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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76384  
Subject: ScaryStuff on Long-term Care Date: 2/27/2004 11:02 AM
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http://biz.yahoo.com/ibd/040226/special02_1.html

Here's a few quotes from the article.

"Long-term care insurance is great for the middle class, upper middle class and wealthy," said Stein. "It's questionable for the lower middle class and not needed by the poor."

But it depends what you mean by wealthy. "A lot of people think of themselves as wealthy," Stein said. "To me, if you have $1 million-$2 million, you're not wealthy."

If you plan an early retirement, say at age 45, with $2 million, you're not wealthy at all, says Stein. "You're in a risky situation."

<snip>



Very scary stuff until you realize.

Stein sells policies from 11 different insurers and consults on long-term care.

intercst


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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: 39512 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 2/27/2004 3:49 PM
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If you plan an early retirement, say at age 45, with $2 million, you're not wealthy at all, says Stein. "You're in a risky situation."

That's an interesting statement all by itself, and one that can possibly be supported. Feel free to shoot holes in the following.

Assuming the whole $2M is in a form that can be invested and you withdraw 4% per year, you start with an income of $80K. Assume that's taxable at an overall rate of about 12% and your after-tax income is about $70K. On that income, I would agree with the statement that you are not "wealthy". Upper middle class in many or even most circumstances. Lower middle class if you want to live in NYC or San Francisco? "Poor" if you have three kids that you want to send to Ivy League private colleges.

Assume that inflation runs about 2%. Then you need to consistantly make 6% on your investments in order to support your withdrawal, keep up with inflation, and leave an inheritance when you die. Under normal circumstances that seems feasible. There are investment risks that could hurt you: a major war, a serious depression, a stretch of much higher inflation. If you're 45 today, the IRS life expectancy tables say the money needs to last for 38.8 years -- I don't think there's been a 40-year period in the history of the US that didn't have one or more of those "disasters". So of course you're in a "risky" situation; but we all are, and the person in question is better off than most.

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39514 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 2/27/2004 4:22 PM
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Assume that inflation runs about 2%.

OK, I'll shoot a hole in this particular argument: Inflation has averaged about 3.48% from 1914 through 2001. From 1956 through 2002 it has averaged about 4.37%. That's almost double your 2% rate and makes a BIG difference when projecting future numbers. So let's say taking that into account that your investments now have to make a minimum of 8%.

I'm assuming you're better in math than I am--If the S&P 500 was 55.61 on 1/1/1960 and was 1111.92 on 12/31/2003, what was the average rate of return over the past 43 years?

So, I agree with Stein, you can't retire at 45 with only 2 million in the bank, it's just not enough. If you're 55 however, it might be. And if you're 60 it probably will be. So, I think the point he was trying to make is that although 2 million sounds like a lot of bucks, as you pointed out, it's lower middle class if you live in NY or SF and let's hope you don't plan on a lot of travel and entertainment. :-)

And this is the best case scenario, because what happens if instead of living 84 years, you live 90, or 95? Which is quite possible given the quality of medical care, etc. Oh-oh, now we've really got problems... ;-)

2old


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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39517 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 2/27/2004 5:13 PM
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Wealthy is a realative term of course. If you have $2MM you're probably richer than 99.99% of people in the world income-wise.

And I think anyone can live well almost anywhere on $70k per year. My girlfriend lives just fine in San Francisco on $28K per year after taxes.

And presumably the 45 year old in your example could go back to work sometime in the next 25 years if necessary.

Of course, I agree there's risk here. Just playing devil's advocate!

Nick

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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: 39518 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 2/27/2004 7:09 PM
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I'm assuming you're better in math than I am--If the S&P 500 was 55.61 on 1/1/1960 and was 1111.92 on 12/31/2003, what was the average rate of return over the past 43 years?

About 7.2%. That's consistent with the usual views of 11% average total annual return, which includes about 4% in annual dividends. The bad news for someone who has started making withdrawals is, of course, that that average includes years with 20% gains (last year) and 20% losses (the year before). Big losses in the early years after withdrawals start have a devastating effect on the amounts you get to withdraw.

