What a $1M Retirement Looks Like in America(wsj.com)
wsj.com
What a $1M Retirement Looks Like in America
https://www.wsj.com/articles/heres-what-a-1-million-retirement-looks-like-in-america-11671890735
129 comments
FYI 4% rule is probably too aggressive because it’s based on historical U.S. stock market data for a 30 year retirement. People are living longer and it’s a better assumption to use global stock market returns (because there’s no reason to think U.S. stocks will continue to outperform the global average - they very well may revert to the mean).
3% is a better bet for people retiring today.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227132
3% is a better bet for people retiring today.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227132
Cant you just guarantee your ability to do the 4% rule by buying some 30 year treasuries (the current interest rate is ~4%)? If you're worried that interest rates will be lower if that matures and you're still alive, you could even look at annuities (not that an annuity is necessarily the right move)
Not exactly because the 4% rule allows you to increase your withdrawals throughout time to track inflation. That would it be true if the treasuries.
Also worth noting that the 4% rule is not designed for principle preservation. So you end up with zero after 30 years.
I’m contrast, your approach would preserve the principle.
Also worth noting that the 4% rule is not designed for principle preservation. So you end up with zero after 30 years.
I’m contrast, your approach would preserve the principle.
The 4% rule is inflation-adjusted, so no.
You can do it with TIPS:
https://www.advisorperspectives.com/articles/2022/10/24/the-...
https://www.advisorperspectives.com/articles/2022/10/24/the-...
Some people are living longer. But the average is decreasing in the US.
The average just got whalloped by a deadly pandemic, so the average today is probably not representative of how long a person should expect to live in the future.
The average was decreasing before the pandemic.
For men, at least
Isn’t this due to things like the opioid crisis etc? Is it still true if you marginalize on HN readers? There might be a few fentanyl addicts here but I suspect fewer?
You can find comments pretty regularly made here by users and former addicts.
There is little reason to suspect that HN would not follow age and income demographics; and chair sitting is a common source of chronic pain.
But also increasing rates of depression, obesity, diabetes, and other chronic diseases led to the decrease in life expectancy.
There is little reason to suspect that HN would not follow age and income demographics; and chair sitting is a common source of chronic pain.
But also increasing rates of depression, obesity, diabetes, and other chronic diseases led to the decrease in life expectancy.
Either way, it’s not relevant for withdrawal guidelines because the relevant statistic is life expectancy at retirement age, not life expectancy at birth.
Things like ODs mostly impact those who aren’t yet of retirement age, so they don’t effect the parts of the actuarial tables used for retirement calculations.
Things like ODs mostly impact those who aren’t yet of retirement age, so they don’t effect the parts of the actuarial tables used for retirement calculations.
The 4% rule paper was written in 1994, when most retirees would expect to live 15.3 (male) to 19.4 (female) more years. People retiring now can expect to live 18.1 to 20.7 years, make and female respectively.
The % rules are calculated using joint actuarial tables and a given percentage chance of going broke before death (I believe it is 5%).
The % rules are calculated using joint actuarial tables and a given percentage chance of going broke before death (I believe it is 5%).
> The first guy in the article built a $1.4 million house...
The article also notes that he doesn't have a mortgage. So that's $1.4M in assets. Not liquid assets, sure, but a lot of folks here are being snarky about it.
If you're already retired, you could do a lot worse than having $1.4M in home equity on top of your existing million dollar retirement savings. There are ways to get at that money, not the least of which is selling the home when the time comes (as it will come for all of us).
The article also notes that he doesn't have a mortgage. So that's $1.4M in assets. Not liquid assets, sure, but a lot of folks here are being snarky about it.
If you're already retired, you could do a lot worse than having $1.4M in home equity on top of your existing million dollar retirement savings. There are ways to get at that money, not the least of which is selling the home when the time comes (as it will come for all of us).
Did you have trouble finding an LTC plan that was reasonably priced to provide enough coverage? As expensive as care is and premiums are, I didn't see pricing that made sense vs. saving for it myself.
(I do have a tiny life insurance plan with a LTC rider so I could get exempted from the payroll tax in WA state.)
(I do have a tiny life insurance plan with a LTC rider so I could get exempted from the payroll tax in WA state.)
