How do you decide how much is enough to save for retirement?
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  1. #1
    Registered User KathyB's Avatar
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    Default How do you decide how much is enough to save for retirement?

    My husband and I have both been contributing to a retirement fund at work for quite a while now. Since we finished paying off our debts, we planned to increase the amount we are giving.

    It seems to come down to whether we want more to spend now or in retirement. Or maybe somewhere in between.

    Have other people thought about that?
    KathyB

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    Registered User josantoro's Avatar
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    I'm no expert, but I think the figure is about 4% for withdrawals. In other words, if you have $100,000 in retirement savings, you should count on $4000 a year as what you can safely take out of that savings.
    Make America Kind Again.

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    Registered User Spirit Deer's Avatar
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    4% would decrease each yr as the principal decreases due to the withdrawals.

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    Registered User Spirit Deer's Avatar
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    I meant 4% would be less money per yr, not a lower percentage.

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    Registered User KathyB's Avatar
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    The idea is that it you earn 4 percent of interest each year. You live off the interest so the money lasts indefinitely.

    I have heard the numbers before.

    I am thinking about it from a different perspective. Financially you would break even if you lived 25 years after retirement. This is a gamble because I don't know how long I will live. If I live a really long time I get more total money. But if I live less than 25 years after retirement I lose money.

    Of course this is really, really oversimplifying it. You have to think about inflation, differing tax rates, possible stock market crash, possible stock market boom, etc.

    The bigger question in my opinion it is whether it is better to spend the money on my self now or spend the money on myself later. In my later years I will have more time for hobbies, entertainment, travel, etc. However, health tends to decline as you age so there may be less ability to do some activities. For example travel and maybe events and festivals that require a lot of standing or walking.

    And living in a nursing home hobbies with a lot of bulky stuff may not be realistic.
    KathyB

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    Registered User Spirit Deer's Avatar
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    I don't know what investments pay 4% annually. Interest rates are very low and have been for yrs.

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    Registered User KathyB's Avatar
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    You will not get that much in safe investments like savings or money market. However it is not unusual for an investment fund that is based on stocks to do 10 to 15 percent a year or more. Of course there can be years where the investment only does a couple percent and it is possible to lose money as well.

    2018 was a bad year for stocks, but 2017 had high returns. At least for my funds. You can Google TSP if you are curious. The return rates are public knowledge.

    There are attempts to create an investment portfolio where safe investments are mixed with some investments that have some risk but can generate higher returns.

    So 4 percent is a rough estimate for these mixed portfolios. It will not be 4 percent every year but may average to be that or higher.
    KathyB

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    Registered User Spirit Deer's Avatar
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    We're not risk takers when it comes to our money.

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    I try to do things I enjoy now on a regular basis. Yes spending money is a factor but I think I have plenty of low-budget alternatives for having fun. I would rather save for later in case I have a lot of medical needs/expenses. But I will continue to try finding things to do for fun within a budget. I guess I don't see it as an issue for myself. The dog can be expensive (vet bills) but he's my companion and we do things every day. My other hobbies are all really inexpensive. I kind of compare that to my husband who has a lot of "things" but doesn't really use them to have fun - the motorcycle that gets ridden 3X a year, the telescope that never gets used, the fancy bicycle that is never ridden. He watches TV and surfs the internet every day instead. I don't see that as money well-spent.

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    My dad died suddenly at 52. All the things he and Mom wanted to do "later" were instantly lost. We learned a valuable lesson from that, which was reinforced 2 yrs ago when Husby had a heart attack and could have also died young. We aren't guarenteed a future. That's been a big factor in our decisions to do things like travel. We decided yrs ago not to wait for retirement to pursue our interests. We spent the money and made the time, to the best of our ability. We're not sorry. We've done things like move to the lake so we could do things we enjoy even when we don't have a lot of time. Because of Dad, we didn't feel we could wait for retirement to move to the lake. It was the right decision for us.

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    Should have said we were also contributing the maximum to Husby's employee retirement funds and were, and still are, making payments on an investment we were more or less forced into buying. I didn't mean to imply we've been out merrily spending all our money on fun and games while ignoring retirement needs.

  13. #12
    Registered User KathyB's Avatar
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    I was planning on contributing the max to our retirement funds at work, but I recently found out the max was $26,000 a year. (These are the updated 2020 numbers.) Or $52,000 a year for both of us. We are currently giving 10% each and we get 5% matching. I do plan on upping our number a bit, but not the max.

    With annuities it is possible to have something that is guaranteed and is over 4% a year. It depends on your age. You will get more per year the older you are when you get them. However, they are terrible for couples. They are reduced by quite a bit if you want the annuity to keep money to the survivor at the same rate. I might consider it if I become a widow. One draw back is that unlike regular investments, you cannot withdraw money from the base amount for an emergency. Another drawback is that there is no money to leave to a family member in a will.

    It is funny that I look at some of the investment advice on line a draw very different conclusions than them. They are all about investing piles of money so you are not reduced to moving to low cost of living place and living frugally. Oh the horrors!

    Umm...I did plan on moving some place with a lower cost of living. And I live pretty frugally now. It is a decent life. Now my amount of free time is another matter.

    In short their idea of what it costs to live a good life and my idea of what it costs to live a good life very by a lot.

    The retirement income for both my husband and I together will be pretty good I think. The amount left if I become a widow. Well I might just be "forced" to live frugally.

