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waffle
Explorer ○○

How much money for retirement

I am 51. Sadly I was not financially aware and started saving and investing when in 40s. Assuming I am able to work till 65.  How much money do I need to save for my retirement? What is the best way to calculate?

I do not have any pension. But hopefully should get Social Security if it is not run out of money till then.

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23 Replies
sugarhill6
Explorer ○○

Re: How much money for retirement

Do the following: 

#1: Forecast how much your basic monthly living expenses will be in 14 years.  You can see what you spend now and factor in some sort of inflation.   Don't over inflate this number.  Try to come up with a "bare minimum number".

#2: Figure out how much social security you will get monthly.  You can use the following link:

https://www.ssa.gov/OACT/quickcalc/

#3: Figure out how much monthly income you will need to cover your basic monthly living expenses, not covered by social security.  (#1 minus #2)

#4 Estimate how much money you would need to invest in an "immediate annuity" to cover the monthly income social security can't.  You can use the following link:

https://www.schwab.com/public/schwab/investing/accounts_products/investment/annuities/income_annuity...

…..and voila, it is that number....at minimum you will need to retire with.   Mind you, this is a bare minimum number.   It at least gives you a framework to access where you are today and move forward.  

 

 

 

 

 

 

 


@waffle wrote:

I am 51. Sadly I was not financially aware and started saving and investing when in 40s. Assuming I am able to work till 65.  How much money do I need to save for my retirement? What is the best way to calculate?

I do not have any pension. But hopefully should get Social Security if it is not run out of money till then.


 

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Saratoga
Explorer ○

Re: How much money for retirement

You could use retirement income calculator at TRowePrice and work on it interactively.  
You need to search for it on their site.   You need estimates of SS payments.    You can do this on the SS site.

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FD1001
Valued Contributor

Re: How much money for retirement

My rule of thump is savings equal to 25 times your annual expense but not including SS. If you have a monthly pension that use is as part of your savings. 

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madphil
Follower ○○○

Re: How much money for retirement

I did not start saving for retirement until 42.  It was almost by accident.  I had left a job with, unknown to me , an IRA plan in place, which was paid out about a year after I left.  I threw the check in a drawer while trying to figure out where and how to invest it.  2 weeks later an Edward Jones rep stopped by our new business (gift shop) and signed us up for 2 new IRA's.  For 20 some years we had just 1 fund, American Fds ICA Fd, which we added the max to every year.  Along the way we bought the building we were in, and sold it for a profit at retirement.  Long story short, save as much as you can for as long as you can, keeping your eyes on the prize, because there are a lot of black swans out there (we retired in 01/2007), and you don't know when or what will jump out at you along the way.  We retired with an amount of money I never thought I would see from a life that threw us some real curve balls.  ICA is a great fund to use for saving for retirement, but whatever you choose keep putting in the max - it's time in the market that brings the greatest reward. What you end up with is your retirement number. Good luck. 

arriba
Participant ○○

Re: How much money for retirement

IGNORE the WAG strategies you read that are posted on an internet forum.

Instead, start here...

https://www.investopedia.com/retirement/how-much-you-should-have-saved-age/

Then go here...

https://www.investopedia.com/articles/personal-finance/011216/3-best-retirement-calculators-2016.asp

and here...

https://www.fidelity.com/calculators-tools/retirement-calculator/overview

and here...

https://www.google.com/search?sxsrf=ACYBGNQcTw7lVFonEID87uN8f_WE-jcprQ:1572214542132&q=best+retireme...

Keep going from there...

BTW, based on what little you posted in the OP, it appears you are a candidate for professional services in this regard.

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bilperk
Participant ○○○

Re: How much money for retirement

I agree with sugarhill up through his #3.   I don't think it is possible to determine annuity rates 14 years in advance, nor do I think annuitizing all of your nest egg is smart.  You would need to have an inflation adjust annuity if you went that route, and that would lower the rate you would receive by a lot.

After 3, I would multiply your yearly expenses by the number of years you want to cover.  For most, that would be 25  as FD says, or age 90.  If your mother and father lived to 100, you might want to go 30 times.

What is more important at this point is to realize that you must be ruthless in your saving strategy, and save every little bit you can.  Carry your lunch, skip *Bucks, be raggedy.  You will never get there wishing it would happen, you must make it happen.  And, IMO, you should not have more than 60% equities in your portfolio and likely not much less either.  Determine the bare minimum you can live on and save the rest.  Estimate how much you will have in 14 years.  If it clearly won't be enough, consider putting off retirement and SS, and consider getting a second job now, and perhaps a part time one after you retire.

Do not willingly retire until you have hit your number.  Good luck.

SJ60
Explorer ○

Re: How much money for retirement

Figure how much money you need each year (x), and estimate your social security income (y).  The minimum you'll need is (x-y)*25.  If you want a safety factor - x*25 should be enough.  That said, there are no guarantees, so decide what you'll do if unexpected big expenses (illness personal or family, lawsuits, government, flood, fire, quakes, tornado, hurricane, etc.).  Good luck.

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Gary1952
Contributor ○○○

Re: How much money for retirement

You most likely will need to work longer. Already SS benefits won't start until 67 or later for you. Plan your career around working until 70.  And you may find out that year might be bad one to retire in and need to work until 71. If things work out then maybe 69 or sooner will work. The rule of 72 tells you how long to double your money at "X" return: 72/7% = 10.2 yrs. If you have $250k now then it would double to $500k (at 7% compounded) in 2029+ and to $1m in 2039+.The year you turn 71. Just a rule of thumb to use as a guide. Get some good sound advice to help invest correctly.