Inflation has averaged about 3.48% from 1914 through 2001. From 1956 through 2002 it has averaged about 4.37%. That's almost double your 2% rate and makes a BIG difference when projecting future numbers.

Inflation is a really tough thing to account for accurately. The CPI is generally recognized as overstating inflation, but it's less clear by how much (some economists think it's a full percentage point -- which would take 3.48% down to 2.48%). Individual circumstances can have a substantial impact -- for example, elderly people tend to spend a larger portion of their income on health care, which has had a nasty inflation rate for the past decade. The 1956-2002 number is heavily affected by the late 1970s and early 1980s, when inflation was MUCH higher. Interest rates were correspondingly high -- our first mortgage was at 15%, and we knew people with 17% mortgages. 30-year Treasury bonds were paying 13%. Of course, a period of high inflation is one of the things that can cause a retirement effort to fail.

So, I agree with Stein, you can't retire at 45 with only 2 million in the bank, it's just not enough. If you're 55 however, it might be. And if you're 60 it probably will be.

I would have been happier if he had expressed things as probabilities. For example, saying that the probability of "successfully" retiring at age 45 with $2M in the bank is 0.3. Some people will be able to pull it off, more won't. Some people will be "successful" in unfortunate ways -- like getting hit by a bus at age 50. As you point out, that probability goes up with increasing age, but there's still no guarantees -- some people who retire at 65 with $2M in the bank will run out of money.

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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: 39519 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 2/27/2004 11:25 PM
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"only" 2 million

That's an interesting statement all by itself, and one that can possibly be supported. Feel free to shoot holes in the following.

We'll be happy to...

Assuming the whole $2M is in a form that can be invested and you withdraw 4% per year, you start with an income of $80K.

And your annual withdrawal is inflation indexed, regardless of the rate of inflation. The 4% withdrawal has withstood every 30 year period in the past 130year, including the great depression of 29, which was NOT the worst time to retire (1966 was), and the high inflation of the 1980s with 15% treasury bill rates.

Assume that's taxable at an overall rate of about 12% and your after-tax income is about $70K. On that income, I would agree with the statement that you are not "wealthy".

You may not be 'wealthy' according to Madison Ave and Hollywood, but seeing that half of all retirees in Florida live on 25,000 bucks a year or LESS, you wouldn't be hurting too bad.

Heck, I never made more than $90,000 before I retired, with more than 2 mil. SO I only have $80K income, but I pay no SS or FICA, and that was almost 10% off the top. And maybe you don't pay state or local income tax...and I don't pay commuting costs....or have to buy good work clothes...and get to travel at off peak times....and I was saving 20% of my pay for retirement. I actually now have MORE money.

You confuse 'wealth' with a happy normal life. Oh, you need to SPEND lots of money to feel good...like $300,000/yr...tought...

Upper middle class in many or even most circumstances. Lower middle class if you want to live in NYC or San Francisco? "Poor" if you have three kids that you want to send to Ivy League private colleges.

Yes, but those who just earn 80K are 'poor' in SF and Los Angeles if they want to feel deprived. OThers get by on a lot less.

And if you have kids in college, then maybe you don't retire quite yet, although many families get their kids through college on a lot less. So the kids don't go to Harvard or Yale....oh, how deprived they'll be....


Assume that inflation runs about 2%. Then you need to consistantly make 6% on your investments in order to support your withdrawal, keep up with inflation, and leave an inheritance when you die.


Why? where is it written that you HAVE to leave your kids lots of money. Read THe MIllionaire Next Door again. You badly miss the point.


Under normal circumstances that seems feasible. There are investment risks that could hurt you: a major war, a serious depression, a stretch of much higher inflation. If you're 45 today, the IRS life expectancy tables say the money needs to last for 38.8 years -- I don't think there's been a 40-year period in the history of the US that didn't have one or more of those "disasters".

Yes, and the 4% rate for 30 year periods withstood WW1, WW2, the korean war, the Vietnam WAr, the Gulf WArs.....and the major depressions and high inflation of the past.

You make too much of it....

Read up at the www.retirearlyhomepage.com

For 40 years, you will only be able to take about 3.5% a year, to have 99% probability of portfolio survival in the WORST case. You likely will die with five million in the average case.



