Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
No your math is wrong because you only look at the share price but the appreciation is all from the dividends.
Therefore your withdrawal calculation of 3.5% is wrong.
oh please ,you are clueless. down is down . do yourself a favor , you can look at that time frame and the results of spending down in firecalc . look at it ,learn and again enough trying to dispute what are just fact.
figuring in ALL DIVIDENDS and rebalancing there were failures for those retires in 1965 and 1966 by the end of their 30 year time frames.
here are the updated results from the trinity study so you dont even have to bother entering the data on your own.
"Now complete annual data is available through the end of 2009, giving us now the chance to look at 55 retirement periods of 30 years, as we can now consider retirement dates between 1926 and 1980. When we want to discuss a 30 year retirement duration, we still don't know what happens for retirees after 1980, because their story has not been finished. Of the 55 periods now available, there are still only 2 failures, 1965 and 1966. There hasn't been any failures since then. Now we have a success rate of 53/55 = 96.36% or 96%. "
The mathematical formula for an annuity with mortality and interest is
Sum tPx * v^t
You can use the 2008 vbt table for the mortality just google it
That's the math behind a basic annuity.
That is the present value of 1$ paid out discounted for interest and mortality. In other words you could pay out a dollar invested at the discounted interest rate on average to someone with that level of mortality.
That is the basic problem you are trying to solve when you try to spread out a lump sum over your years in retirement. You don't know how long you will live and this gives you an average cost of how far your savings will go.
If you include inflation divide v^t by f^t where f is the inflation rate
No one doubts the formula. Now finding an annuity to buy that pays out at 6%, that is the question.
thats why i said stop with the formula , there is no company that pays that.
vanguard's inflation adjusted annuity pays 3.2% at 62 for a couple with survivor benefits and they are one of the lowest cost.
a single male at 62 inflation adjusted is a 4% payout and thats even higher then the other companies i looked at.
non inflation adjusted is 6.2% for a 62 year old male and 5.3% for a couple.
according to moishe milevsky who is one of the worlds authorities on annuity stratagies in retirement planning his research shows the inflation adjusted ones are poor deals for what you get and demand way to much of a give up in payout to get.
the rates shown in the comparison are still todays rates.
That's what so called financial professionals say people need saved up.
I agree it is ridiculous it has no basis just like a lot of what they say. I spend about 30% of my gross income right now and I would end less if I were retired.
Do you think that is the norm for the majority of Americans? I live on approximately 30% of my gross too. I bring my lunch to work and wear everyday clothes. When I retire, I will save money on gas for my commute and stop funding my 401K. That is the most i can reasonably expect to save. But our situation does not apply to the majority of Americans. I would suspect most people spend everything they earn (maybe save 5-10% annually). After retirement they will save on commuting costs and no longer fund their 401K. What else might they cut out of their budget?
People still have to pay rent or property taxes, still have to pay utilities, still have to buy food and pay insurance. Health care costs are likely to rise, as are taxes and food and gas and...
So, for the majority of Americans who already spend 90-100% of their after tax income, it would be irresponsible to suggest they will suddenly reap a retirement windfall. Most would be lucky to get by on 80% of what they currently spend.
another less considered factor is fund fees. while the 4% rule is 96% true most of the time the fact is the studies dont include fund fees.
with a 50/50 mix the actual success rate drops from 96% to 84% with 1% fees and as low as 65% success rate with 2% fees. that can also increase the amount you need to save for a high success rate.
those that retire early and live long can have an added whammy. that is that 96% success rate drops to only 60% if you draw 40 years and include the fund fees of 1%.
thats barely better then a coin toss out of the gate .
an early retiree has to take into consideration that even if you dont live 40 years in retirement as you go beyond 30 years the numbers do change alot as the variables and unknowns become bigger..
the point you have to remember is the amount you need to save is not dependent on just paying your bills. its paying your bills at what level of cushion for the unknown and dealing with stress in your finances..
everyone talks like its just about meeting your expenses. the reality its a whole lot more.
its meeting the unkowns of major expenses, life expectancy , markets and interest rates and at what comfort level for things to go wrong and at what lifestyle and geographic location ...
nothing is ever a problem if you can throw money at it and it goes away. its up to you to decide what level of cushion you want in retirement so trying to apply your beliefs to others is a waste of time.
i doubt there are many who retired who said crap, i saved to much for retirement but i bet there are a whole lot of folks who wished they saved more.
