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Info Seeker

Re: How much do you need for a comfortable retirement?

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Message 1 of 158

That would be "angels" not "angles" in case someone is wondering.  Smiley Happy  I think you need to plan that you will need as much income in retirement as you spend now. We are spending the same as we did when we were working. You won't get the full benefit that SSA tells you because you have to pay for Medicare Parts B&C. And at the end of the year, you may have to pay taxes on your social security. That was a shocker to me. Utilities are my biggest worry - heat, a/c, cable, internet, phone, etc. We moved to a rural area where most expenses are less except utilities. We had other expenses that you get when you move to a new house - curtains, chairs, etc. I spent 3 days in the hospital at $25,000, of which insurance paid 80% - my share $5,000. At least four months of the year we have low heating/ac bills. We're working on eliminating cable @ $140/month by utilitzing an Amazon Firestick.  We will eventually have to get rid of our Apple smartphones - not as much need for them in retirement. When one of our vehicles dies, we won't replace it. We're doing OK for the foreseeable, unknowable future. I'm SO grateful for an employer who encouraged retirement savings by bringing in a financial advisor once a year, whom we could consult with privately, by operating a 401k plan and by profit-sharing. Planning 15-20 years out for your retirement is essential. Putting money aside at the beginning of my career would have been the smartest thing I could have done. Can I start over?

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Silver Conversationalist

Re: How much do you need for a comfortable retirement?

540 Views
Message 2 of 158

Some notes on taking RMDs.  Because your first RMD has to be taken the year you turn 70.5, you RMD divisor depends on your birthday.  For people born between Jan 1-Jun 30, the divisor will be 27.4 because you turn 70.5 in the same year you turned 70.  For people born between July 1 - Dec 31, they turn 71 in the same year they turn 70.5, so their RMD divisor is 26.5.  Make sure you use the right divisor.  Also, make sure you use the divisor on your IRA balances as of Dec 31 of the previous year you take the RMD, not the current balance at the time you take the RMD.  Otherwise you might be taking a low RMD and be fined 50%.  For example, if your IRA was worth $100K on Dec. 31, 2017 but the market had taken a dive and your IRA is worth 50K now, you still have to compute the RMD on the $100K balance for 2018.  Vanguard has an easy to use RMD calculator using you and your spouse's birthdate.

 

https://personal.vanguard.com/us/insights/retirement/estimate-your-rmd-tool

 

Some people use the time between retirement and RMDs to rollover some IRA funds to Roth IRA by rolling over only an amount that would keep them from moving up a tax bracket.  Then when RMD time comes around, there is less IRA balance to have to take an RMD on.  However, if you plan on rolling over IRA funds to a Roth IRA AFTER you start RMDs, the IRS requires you to take your full RMD plus rollover funds from your IRA .  It means that if your RMD is $50K and you want to rollover $50K to your Roth IRA, you will have to withdraw $100K from the IRA to do it.  You can not rollover your RMD.

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Social Butterfly

Re: How much do you need for a comfortable retirement?

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Message 3 of 158

Great conversation by the way @NOTHAPPENING...  I may be learning more than I am imparting.  I never looked much into RMD since it is still a few years off and my accountant will just tell my portfolio manager how much to move. It is what it is I can't really change anything.  I have read about stratagies to pay less taxes.  The big question is is it good or bad to pay taxes.  That all depends on the bottom line.  Which stratigy provides you with the most money.  I inherited part of my mother's account which was taylored to lower her tax bracket but she was in a high bracket when it was taylored.  The tax paperwork was odious so I told my broker to get rid of all that stuff.  He sold off all her equities and moved me to the company's manager protfolio.  The result was I made 300% more profit but had to pay taxes on it.  Even in the highest tax bracket you still keep more than you give to Uncle Sam.  Therefore, it is always better to pay more tax than less tax.  Tax free bonds and equities don't pay as much return and are probably priced to do better if you are in the top tax bracket but I am not. You need a 7 figure income to be in that bracket.

