We run firecalc and only input the higher of our 2 projected SS payments.

Anonymous wrote:

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

All these benchmarks are anecdotal and you can't rely on them for planning. You need to do the math for your situation

Anonymous wrote:How does SS income factor in? Let’s say both spouses can expect $3000 or so per month based in the calculator on the SS website. That’s 70,000 per year right there. What am I missing? I agree with some posters who say that the formulas don’t apply for people with a higher HHI. Right now, 80% of my expenses are child related: private school, lessons, tutors, clothes, hobbies, and more than 50% of vacation expenses as I have to travel at peak season. So I really don’t think that the models apply. In terms of healthcare - I already pay for private insurance and max out all co pays etc. So what am I missing? Honestly, if I need institutional care when I am old, I’ll get it in my home country and not the US. Can’t afford quality care here (and unwilling to spend all my hard earned savings on that).

You have to calculate your wage replacement ratio. This is your current gross income minus things that will go away in retirement, such as savings and payroll taxes. The big question with the items you mention is whether those will become "savings" or "expenses" after the kids leave the nest. If they become savings, then you can delete them from your WRR. But if they become expenses, they add to your cost of living and have to be considered in your WRR.

WRRs are different for each person based on how much they save and how much they spend. For one person, an 85% WRR could be normal, while 55% might be a good WRR for someone who has a low cost of living and saves a lot.

You can remove SS from your WRR to determine how much you need from investments, but be careful. Supposedly, Social Security is going to change starting in 2034... so the expected benefit might not be accurate.

Re: Health insurance... don't forget about IRMAA... extra Medicare premium based on your income in retirement.

But the method I mention in my previous post of how to calculate retirement needs works for all income levels.

Greg Caramanica, CFP

Anonymous wrote:How does SS income factor in? Let’s say both spouses can expect $3000 or so per month based in the calculator on the SS website. That’s 70,000 per year right there. What am I missing? I agree with some posters who say that the formulas don’t apply for people with a higher HHI. Right now, 80% of my expenses are child related: private school, lessons, tutors, clothes, hobbies, and more than 50% of vacation expenses as I have to travel at peak season. So I really don’t think that the models apply. In terms of healthcare - I already pay for private insurance and max out all co pays etc. So what am I missing? Honestly, if I need institutional care when I am old, I’ll get it in my home country and not the US. Can’t afford quality care here (and unwilling to spend all my hard earned savings on that).

Yes, but remember that SS comes in later in life for max benefit. Structure those withdrawals such that spouse with the highest benefit takes it at 70 with the other taking it whenever it is needed. In this scenario, Spouse 1 will start getting 36K at 67 and spouse 2 36K at 70. You'll have to account for the 72K cashflow before 67 and 36K cashflow between that time and when spouse 2 hits 70.

Also, if you plan your annual spend in retirement based on your current expense level, you'd be able to better handle surprises. Of course, remove large items like private school tuition, lessons and tutors. The rest will just morph into something else.

We have over saved based on the calculations. We are currently 58 and 62. We have about 30x our post tax spend rate in IRAs and 401ks. Plus a paid off house and a hefty emergency fund. However, the cost of healthcare before we hit 65 is daunting and would increase our spend rate too much. So, no retirement for now. I was hopeful a few years ago when they talked about a buy into Medicare at age 60. That would change the calculations.

Anonymous wrote:An advisor is not going to tell you this either..

A good rule of thumb (assuming you are retiring at 65) is to have 25X your annual spend (the year you will retire) in savings (or 4%). The assumption is that it will last you at least another 25 years even if your net worth grew just enough to keep up with inflation.

This will automatically take care of the reduced spend associated with a LCOL area.

If you have 25x your current spend rate, you will have more than enough because people also get Social Security.

How does SS income factor in? Let’s say both spouses can expect $3000 or so per month based in the calculator on the SS website. That’s 70,000 per year right there. What am I missing? I agree with some posters who say that the formulas don’t apply for people with a higher HHI. Right now, 80% of my expenses are child related: private school, lessons, tutors, clothes, hobbies, and more than 50% of vacation expenses as I have to travel at peak season. So I really don’t think that the models apply. In terms of healthcare - I already pay for private insurance and max out all co pays etc. So what am I missing? Honestly, if I need institutional care when I am old, I’ll get it in my home country and not the US. Can’t afford quality care here (and unwilling to spend all my hard earned savings on that).

