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Author: JerryH101 Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75386  
Subject: Enough to retire Date: 2/24/2004 5:52 PM
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I'm age 60 and retired. I am unable to work and have $500,000 in a home with no debt. I have a retirement of $55,000 annually for life. I also have a $70,000 tax free income until I'm age 65. I have approximately $650,000 in a sheltered account and do not plan on withdrawing any of it until age 65.

Will I have enough to retire on at age 65?
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Author: dsemmler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39386 of 75386
Subject: Re: Enough to retire Date: 2/24/2004 5:59 PM
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I'm age 60 and retired. I am unable to work and have $500,000 in a home with no debt. I have a retirement of $55,000 annually for life. I also have a $70,000 tax free income until I'm age 65. I have approximately $650,000 in a sheltered account and do not plan on withdrawing any of it until age 65.

Will I have enough to retire on at age 65?


How much are your annual expenses? Depending on how much you need to withdraw to supplement your current income will determine how long this money will last you.

You note that you will receive $55k annually for life and $70k annually for the next 5 years. If your annual expenses are less than that $125k then you should be able to save a portion of that as well. Since your home is paid off and you have no debt, I am guessing your annual expenses are quite low. Health insurance is likely the highest expense.

On various boards here there has been much discussion of a safe withdrawal rate to make your retirement funds last. I am quite the beginner in the realm of SWR so hopefully those more knowledgable than I will chime in. As a crude recap, studies show that a 4% withdrawal rate will give you good odds of having your funds last over a 30 year period.

Hope that gives you a starting point and hopefully some of the experts will jump in with more discussion on the SWR and making your money last.

dt

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39387 of 75386
Subject: Re: Enough to retire Date: 2/24/2004 6:14 PM
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Welcome Jerry. Glad you could join us.

Your question is very iffy. If you are willing to adjust your lifestyle, the answer is almost certainly yes. But its worth your while to sit down with the numbers and work out a detailed plan.

The first question is how much income do you need to fund your retirement? Your current $70K income gives you an idea, but if you are saving major portions of that your actual living expenses could be considerably lower. Similarly there might be other adjustments if you planned to sell your home and move to something cheaper or move to a lower cost community. Most people also change their lifestyle in retirement. Money spent on clothes or transportation costs for work possibly can be saved. On the otherhand, you will have more time for travel and leasure activities, and you can expect some expenses for those.

I suspect you will find your $55K income for life adequate to retire on, but is that income taxable? Usually it is. So that can reduce it by 15 to 20% easily. Secondly, does it have a cost of living escalator? If not, your major problem will be to figure out how to make up for inflation.

Fools usually recommend a 4% burn rate for your investments. Your $650K hence can give you an additional $26K for life, but you badly need that money or others possibly from sale of your home, to supplement your income and provide you some inflation protection. This could involve various adjustments in your lifestyle. It could also require purchasing an immediate annuity sometime in the future for some of that income.

You did not mention Social Security. Is that an additional source of funds? What about health care? Do you have insurance provided or must you pay for it? What about Medicare supplemental? Factor all the details into your plan.

Fooldom offers a Retirement Planning course that walks you through this process. You may also find books on the subject in the library. Or get a decent spreadsheet program and start working through the numbers. Or hire a financial planner to do it for you.

Best of luck to you.

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Author: telegraph Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39392 of 75386
Subject: Re: Enough to retire Date: 2/24/2004 7:07 PM
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I'm age 60 and retired. I am unable to work and have $500,000 in a home with no debt. I have a retirement of $55,000 annually for life. I also have a $70,000 tax free income until I'm age 65. I have approximately $650,000 in a sheltered account and do not plan on withdrawing any of it until age 65.

Will I have enough to retire on at age 65?


IT all depends where you live and what your monthly expenses are.

You seem to be in excellent shape...most people would envy a $55,000 pension, and the 70K tax free could be added to the nest egg. That would give you a 1 million dollar nest egg.

From that, you could safely withdraw $40,000/yr, inflation indexed, for the next 30 years.

Add that to your $55K/yr, and if you can live on 95,000/yr, you are set.......

Heck, I never made that much in my entire life in a year......as did 80% of all Americans......

t.

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39395 of 75386
Subject: Re: Enough to retire Date: 2/24/2004 7:29 PM
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JerryH101: "I'm age 60 and retired. I am unable to work and have $500,000 in a home with no debt. I have a retirement of $55,000 annually for life. I also have a $70,000 tax free income until I'm age 65. I have approximately $650,000 in a sheltered account and do not plan on withdrawing any of it until age 65.

Will I have enough to retire on at age 65?"


