Milstones on saving for retirement

Politigator

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These articles are a decent guidepost for where you should be in your retirement savings at different ages. I'm afraid that most people are not anywhere near where they probably should be. Of course it goes without saying that one size does not fit all.

Read: This is how your finances should look in your 20s

Read: This is how your finances should look in your 30s

Read: This is how your finances should look in your 40s

Read: This is how your finances should look in your 50s

Read: This is how your finances should look in your 60s


Apparently many Millennials were angry and pushing back at the article about where they should be in their 30s. Do they have a legitimate beef or are they just whining?

Want to make millennials mad? Talk about saving for retirement

I appreciate your posting that but I found the information sorely lacking. You can come up with rules of thumb of what you should have saved at various milestones (and the article doesn't even do that) but it really depends on a lot of factors.
 

Bushmaster

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According to my dad, who is a money manager/broker, 8% return in the market per year is about normal over any 20 year period.
 

Politigator

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According to my dad, who is a money manager/broker, 8% return in the market per year is about normal over any 20 year period.

https://www.crestmontresearch.com/docs/Stock-20-Yr-Returns.pdf

I guess that has mostly been true since the 50s. It was sometimes lower in depression years.

I hope you are right, but I'm not banking on it. CAPE are very high, corporate earnings as percent of GDP are at record levels. Interest rates are at near historical lows. There just doesn't seem like there is a lot of upside.

Are you going to stay 100% stocks unto you are 70? You won't get 8% if you have much bonds in your portfolio.


https://www.crestmontresearch.com/docs/Stock-20-Yr-Returns.pdf
 

CGgater

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According to my dad, who is a money manager/broker, 8% return in the market per year is about normal over any 20 year period.

Dad’s a retired CPA. He said 6% avg over 20 years is manageable and anything above that is gravy. I know, big difference between brokers and CPAs. To be fair, he takes a more conservative approach to his own investments, but he’s reviewed a LOT of tax returns, too.
 

Bushmaster

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Dad’s a retired CPA. He said 6% avg over 20 years is manageable and anything above that is gravy. I know, big difference between brokers and CPAs. To be fair, he takes a more conservative approach to his own investments, but he’s reviewed a LOT of tax returns, too.


CPA here as well. I am fairly conservative in my picks which is just a mutual fund and a few other specific stc my broker recommends. Pretty spread ot over 6 industries.
 

BMF

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Until 1999-2008, the US stock market had never had a 10 year period that it lost money. And since 2008 it's done incredibly well. The problem for a lot of us post here - since most of us are not millenials - that 10 year period killed us. I turned 29 in 1999 (and 38 in 2008). For most people those years are years you build the base of your 401k's/457/403b/Roth, etc. That's a lot of losses for a 10 year period. For those in their late 40's in 1999 they could have taken a severe beating. For me, I wasn't putting a lot away during that 10 year period (regrettably) - as it was a perfect "buy low" period. Now everyone is putting money in the market and it's rolling....but they're "buying high".

I'm very concerned about the market tanking, as this bull run is almost unheard of (like the 10 year period that it lost money). Something has to happen. I have been putting a lot of cash away (getting around 5%) with the mindset that if/when the market tanks I'll "buy low" and if the real estate market tanks I'll buy an investment property.

Good discussions here boys!
 
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BostonGator84

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How should you adjust these suggestions (if at all) if your company offers a pension? I would think you wouldn’t need to save as much on your own if you have that guaranteed income coming in.
 

78

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What is your investment goal?

How long do you have to accomplish it?

If it's current income, do you intend to qenerate it organically through dividends and interest or through systematic withdrawals?

A lot of advisors and DIY investors are fond of the systematic withdrawal method, hence the 4% rule. The problem with populating the income portion of your account with stocks is volatility. It goes against the grain to rely on an inherently volatile asset class to address the here and now.

Think of your retirement savings as a big round pie.

Which part of that pie is for the here and now? Bonds, floating rate and other lower volatility classes uncorrelated to the stock market. That's what you want

Which part is for withdrawals down the road? That's where you want to populate the account(s) with stocks. They'll outperform all other asset classes and thus provide an inflation hedge.

