Going to have enough ?

[2Driver]

Here are some interesting/scary survey results I got from my broker. I am always curious about where we are as compared to the rest of the population as far as saving rates, thinking I am always behind. Don't these people have a clue?
The New Retirement Model
Merrill Lynch released a new survey a few weeks ago called the New Retirement Survey, wherein they polled 3,448 baby boomers, both from the general population and the more affluent segment about their views on retirement.
Unrealistic Retirement Expectations
Those were pretty much the general conclusions. I've found some of the actual survey questions and responses to be very interesting. 42% of baby boomers do not know how much money they will need to be able to live comfortably in retirement. 60% had less then $100,000 of total savings other than their home, and 46% had less than 50,000. Of course 7% were not sure how much they had saved and 12% decline to answer, so it would be a reasonable assumption to think that 70% had less than $100,000.
26% felt they would need between $25,000 and $50,000 annual income to be comfortable in retirement, and another 27% would need as much as 75,000. (23% were not sure what they would need -- so much for financial planning.).
Let's look at that last group. To generate $75,000 of income, with a reasonable degree of safety and adding enough to principal to be able to take care of the effects of inflation, you need a portfolio worth about $1.5 million, give or take $100,000. Only 2% of the respondents said they had as much as one million. Only 3% had more than $500,000 with another 5% having more than $250,000. Less than 10% of the boomer generation had more than $250,000, yet 70% said they would need more than $25,000 annual income to live comfortably.
Even subtracting for Social Security and other pensions, there are going to be a lot of baby boomers who are going to be disappointed about their retirement if they have to live off their savings. To our credit, we seem to recognize that. Thus, less than 20% of us expect to be able to enter retirement without working for pay again.

[HocusPocus]

we went over the same stuff with our financial planner. we should be ok.. at least we hope so.. we are doing all we can. money market account, 401k, IRA's, mutual funds and whole life insurance. if all else fails i will sell both houses by an rv and be a snowbird. :skull: :skull:

[Dave C]

experts generally agree that people generally need at least 75% of their current income to live in retirement. (More if you are a baller). Also this assumes that your mortgage is either paid off or REALLY small.
Consider that life expectancy is in the eighties now, so if you retire at 65, you need at least 20-25 years of income or more.
For 25 years following retirement age: 1) each $100,000 of savings will return $478 per month (assuming net real rr of 3%) 2) maximum social insecurity is $1,600 per month. (indexed)
so if you make $75,000 per year, you need at least $56,250 (or $4,687 per month) during retirement less the max SS, you still need $3000 per month, which means you need at least $630,000 at retirement age.
You need more than this if you live longer than 25 years
Of course consider income from all sources such rentals, pensions, annuities, CV, sugardaddies, etc.

[cdog]

Scary stuff. With prices of everything going up, I can't imagine being in those shoes. I wonder how all those baby boomers will continue buying 60k caddy's with no real income. I'm 28 and have some decent money tucked away in investments that I get 8% on safely. The money I make so far goes toward IRA's. What kind of return do most people get?

[HighRoller]

I'd say 8% is a good return if it's after inflation is factored in. The stock market has made 12% for 70 years, so that's the benchmark. As far as figuring retirement needed, I think of it slightly differently. You don't know exactly how long you'll live, so why not plan to live off the interest? Get out your calculator and do some basic math. If you saved a million and got 8% average return after inflation, you could live on 80K a year without eating away the principal.
And a million is not that hard to save. At minimum wage you could put away 15% for 40 years and have a million, even if you NEVER got a raise.
The average car payment is $378/month. Save that for 35 years and you have 1.4 million. Yes, it is actually possible to live without a car payment.
Even if you're older, like 35, making 60K a year you can do it. Put 15% in a 401K for 30 yrs and you have 1.4 million, which is $112,000/yr without ever touching your principal.

[DCBDaytona]

It's all about planning. I'm 22 and already have cash buliding up in my 401k.

