Saving for retirement

divits · Mar 8, 2019

Part 2:

So now you've gotten to age 65 and done all the right things and resisted the urge to use the money you were putting away for your retirement on something else that provided some short term material benefit, like a BMW, and not the long term security that saving does. Bravo! Now how do you go about spending your savings so that it will last until your death?

There are a lot of different ideas of what the right way to spend your retirement money is and like most things they are seldom a one size fits all. But to get an idea of how long your money can last we'll use a simple savings withdrawal calculator.

Savings Withdrawal Calculator

First, you have to assume how long you're going to live. For our purposes I'm going to go with what the average life expectancy is for a man in the US after he reaches the age of 65. Currently that is approximately 20 years. So after playing around with the savings withdrawal calculator using a conservative return on your invested money at 4%, it appears that you can generally withdraw $6000/month for 20 years until your 85th birthday when you drop dead.

Of course there are lots of different things that can and will affect how you spend your money in retirement. And there are important things to be concerned about as you reach the end of your life like long term care. But those subjects can be covered in another thread. But I just wanted to show that by being a good and consistent saver you will be able to actually live off of more money in your retirement years ($72,000/yr) than you actually did while you were working ($59,000/yr). And none of this takes into account Social Security.

Pablos Tunnel · Mar 9, 2019

Zambo said:
Don't forget real estate. People often ask me how I can afford to live in Kali. The answer is that my house has been appreciating on average $3500 per month since I bought it at the bottom of the market 7 years ago. Yes, there will be swings in the market but over time if you buy in a desirable place the value is as guaranteed to go up as much as nearly any investment. Just one more way to accumulate the assets you need to retire down the road. Throwing money away on rent just makes it harder down the road.

Yep yep yep. Location is key. But what are the carrying costs out there?

Concrete Helmet · Mar 9, 2019

I love using other peoples money to pay for my equity. Real estate has been my only saving grace. Of course dealing with tenants is sometimes a hassle(fixing to serve eviction on one this week).
Although I've never lived paycheck to paycheck I've always been afraid to "tie up" what savings I've had in the past with risk involved so I tend to stick to very conservative investments(CD's, Roth and traditional IRA). Three years ago we started an employee profit sharing program and since I'm technically an employee I take a pretty nice slice annually and the program has been returning nicely.

At 54 though I have some ground to make up and wish I had been a little more focused and driven financially over the last couple of decades. I really could have done without a couple of those boats I bought as well spending ridiculous lumps of cash on jewelry and paying off tens of thousands in debt for someone who is no longer part of my life….

All that said I would not consider myself someone who is any kind of expert as looking back I see way too many fish that slipped right through my hand BUT I did do a couple things right so I would advise these things that helped me survive tough times and build toward retirement.

Buy real estate as young as possible, even if the market is a little high....Paying rent only makes other people money and takes away a tax write off.

Start with a small affordable house and tell yourself that it's a starting point not where you will spend the rest of your life. When you decide to upgrade KEEP the first house and rent it out especially if local inventory is tight....if the market is down rent it until it turns around at least.

Put something ANYTHING somewhere will you won't be able to touch it...even $20 is a start....I'm getting up from the table right now so I can kick myself hard in the ass :cry2:

.

If married don't buy into the logic that you have to start popping out kids right away...The little bastid's are expensive :lol:

..Save/invest in yourself so that you may take better care of kids when you do have them.....private schools, college savings and such will take up some of your retirement funds so it's better to already be on course to retirement/financial stability.

If your jobs allows it schedule wise take a second job....being occupied gives you less time to think and will burn off some of that youthful energy which sometimes steers us into "boredom based" buys. Yes, I'm the dumbass that has went to a dealership and bought a car/truck because my fiance at the time and I were bored....she ended up with the car and I was out another 30K....Don't make large purchases with someone you're not married to....They may give up on you but they don't like giving up the 30K SUV(15 years ago) or the 25-30K diamond ring and assorted trinkets that you paid cold hard cash for. :banghead:

Don't buy them big fake titties either...someone else most likely will be playing with them down the road.

Watch your hobbies and try and choose ones that offer fulfillment but don't sneak up to you when your credit card bill comes. Playing golf occasionally or going fishing every now and then won't brake you but be careful. 10 or so years back I fished(saltwater flats)twice a week. When I figured the cost per trip it's $100 per including gas, tackle, food and ice. That's $800 a month....I was making around 45-50K....
These are just a few of my does and don'ts and hopefully if any youngsters are reading this it will help them make good choices.

Zambo · Mar 9, 2019

Pablos Tunnel said:
Yep yep yep. Location is key. But what are the carrying costs out there?

Principle, Interest, Taxes and Insurance is under 2500 per month. Basically I'm making 1000 per month on the place. Of course I have to pay a gardener, utilities, etc like everyone else but you get the idea. At the end of the day, the idea that its too expensive to live here doesn't really hold up if you set things up correctly.