Now you've got the percentages working in your favor.

One other thing about systematic withdrawals. If it's monthly income you seek, you've just ruled out ETFs and closed-end funds. Transaction costs to sell monthly are too high. You're limiting yourself to open-end mutual funds.

Use ETFs if the withdrawal is annually or (possibly) quarterly.
 

BMF

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How should you adjust these suggestions (if at all) if your company offers a pension? I would think you wouldn’t need to save as much on your own if you have that guaranteed income coming in.

I'll have three pensions (already collecting one, will start collecting the second in 13 months when I turn 50) and will collect the third when I turn 60. One of my biggest financial regrets is not putting more money into my deferred compensation plans. So, yes, you probably don't "need" to put as much away as others if you have a pension....but you "should"!

For calculations, most pensions are valued at $18k-$22K per $100/month in benefit you get (if your pension is $1000/month it is worth around $200K). This is how it would be valued in a divorce settlement, for example. So if you have a pension you can do the math and line it up w/ these suggestions.
 

Politigator

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What is your investment goal?

How long do you have to accomplish it?

If it's current income, do you intend to qenerate it organically through dividends and interest or through systematic withdrawals?

A lot of advisors and DIY investors are fond of the systematic withdrawal method, hence the 4% rule. The problem with populating the income portion of your account with stocks is volatility. It goes against the grain to rely on an inherently volatile asset class to address the here and now.

Think of your retirement savings as a big round pie.

Which part of that pie is for the here and now? Bonds, floating rate and other lower volatility classes uncorrelated to the stock market. That's what you want

Which part is for withdrawals down the road? That's where you want to populate the account(s) with stocks. They'll outperform all other asset classes and thus provide an inflation hedge.

Now you've got the percentages working in your favor.

One other thing about systematic withdrawals. If it's monthly income you seek, you've just ruled out ETFs and closed-end funds. Transaction costs to sell monthly are too high. You're limiting yourself to open-end mutual funds.

Use ETFs if the withdrawal is annually or (possibly) quarterly.

I'm really targeting something closer to 3.0% SWR (safe withdrawal rate). 4.0% is a bit too risky for my tastes starting at high valuations. Also part of our goal is to leave a significant inheritance for one or both kids
 

ChiefGator

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What is your investment goal?

How long do you have to accomplish it?

If it's current income, do you intend to qenerate it organically through dividends and interest or through systematic withdrawals?

A lot of advisors and DIY investors are fond of the systematic withdrawal method, hence the 4% rule. The problem with populating the income portion of your account with stocks is volatility. It goes against the grain to rely on an inherently volatile asset class to address the here and now.

Think of your retirement savings as a big round pie.

Which part of that pie is for the here and now? Bonds, floating rate and other lower volatility classes uncorrelated to the stock market. That's what you want

Which part is for withdrawals down the road? That's where you want to populate the account(s) with stocks. They'll outperform all other asset classes and thus provide an inflation hedge.

Now you've got the percentages working in your favor.

One other thing about systematic withdrawals. If it's monthly income you seek, you've just ruled out ETFs and closed-end funds. Transaction costs to sell monthly are too high. You're limiting yourself to open-end mutual funds.

Use ETFs if the withdrawal is annually or (possibly) quarterly.

Good information but if you rely on withdrawals you are taking a lot of risk, after all unless your investments continue to be worth more eventually they run out. Use dividends, they can be almost 4% in some ways, and if you don't make a lot of money are tax free federally.

Then you never run out unless your investments stop paying dividends. Of course every person is different.
 

78

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Good information but if you rely on withdrawals you are taking a lot of risk, after all unless your investments continue to be worth more eventually they run out. Use dividends, they can be almost 4% in some ways, and if you don't make a lot of money are tax free federally.

Then you never run out unless your investments stop paying dividends. Of course every person is different.
You're arguing for organic income over harvesting the income need prorate through periodic selling. I tend to agree. I went in depth into that subject in a previous post.
 

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