How much income do you need to retire?

[Fred W]

Another PMS topic, perhaps, but one that is surely near and dear to the average (well aged) FJR rider, no doubt... Where else to come for financial advise than to a motorcycle forum? At least you guys and gals will keep a budget for gas and tires commensurate to support a retired rider's wanderlust! And I know there are a bunch of current retirees on here that might lend some insight to those of us soon to follow.

So, without getting into specific dollar figures, (which would vary wildly anyway depending on where in this economically diverse country you exist now, or expect to retire to). And I realize we are dealing with gross generalities, depending on your debt load and what you want to do when you quit working. But...

How much of your pre-retirement income do folks feel they will need( or have needed) to cut the umbilical cord of regular pay checks?

I've recently been doing a lot of web searching on the topic and the opinions vary too widely to be credible. Seems there is an endless stream of people that know how and what to do with your money if you'd only give them access.

Being kind of a control freak I'm reluctant to put that kind of faith in anyone that has no skin in my future and would much rather make the decisions and mistakes, myself (if mistakes are to be made).

So whatc'ha think? 80%, Full? More? and why?

 

[Geezer]

I have been retired for almost 2 years now. I expected to spend about the same amount as I did when I was working, but find that I can do pretty much whatever I want and still spend less that I thought I would. I think your 80% number is pretty good.

I am talking about net. My gross is quite a bit less because I used to be contributing to my 401K, and paying into social security, and a few other things.

The big variables are inflation and how long you expect to be needing income. When you account for inflation, which is likely to kick in some time in the next few years, the numbers change so you have to be prepared for the actual number of dollars you need each year to increase.

Don't forget, I am parsimonious.

 

[Redfish Hunter]

This is a tough one because of the variables involved.

1. How old will you be when you retire?

2. How long do you expect to live?

3. Do you intend to sit in the living room watching TV or do you want to travel the world? In what level of style?

4. Debt load. Is the house paid off?

5. Does your retirement include paid health insurance? If not, wow is it expensive to buy for an older person.

There are many other things in the equation. I currently put 15% of my pre-tax income into my 401K and my company matches 6% of that. I will also get a pension.

I truly have no idea what I will need. My Dad quickly found out that a few sideline jobs make a huge difference to your retirement income.

 

[Longrider]

Retired now for 19 years. The big variable in amount needed I believe is what type of medical insurance you have and how much deductible you end up paying.

Some of my so called in and out simple operations have run over $160,000. Our insurance has paid almost all of the costs.

If the out of pocket for this is small then 80% will do it for most of the rest.

Retirement is worth working for.

Longrider

 

[wheatonFJR]

Just enough...until you die.

Then let the kids take care of wifey.

 

[FJRay]

I don't have what I want but I went out on a disability at 48 and they don't give you much of a pension and no survivor benefits. The pension keeps the lights on and food on the table but fun money has to come from the shop. got a little life insurance for the wife while she figures out what to sell and which kid to live with.

Plan early and stash as much as you can because it isn't going to last as long as you think. I wish I had worked a job with retirement but I chose to live life for the moment and in a lot of ways it was a good thing to do but old and broke isn't fun. Save your money.

 

[Silver Ranger]

When I look at the targets my 401k company says I need I will never be able to retire. As you said they don't have skin in my retirement however they do have skin in how much and how long I invest with them.

My plan is to protect as much of my income from taxes today as I can and when I am ready for retirement I will determine my budget and call it a day. I may need to find a side job for some time to offset. But that could be fun.

The big risk to when that magic day is will be health insurance. My company has capped how much of the premium cost they pay so it could get very expensive.

 

[Bounce]

Retired @ 2 months short of 58. The next month after I retired, they offered a $25k incentive to people like me who could retire but hadn't done so yet (damn!).

Pension was higher than I expected @ ~65% of my full-time pay at time of retirement. The trade off was that, while I didn't contribute to SS, my contribution into my retirement plan was higher and I can never draw from SS as a supplement. It's not a magic bullet of special treatment; just draw a little more from one because they withheld a heck of a lot more each payday. Sock away max into the TSP (sort of a 401K) for as long as possible.