    I am currently having mixed feelings on travel. I enjoy travel, but I am not an into it as some people are. I actually lean pretty heavy toward introvert homebody. (Even though I work outside the home.) I do not feel refreshed by travel. Even with a few days of home rest thrown in at the end, I feel a bit worn out coming back to work. And I generally have a pile of work waiting for me.

    It is not really about feeling physically worn out. It is more of emotional/mental/psychological thing. It is an introvert thing. Possibly with a touch of sensory overload tossed in there.

    So ideally for me, I would take a trip then spend a couple weeks where I did not go outside much. Of course this is an after retirement kind of thing.

    I am also facing parent guilt about travel as well. My mom feels that if I have money and time to travel for vacation, I should have money and time to visit my hometown. My last visit to my hometown was visiting a family member in a nursing home, visiting a family member in the hospital, visiting a family member that is not up to leaving the home. In other words, no fun activities. They are not up to going places, except maybe out to eat.
    And they get upset if I want to visit one of my old favorite places on my own. It is pretty much the opposite of what I want in a vacation. And it takes more time and money than a regular vacation because it is much further than the places I normally visit.
    KathyB

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    that sucks kathyb.. because yes you want fun vacations. I told dh yes visiting your aunt 12 hr drive is technically a family vacation but not really a vacation. she is passed now but wouldn't leave her house anymore cus she was sensitive about her weight or we would have flown her out ..cheaper for us! a lovely person but 2 little kids in a house where she is a neatik... we went out alot lol.

    I tell dh better to travel now then later since medical insurance cost so much more later going outside the country and who knows what will happen. his cousin just died a few days ago from cancer at 63 and it started at dh age. got a lot of money from his mom but never got to enjoy retirement etc. plus enjoy hobbies. and I don't see wanted to be on a plane for hours either.

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    Registered User Spirit Deer's Avatar
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    For us, the journey is part of the vacation. But mostly we like cruising the interstates. Some people find it boring but I like the subtle changes as we drive across the Dakotas or watch the Rockies growing in front of the windshield. Every mile is different.

    If we waited till the time was perfect for various activites, we would never do them. We learnedcfrom Dad, don't put off stuff if we don't have to.

    Nobody could try harder to book us on a guilt trip than my MIL. We ignored her whining. No way would we allow her or anyone else to run our lives or force us to stay home because she wanted us to visit her instead of taking a vacation. She tried everything, up to and including faking health emergencies. Didn't work, and it pissed her off frequently because we didn't allow her to run our lives. But as grownups, we made our own choices. We were always there for them when we were truly needed, so didn't see why we should feel guilty.

  16. #15
    Registered User KathyB's Avatar
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    I have gone places by plane. I dislike pretty much everything about traveling by plane.

    I do like train travel, but that is sometimes problematic. Some stations have train platforms that stop even with the train. But other have stations where you have to climb up stairs to enter the train. Made especially hard if you have luggage. And on some of the stops the train starts moving before you can find a seat.

    I do vaguely remember that those stations did have some kind of ramp/platform type things for people with wheelchairs. If you are not at a major stop, not all car doors open. You have to exit by certain doors. Obviously if you were in a wheelchair they would make an exception and open those doors for you. But if you are in that awkward category of having mobility issues, but not having a visible disability, those considerations are not automatically offered to you. You have to know they are available and who to talk to make it happen.

    I am in pretty decent health, but my husband has problems with stairs and some mobility issues. He has starting using a cane, so maybe more things would be offered to us now. At the least, people no longer give us unpleasant looks for sitting in the handicap seats on bus and metro.

    There is a commuter train that runs between DC and Baltimore. But it is a double decker train. You go down stairs for the lower level and up stairs for the upper level. It seems like they would legally have to offer some kind allowance for people in wheelchairs. But if there is one, I have not seen it.

    Still, I am hopeful that we might have more train travel trips in the future. I find myself more drawn to seeing things domestically than internationally. I am also thinking about the possibility of things like Megabus and Bolt bus. I have heard some good things about them. They are supposed to have large comfortable seats, unlike the ever shrinking airplane seats.

    ***
    I talked to my husband a little about retirement stuff on Tuesday evening. We are both increasing our retirement finds contributions. They are not at the max, but my husband did mention possible increasing them more later. In other words he does seem interested in maybe trying to put the whole $52,000 a year ($26,000 each) in the accounts if we can manage it.

    I think part of this is because I finally got it through to him that our pensions do not offer survivor benefits. And that the survivor benefits on social security is 1/2 what your spouse got OR what ever you can claim on your own. You do not get both. So this would effectively be no survivors benefit in our circumstance. The only thing you can claim is the retirement fund your spouse put money into.

    He does see spending a good chunk of retirement money in the first 15 years after retirement. And if we run out of the retirement funds, social security and pensions would be enough to live on. Because of my husband's health, he does not expect to live more than around 15 years after retirement. So that is the time we will be potentially traveling, going to more events, spending more on hobbies, etc.

    I feel like after I hit around 80 or so, I will be fine with not traveling as much. Lots of local events are free or reasonably priced. And about that time, I will almost certainly be at SABLE - stash available beyond live expectancy - for craft material. In other words, more craft material than I could reasonable use in my life expectancy. So I will just use what I have.
    KathyB

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