Non-JS readable version [1]
[1] - https://archive.ph/RERIk
[1] - https://archive.ph/RERIk
Wait until they find out that the United States has way more debt that it can service over the coming decades, and that the way out is persistent inflation combined with gaming the inflation metric used for Social Security cost-of-living increases.
The US can service essentially any level of debt, and has far lower levels of debt than, most notably, Japan, which continues to function entirely normally.
Certainly, there are countries in a worse place than the United States. Japan or Italy are the first to be likely to blow up in a big way. Greece is a good candidate for blowing up first, but it is small enough to be backstopped by the ECB. Italy is too big to be backstopped. The USA may fall, but it probably won't be the first major economy to do so.
Historically, governments have been prone to currency crises when their debt-to-GDP ratio exceeds 100%. The USA is just slightly above that now, and interest rates have remained low here (and in other countries) because central banks are monetizing the debt. But that can't be sustained forever.
Historically, governments have been prone to currency crises when their debt-to-GDP ratio exceeds 100%. The USA is just slightly above that now, and interest rates have remained low here (and in other countries) because central banks are monetizing the debt. But that can't be sustained forever.
Only if you assume that the US economy will stop growing, and with it the tax base. The US government’s ability to pay debt isn’t just its ability to print money. It’s also the ability to collect tax revenues and given how stable economic growth in the US has been for hundreds of years, it’s reasonable to assume that it can easily pay debts well over 100% of gdp.
Many countries have been above 100% for a while now without any apparent issues
It's not a hard-and-fast rule.
The problem is this: once you have a high level of debt, you become sensitive to interest rate changes. Your debt rises, so you have to increase interest rates to lure investors to buy the bonds. The high interest rate forces to you run a bigger deficit, do you have to borrow even more money. Then investors demand an even high risk premium. That's the cycle.
Once that process takes hold, the only way out is some combination of lower living standards, higher taxes, higher inflation and currency devaluation.
You're right that it hasn't happened yet in the modern era. But it will. Remember where you heard it first.
The problem is this: once you have a high level of debt, you become sensitive to interest rate changes. Your debt rises, so you have to increase interest rates to lure investors to buy the bonds. The high interest rate forces to you run a bigger deficit, do you have to borrow even more money. Then investors demand an even high risk premium. That's the cycle.
Once that process takes hold, the only way out is some combination of lower living standards, higher taxes, higher inflation and currency devaluation.
You're right that it hasn't happened yet in the modern era. But it will. Remember where you heard it first.
>Remember where you heard it first.
I first heard it in a book written in 1986. It showed debt growing exponentially and forecast hyperinflation and economic collapse. People have been crying about that particular wolf for quite a long time.
I first heard it in a book written in 1986. It showed debt growing exponentially and forecast hyperinflation and economic collapse. People have been crying about that particular wolf for quite a long time.
It's true that the country will be fine for a while but savers are getting decimated in the process.
That $1M nestegg will feel like $250k in a few years.
That $1M nestegg will feel like $250k in a few years.
That’s why it’s better to have a mix of assets, some that can be easily liquidated, than cash.
$1m in the right assets could become $4m in youre scenario with the same purchasing power of the $1m before inflation.
In reality, you’ll probably lose some value though because the people holding cash that now have far less purchasing power, which torpedoes demand. Still better to be in assets than cash though.
$1m in the right assets could become $4m in youre scenario with the same purchasing power of the $1m before inflation.
In reality, you’ll probably lose some value though because the people holding cash that now have far less purchasing power, which torpedoes demand. Still better to be in assets than cash though.
>$1m in the right assets could become $4m in youre scenario with the same purchasing power of the $1m before inflation.
Yes, the "place bets in a rigged casino to beat inflation" strategy.
A terrible idea for people over 50 that are looking for a rock solid retirement solution but when the government is robbing savers, one of the only options.
Yes, the "place bets in a rigged casino to beat inflation" strategy.
A terrible idea for people over 50 that are looking for a rock solid retirement solution but when the government is robbing savers, one of the only options.
Inflation is headed down. It's not a completely clear picture yet, but I think this is the only reasonable conclusion from the current statistics. Things could change, but right now the arrows all point in the right direction.