So of course you're in a "risky" situation; but we all are, and the person in question is better off than most.

ANd you could drop dead of a heart attack in five years, and not live to retirement...or get run over by a drunk driver....so?

Life is risky. If you can retire, don't need a new Porsche every year and live in a $500,000 house with a commensurate lifestyle, then you shouldn't have any problem getting by on "only" $80K/yr.

t.


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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: 39520 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 2/27/2004 11:31 PM
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I would have been happier if he had expressed things as probabilities. For example, saying that the probability of "successfully" retiring at age 45 with $2M in the bank is 0.3. Some people will be able to pull it off, more won't. Some people will be "successful" in unfortunate ways -- like getting hit by a bus at age 50. As you point out, that probability goes up with increasing age, but there's still no guarantees -- some people who retire at 65 with $2M in the bank will run out of money.


If you want all the gory details, see William Bernstein, the Intelligent Investor....it goes through every asset class and shows statistically why Modern Portfolio Theory works, the efficient frontier of investing.

And it will give you success rates (over the past 130 of market data) for any combination of assets, for any withdrawal period from 20 to 50 years.

If you want an equally good book, with only a lot of details, and a lot more readable, see his newer The FOur Pillars of INVesting. web site at www.efficientfrontier.com

Another good book is Roger GIbson's Asset Allocation, latest edition.

Scott Burns also discusses withdrawal rates on his web site at www.scottburns.com



Otherwise, visit the www.retireealyhomepage.com and start reading there!...tons of information. Everything about what you ask, including probabilities of success for withdrawal rates vs time for the WORST case in the past.



t

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Author: mtbogre Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39598 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 3/2/2004 12:42 PM
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So, I agree with Stein, you can't retire at 45 with only 2 million in the bank, it's just not enough. If you're 55 however, it might be. And if you're 60 it probably will be. So, I think the point he was trying to make is that although 2 million sounds like a lot of bucks, as you pointed out, it's lower middle class if you live in NY or SF and let's hope you don't plan on a lot of travel and entertainment. :-)

I have to disagree with you both. Currently I am 34 and if there were 2M in my investment accounts I would retire today. Of primary concern is this arbitrary requirement for $80,000/ year?

My wife and I (and our 3 children) live comfortably on slightly more than $50,000 right now and we invest the remaining portion of our current income. If we didn't have work related expenses we could get by with even less. When the children move out in a few years our requirements go down even more.

Perhaps if I retired I wouldn't be able to travel the country in a $150,000 rolling mini-mansion with satellite TV and matching quad runners in the back. We would be able to tour the country in a more modest vehicle. We would also be able to fly to Europe and tour Europe by bicycle. We would also be young enough to really enjoy it.

I'll take (relative) youth over luxury any day.

-- Dennis

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39630 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 3/3/2004 10:04 AM
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Of primary concern is this arbitrary requirement for $80,000/ year?

In my opinion also, this requirement seems a little high, but not as high as you think. According to my calculations, the effective tax rate on $80K is 14%, which would leave you with 68,800 after-tax. I am applying an ordinary income tax rate because most people will be retiring on their 401K proceeds, which are taxable as ordinary income. In addition, if you retire before you are eligible for Medicare, your medical insurance costs will probably be somewhere in the area of $1000/month. That's $12,000 a year, and most likely would not include dental, optical, co-payments, or prescription drugs. Even if you're eligible for Medicare, you have to pay a premium for it, and it also doesn't include most of the items mentioned above. In my retirement plan, I'm expecting to average $750/month (today's dollars) in medical expenses, even with Medicare (and I don't have any serious medical problems).

My wife and I (and our 3 children) live comfortably on slightly more than $50,000 right now...When the children move out in a few years our requirements go down even more.

After deducting the $12,000 medical premiums from the $68,800, one is left with $56,800--just a bit more than you're living on--suddenly the $80,000/year isn't quite as high as you originally thought. Keep in mind that this also doesn't include premiums for long-term care insurance, which one might need if you have $2 million to protect, nor the dental, optical, co-payments or prescription drug expenses mentioned above. I think the additional medical expenses would more than make up for any savings you'd have when your children move out.

Currently I am 34 and if there were 2M in my investment accounts I would retire today

At your age, the 2M would then have to last you about 60 years. To generate $50K PRE-tax, one would need just over 1M at a 4% rate of return (6% minus 2% inflation), and the 1M would be totally depleted in 40 years. If one wanted to generate $75K PRE-tax, the amount needed at the same rate of return and years of depletion would be $1.5M. In order for it to last 60 years, you'd need much more. I still stand by my opinion that you'd hardly be able to squeak by, and that's assuming that everything goes well.

Three Trinity University professors -- Philip Cooley, Carl Hubbard, and Daniel Walz -- examined this issue by looking at historical annual returns for stocks and bonds from 1926 through 1995. Not surprisingly, their study revealed that withdrawal periods longer than 15 years dramatically reduced the probability of success at withdrawal rates exceeding 5%. They also concluded that:
1. Younger retirees who anticipate longer payout periods should plan on lower withdrawal rates.
2. Owning bonds decreases the likelihood of going broke for lower to midlevel withdrawal rates, but most retirees would benefit with at least a 50% allocation to stocks.
3. Retirees who desire inflation-adjusted withdrawals must accept a substantially reduced withdrawal rate from the initial portfolio.
4. Withdrawing 4% or less from a stock-dominated portfolio is probably too conservative.
5. For payout periods of 15 years or less, a withdrawal rate of 8% to 9% from a stock-dominated portfolio appears sustainable.


2old


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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: 39634 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 3/3/2004 11:40 AM
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2old4bs:

{{{{Of primary concern is this arbitrary requirement for $80,000/ year?}}}}

"In my opinion also, this requirement seems a little high, but not as high as you think. According to my calculations, the effective tax rate on $80K is 14%, which would leave you with 68,800 after-tax. I am applying an ordinary income tax rate because most people will be retiring on their 401K proceeds, which are taxable as ordinary income."

That effective rate seems to high to me; how did you calculate it?

{{{{My wife and I (and our 3 children) live comfortably on slightly more than $50,000 right now...When the children move out in a few years our requirements go down even more.}}}}

"After deducting the $12,000 medical premiums from the $68,800, one is left with $56,800--just a bit more than you're living on--suddenly the $80,000/year isn't quite as high as you originally thought. Keep in mind that this also doesn't include premiums for long-term care insurance, which one might need if you have $2 million to protect, nor the dental, optical, co-payments or prescription drug expenses mentioned above."

{{{{Currently I am 34 and if there were 2M in my investment accounts I would retire today}}}}

"At your age, the 2M would then have to last you about 60 years. To generate $50K PRE-tax, one would need just over 1M at a 4% rate of return (6% minus 2% inflation), and the 1M would be totally depleted in 40 years. If one wanted to generate $75K PRE-tax, the amount needed at the same rate of return and years of depletion would be $1.5M."

I am not sure that I follow. All the "Safe Withdrawal Rate" (SWR) studies I have seen show the curve of the SWR going asymptotic somewhere near 3% (depending upon exactly which study you are reviewing) and in many instances the principal amount still gorws. Call it 2.5% to include a margin of safety.

"In order for it to last 60 years, you'd need much more. I still stand by my opinion that you'd hardly be able to squeak by, and that's assuming that everything goes well."</i?

50k/2.5% = $2M, so 75k would be $3M.

{{{{Three Trinity University professors -- Philip Cooley, Carl Hubbard, and Daniel Walz -- examined this issue by looking at historical annual returns for stocks and bonds from 1926 through 1995. Not surprisingly, their study revealed that withdrawal periods longer than 15 years dramatically reduced the probability of success at withdrawal rates exceeding 5%. They also concluded that:
1. Younger retirees who anticipate longer payout periods should plan on lower withdrawal rates.
2. Owning bonds decreases the likelihood of going broke for lower to midlevel withdrawal rates, but most retirees would benefit with at least a 50% allocation to stocks.
3. Retirees who desire inflation-adjusted withdrawals must accept a substantially reduced withdrawal rate from the initial portfolio.
4. Withdrawing 4% or less from a stock-dominated portfolio is probably too conservative.
5. For payout periods of 15 years or less, a withdrawal rate of 8% to 9% from a stock-dominated portfolio appears sustainable.}}}}

Have you ever investigated the Retire Early Home Page board on TMF? Or, even more importantly, intercst's actual Retire Early Home Page (link provided in the other board)? Lots of discussion about SWRs.