78 · Mar 9, 2019

williston_gator said:
My company recently got bought out. It switched us from Fidelity to Vanguard for our 401ks. Not sure wtf Fidelity was doing but it jumped $4k since the switch in January.

Fidelity offers the different investment buckets, the 401(k) participant chooses which buckets. Fees do make a difference and passive index funds are cheaper than actively managed ones. But your choice of which buckets to invest in makes the biggest difference.

Pablos Tunnel · Mar 9, 2019

Zambo said:
Principle, Interest, Taxes and Insurance is under 2500 per month. Basically I'm making 1000 per month on the place. Of course I have to pay a gardener, utilities, etc like everyone else but you get the idea. At the end of the day, the idea that its too expensive to live here doesn't really hold up if you set things up correctly.

What are properties selling for per sq ft where you are?

Zambo · Mar 9, 2019

Concrete Helmet said:
I love using other peoples money to pay for my equity. Real estate has been my only saving grace. Of course dealing with tenants is sometimes a hassle(fixing to serve eviction on one this week).
Although I've never lived paycheck to paycheck I've always been afraid to "tie up" what savings I've had in the past with risk involved so I tend to stick to very conservative investments(CD's, Roth and traditional IRA). Three years ago we started an employee profit sharing program and since I'm technically an employee I take a pretty nice slice annually and the program has been returning nicely.

At 54 though I have some ground to make up and wish I had been a little more focused and driven financially over the last couple of decades. I really could have done without a couple of those boats I bought as well spending ridiculous lumps of cash on jewelry and paying off tens of thousands in debt for someone who is no longer part of my life….

All that said I would not consider myself someone who is any kind of expert as looking back I see way too many fish that slipped right through my hand BUT I did do a couple things right so I would advise these things that helped me survive tough times and build toward retirement.

Buy real estate as young as possible, even if the market is a little high....Paying rent only makes other people money and takes away a tax write off.

Start with a small affordable house and tell yourself that it's a starting point not where you will spend the rest of your life. When you decide to upgrade KEEP the first house and rent it out especially if local inventory is tight....if the market is down rent it until it turns around at least.

Put something ANYTHING somewhere will you won't be able to touch it...even $20 is a start....I'm getting up from the table right now so I can kick myself hard in the ass .

If married don't buy into the logic that you have to start popping out kids right away...The little bastid's are expensive ..Save/invest in yourself so that you may take better care of kids when you do have them.....private schools, college savings and such will take up some of your retirement funds so it's better to already be on course to retirement/financial stability.

If your jobs allows it schedule wise take a second job....being occupied gives you less time to think and will burn off some of that youthful energy which sometimes steers us into "boredom based" buys. Yes, I'm the dumbass that has went to a dealership and bought a car/truck because my fiance at the time and I were bored....she ended up with the car and I was out another 30K....Don't make large purchases with someone you're not married to....They may give up on you but they don't like giving up the 30K SUV(15 years ago) or the 25-30K diamond ring and assorted trinkets that you paid cold hard cash for. Don't buy them big fake titties either...someone else most likely will be playing with them down the road.

Watch your hobbies and try and choose ones that offer fulfillment but don't sneak up to you when your credit card bill comes. Playing golf occasionally or going fishing every now and then won't brake you but be careful. 10 or so years back I fished(saltwater flats)twice a week. When I figured the cost per trip it's $100 per including gas, tackle, food and ice. That's $800 a month....I was making around 45-50K....
These are just a few of my does and don'ts and hopefully if any youngsters are reading this it will help them make good choices.

There are ways to play that don't cost so much money. For instance, instead of buying a boat, buy a classic car instead. It will be worth more money every year unlike the boat.

Zambo · Mar 9, 2019

Pablos Tunnel said:
What are properties selling for per sq ft where you are?

Varies greatly. Our little house near downtown San Diego was 535/sqft when we sold it (in one day on the market) back in 2015. Its now about 650/sqft estimate

Bought current house at about 200/sqft. Estimate about 340/sqft right now. Its 30 minutes from downtown.

BostonGator84 · Mar 9, 2019

Anyone still have a pension? I work in pension consulting so I see them every day, but I know on the whole they are becoming less and less common.

ChiefGator · Mar 9, 2019

divits said:
Part 2:

So now you've gotten to age 65 and done all the right things and resisted the urge to use the money you were putting away for your retirement on something else that provided some short term material benefit, like a BMW, and not the long term security that saving does. Bravo! Now how do you go about spending your savings so that it will last until your death?

There are a lot of different ideas of what the right way to spend your retirement money is and like most things they are seldom a one size fits all. But to get an idea of how long your money can last we'll use a simple savings withdrawal calculator.

Savings Withdrawal Calculator

First, you have to assume how long you're going to live. For our purposes I'm going to go with what the average life expectancy is for a man in the US after he reaches the age of 65. Currently that is approximately 20 years. So after playing around with the savings withdrawal calculator using a conservative return on your invested money at 4%, it appears that you can generally withdraw $6000/month for 20 years until your 85th birthday when you drop dead.