we all know retirees who stress and cringe over every expense thats over and above what they guessed they would have . fearing something will fail or break throughout retirement is no way i would want to live.
my own goals are set pretty high and the fact is now that im retiring in 1-1/2 years or so im glad i set those goals as high as i did as its pretty scarey stopping 2 pay checks .
you can argue what percentage of your income you will need but your talking only about yourself and arguing what others need is just rediculous..
the numbers and studies are all there if you want to know statistically what your odds are with your plan based on how many times it would have failed in the past , its still up to you decide at what statistical level you want to roll the dice .
the higher amounts your told you need are only basing it on giving you the greatest odds on your side and for being able to continue that income stream without alterations as long as scenerios are not a whole lot worse then what we had over 55 -30 year retirement periods spanning many many decades.
you have alot of latitude to adjust your savings downward ,you just cut the cushion.
if there is a negative to these studies and calculators is they might keep someone from retiring because their worst case scenerio planning and the fact they figure you taking an inflation adjusted raise forever may have you over conservative in estimating your amount . the fact is dynamically adjusting your spending you really do have enough to retire earlier.
o course many retirees will not be committing to equities like the studies figure and so they will need more in savings
Last edited by mathjak107; 12-07-2012 at 04:05 AM..
many annuity companies are calling in the chips. hartford is offering some weak cash buy outs of some of their annuity products that have certain gurantees .
prudential locked down 14 or so guaranteed annuity plans and wont let anyone add new money even if they didnt fully fund their plan as they thought they would.
they arent accepting new subscribers either.
most were of the gwib type, guarantted withdrawal income benefit.
milevsky called it when he said there is no way the annuity compnies could offer the gurantees they did in the gwib type planes.
If you sit down and do the math, it is quite scary. To retire at age 60-65, you'll need $1-1.5 million of assets. Lets say someone retires at 65 and has $1,000,000 and dies at 88, that means they'll have $43k a year to live off. It should be enough for the basics but one is hardly living lavishly.
The baby boom generation after WWII got lucky in terms of jobs, opportunites and real estate but this coming generation will not have as much going for them. Plus a lot of baby boomers probably got hit with the markets and real estate meltdowns. Some people can surely save the money to retire on but most cannot as the cost of everything in life has gone up. Consider this, you would need to tuck away $1500 / month at 3.5% interest to have a $1 million in 30 years. Many people are now retiring in places like Panama and Thailand because the cost of living is so much lower and they gear services toward english speakers.
My question how do you guys plan on funding retirement? Pensions, savings/investment, selling your home, etc? Do you think you are on track or do you never think about it? Are you worried or is it just me?
What constitutes a reasonable standard of living vs lavishly is all relative. If you have food, clothing, housing, and healthcare you at least meet your needs, which in some cases can be done on under $20k per year (but this means, no car, no grandkids-at-home, no vacations, limited entertainment, tiny living space (i.e. shared housing), no (or limited) dining out, etc.)
You must define what you consider 'basic' vs 'lavish' and then we can have a meaningful discussion.
as well as "financial stress free".... there is way to much stress living hand to mouth when your working . it has to be even worse when your retired i would imagine.
having more money available gives you more choices in life . i learned early on that having money for choices is the most important reason to have some extra dough available.
i always say the best thing about having a bit extra then you need is it gives you choices. i grew up in the woodside housing project in nyc. we really had nothing as a family.
well my best friend got in legal trouble and his family was just over the limit for legal aid. he couldnt afford a lawyer and had no choice but to plead guilty to something he didnt do.
i knew he didnt do it because him and i chickened out and didnt go with the group.
i learned early on you need money to have choices and i wanted choices in my life.
a relative mortgaged the house and so he pleaded not guilty and was found innocent.
Last edited by mathjak107; 12-07-2012 at 04:21 PM..
If anyone just sits with a calculator and ask themselves how much they need to retire on, it's scary. I would say one needs at $1-1.5 million in cash/assets to retire at age 60-65 and live another 20-25 years. $1 million dollars over 25 years is $40k a year so we are not even talking about living lavishly here. And I'm assuming we cannot rely on the government here. Whatever benefits we get will be insignificant.
Sure some people can save this money but how many really can, especially the way the markets and the world has turned. Some people even retire abroad in Panama and Thailand because they can't afford it. My question is that are you saving for retirement and how do you plan on funding it?
I am saving for something, I don't yet know what. I'm sure life will throw something at me one day and answer that question for me.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