Regards, JAFO




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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39642 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 3/3/2004 1:16 PM
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That effective rate seems to high to me; how did you calculate it?

80000-68500 = 11500 * .28 = 3220 + 13295 = 16515

Got these numbers from the Federal 2004 Withholding Tax Tables - Annual, Single, 1. So, the rate's actually closer to 20%. $16515/$80000 = 20.64

50k/2.5% = $2M, so 75k would be $3M.

I used numbers from a Vanguard table. Here's the link to the Vanguard article dated 2/26/04 titled, "Why saving isn't enough" which included the table:

http://flagship3.vanguard.com/VGApp/hnw/web/corpcontent/vanguardviews/jsp/VanViewsNCArticlePublic.jsp?chunk=/freshness/News_and_Views/news_ALL_vanviews_02262004_ALL.html

I am not sure that I follow. All the "Safe Withdrawal Rate" (SWR) studies I have seen show the curve of the SWR going asymptotic somewhere near 3% (depending upon exactly which study you are reviewing) and in many instances the principal amount still gorws. Call it 2.5% to include a margin of safety.

Sounds OK to me, and pretty much in line with my quote from the professors study. But you said you'd retire at 34 on $2M--at 2.5% that would net you a PRE-tax of $50K, and you'd still have to absorb the medical premiums and expenses. How could you do that when you're now 'living comfortably' on $50K POST-tax without the medical expenses?

Have you ever investigated the Retire Early Home Page board on TMF? Or, even more importantly, intercst's actual Retire Early Home Page (link provided in the other board)? Lots of discussion about SWRs.

Yes, I have visited the Retire Early board. Unfortunately there's so much junk on it that's totally unrelated to retirement in any way, it makes it quite difficult to find anything that might be of real value there. For the most part I avoid that board, because I don't have the time to wade through all the OT posts, particularly the ones that aren't marked OT, but are. This board is much better, IMHO.

JAFO, all I'm really saying is that I think when planning for retirement it's best to estimate conservatively--better safe than sorry. I'm much closer to retirement age than you are. Perhaps some of the differences in our perspective is based on our age difference. I hate to pull the 'experience' card, but when you've lived through more recessions, more layoffs, more stock market disasters, etc., I think one can't help but become a tad more conservative in estimations. The people I know that I would consider 'moneysmart' who are retiring today (ages 60-66) have at least $1M in their portfolios, plus some paid-in-full real estate. I know one 49 year old who intends to retire within one year--she has almost $3M in her portfolio, plus the real estate. That's not to say there aren't plenty of folks I know retiring with MUCH LESS than that ($275K-$500K), but for the most part these are folks that I never considered 'moneysmart', and based on their past spending habits, I believe I can reasonably predict that, unless they die soon, they're going to be in trouble somewhere down the line.

Isn't it better to be safe than sorry?

2old



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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39647 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 3/3/2004 2:00 PM
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But you said you'd retire at 34 on $2M--at 2.5% that would net you a PRE-tax of $50K, and you'd still have to absorb the medical premiums and expenses. How could you do that when you're now 'living comfortably' on $50K POST-tax without the medical expenses?

Sorry JAFO, seems I got you confused with Dennis (I lost track of the italics)

2old



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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: 39654 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 3/3/2004 3:44 PM
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2old4bs:

JAFO: <<<<That effective rate seems to high to me; how did you calculate it?>>>>

"80000-68500 = 11500 * .28 = 3220 + 13295 = 16515

Got these numbers from the Federal 2004 Withholding Tax Tables - Annual, Single, 1. So, the rate's actually closer to 20%. $16515/$80000 = 20.64"


Ask the wrong question, get the wrong answer.