Moved my Thrift Savings Plan into an IRA which survives me where the TSP doesn't.

Am not currently touching the IRA so it's grown pretty well during that time. If I hold out until 72, then there are things that kick in to make it better when I do draw from it (as well as letting it continue growing for as long as possible).

House, cars, and any other loans paid in full and pay-as-I-go (or don't go) is the rule. If a car eventually needs replacing it will not be of the same tier and not be new. Pay off everything in advance climb up out of the debt hole. That, in itself, is a significant boon to living on a fixed/reduced income.

In spite of all that, I've saved more than I ever did in any given year during my working life. Some of that has to do with the cautiousness of not doing anything until I get a feel of what to expect. While a little more spartan of a lifestyle than before, it's not been totally without toys. The Shop project and the POF that Dale, Justin and some others got to shoot while on the Playa being just 2 examples... which brings out the Gerlachfest trip I chose to take with a local bonus hunt in ABQ for location sites of Breaking Bad.

I busy myself with home projects instead of travel. It's kept me plenty busy and there's still more to do.

So, you can live an enjoyable life if you set your expectations properly and live within your means.

"Owe no man."

 

[russperry]

When I look at the targets my 401k company says I need I will never be able to retire. As you said they don't have skin in my retirement however they do have skin in how much and how long I invest with them. My plan is to protect as much of my income from taxes today as I can and when I am ready for retirement I will determine my budget and call it a day. I may need to find a side job for some time to offset. But that could be fun. The big risk to when that magic day is will be health insurance. My company has capped how much of the premium cost they pay so it could get very expensive.

I finally came to the realization that the key to retiring early is to live WELL under your means while working, then retiring should be OK. Here's what I mean if taken to the extremes:

1) You live at the max of your income - that means no savings, no investments. Maybe it's OK if you've got a fat cat pension but if not then you can NEVER retire because its likely that social security will be all you have and unless you're in poverty to start, social security will be a huge drop in income. And if you've become accustomed to living at 100%, then living on 30% will seem like you're doomed.

2) You live on 50% of your income. In this case you've set your lifestyle to match and you can save 50% - invest it, buy an annuity, whatever.... Now when you get to retirement, dropping from 50% to 30% isn't such a big deal, and hopefully you've got a sizable nut to augment and can get you back to 50% which would seem like living as usual.

So in order, here's my advice:

Option 1) find a soft-ass city or local government job with a pension if you've got a few years left to work. At least in Kali its a license to steal.

Option 2) If not 1) then set your lifestyle to live on less and save like a maniac

Option 3) if not 1) or 2), then spend everything you make, join a political party that blames the rich and call for bigger handouts - it works in Greece, why not here?

 

[Chuck35]

"Owe no man."

+ 100

 

[ULEWZ]

I am eligible to retire in August, but want the house paid off, so 5 more years.

 

[Eric L]

I am on the 'save like a maniac' route. I am 53 and clearly will want to move somewhere cheaper and draw equity from the sale of the house outside of DC. Looking forward to Obamacare as I hope to retire at ~60 or so.

I think we spend an enormous amount just to live where we do and hope that we can live a good simple 30 years somewhere near kids, grandkids, and a good twisty road.

 

[bgross]

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Our gross income now is less than half of what it was when we were working.

For us, a couple questions that helped clarify things were:

1) what changes in "lifestyle" would we expect to make?

IOW, when we were working we could plan large purchases (car, motorcycle, etc) and save for them; in retirement, those items will be approached differently. We've always had a 'cash for toys' rule.

When we were working, we never traveled and rarely even took time off for 'staycations'. We worked weekends & holidays, six days a week. Rarely even had the same day off together. Amazing how much money you can save that way - no time to spend it.

2) What expenses could we reduce before or during retirement? The biggest one was the house payment. That leaves taxes, insurance, utilities and food.

