Retirees whatcha living on?..........

[Dave N]

I didn't really have a "last day" but it would normally be walking around doing the goodbyes and waiting for the cake ceremony. Leave any time you want.

 

[Nameless Range]

Financial threads are the ones I know the least about by far. I’m not contributing to this one because my knowledge is next to nothing, but it’s really informative and thought provoking.

A while back on recommendation from a friend, I read the book, “Die With Zero.” The premise of which is, if finances are done right, one should run out of money just as one runs out of life. I think for a lot of folks, the running out of money is the main concern, but the author was compelling.

I hope all those planning for and in the middle of their own well-earned retirements enjoy them.

 

[BigHornRam]

Financial threads are the ones I know the least about by far. I’m not contributing to this one because my knowledge is next to nothing, but it’s really informative and thought provoking.

A while back on recommendation from a friend, I read the book, “Die With Zero.” The premise of which is, if finances are done right, one should run out of money just as one runs out of life. I think for a lot of folks, the running out of money is the main concern, but the author was compelling.

I hope all those planning for and in the middle of their own well-earned retirements enjoy them.

My Dad told me that line when he was around 65. "If I die with 1 penny in the bank, it will be due to poor financial management. I told him that sounds like a good plan. He mismanaged little, but not by much.

 

[MNElkNut]

One little thing to consider, if you are now contributing to retirement plans out of your income, that will stop. For example, if you are putting 10% into your 401K, you won't be doing that in retirement so you can take that off the top of what your income needs will be after retirement.

 

[SAJ-99]

Financial threads are the ones I know the least about by far. I’m not contributing to this one because my knowledge is next to nothing, but it’s really informative and thought provoking.

A while back on recommendation from a friend, I read the book, “Die With Zero.” The premise of which is, if finances are done right, one should run out of money just as one runs out of life. I think for a lot of folks, the running out of money is the main concern, but the author was compelling.

I hope all those planning for and in the middle of their own well-earned retirements enjoy them.

My wife just read that book. The title is a little off from the premise, which is mostly balancing enjoying today with saving for the future, but she loved it. I'm not sure how some would spend less in retirement unless the mortgage gets paid off. You essentially have more free time and less income. Food, fuel, other essentials stay the same and increase with inflation. Maybe the main question is how much you spend on having fun and traveling, because you will have a lot more time to do that.

You can always bite the bullet and convert them to Roth, give Uncle Sam his cut now.

I'm trying to get my head around the ideal time to convert, RMD rules, and the overlying tax implications. The advantage of the Roth is withdrawals aren't considered income so you don't get hit on SS taxes if you go over the limit. However, it seems like walking a tightrope.

 

[npaden]

I'm not sure how some would spend less in retirement unless the mortgage gets paid off. You essentially have more free time and less income. Food, fuel, other essentials stay the same and increase with inflation. Maybe the main question is how much you spend on having fun and traveling, because you will have a lot more time to do that.

I am probably not a good example with my less than 50% of current income number. By far my biggest expense now is saving. Pretty close to half my income. 2nd biggest expense is taxes. 3rd biggest expense is charitable contributions.

My mortgage payment is 2.3% of my income and will be paid off next year.

We live well below our means. We will be spending just as much in retirement on actual expenses, we just don’t spend very much of our income now.

 

[npaden]

I'm trying to get my head around the ideal time to convert, RMD rules, and the overlying tax implications. The advantage of the Roth is withdrawals aren't considered income so you don't get hit on SS taxes if you go over the limit. However, it seems like walking a tightrope.

My simplistic way to look at this is that anytime I’m not fully utilizing all of the 24% income tax bracket I will be converting that much from pre-tax sources to Roth. Pretty basic but for the most part is a good rule of thumb.

 

[JCS]

If you plan on not changing your spending habits, you'll need 100%.

There is no easy answer. I took an early retirement when I was still in my 40's. I lived on about 60% of my take home pay for a few years. Then, health insurance increased around 500% in a couple of years. House taxes went up 70% in 8 years. Those are the things you need to keep in mind. In my calculations for retirement i used the inflation number as 4% per year. Well, the last 4 years it was way over 4% per year.