Anonymous wrote:4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

4% takes care of the worst historical periods. Go lower if you want but saying 3% is “much safer” is just silly. Only if the future is much worse than any time in the past.

Anonymous wrote:An advisor is not going to tell you this either..

An advisor absolutely will tell you whether you are on track!

You need to make sure to go to an RIA (financial and investment advice) that has a CFP, not a Broker-Dealer (investment advice). But you said you don't want to hire an advisor, so here is how to do it yourself:

Purchase "Kaplan Schweser Review for the CFP Exam, Understanding Your Financial Calculator" and navigate to the section on Retirement Needs Analysis (In the 4th edition, this is page 90). Follow the instructions to calculate your retirement needs. The general approach is:

"
1. Determine the amount of annual income needed during retirement in today's dollars.
2. Determine the amount of annual income needed in the first period of retirement by inflating the amount calculated in Step 1 by the expected inflation rate.
3. Determine the amount of funds that must be accumulated at retirement. This is done by finding the Present Value (PV) of an annuity (annuity due) of the amount calculated in Step 2 using an inflation-adjusted discount rate. The term of the annuity will be determined by the number of years from retirement to life expectancy.
4. Determine the annual amount of savings required to accumulate the necessary funds for retirement.
"

This is how we (advisors) calculate whether you are on track. There are a few assumptions embedded in this that require some discussion of family history, health, cost of living, and plans for retirement (location and standard of living) that advisors will work through with you.

Greg Caramanica, CFP

Anonymous wrote:I mean, this is really common sense. If it makes you feel better to spend thousands on a financial advisor, go ahead. B

My financial advisor is $500 per year and she is worth her weight in gold.

I mean, this is really common sense. If it makes you feel better to spend thousands on a financial advisor, go ahead. B

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Apparently we need $11 million to retire haha! Not going to happen. We’ve saved since we were first working but this area is $$ and we paid for our first mortgage while paying off student loans and paying for daycare.

You need over $500k a year to retire? ($11,000,000x .04= $440,000 then add low $60k estimate for Social Security)

I was using the calculation someone mentioned above: 16x HHI

We’re still paying pff our mortgage and have two kids in $$ colleges so we def spend more than $500k now. Hope to lower that by retirement but

Wow, that is quite a bit to spend each year on an income of $690,000 - even with a mortgage and two kids in college.

Our income is closer to 900k. I used 700k because I’m not sure the $900k will last

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Apparently we need $11 million to retire haha! Not going to happen. We’ve saved since we were first working but this area is $$ and we paid for our first mortgage while paying off student loans and paying for daycare.

You need over $500k a year to retire? ($11,000,000x .04= $440,000 then add low $60k estimate for Social Security)

I was using the calculation someone mentioned above: 16x HHI

We’re still paying pff our mortgage and have two kids in $$ colleges so we def spend more than $500k now. Hope to lower that by retirement but

Wow, that is quite a bit to spend each year on an income of $690,000 - even with a mortgage and two kids in college.

4% withdrawal rate is pushing it. US stock valuations are currently high and bond yields are projected to be lower (who knows?). 3% is a much safer bet. Maybe an argument could be made for slightly higher withdrawal rates like 3.5% if you increase international stocks and decreasing bond allocation, but again nobody knows.

Anonymous wrote:

Anonymous wrote:Apparently we need $11 million to retire haha! Not going to happen. We’ve saved since we were first working but this area is $$ and we paid for our first mortgage while paying off student loans and paying for daycare.

You need over $500k a year to retire? ($11,000,000x .04= $440,000 then add low $60k estimate for Social Security)

I was using the calculation someone mentioned above: 16x HHI

We’re still paying pff our mortgage and have two kids in $$ colleges so we def spend more than $500k now. Hope to lower that by retirement but