My apologies, I know how to calculate effective rate, I was wondering about your tax due calculation. I ran the numbers using 2003 rates:

2003 tax tables: 68,800 - 143,500; 14,010.00 + 28% >68,800 (Single)

http://fairmark.com/refrence/2003rate.htm

Single: 4750 Std Deduction, 3050 personal Exemption

http://fairmark.com/refrence/index.htm

Thus, 80,000 - (4750 + 3050) = 80,000 - 7,800 = 72,200

Tax would be, 14,010 + 28%(72,200 - 68,800) =
------------ 14,010 + 28 (3,400) =
------------ 14,010 + 952 = 14,962

Effective Rate 14,962/80,000 = 18.7%

But OP sid he was married, rerun as MFJ, and you get

2003 tax table: 56,800 - 114,650; 7,820.00 + 25% >56,800 (MFJ)

MFJ: 9500 std deduction, 3050 personal exemption (x2)

Thus, 80,000 - (9500 + 2[3050]) = 80,000 - (9500 + 6100) =
----- 80,000 - 15,600 = 64,400

Tax would be, 7,820 + 25%(64,400 - 56,800) =
------------ 7,820 + 25% (7,600) =
------------ 7,820 + 1,900 = 9,720

Effective Rate 9,720/80,000 = 12.2%

The OP was married, so you may wish to reconsider the numbers in your argument.

<<<<50k/2.5% = $2M, so 75k would be $3M.>>>>

"I used numbers from a Vanguard table. Here's the link to the Vanguard article dated 2/26/04 titled, "Why saving isn't enough" which included the table:

http://flagship3.vanguard.com/VGApp/hnw/web/corpcontent/vanguardviews/jsp/VanViewsNCArticlePublic.jsp?chunk=/freshness/News_and_Views/news_ALL_vanviews_02262004_ALL.html"


The link did not work for me.

<<<<I am not sure that I follow. All the "Safe Withdrawal Rate" (SWR) studies I have seen show the curve of the SWR going asymptotic somewhere near 3% (depending upon exactly which study you are reviewing) and in many instances the principal amount still gorws. Call it 2.5% to include a margin of safety.>>>>

"Sounds OK to me, and pretty much in line with my quote from the professors study."

OK

"But you said you'd retire at 34 on $2M--at 2.5% that would net you a PRE-tax of $50K, and you'd still have to absorb the medical premiums and expenses. How could you do that when you're now 'living comfortably' on $50K POST-tax without the medical expenses?"

That was not me; you have me confused with another poster.

<<<<Have you ever investigated the Retire Early Home Page board on TMF? Or, even more importantly, intercst's actual Retire Early Home Page (link provided in the other board)? Lots of discussion about SWRs.>>>>

"Yes, I have visited the Retire Early board. Unfortunately there's so much junk on it that's totally unrelated to retirement in any way, it makes it quite difficult to find anything that might be of real value there. For the most part I avoid that board, because I don't have the time to wade through all the OT posts, particularly the ones that aren't marked OT, but are. This board is much better, IMHO."

Two things. There is alot of meat in the earlier threads on that board; do not let the current postings hide that issue. Do not let the current postings (many from people who have been on that board for years) hide the good stuff. Consider reading old posts in threaded mode.

In addition, it does not sound like you have followed the link to the the intercst's actual REHP, where there is also alot of good stuff (and no discussion boards, IIRC).

"JAFO, all I'm really saying is that I think when planning for retirement it's best to estimate conservatively--better safe than sorry."

Estimate too conservatively and one never retires. While one does not want to be too aggressive, too conservative also comes at a price!

"I'm much closer to retirement age than you are."

I do not know your age, and you seem to have me confused with some 34-year old youngster, so I am not sure whether that statement is accurate.

"Perhaps some of the differences in our perspective is based on our age difference. I hate to pull the 'experience' card, but when you've lived through more recessions, more layoffs, more stock market disasters, etc., I think one can't help but become a tad more conservative in estimations."

Possibly?

"The people I know that I would consider 'moneysmart' who are retiring today (ages 60-66) have at least $1M in their portfolios, plus some paid-in-full real estate. I know one 49 year old who intends to retire within one year--she has almost $3M in her portfolio, plus the real estate. That's not to say there aren't plenty of folks I know retiring with MUCH LESS than that ($275K-$500K), but for the most part these are folks that I never considered 'moneysmart', and based on their past spending habits, I believe I can reasonably predict that, unless they die soon, they're going to be in trouble somewhere down the line."

