UnThreaded | Threaded | Whole Thread (51) | Ignore Thread Prev | Next
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: of 76421  
Subject: Re: Asset Allocation Date: 4/6/2006 8:20 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
ziggy29:

<<<<Amount Needed to Retire = 25*(Necessary Retirement Income - Other Sources of Income), where

Necessary Retirment Income = annual expenses (including income taxes) plus savings for capital expenses

Other Retirement Income = non-portfolio expected income, like any defined benefit pensions, social security (subject to whatever assumptions about longevity), annuities, etc.

25 = reciprocal of 4%; if you believe that the SWR will be lower, than the multipler would be higher, but would still be the reciprocal of your expected SWR>>>

"Closer, but this still assumes that all your other sources of income keep pace with inflation."

Sort of. If you want to be conservative jsut assume zero other income and use Amount Needed to Retire = N*(Necessary Retirement Income), where

Necessary Retirment Income = annual expenses (including income taxes) plus savings for capital expenses,

N = reciprocal of your expected SWR,

and other income is gravy, to be saved and invested>>>

"Social Security does (in theory, anyway), but most non-government pensions don't. So in that case, your personal investments have to provide an income stream that makes up for the lack of inflation protection in most private defined-benefit plans."

Agreed. Annuities, however, can be plain or inflation adjusted. Persoally, I view the capital expense category as a cover for that inflation adjustment issue, too. But it is easier to calculate if you assume a lifespan and an expected inflation rate - and figure how much additional income you need to set aside each year in the early years to cover the later years.

This also assumes that inflation will be evenly felt by all person and not felt more directly by the retired in the personal categories in which their consumption outpaces the standard used in calculating the CPI. Given the rising insurance and medical costs, including prescription drugs, the personal inflation rate for the retired could be significantly higher than the general CPI rate.

"#29 (who is actually vested for a puny pension with a previous employer, to the tune of $250 a month at age 55 or $620 a month at age 65, which will buy one gallon of gas by then)"

Sounds about like the pension in which I am vested. I generally tend to ignore it in my planning and figure it will be a slush fund that covers errors and inflation matters.

Regards, JAFO

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (51) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement