How much do people have saved for retirement?
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Anonymous
Can someone explain why it’s 25 times your current hhi? We currently make 350k per year. We have a big house payment, daycare, and lots of other expenses that we definitely don’t plan on having in retirement. There is no way we need that same hhi when we are retired assuming no house payment. Shouldn’t it really be 25 times tour expected yearly expenses, not 25 times your current hhi? |
Anonymous
I have several friends who are currently in their early 60s and won't have that much money. Their plan is to work until they physically can't any longer. Not destitute, but not enjoying being retired either. |
Anonymous
25 times your anticipated expenses, not your current HHI. From Forbes: "The 25x Rule is a way to estimate how much money you need to save for retirement. It works by estimating the annual retirement income you expect to provide from your own savings and multiplying that number by 25. For example, let’s assume you’ve settled on a retirement budget of $75,000 a year. In this scenario, Social Security, pensions, a part-time job or other sources of income cover $25,000 of this amount, so you must cover the remaining $50,000 with your investments. According to the 25x Rule, you would need to save at least $1.25 million to be able to safely withdraw $50,000 of income in your first year of retirement. And keep in mind that depending on the type of account the money is withdrawn from, you may owe income or capital gains tax. You’re able to safely withdraw this amount without depleting your portfolio early thanks to another personal finance guideline, the 4% Rule." |
Anonymous
Ha ha, no. It's not your income that matters, it's your spend rate. When I retired at 53 I was making 800k a year. By your calculation I would have needed $20 million! I retired with 1/5 of that and my lifestyle hasn't changed at all. |
Anonymous
What's up with all the scare tactics? If your taxes and insurance in Fairfax County were 20k you must have been living in a friggin mansion. My DC rowhome is appraised at $1.6 million and our taxes are 12k a year. Insurance isn't even $1000. Beyond that, "going out to dinner" is nothing when you're not paying for kids. |
Anonymous
| PP here. I stand corrected. Taxes in Fairfax ARE that high, and start getting there real quick even without a mansion. Another reason not to live there, I guess. |
Anonymous
Bogleheads is much more realistic than here, largely because people post from across the country not just HCOL areas like the DMV. I'd say the bulk of posters I see on BH are aiming for $1 to $1.5 million |
Anonymous
| I have lots of friends that have retired. I am getting close. The middle class friends have seen their expenses drop assuming house paid for. Interestingly my UMC friends (sample of 3) all have had expenses stay the same or even increase -- also with house paid off. Why? They say spending more on travel than planned (1) Regularly visiting kids who do not live in this area, and (2) taking more vacation type trips. Also they say they spend a lot on kids when visiting. Not for everyone but that is their experience. |
Anonymous
Bingo -- this is what I was thinking. With kids in school we generally take 1 major vacation per year (summer), and sometimes some smaller trip during winter break. If we were completely free, it would be awesome to take a trips 4-6 times per year. And since you don't need to "conserve vacation days" from work, you could actually do longer trips, where you could explore more. So I would think that travel expenses could definitely be higher than current. |
Anonymous
Except when you do longer trips they tend to cost less on a daily basis. Also, when you're not constrained by time, dates, and schedules you get take trip around the very high season and save money and have a more enjoyable time without the crowds. That's what we've done in (early) retirement, taking month-long trips to places like Uruguay, Vietnam, Costa Rica, and Europe. And, believe me, it's still cheaper than when we were supporting our kids. |
Anonymous
Yes. We are pretty UMC, but with MC parents. They are planning on retiring soonish, and as far as I can tell, mostly will rely on social security. They have some other savings and a paid off house, but I can't imagine they have anywhere near $1M. They told me "you know, we won't be able to visit as often when we are retired" because their budget will be more limited. But like, they stay with me when they visit, so it really is just plane tickets, so I was pretty surprised their retirement budget doesn't include enough for that. It seems pretty odd to me, but I think they are just pretty ready to retire. We can't increase our visits to them significantly either, because we still only have so much vacation time. |
Anonymous
Why? Other than 5 years of house payments in retirement they seem more than fine. Seriously. |
Anonymous
Youre right. PP mis-stated things. 25x expected expenses. |
Anonymous
+2. I don't expect expenses to decrease at all for several reasons: 1. health insurance costs until medicare kicks in 2. more "entertainment" costs such as traveling/hobbies 3. vacation as a family including kids/grandkids when they have families of their own. I also think that we may spend more than we currently do. Glad someone else spoke up. |
Anonymous
True. I have a borderline teardown worth about $900K and our taxes and insurance run $15K a year. |