How Much Would You Need to Pull the Plug at 59.5 and Retire?

[Craig T]

I read a financial article today that said individual IRA's and 401K's are finally starting to hit the $1MM mark. For three reasons primarily, 1. Qualified plans have been around a long time now. 2. Pensions drastically eliminated in the 90's forcing people to save. 3. The Stock market is at record levels.

Taking into account our IRA's and 401k's were invested pre-tax, and taxed upon withdrawal, how much would you need in your "qualified plans" to pull the plug on work and retire? ...And I mean retire. Full-time fishing, golf, babysitting grandchildren, car restoration project, drinking too much, and general old man debauchery.

Let's create some hypotheticals:

-Your House is paid off
-You still need to cover healthcare until Medicare age of 65 (estimate $20K annually)
-You have a decent Soc Sec check coming at 62
-No rental income

[wdfifteen]

How much you would need would depend on where you choose to live and how much you intend to leave to your heirs.

[Craig T]

Originally Posted by wdfifteen

How much you would need would depend on where you choose to live and how much you intend to leave to your heirs.

Exactly! Let's hear it. Do you care about leaving an inheritance? Would you move to someplace cheaper? Maybe $500K at 59.5 is enough if you have a paid-off cabin in the hills of Arkansas that you love.

[fintstone]

If single and not living in CA...1MM might cover it...but it would be tough with $20K per year health care costs.

[wdfifteen]

Originally Posted by Craig T

Exactly! Let's hear it. Do you care about leaving an inheritance?

Done it.
The best gift my parents ever gave to me was to say, "You will be the first of our family to go to college. We don't know how you are going to pay for it, but you are going to college."
I pretty much passed on that gift to my son. I admit i helped with cash now and then. He has become more successful than I ever was. He has his career and his family and his self respect and he doesn't need anything more from me.

Originally Posted by Craig T

.
Would you move to someplace cheaper?

I started cheap. I can live high on the hog here at $35k. At that rate I'm good until I'm 90.

[RKDinOKC]

Just turned 59 and current plan is to keep my current income after taxes for 10 years.
Have had a TIA stroke and currently only 20% of TIA victims live past 10 years of the event.

My oldest brother is 80, all he has left is SSI of around $1300/mo.

[fast_e_man]

Wet thumb in the air:

$3M pretax savings, assuming 4% annual withdrawal yields $120k/year. That's "Openers" for what I'd like to do when I retire. Prefer to hold off on SS, unless you feel you can make >$8% annual return on principal that would otherwise remain in savings if you elect early SS.

Me personally, I want the $3M + the pension from my 35 years with my employer, at the time I retire.

Not interested in planning a financial legacy for the kids. If there are assets remaining that's fine, just don't plan to manage my financial affairs to assure a legacy.

I built a retirement budget, with uncertainty for health care escalation. Then calculated average CAGR scenarios for my investments, with and without inflation. Did some analysis of the stock market since great depression and looked at market CAGR with inflation since then, in 10 year walking windows. looked at market 10, 20, and 30 year average CAGR. We've had some bad decades, but not for 15 years and longer. I concluded a CAGR of 1.5% ave above inflation is reasonable expectation over a 20 year retirement horizon, except if a Black Swan event happens. So, for a 1.5% CAGR, at age 95 I'll have roughly what I have now in portfolio principal.

So, I think I'm conservative - up to a point, although my plan is not robust to Tabs weighing in with a larger downside risk than I've modeled.

[island911]

Problem is the math. --Too many unknowns for the number of equations.

That is, unless you know how long you will live AND know the future cost of hookers and blow...

[island911]

So the answer is ...

[wdfifteen]

Originally Posted by island911

That is, unless you know how long you will live AND know the future cost of hookers and blow...

Pretty sure the cost of hookers will be a declining expense. As the punch line from the old joke goes, "I think I'll have the soup.'"

[Craig T]

Originally Posted by island911

Problem is the math. --Too many unknowns for the number of equations.

That is, unless you know how long you will live AND know the future cost of hookers and blow...

Nobody knows how long they will live. You don't wait until you die to plan retirement. Thankfully, blow is decreasing in price due to lack of demand. Hookers unfortunately, have gone up...Unless you can afford to travel. I hear Costa Rica is still reasonable prices for whore mongering.

[stevej37]

Need another choice for those of us who will receive a retirement pension.

[dan88911]

Just remember there will be taxes to pay.
Inflation to deal with.
And God help you if the market takes a dump the year after you retire.
Imagine a 50/50 conservative portfolio at retirement and 30% drop in the equity portion.
Million just does not sound like enough to me.

[masraum]

If I retire at 59, I'm going to need a lot of money. If you aren't making money, then chances are you are spending money. I'd want to travel more. I don't necessarily need to be eating out at trendy restaurants every night, but I would be spending money. If I can't afford to retire and not worry much about money, then I'll keep working.

[RKDinOKC]

Originally Posted by Craig T

\ Thankfully, blow is decreasing in price due to lack of demand. Hookers unfortunately, have gone up.

Crack hoes are a lot more affordable.

[wdfifteen]

Originally Posted by Craig T

Thankfully, blow is decreasing in price due to lack of demand. Hookers unfortunately, have gone up....

I don't follow those markets that closely myself, but that's good to know.

[MBAtarga]

I typed up a bit of info, then realized I'm not going to announce to the world some personal details. I'll simplify my answer. I wouldn't be comfortable with only $2M at 59 1/2 to retire.

[Craig T]

Originally Posted by MBAtarga

I typed up a bit of info, then realized I'm not going to announce to the world some personal details. I'll simplify my answer. I wouldn't be comfortable with only $2M at 59 1/2 to retire.

The post is in relation to the recent news of IRAs and 401Ks starting to crest the $1MM mark. Many American baby boomers have no other line entries to their net worth outside qualified plans and home equity. Although a $1MM 401K is a sizable sum, many of us could not sustain their current lifestyle in retirement on $1MM for long. I certainly could not where I live, but others obviously can.

If you truly hate your job or profession, would $1MM or 2MM in a 401K be enough to make the move to a cheaper real estate environment and simplified life. I bet a lot would pull the plug.

[aschen]

Everytime i mess with an online calculator ir says i need about $ 1.8 to 2.2 m to retire in my late 50s / early 60s

[fintstone]

I would figure that one could probably pull out 4-6% per year and never run out. 5% of 1M is $50K...before taxes. So, $2M would give me about $100K minus taxes, healthcare, etc... As long as we can avoid protected high inflation...that would work for many with a paid off home (unless their property taxes/insurance/upkeep are not very high).

If they want, they can walk defined retirement backwards. If it pays them 50K per year, it is worth about $1M. If $20K, then it is worth about $400K. So, if you get a defined retirement of $50K and have about $2M in a 401K, you can figure your are with about $3M plus other assets like home, cash, car.