Good responses, already. As several posters have noted, you give no indication of your "required" spending level. IOW, enough compared to what?

Also, even if the house is owned free and clear, you do not mention taxes and insurance (which at say 2% would be 10k/year and 15k/year at 3%, and likely to continue rising) or maintenance expenses.

Others have done good job about adding 70k tax free to savings for 5 years (another 350k+), discussing inflation risk WRT to 55k annually, referencing SS, and safe withdrawal rates (SWR).

Good luck. Regards, JAFO






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Author: FuskieFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39405 of 75386
Subject: Re: Enough to retire Date: 2/24/2004 10:05 PM
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Will I have enough to retire on at age 65?

To retire, yes. To live for another 20 years depends on all the factors previously stated.

Fuskie
Who thinks you have enough to give him a low interest loan...

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Author: mcain6925 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39409 of 75386
Subject: Re: Enough to retire Date: 2/24/2004 10:55 PM
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You seem to be in excellent shape...most people would envy a $55,000 pension, and the 70K tax free could be added to the nest egg. That would give you a 1 million dollar nest egg.

From that, you could safely withdraw $40,000/yr, inflation indexed, for the next 30 years.

Add that to your $55K/yr, and if you can live on 95,000/yr, you are set.......


Assume that the existing deferred account and the $70K per year earn 5% per year and (ignoring taxes on the earnings on the 70K stream), the egg comes out to about $1.23M in five years (compound interest is your FRIEND). A 4% withdrawal rate from that source then starts at just a hair under $50K, so the annual income is closer to $105K per year. While the original post didn't say so, given the size of the deferred account, I would assume that there's also Social Security. If that's near the maximum amount, that would be roughly another $24K per year. At $129K per year in income, you'd pay enough tax for it to be an issue -- consulting a good tax accountant might be in order.

Given a 30-year or longer planning horizon, one question no one has asked is the reliability of the $55K-for-life income. Many of the possible sources have some risks associated with them over that long a term. Is it a company pension? What's the financial health of the company? Bankruptcy can result in sharp decreases in pension payments -- ask the members of the steel-company unions or some of the airline unions. If it's an annuity, what kind of shape is the insurance company in? If they go broke, there's no guarantee on the annuity payments.

Still, I should be in such good shape :^)

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Author: pekinrobin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39434 of 75386
Subject: Re: Enough to retire Date: 2/25/2004 1:02 PM
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Good Lord, if you don't have enough to retire, no one does. Most Americans don't have $55,000 a year when they're working! If you really don't know how to live on such a high income, check out the living below your means discussion board.

You should have more than enough to do everything you want to do as long as you don't make hand-outs to bums. After seeing the way con artists circled her older relatives, my mother made a firm decision to get a full medical check-up before signing any paperwork "lending" (much less giving) significant assets to someone else. Dementia can be gradual, and medications can also affect your judgment as you age, so be cautious about running wild with your money, but don't be afraid to enjoy yourself.

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Author: duke345432 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39867 of 75386
Subject: Re: Enough to retire Date: 3/17/2004 8:55 PM
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Why do you need a half million house? It uses cash for taxes and repairs at twice rate of lower priced digs. My taxes are about 4% of my retired income, and insurance adds another one percent. Add a bit for an umbrella liability policy and I have under 5.5% cost. You do not mention how many cars you have. We have two, one 15 years old the other just over 2. This is about average for us. Wear one out and the other then becomes the old car with a new replacement. Always paid for with cash.
With money already in tax free bonds for their replacement, we now earn 4% tax free, beating any CD.

My reserves are about 40% tax sheltered, and remaining either stocks or tax free bonds. Your exposure is that any of the $650,000 upon withdrawal will be hit with fed tax of at least 25% currently and what ever the state deems their due. Therefor the withdrawn money will not be face but at a maximum of 75%. Depending on the return of the sheltered funds, you may be able to gross out around 4% without seriously reducing capital, but if there are a lot of mutual fund fees, you could feel a pinch.

Putting a large fraction of the tax exempt income into very low cost Vanguard funds (by name as only they and TIAA have decent overhead costs) or individual stocks would be in order. Other option might be tax exempt bonds for a portion of the money. Unfortunately this is a poor time for both long and short term bonds. Short term have low yields while long term have interest rate risk as sometime Dr. Greenspan will crank up interest rates. This will reduce the value of long maturity bonds. I have lower exposure as most of mine were bought when rates were much higher and the appreciation would just be returned.

You have the possibility of putting most of your exempt third of a million away to increase your stake to around a million. That might be enough to enable a rather decent living standard. That you owe nothing on your house is a big plus. Hope all the hints of others and mine are useful.



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