Maybe. Controlling expenses and keeping them below income is crucial, as even Dickens noted years and years ago:

"Annual income £20, annual expenditure nineteen nineteen six [£19 19s 6d], result happiness. Annual income £20, annual expenditure twenty pounds ought and six [£20 0s 6d], result misery." Micawber in David Copperfield
http://www.claremont.org/projects/goldenstate/021117janiskee.html?FORMAT=print

You also make no mention of pensions, social security or other potential sources of income for those aged 60+ that you reference.

"Isn't it better to be safe than sorry?"

Truly safe would be to never retire. Is that really the position you want to argue?

Regards, JAFO





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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39663 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 3/3/2004 11:00 PM
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The OP was married, so you may wish to reconsider the numbers in your argument.

You are correct, I should have taken the married tax rates into account. But who knows how long these lower tax rates will remain in effect anyway?

In addition, it does not sound like you have followed the link to the the intercst's actual REHP, where there is also alot of good stuff (and no discussion boards, IIRC).

You're correct, I hadn't, but I now have bookmarked the first page of the board where that link appears, for future reference.

I do not know your age, and you seem to have me confused with some 34-year old youngster, so I am not sure whether that statement is accurate.

In my last post I apologized for confusing you with another poster, are you looking for something further, like an invitation to my daughter's wedding? ;-)

You also make no mention of pensions, social security or other potential sources of income for those aged 60+ that you reference.

The only other source of income of those I referenced is Social Security. The OP didn't say he had any other sources of income either.

Truly safe would be to never retire. Is that really the position you want to argue?

The position I was arguing to start with was that $2M might not be enough to retire on at the age of 45. Then OP responded that he could retire on $2M at 34, which I disagreed with, and gave some reasons why. My position was NOT that to be truly safe one should never retire.

Here's an article that supports my position:

http://moneycentral.msn.com/content/Retirementandwills/InvestYourSavings/P34685.asp

Actually, says Katz, "Retiring at 50 years old with $2 million is very risky, unless your expenses are very low, and you are really penurious."

Katz is overstating the case a bit. Retiring at 50 with $2 million set aside isn't very risky; it just might not be as smart, or as liberating, as it seems.

"If you retire at 50 with $2 million, that means you're not working for the last 15 years before Social Security starts paying," says Katz. Social Security benefits are calculated based on your 35 most productive years, income-wise. That can lead to several years of "0" included in the calculations for your benefits...

Then there's medical insurance. Most people get their insurance through work. If you're through working at 50 or 55 (before Medicare eligibility), you have to buy insurance on your own, for yourself, your spouse and perhaps for children who haven't yet headed off to college. And if you think medical insurance is expensive when you're 40, check out the prices when you're 60. "It's a huge cost," says Katz.


2old




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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: 39666 of 76384
Subject: Re: ScaryStuff on Long-term Care Date: 3/4/2004 9:36 AM
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2old4bs:

<<<I do not know your age, and you seem to have me confused with some 34-year old youngster, so I am not sure whether that statement is accurate.>>>

"In my last post I apologized for confusing you with another poster, are you looking for something further, like an invitation to my daughter's wedding? ;-)"

Sorry, I posted before reading the entire thread (including your subsequent post).

<<<Truly safe would be to never retire. Is that really the position you want to argue?>>>

"The position I was arguing to start with was that $2M might not be enough to retire on at the age of 45. Then OP responded that he could retire on $2M at 34, which I disagreed with, and gave some reasons why. My position was NOT that to be truly safe one should never retire."

It depends greatly upon your expenses; focus on only one side of the income/expense equation can never fully answer the question.

"Here's an article that supports my position:

http://moneycentral.msn.com/content/Retirementandwills/InvestYourSavings/P34685.asp

Katz is overstating the case a bit. Retiring at 50 with $2 million set aside isn't very risky; it just might not be as smart, or as liberating, as it seems."


Regards, JAFO



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