We buy most of our clothes at thrift stores, rarely dine out, don't go to movies, and have a simple diet - lots of beans & rice.

But that's easy for us because it didn't change when we retired!

Any money we can squirrel away from our monthly income goes toward travel!

 

[Old Guy]

I retired in March of '13 and made sure I did so with no mortgage, car payments, revolving credit card or charge account debt, etc. I had also saved diligently for a couple of years just to build a cash buffer to help me stay out of my 401k and IRA. With the cash on hand and without out those monthly obligations, our standard of living didn't change much.

After I retired, I did finance the FJR and a new RAV4 for my wife. I did this to keep my cash I had on hand to avoid dipping into the IRA for a couple of years. I think I can pay the moderate interest rate and come out ahead by not paying 22% income tax (federal + state) on the money to pull it out. I know that's somewhat of a gamble, but my wife will probably retire in 2015, and starting in 2016 I should be able to get to that money at a much lower tax rate. So far, I've made more on the money I left in the IRA than the interest will cost on the life of the loans.

Please note in above paragraph that my wife still works. It helps to marry a younger woman that's not afraid to work

For our part, we have no children and feel like it'd be ideal if the last one standing spends our last dime the day he/she dies. Therefore, I don't mind getting into the principal of the IRA and may even be able to sell our home and acreage for enough to sustain us for years after we're no longer able to live here.

I also recently started working part time for the bank I retired from, so I'm starting to build cash reserves again.

Obviously, everyone's situation is different.

Do a budget. Add all your income from social security and/or company pensions and any other income sources you have. Are you willing to start drawing from your IRA or 401k? Maybe 4% or 5% a year wouldn't be unreasonable. Are you willing to work part time?

Subtract from that all monthly obligations being sure to include health insurance that may be paid currently by your employer. Figure your travel expenses for those motorcycle trips you'll certainly be wanting to take.

If the bottom line is black -- go for it

 

[Dutch]

One thing that has worked well for me is the fact I married well - and she is quite a bit younger than me.

Her insurance and income make my retirement pretty nice.

 

[ANZAC]

Max your 401k and get into the catch up program if you can. Throttle back your spending and budget like you are already retired.

Pay off all the toys and home ASAP. 80% sounds nice but shoot for lower. Get used to that and make the adjustment.

 

[garyahouse]

How much is needed? Depends on yer overhead. I"m on the other end of the spectrum. I'm three years from retirement as ya can't draw SS 'til yer 62. I don't have a 401 or much in savings, but I do have a very low overhead. Like Brett above, I don't waste money. In San Clemente where he lives, weather is just about perfect so his utilities are EXTREMELY low. But housing costs are not. I live in a small house on a miserable dirt road. I'm surrounded by trailers and 1/2 acre lots. The taxes here? 280 per year. Cheap to heat and cool, cheap to maintain, cheap to insure. This modest 2/2/1 home might sell for 85 k right now. No payments, low taxes, life is good. I do have to heat most nights in the winter and I have to cool EVERY day in the summer. But spring and fall are free. Utilities here might average 80 a month. Gotta love central Florida. No wonder so many people come here to retire. Pasco County is a cheap place to live. Lots are for sale everywhere because there's not much employment nearby. However, there is one little problem. The nearest twisties are in Georgia, unless you count the S curves coming outa WalMart - oh, and don't forget the stop signs there.

But remember, finding a great place to be able to afford to retire involves many things. For example the health care facilities here are second to none. Low crime, open spaces, light traffic, a great church nearby; these things matter. Not to mention proximity to family and living in a place that old friend might actually want to come to to visit once in a while. For me, it's the right choice. One serious drawback though, I NEED twisties...

Gary

darksider #44

 

[beemerdons]

"Owe no man."

+ 100

+1000!

 

[timk]

From other horror stories I read,staying in a marriage is one of the best things you can do. No child support or alimony collected from me. Also the 401k are the best thing since sliced bread.