]

Happy Birthday :thumbsup:... I'm 4 years away. No immediate plans to retire anytime soon.

Thank you. Birthday is actually at end of month, but Medicare always starts on the 1st of the month of your birth. But got my supplement in force (sold it to myself, whoo hoo), still need to decide on drug plan. Those 4 years will fly by like nothing.

 

[kenmac]

For the most part, This has been about SSI and when one should begin taking withdrawals.
I would like to urge young people that may be following all of this, to invest all you can while you're young.
The stock market hit record highs today. If you stayed in the market during the bad times till today. You should have made a lot of Ben Franklins ! !!

 

[goeduck]

^^^^ great advice. Invest and stay with it. It pays off in the long run, I can attest to that. I had nothing, now I have millions.

 

[bird dogger]

^^^^ great advice. Invest and stay with it. It pays off in the long run, I can attest to that. I had nothing, now I have millions.

Same here! We'll never spend it all. I'm presently 65 and going to start gifting to our kids this year. But only because they've proven already that they're fiscally responsible with their own funds.
I figure with some gifting they'll be able to max out their 401Ks and Roth IRAs to boot.

 

[drssg]

For the most part, This has been about SSI and when one should begin taking withdrawals.
I would like to urge young people that may be following all of this, to invest all you can while you're young.
The stock market hit record highs today. If you stayed in the market during the bad times till today. You should have made a lot of Ben Franklins ! !!

I mostly agree with what you're saying. That's what I did. I lived well within my means, bought low-end cars, and drove them until they were mechanically unsound. My dream car was a Chevy Corvette, but I never considered buying one, because it would be a terrible waste of money.

I finally reached the point in my life where I could responsibly purchase one, so I went for a test drive. It turns out that I CAN'T STAND driving that car. If I had irresponsibly bought one in my 20s or 30s, I would have loved it. Now it's just stupid.

I have a nephew in his 20s who bought a brand new Dodge Charger. About a year and a half into the payments, he traded it in on an even faster Charger. It's a stupid irresponsible waste of money, but I have a hard time criticizing him. It sounds like a race car, and he has a big grin on his face every time I see him drive up in it. This may be the last time in his life that he wants it.

 

[kenmac]

It sounds like a race car, and he has a big grin on his face every time I see him drive up in it. This may be the last time in his life that he wants it.

Lets just hope he's able to grin when he looks at his bank account many years down the road.
I had many fast cars back in my days.
Later in life, I learned it was really a waste even thought it was fun for the moment .
I have thought several times about buying another one. Like your nephew, I was always a Dodge man.
If I could get around worrying about the depreciation, I would go purchase a new Dodge Hellcat

 

[drssg]

Lets just hope he's able to grin when he looks at his bank account many years down the road.
I had many fast cars back in my days.
Later in life, I learned it was really a waste even thought it was fun for the moment .
I have thought several times about buying another one. Like your nephew, I was always a Dodge man.
If I could get around worrying about the depreciation, I would go purchase a new Dodge Hellcat

Yep, that will be the true test.

I think his is one step below the Hellcat.

 

[kenmac]

Yep, that will be the true test. .

Yep. A wise man once said.''Live like no one else today. so later, you get to live like no one else'' !

 

[Jstpssng]

Yep, that will be the true test.

I think his is one step below the Hellcat.

If he was really wise he'd take care of it, then park it in a barn and forget about it.

 

[Spindifferent]

I wonder what rate of return on investments people on this thread are using in their planning, or if they are even consciously thinking about that. I use 5% because the inflation adjusted return on the S&P 500 is about 7%, both historically and throughout my working/investing time.

I use 5.0% as well, and model both 2.5% and 3.0% inflation.

 

[3Ts]

I use a range of returns starting at 4% and go up to my average x% over 10 years and 3% inflation. The one I pay attention to the most is 70% of my average over 10 years.

 

[goeduck]

^^^ I close my eyes and pray.

Well not quite, I make wise investments and check in on them once a month and as long as I am gaining a little ahead of the general market rate I am good. I try not to overthink investing or I would be in there tweaking them all the time and losing money.

 

[Travelover]

....... I try not to overthink investing or I would be in there tweaking them all the time and losing money.

This is important. Market timing is where most people that do invest but lose their butts, fail. Set an asset allocation like 60% stocks / 40% bonds and just re-balance once a year. Period. Don't read financial ****, watch financial shows or check your balances all the time. Market timing doesn't work over the long haul, though someone will always have an anecdotal "win". Like Las Vegas, no one brags about the losses, so you never hear about them.