I want to retire at 57. How much money will I need to have saved?

cantdrv55 · 03-14-2007, 09:52 AM

My dream is to retire when my mortgage is completely paid off. I'll have that done by 57, hopefully sooner depending on how much I'll spend with this remodel and landscaping I am doing now. I want to calculate how much spending money I'll need to have saved in order to retire at that age and still live comfortably.

I plan to golf weekly, vacation abroad every 3 years, no more car purchases, my son will have graduated college and grad school by then so he will make his own student loan payments and, basically, will plan to spend a little less in every way but not drastically so.

How much in savings do the financial experts advise to have for an early retirement? What's the formula? I don't use a financial planner.

RickM · RickM's Garage

Can you determine what income level you'd be comfortable with?

$30k, $70K, $100k.....?

the · 03-14-2007, 10:03 AM

$3 million cash.

cantdrv55 · 03-14-2007, 10:05 AM

I think we can live off $50k comfortably, probably less. Not knowing how much gas, food, etc will be in 13 years so this will be a big guess.

motion · 03-14-2007, 10:06 AM

Quote:

Originally posted by the
$3 million cash.

You must be reading Kiplingers and Money. Cough, cough, BS, cough, cough.

Retiring on $1MM is easily do-able. $1.5MM should be plenty if you have no mortgage, car payments, credit cards, etc.

Dueller · 03-14-2007, 10:08 AM

Try this calculator for starters

http://moneycentral.msn.com/retire/planner.aspx

the · 03-14-2007, 10:11 AM

Quote:

Originally posted by motion

Retiring on $1MM is easily do-able. $1.5MM should be plenty if you have no mortgage, car payments, credit cards, etc.

Wouldn't be for me.

cantdrv55 · 03-14-2007, 10:13 AM

Quote:

Originally posted by the
$3 million cash.

How'd you come up with that? What's your formula?

MikeSid · 03-14-2007, 10:20 AM

I think Motion is closer to the retirement amount you're looking for. With $1M in cash and zero debt you could retire today and stick it in 26 week T-bills and generate $47K a year. A more diversified portfolio might generate $80K a year. But your retirement allowance might be a bit low.

I think in 13 years, $50K isn't going to give you much purchasing power.

the · 03-14-2007, 10:21 AM

I don't think there is a set formula.

But there's a good chance from the age of 57, you'd have another 30 years to live. 30 years is a long time. Not only do you need the nest egg to produce income, but you also have to have it keep up with inflation.

13 years from now, when you are planning on retiring, $3 million will be worth a lot less than it is today. And assume you are going to live to 90, that's 46 years from now. 46 years from now, $3 million will be worth nothing.

And when I talk about retirement, I mean retirement. When I retire, I don't want to be managing an apartment complex, worrying about tenants, etc. in Tucson to gain income to live on. That's not retirement at all - I'd rather keep doing my current profession when I'm 60 than do that.

the · 03-14-2007, 10:23 AM

Quote:

Originally posted by MikeSid
I think Motion is closer to the retirement amount you're looking for. With $1M in cash and zero debt you could retire today and stick it in 26 week T-bills and generate $47K a year. A more diversified portfolio might generate $80K a year. But your retirement allowance might be a bit low.

I think in 13 years, $50K isn't going to give you much purchasing power.

Yeah, and that more diversified portfolio also might generate $20K per year.

That $47K per year is marginal for you to live on even today, but 25 years from now, you'll be eating butter sticks on that income.

competentone · 03-14-2007, 10:25 AM

Quote:

Originally posted by motion

Retiring on $1MM is easily do-able. $1.5MM should be plenty if you have no mortgage, car payments, credit cards, etc.

Over multi-decade periods, the effective real (inflation-adjusted) interest rate on extremely safe investment vehicles (CDs, government securities) is about 1.5%

One million dollars would give you about $15,000/year. I guess if you're really frugal, you could swing it on that.

einreb · 03-14-2007, 10:26 AM

Quote:

Originally posted by motion
You must be reading Kiplingers and Money. Cough, cough, BS, cough, cough.

Its amazing how much the 'industry' that gets money from you 'saving for retirement' suggests that you save. Lots of stuff to ponder w/regard to expenses during retirement... health insurance is a big one.

I spent a good bit of time in years past freaking out about 'saving for retirement'. My mindset has really shifted over the past few years to look at how to 'need less' in retirement as being as important as the pile of money required. Soon to retire boomers in McMansions with big mortgages are not an example I hope to follow.

Aurel · Aurel's Garage

So, in general, when you guys calculate an amount for retiring, are you considering just living off its interest and not touching the principal, or spending it all and leaving nothing?

Aurel

pwd72s · 03-14-2007, 10:29 AM

With a well balance portfolio of stocks and bonds, it's a safe assumption that one can remove 4% every year without reducing the base amount...

competentone · 03-14-2007, 10:30 AM

Quote:

Originally posted by Aurel
So, in general, when you guys calculate an amount for retiring, are you considering just living off its interest and not touching the principal, or spending it all and leaving nothing?

I want "critical mass" with no need to touch principal.

the · 03-14-2007, 10:32 AM

I generally plan on not touching the principal. Because that's the "cushion." The principal isn't going to be worth much anyways in 30 or 40 years, inflation will make sure of that.

And it's hard to plan on spending it all and leaving nothing, when you don't know how long you are going to live. Or how much things will cost 30 years from now.

pwd72s · 03-14-2007, 10:33 AM

Quote:

Originally posted by competentone
I want "critical mass" with no need to touch principal.

Ahhh, another Brinker believer. "Critical mass" can also be defined as having "screw you" money. Enough money to be able to say "screw you" to anyone you please. This amount varies from individual to individual based on chosen lifestyle.

the · 03-14-2007, 10:34 AM

Quote:

Originally posted by pwd72s
With a well balance portfolio of stocks and bonds, it's a safe assumption that one can remove 4% every year without reducing the base amount...

I agree, except the base amount does get reduced each year by inflation. The purchasing power of the base amount goes down each year.

pwd72s · 03-14-2007, 10:38 AM

Quote:

Originally posted by the
I agree, except the base amount does get reduced each year by inflation. The purchasing power of the base amount goes down each year.

I was factoring in inflation. The portfolio should enjoy an average annual growth beyond that 4%...maybe I should say despite the 4% being removed.