Bilperk had excellent advice but most likely you won't hit your number with only 60% equities. Bonds at 3-4% wont cut it.


@waffle wrote:

I am 51. Sadly I was not financially aware and started saving and investing when in 40s. Assuming I am able to work till 65.  How much money do I need to save for my retirement? What is the best way to calculate?

I do not have any pension. But hopefully should get Social Security if it is not run out of money till then.


 

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bilperk
Participant ○○○

Re: How much money for retirement

"Bilperk had excellent advice but most likely you won't hit your number with only 60% equities. Bonds at 3-4% wont cut it."

Gary,

My thinking on that was based on his indication that he was retiring at 65.  Fourteen years is not long enough to have more than 60% IMO, because if he sees a recession a few years from now, he may not be able to recover by 65.  I'm pretty sure we will see a recession in the next 14 years, and the longer before we see it, the deeper it will likely be.

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youth
Explorer ○○○

Re: How much money for retirement

5MM for the good life!

Gabe

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Capital
Participant ○○○

Re: How much money for retirement


@youth wrote:

5MM for the good life!

Gabe


Based upon the issues that the original poster cited I do not see how this could be possible. 

Capital
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kzug
Explorer ○

Re: How much money for retirement

Lots...  

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youth
Explorer ○○○

Re: How much money for retirement

Capital......I understand, however for those not in that situation mentioned, I do believe that 5MM Is the optimum amount necessary to live the "good life".

Gabe

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FD1001
Valued Contributor

Re: How much money for retirement


@youth wrote:

Capital......I understand, however for those not in that situation mentioned, I do believe that 5MM Is the optimum amount necessary to live the "good life".

Gabe


Mmm... Why it's 5 and not 4,4.5 or 8? I don't believe in absolute numbers but % and multipliers.

If someone spends $50k annually then 2 million should be enough but If they spend $500k annually then 5 million is not enough. 

hugh7656
Explorer ○○○

Re: How much money for retirement

I didn't start my retirement savings until about 52-53.  I ended up ok by 65.  Max out your 401K each year.   In 2019 it was 25000 for a single person.  There is a problem with 401k.  You don't want all your money in 401K and IRA.  Here is a better rule.  After you hit 59.5 and before taking SS, start converting IRA to Roth.  Here is the kicker.  When you take SS, your SS becomes from 0 to 85% taxable especially for married couples. Don't think you taxes will go down in retirement.  They will for a few years but if you have all your money in 401K or IRA when you hit 70.5 then RMD start it will force 85% your SS taxable.  You can avoid this by having money in taxable or Roth accounts.   

Starting at 51 savings is OK or it was for me.

Don't live off your taxable money 1st.  (save it)  If you get your 401K-IRA money high then live off your IRA money after 59.5 1st. . 

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Juris2
Explorer ○○○

Re: How much money for retirement

Almost all the suggestions -- references -- above are general in nature and don't account for two things that may be very important.

1) One often overlooked factor in the savings calculation is savings for children's college education. Depending on the type of college or university that could require as much as $500,000 per child. (When my children attended college the costs were about $120K for each of them. We had some help from the grandparents, but it was still a lot of money 20 years ago.)

2) Another factor is that most people are married, so retirement is not only an individual event but most often a family event. All the calculations referred by others here have to take couples into account in retirement savings possibilities and needs.

Obviously other costs, such as medical and health insurance, also depend on needs for families, not just individuals.

I would also add that some types of career start late, perhaps after graduate education, military service, or other major events. Those may delay the starting dates for savings and investing. In my case, my first "real" job began after I completed graduate school at age 27. Partly for that reason, I deferred my retirement til age 70.

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Gary1952
Contributor ○○○

Re: How much money for retirement

The question was how much do I need for retirement. Not how much do WE need or how much for educating kids. The amount is probably not relevant. What is relevant is to do the best possible things from this day forward. For that he got a lot of good info.

However there was not much info in the OP. He may have $5m and thinks it is not enough.

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Juris2
Explorer ○○○

Re: How much money for retirement

Gary, retirement planning is seldom just an individual calculation, and it should begin from a broader and more realistic perspective.

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FD1001
Valued Contributor

Re: How much money for retirement


@Juris2 wrote:

Almost all the suggestions -- references -- above are general in nature and don't account for two things that may be very important.

1) One often overlooked factor in the savings calculation is savings for children's college education. Depending on the type of college or university that could require as much as $500,000 per child. (When my children attended college the costs were about $120K for each of them. We had some help from the grandparents, but it was still a lot of money 20 years ago.)

FD: paying for your kids education is a choice not a must and paying $500K is definetely not a must.. Paying for your retirement is a must.

2) Another factor is that most people are married, so retirement is not only an individual event but most often a family event. All the calculations referred by others here have to take couples into account in retirement savings possibilities and needs.

FD: I hope we all talk about family event and not an individual  :-)

Obviously other costs, such as medical and health insurance, also depend on needs for families, not just individuals.

FD: same again, we must take into consideration....everything including LTC.

I would also add that some types of career start late, perhaps after graduate education, military service, or other major events. Those may delay the starting dates for savings and investing. In my case, my first "real" job began after I completed graduate school at age 27. Partly for that reason, I deferred my retirement til age 70.


 

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