Another big item to keep in mind is if you will need another vehicle in the near future. It is a big expense.

Just a few things to keep in mind while trying to figure out what to do.

 

[Southern Elk]

I hope to retire early. Does anyone have any advice or experience living off of savings until you can access 401Ks? My goal is to retire at 50. We plan to have our home paid off before then.

 

[noharleyyet]

If you plan on not changing your spending habits, you'll need 100%.

There is no easy answer. I took an early retirement when I was still in my 40's. I lived on about 60% of my take home pay for a few years. Then, health insurance increased around 500% in a couple of years. House taxes went up 70% in 8 years. Those are the things you need to keep in mind. In my calculations for retirement i used the inflation number as 4% per year. Well, the last 4 years it was way over 4% per year.

Another big item to keep in mind is if you will need another vehicle in the near future. It is a big expense.

Just a few things to keep in mind while trying to figure out what to do.

Good post.

 

[Richard22]

Yes. I think a % of current income might be more useful than a specific dollar amount. Some of the calculators use 85% of current income and I think that is too high.

The number I've seen most often is 75% of your pre-retirement income.

 

[peterk1234]

Most people can only reduce income by 20% from where they were at prior to retirement. So that is a good starting point. The next step is to determine what your current passive investments are consistently throwing off. Then figure out at what age you plan to call it quits.

Best piece of advice someone gave to me was this..... as soon as you can afford it, retire.

I did it at age 53. I was fortunate to be offered a part time gig that provides me health insurance. That right there is about a $30k per year problem. But I would have done it anyway. I also find that the down time working a bit helps me recover. It has also been great to keep my brain going.

I have some commercial real estate, stocks and bonds. Other than my real estate, I'm only banking on a 4% return per year. Anything above that I consider gravy. I know that is a low hurdle but it keeps the pressure off. My strategy though is to not have to deplete my assets through retirement. My goal is to have it appreciate organically and leave it all to my family.

Also be smart, simplify and downsize. Number one biggest mistake retirees make, building that dream home. We moved to where we would vacation. So every day is a vacation. My home is tiny. Why? Because I don't want to get taxed out of it in twenty years.

And for the average middle class American, around $3 million is dead on.

Also, no mortgages unless it's income producing property, no car payments or credit card debt. I don't want to hear that my money can earn more than the cost of a mortgage. There is nothing sweeter in life than having no debt. Peace of mind is worth a couple points all day long.

 

[cgasner1]

Most people can only reduce income by 20% from where they were at prior to retirement. So that is a good starting point. The next step is to determine what your current passive investments are consistently throwing off. Then figure out at what age you plan to call it quits.

Best piece of advice someone gave to me was this..... as soon as you can afford it, retire.

I did it at age 53. I was fortunate to be offered a part time gig that provides me health insurance. That right there is about a $30k per year problem. But I would have done it anyway. I also find that the down time working a bit helps me recover. It has also been great to keep my brain going.

I have some commercial real estate, stocks and bonds. Other than my real estate, I'm only banking on a 4% return per year. Anything above that I consider gravy. I know that is a low hurdle but it keeps the pressure off. My strategy though is to not have to deplete my assets through retirement. My goal is to have it appreciate organically and leave it all to my family.

Also be smart, simplify and downsize. Number one biggest mistake retirees make, building that dream home. We moved to where we would vacation. So every day is a vacation. My home is tiny. Why? Because I don't want to get taxed out of it in twenty years.

And for the average middle class American, around $3 million is dead on.

Also, no mortgages unless it's income producing property, no car payments or credit card debt. I don't want to hear that my money can earn more than the cost of a mortgage. There is nothing sweeter in life than having no debt. Peace of mind is worth a couple points all day long.

Sounds very similar to the road I’m trying to travel

 

[BRI]

I just spent my first full year in retirement. The wife and I tracked our spending for the entire year doing what we wanted, spending what we wanted. No mortgage and only debt is a truck purchased last year. We want $100k to live and do what we want. My pension provides half, the other half comes from an investment account. The one part of retirement I did underestimate was insurance and how much out of pocket cost that would be.