 

This was just food for thought.

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Valued Social Butterfly

Re: How much do you need for a comfortable retirement?

686 Views
Message 4 of 158

@RonMesnardwrote:

@NOTHAPPENING, your math is sound and so is your statement but that is only for the up comming tax year.  This is what the IRS says.

 

https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

 

Actually you only want to take out RMD since the rest still grows tax differed.  As long as the market stays up, your IRA will continue to grow if you have mostly stock. If you were invested purely in a S&P index fund you would be making over $300,000 and only taking out 60,000 if the market hold at this rate.  You could have an RMD of 90k 'if the music lasts that long'.


As you get older, the RMD "factor" gets smaller forcing you to deplete your IRA more rapidly as you age. Your RMD amount may cause you to pay higher Medicare monthly rates (assuming you also have pension, SS benefits, as well as income from other investments). Another complex problem is the tax rates being lowered (normally a good thing) but if you see legislation coming in the future that raises those rates substantially, it may be time to exceed your RMD while the rates are lower. If fact, once you've taken the RMD out, you can even CONVERT some of the IRA to a Roth IRA which doesn't have the mandatory RMD! It's always OK to take more out than the RMD but never lower because of the 50% penalty.

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Social Butterfly

Re: How much do you need for a comfortable retirement?

708 Views
Message 5 of 158

@NOTHAPPENING, your math is sound and so is your statement but that is only for the up comming tax year.  This is what the IRS says.

 

https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

 

Actually you only want to take out RMD since the rest still grows tax differed.  As long as the market stays up, your IRA will continue to grow if you have mostly stock. If you were invested purely in a S&P index fund you would be making over $300,000 and only taking out 60,000 if the market hold at this rate.  You could have an RMD of 90k 'if the music lasts that long'.

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Valued Social Butterfly

Re: How much do you need for a comfortable retirement?

722 Views
Message 6 of 158

@sggbrownwrote:

I will retire in April 2018.  I figure i can maintain my lifestyle pretty comfortably on $68K a year - maybe less, that's pretty still including vacations, helping the kids, etc.  the 2 big 'annoyances' in retirement for me are - my Social Security will be taxable because of the amount of spend down i am taking from my investements and the fact that because i DID manage to save a good amount for retirement ($1.6 million before taxes) I will never be in a lower tax bracket - my min distribution will run about $90K annually at age 70 1/2 - so, hey, might as well take it the tax hits now and enjoy!


At 70.5 years old, your RMD factor is 27.4 so dividing your $1.6 million by 27.4 gives you just over $58K as your RMD amount (pretty good but not $90K)!

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Social Butterfly

Re: How much do you need for a comfortable retirement?

735 Views
Message 7 of 158

I think you are arguing how many angles can dance on the head of a pin!  What does it matter if you could have made a better return if you did you own investing?  You SHOULD have invested your own money and see what happens to it.  Mine has been all over the place and has been lack luster dispite some major triumphs.  It was only this last bull run that has saved me.  My current investor has a great track record for knowing when to play it safe in the market.  After taking a bath in 2000 and 2008 I started using my mom's broker because she didn't lose more than 20% in either crash.  I lost 80% in 2000! 

 

My opinion about how much you need to retire is no one knows.  These retirement calculators are pretty much worthless.  The 2 biggest factors about how much you need are how long will you live and how will your investments do in the next 20 years.  No one has a clue about either!  My opinion is save as much as you can and retire as late as you can unless you have a great deal of money.  Most persons I know who retired before 60 are hurting.  Both assumed their investment would be doing much better and are forced to spend principle as wel as having to get a minimum wage job.  Once you are retired a few years and are in your 60s you are as needed as a square tire. Unless you have rare skill which are in high demand you will never get a real job again unless you know someone.  I am certain they 'will be taken to the cleamers' in the next few years.  Their 'solid' investments will turn to dust with rising interest rates.  They are so ignorant they may be eager for higher interest rates assuming that will make their bonds more productive.  NOT!  Thier bonds are locked into a 1% interest rate.  If the rates go to 2% their bonds will be worth half what they bought them for.  Who would want a 1% rate when they can buy a 2% rate and make double? They need to sell their bonds and buy CDs until the interest rates stabilize then buy bonds at a descent interest rate.  Then bonds will be a good safe investment. 