[2Driver]

. At minimum wage you could put away 15% for 40 years and have a million, even if you NEVER got a raise.
Good points, remember that million it took 40 years to save will be like having $150-200K today. So if someone is that far out they best set their sights on 4 million as a minimum. So that 1 million 40 years form now would generate 12k a year income, less taxes you have a whopping 9K left to live off of in todays money

[Mandelon]

Apartments. Inflation indexed. Buy 10 duplexes, triplexes or fourplexes. One a year for ten years. Then retire in ten to 15 years instead.
Buy little fixer places, make em nice, and keep them rented. Get fixed interest rate loans, pay em down quicker so that when you aim to retire they are paid off. Then you get to keep all the rents...
For example, I have a triplex I paid $72,000 for. It brings in $1800 a month. Just get three or four of those and you would be golden. It will be paid off in 14 years. By then the rents will be higher....of course so will everything else.. :rolleyes:

[HocusPocus]

The average car payment is $378/month. Save that for 35 years and you have 1.4 million. Yes, it is actually possible to live without a car payment.
this is pretty much what we did for 12 years and we were able to save up a pretty penny doing that. it wasn't until april of this year that i bought a new truck. it can be hard fighting off the temptation to get the newest stuff but looking back it was well worth it.

[DCBDaytona]

I think a lot of people in this "boating world" are going to be in for a rude awakening when retirement comes. They are going to question if they truly needed the $600 car payment along with the $1500 boat payment. :(

[Dave C]

thats a great idea, when I grow up I wanna be a slum lord just like you!! :D
I am working on one right now and hopefully more.
Apartments. Inflation indexed. Buy 10 duplexes, triplexes or fourplexes. One a year for ten years. Then retire in ten to 15 years instead.
Buy little fixer places, make em nice, and keep them rented. Get fixed interest rate loans, pay em down quicker so that when you aim to retire they are paid off. Then you get to keep all the rents...
For example, I have a triplex I paid $72,000 for. It brings in $1800 a month. Just get three or four of those and you would be golden. It will be paid off in 14 years. By then the rents will be higher....of course so will everything else.. :rolleyes:

[Dave C]

Experts say to keep two things in mind when it comes to investing:
Diversification. Do not be all in one thing. A little bit of equity and little bit of real estate, etc.
balance risk/return with age, the younger you are the more risk you should take with you're investments. However the older you are the more conservative and diversified you should be. There are no rules of thumb but rather you should be comfortable with the risk you are taking and be age appropriate.
Its easy to say that the stock market returns 12% long term before inflation but thats a long term indicator and as you approach retirement age, one needs to diversify away from equities and into fixed incomes.

[HighRoller]

Good points, remember that million it took 40 years to save will be like having $150-200K today. So if someone is that far out they best set their sights on 4 million as a minimum. So that 1 million 40 years form now would generate 12k a year income, less taxes you have a whopping 9K left to live off of in todays money
Touche. But I already calculated taxes in. And notice it's minimum wage and NEVER getting a cost of living increase. In the real world those numbers would adjust just as inflation does.
As far as the car payment thing, the car makers now make more money on the financing than the car. That should tell you something. For most people, buying a new car is the worst decision they can make because they are basically purchasing something they can't afford. I define "afford" by calculating the car's value versus household income. Someone making 30K a year should not buy a 20K car. But they let the finance manager at the dealer decided how much they can afford. OOPS. That's like letting a dog decide how much he wants to eat. New cars also lead to wonderful things like negative equity and horrible depreciation. I catch a lot of crap about paying cash for cars, but it works for me. We have $400 a month more to spend now and we don't drive garbage.

[HighRoller]

Good points Dave. The first three rules anyone needs to learn before they invest are:
1.Diversify
2.Diversify
3.Diversify
Enron is a perfect example of what happens when bet all your money on one horse and the horse breaks its leg. You go broke. Having your 401K from a company as well as company stock is a recipe for disaster.
On the risk according to age thing, a lot of mutual funds have portfolios now that you can pick a retirement date and they will gradually reduce your risk as you get closer. Pretty cool. The new I-bonds are good for a low-risk hedge as well. Indexed to inflation and a decent return.(4.5% or so right now)

[Sleek-Jet]

It's all about planning. I'm 22 and already have cash buliding up in my 401k.
I started at 21, and had a little over a 100K at it's peak... I'm back up to about 70K right now in my IRA (after the tech fall out, I was invested in very high risk funds). I also have another 40 years till I can retire.
The company I'm with now has a defined benefits package (i.e. pension) and a 401k, both of which I'm involved in. None of my retirement holdings are invested in the company I work for.
I'm busy paying off bills right now, and as soon as that's done I want to put enough cash away to have 6 months worth of take home pay in the bank (regular savings account and cash in the safe). I have about half that right now, which is really not where I want to be.
I drive an old Blazer, my boat is the same age I am, but hopefully I'll be able to eat and keep a roof over my head when I get to retirement age, especially since SS will be nothing but a bitter memory by then.

[HighRoller]

Damn Sleek, sounds like you have the same financial counselor I do!! :D