 

[Johnny Bravo]

Perhaps it has already been mentioned but don't forget to increase your cash requirements each year by 3% for inflation. In other words, if your cash requirements are $100K/year in the first year it'll be $130,477 in year 10, unless you reduce your wants and needs.

This 10 year number is not correct, it does not seem like you compounded it correctly. It’s more like 135k

 

[Bambistew]

For planning I use 100% of my current income and no lifestyle change. Even though I'll have the house paid off and no other debt. If all goes as planned I'll be done in another 10 years, if I cut back to the 85% I could probably be done in 7. Doubt I will do anything until my kids are out of school though. The last price I need to work out with early retirement is health insurance until I can get on Medicare.

 

[TN2shot07]

I hope to retire early. Does anyone have any advice or experience living off of savings until you can access 401Ks? My goal is to retire at 50. We plan to have our home paid off before then.

If you both want to retire it can really take some planning to build up those funds. Especially being that early, you’ll probably want to be pretty active. The straight forward option is to be building a “bridge” account to tide you over. Just a brokerage account, so it’ll be taxable income (capital gains, if you’ve held the investment long enough). I’ve also heard about people accessing the principal in their Roth IRA, although I’d hate to kill the future value that way. Could also look into a 457 if your job offers it

 

[schmalts]

Good topic. And funny that once you get to a certain age a lot of coversation revolves around this. I am looking for answers as well but as others have said there are so many variables like your current debt and an often overlooked topic of the type of income such as ROTH vs not. All I can say is that for the last 2 years I took the ATM card away from the wife and told her to use the charge card for everything possible. I can look at the EOY statement that many banks will provide with a nice category breakdown. Now of course we have monthly autopay so we do not pay interest of have growing debt. It at least gives me a better idea of what we actually spend and on what.
Then the guessing starts as you try to figure how more/less will be spent on gas/mileage depending on how far you commute, healthcare costs, and more. The reason I don't listen to the "percentage of current income" thing is because again everyone is different. I my case we are maxing out our 401k in ROTH contributions so in effect of paychecks are much smaller than someone who is only putting in say the company match with traditional 401k. That over 50K missing from our take home makes us live like some do with a lot less of income. Once retired we will not be putting that money in anymore so if we worked part time as we plan for a few years until SS age our take home will not be much different. It is overwhelming but I talk with a lot of ex co-workers that have retired on less of a 401k balance and are doing just fine. Another factor is how much you have in ROTH as it can make a big difference in how you can adjust your withdraws to make it look on paper you have low income to get lower cost on the healthcare exchange if you retire before 65. I have a pension available that is only 1800.00 per month but if I supplement that with ROTH withdraws my income on the exchange is only 21.6K and that will get the lower rates.
I will check in on this topic more for sure.

 

[cowboy]

Many variables to the individual situation. Your accountant and lawyer are your friends. Use them - money well spent. As far as financial advisors go - my experience is to take their comments with a grain of salt. Your future actions always out weigh their advice.

You owne your own business, will that continue? It’s not all about how much money you make or have but how much can you keep. When I retired, for the first time in my life I had to buy my own pickup, own fuel, cell phone, expense account etc. - and you can no longer write that off or get reimbursed.
Another concern is how much (if any) do you want to leave for your offspring.
Would you completely live on stored up reserves or supplement it with another endeavor not so time- energy demanding?

Retirement is just like doing your annual business budget plus 3 yr 5 yr etc. business plans.

I will say that if you’re seriously considering retiring, if there’s a will, there’s a way.

There’s a well known accountant on here that portrays the mantra that “You’re going to run out of health before you run out of money” - none of us are going to outlive whatever the Big Guy upstairs has in mind for us.

 

[schmalts]

Many variables to the individual situation. Your accountant and lawyer are your friends. Use them - money well spent. As far as financial advisors go - my experience is to take their comments with a grain of salt. Your future actions always out weigh their advice.

Yep, a red flag is when they don't ask what portion of your savings are ROTH because that makes a big difference.