JHZR2
Staff member
Originally Posted By: dparm
It really depends on what you want your standard of living to be. Plus you have to remember the value of said money in the future. $1M today is not the same as $1M in 40 years, or 40 years ago.
Do a simple budget and figure out what sort of lifestyle you want to live.
This.
Someone living in a very low cost of living area in a meager home has a far different cost than someone living in a pricier area.
My grandparents have always been frugal, careful with money, etc., but now have a $15k or so property tax bill. They love and want to stay in their home - nothing wrong with that. But it certainly changes the kind of money needed.
Because hopefully youre living off savings favorably taxed, let's say youre in the 15% bracket versus roughly 30%. That's a savings. But then what? healthcare? Taxes? Inflation? Something to keep you busy?
Lots to consider. Based upon how things look right now, figure this:
1% return on cash, 3% dividend on stocks.
Figure what your net salary is, multiply it by 1.15. That is your base required income.
Figure your retirement age, and assume a good death age (say 30 years if you retire at 65, or be more conservative and say 105!). Calculate the number of years
Say inflation will run 4% going forward. Then your last year's required income is LY=base(1.04)^years
Personally, Id then shoot for getting enough money so that your income from the money would provide that LY valuation your first year of retirement.
This is just me thinking and talking out loud on how I try to do it. There are far more complex formulas assuming draw down of principal, etc.
But in my example, let's say someone takes home 100k their last year before retuirement, at 65.
$100k*1.15=115k
Retire 65, die 95. 30 years
Last year income = 115*(1.04)^30 = 372k
So that means that a target, no-drawdown retirement nest egg would need to be about $10M with 3% dividend payouts to be safe.
Now this may be impractical, but this style analysis gives a great target to shoot for.
Of course if you were to draw down, the amount required would be far lower.
But unfortunately given how things look, being on the safe side is the best option.
Remember also that likely some of your money will be paid by social security.
Im sure Ill get flamed for my calculation, but its how I shoot for a goal. If I dont get there, Ill still be sure of a comfortable retirement.
It really depends on what you want your standard of living to be. Plus you have to remember the value of said money in the future. $1M today is not the same as $1M in 40 years, or 40 years ago.
Do a simple budget and figure out what sort of lifestyle you want to live.
This.
Someone living in a very low cost of living area in a meager home has a far different cost than someone living in a pricier area.
My grandparents have always been frugal, careful with money, etc., but now have a $15k or so property tax bill. They love and want to stay in their home - nothing wrong with that. But it certainly changes the kind of money needed.
Because hopefully youre living off savings favorably taxed, let's say youre in the 15% bracket versus roughly 30%. That's a savings. But then what? healthcare? Taxes? Inflation? Something to keep you busy?
Lots to consider. Based upon how things look right now, figure this:
1% return on cash, 3% dividend on stocks.
Figure what your net salary is, multiply it by 1.15. That is your base required income.
Figure your retirement age, and assume a good death age (say 30 years if you retire at 65, or be more conservative and say 105!). Calculate the number of years
Say inflation will run 4% going forward. Then your last year's required income is LY=base(1.04)^years
Personally, Id then shoot for getting enough money so that your income from the money would provide that LY valuation your first year of retirement.
This is just me thinking and talking out loud on how I try to do it. There are far more complex formulas assuming draw down of principal, etc.
But in my example, let's say someone takes home 100k their last year before retuirement, at 65.
$100k*1.15=115k
Retire 65, die 95. 30 years
Last year income = 115*(1.04)^30 = 372k
So that means that a target, no-drawdown retirement nest egg would need to be about $10M with 3% dividend payouts to be safe.
Now this may be impractical, but this style analysis gives a great target to shoot for.
Of course if you were to draw down, the amount required would be far lower.
But unfortunately given how things look, being on the safe side is the best option.
Remember also that likely some of your money will be paid by social security.
Im sure Ill get flamed for my calculation, but its how I shoot for a goal. If I dont get there, Ill still be sure of a comfortable retirement.