 

All the complaints I have heard are persons with too little money.  I don't think you can have too much money.  At the very worst, you leave your kids some money. I say make hay while the sun shines!

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Conversationalist

Re: How much do you need for a comfortable retirement?

834 Views
Message 8 of 158

Hi, not sure what state your in but please google the senior job service called - Experience works. They may have a job for you working for either government or non profit organizations right in your community. I know they are not in every state but they pay minimum wage and offer part time work according to what your current situation is.Also I think that there are others out there and if you have an ADRC in your county they may be able to point you in even more directions. I know a man that delivers meals on wheels a few hours a day as a volunteer but he has an economy vehicle and gets federal mileage pay earning around $55 per day.

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Conversationalist

Re: How much do you need for a comfortable retirement?

2,163 Views
Message 9 of 158

All my wife and I need for a comfortable retirement is enough income to cover our normal living expenses.  I didn't get around to retiring until I was 68 and my wife was 66 and eligible for the full Social Security spousal benefit.  As a result, Social Security provides 87% of our normal living expenses but only 66% once you include Federal and State income taxes in our normal living expenses.

 

RMD withdrawals from my IRA account were to be used for an extravagance, new car, major home improvements, or unexpected medical expenses.  What wasn't anticipated when I retired was my IRA more than doubling in value after I retired resulting in my RMD more than doubling as well.  So far, we haven't been able to shed the frugal habits we learned raising three children and putting them through college.  The RMD withdrawals have been moved to a taxable account and invested to ensure that we have assets that can be sold to cover the expenses that we might incur in our nineties.

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Silver Conversationalist

Re: How much do you need for a comfortable retirement?

2,943 Views
Message 10 of 158

Epster wrote:

ASTRAEA wrote:
retiredtraveler wrote:

 

   No semantics won't change anything. Facts will. The average American gains about 25%-33%  in benefits over what is paid in. That is an entitlement. I'm on medicare, and happy to be so. But I'm perfectly aware that the odds are that I will be getting an entitlement, or welfare, if you like.


That's not really accurate, if you factor in the interest you would have earned, had you saved the amount paid in to SS all those years. In the years when we had high interest rates, it didn't take that long for savings to double in value .. so money that was paid in when I started working back in 1973, should have gained a lot more than 25 - 33% by now!

 

"The Rule of 72"


Thank you @ASTRAEA, I was just about to make that point.

 

 


Actually, @retiredtraveler was a bit low on how much more the average person gets back from SS over what they paid in taxes.  Since the taxes were invested in special Treasury bonds and the rates are known, I took a look at those invested earnings.  It hasn't grown near as much as you would think.  Those early taxes were lower than now and your wages were a lot lower too.  The later year taxes haven't had much time to be invested and grow.  For example, my 1973 SS tax for the year was $173.  That year's tax invested in the special T-bonds for the last 45 years is worth $1980 today.  My total taxes paid since 1970 is $155,330 (from my SS statement, page 3) and when invested in the T-bonds, it's worth $343,141, barely over double.  At age 66, when I start SS, it will take me just 5 years to recover the same as I paid and in 10 years I will recover my taxes plus the interest earned in bonds.  At twenty years, I'll have back mine, my employers, and all bond earned interest back, which is 75% more than I personally paid in, or 50% more than my taxes with earnings.  Those are the longest time frames.  Average and lower earner full recovery of all taxes and earnings of employee and employer at full retirement age (FRA) are shorter, from 6-12 years.  People who start before their FRA will take longer but still receive quite a bit more than they paid.  The only way to not make out is to die early.

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