Of course there are lots of different things that can and will affect how you spend your money in retirement. And there are important things to be concerned about as you reach the end of your life like long term care. But those subjects can be covered in another thread. But I just wanted to show that by being a good and consistent saver you will be able to actually live off of more money in your retirement years ($72,000/yr) than you actually did while you were working ($59,000/yr). And none of this takes into account Social Security.

It is very simple, yet difficult. Spend less than your cash income and then your investments will last for your entire life.

If you don't make a lot of money qualified dividends pay no federal income tax, so they are great investments for retired people.

Pablos Tunnel · Mar 9, 2019

Zambo said:
Varies greatly. Our little house near downtown San Diego was 535/sqft when we sold it (in one day on the market) back in 2015. Its now about 650/sqft estimate

Bought current house at about 200/sqft. Estimate about 340/sqft right now. Its 30 minutes from downtown.

That is an insane bubble. Is there no new housing unit inventory?

Pablos Tunnel · Mar 9, 2019

BostonGator84 said:
Anyone still have a pension? I work in pension consulting so I see them every day, but I know on the whole they are becoming less and less common.

Yes sir! Can go out at 55 early or take full benefits at 65.

Zambo · Mar 9, 2019

My UPS driver tells me their rule is a combination of 80 years. Age plus time on the job. So if you're 55 and you've worked there 25 years you can retire with a pension. Something like 75% of their average pay. If you work more years it goes up a little bit every year.

Zambo · Mar 9, 2019

Pablos Tunnel said:
That is an insane bubble. Is there no new housing unit inventory?

Yeah, new housing is popping up everywhere. But there isn't any new land. That's the thing with real estate, nobody is building more land. It is the unyielding side of the supply/demand equation.

Pablos Tunnel · Mar 9, 2019

Zambo said:
Yeah, new housing is popping up everywhere. But there isn't any new land. That's the thing with real estate, nobody is building more land. It is the unyielding side of the supply/demand equation.

And we keep importing and making more people.

Zambo · Mar 9, 2019

Pablos Tunnel said:
And we keep importing and making more people.

Yes, I know we are getting off track here but any environment can only sustain so many animals. Whether is fish in a lake or deer in a forest or people on a continent. The limiting dynamic is always the same. Death to the weak.

Enjoy :lol:

Pablos Tunnel · Mar 9, 2019

Zambo said:
Yes, I know we are getting off track here but any environment can only sustain so many animals. Whether is fish in a lake or deer in a forest or people on a continent. The limiting dynamic is always the same. Death to the weak.

Enjoy

Well sell and get out before the collapse.
Time to watch bball whoop Kentucky!

Gator By Marriage · Mar 9, 2019

bradgator2 said:
Yeah, I've always loved the Roth. I actually consider our Roth to be our true emergency fund because you can always pull out your contributions at any time with no penalty or tax (since it is post tax dollars). Currently, if you are married, you can contribute $6000 per person, per year.... if you make less than $193,000 of MAGI.

Call it paranoia, but I have always been slightly nervous of Roth IRAs. (in the interest of full disclosure, it has not prevented Mrs. G and I from both having one, i'm just nervous about it.) My nervousness comes from the difficulty of trying to predict what a future Congress might do. WIth a regular IRA, i get my tax savings now, so, naturally, I am sure I am getting them. What's to stop a future Congress from deciding there's "too much" non-taxable money sitting in Roths and deciding they need put some sort of "withdrawal fee" (or whatever they'll call it) in place? Wouldn't be the first time a Congress changed the rules of the game halfway through the game. Please opine with how I am crazy, so I can stop worrying about it.

Gator By Marriage · Mar 9, 2019

Pablos Tunnel said:
Furthermore, for those of you with corporate qualified plans (Simple, 401-k, 403-b, 457 ect) please make sure you are contributing whatever level that is needed to capture your employers full match. If you do not know then speak with HR or the plan administrator and ask. Never leave free money on the table.

This.

I had a 31+ year career with the USG and was always amazed at my fellow employees who did not max out their TSPs (For those unfamiliar, the USG 401K is called the Thrift Savings Plan, or TSP for short.) A group of us used to hound the employees who didn't at the very least invest the required amount to get all the matching contributions. Had quite a few thank me later. My explanation was always a simple one: Would you invest in something that guaranteed to immediately double your money? Somehow, that simple stupid explanation caused the light to go on for them.

Pablos Tunnel · Mar 9, 2019

Gator By Marriage said:
This.

I had a 31+ year career with the USG and was always amazed at my fellow employees who did not max out their TSPs (For those unfamiliar, the USG 401K is called the Thrift Savings Plan, or TSP for short.) A group of us used to hound the employees who didn't at the very least invest the required amount to get all the matching contributions. Had quite a few thank me later. My explanation was always a simple one: Would you invest in something that guaranteed to immediately double your money? Somehow, that simple stupid explanation caused the light to go for them.

Preach it brother. I see it all the time. People are so short sighted.

Saving for retirement

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