The pace of growth has slowed, but it is still growing in absolute terms at multi-decade highs.
YoY inflation for the US:
Jun 22: 9.1% Jul 22: 8.5% Aug 22: 8.3% Sep 22: 8.2% Oct 22: 7.7% Nov 22: 7.1%
The only way I can understand your comment is if you are confusing inflation (change in price level) with price level itself.
Inflation is slowing down and has been for months.
[0] https://www.statista.com/statistics/273418/unadjusted-monthl...
Jun 22: 9.1% Jul 22: 8.5% Aug 22: 8.3% Sep 22: 8.2% Oct 22: 7.7% Nov 22: 7.1%
The only way I can understand your comment is if you are confusing inflation (change in price level) with price level itself.
Inflation is slowing down and has been for months.
[0] https://www.statista.com/statistics/273418/unadjusted-monthl...
So we've still got high inflation, and the fed seems like it's only got so long until it'll resume pumping money into the economy.
If you invest in real assets, such as stocks or real estate, your savings should be more or less safe from inflation.
So far in 2022 this has not been true. Compare the 1 year of VOO to inflation.
USD inflation, no idea but like +8-12% depending on what you are trying to buy? VOO -20%.
Ouch. Personally this year I have had better results holding cash than investing it to hedge.
USD inflation, no idea but like +8-12% depending on what you are trying to buy? VOO -20%.
Ouch. Personally this year I have had better results holding cash than investing it to hedge.
There are always exceptions.
Fundamentally, when both prices and wages go up, there’s no reason to expect companies to lose real value.
AFAIK in 2022 we’re seeing cost-push inflation and wages haven’t really gone up, which could partially explain why companies are having difficulties producing and selling.
Fundamentally, when both prices and wages go up, there’s no reason to expect companies to lose real value.
AFAIK in 2022 we’re seeing cost-push inflation and wages haven’t really gone up, which could partially explain why companies are having difficulties producing and selling.
Not for long. Just as long as the Dollar is the world reserve currency. Something that seems to be coming to an end in the next one or two decades.
If the US's debtors wish to have their debts converted into a 2nd rate (i.e. non-reserve) currency, then by all means, let's see it happen. It will be easier to pay off the debt if that happens (just harder to accumulate more).
They don't need to sell their bonds in US Dollars. Just buying less is enough to play havoc with the American economy, given the gargantuan trade deficit it runs every year.
> If the US's debtors
I think you mean creditors. Debtors is the opposite.
I think you mean creditors. Debtors is the opposite.
The way I read it, debtor makes more sense to their point.
Even worse... the 4% rule is only tested over 30 years. If you're retiring at 55 you should probably be looking at a withdrawal rate of 2.5 - 3%, so 35-40 times your desired retirement income
Spends tends to go down with age though. If you live to 90 you aren’t going to be jetsetting around, you’ll just be resting at home all day.
In an elder care facility that costs?
If I retire at 55, I'm more likely to be dead at 85 than broke.
That should cheer you up!
https://engaging-data.com/will-money-last-retire-early/
That should cheer you up!
https://engaging-data.com/will-money-last-retire-early/
First bear market in over a decade and suddenly the entire FIRE community capitulates to a decision that keeps them working for another decade. What a joke.
The FIRE community were definitely extrapolating from a 15 year bull run and assuming they had the foresight to find the next FAANG for the next 40 years. I like a lot of the FIRE stuff but I didn’t the numbers held up over a long retirement when you factored in inflation.
I was mostly frustrated with the "100% VTSAX" mantra, especially across 2020-2021, as every possible valuation measurement was screaming how overvalued things were. And any attempt at pointing these things out received a harsh reply of "4% rule!" and "Stick to your allocations!" and pictures of 10-yr charts.
100% VTSAX has actually performed pretty well relatively. International & Bond markets are not doing great either.
I don't think that's the case. It must means you need to lower your retirement expectations.
That's only if you plan to leave your stock portfolio to your children when you die. You can take out more than 4% if your plan is to use up your savings while you are alive.
Sadly this isn't the case. Volatility in the stock market will see your withdrawals deplete your equity at a faster rate during downturns and put you at risk of going broke early.
A $1M stock portfolio may not service $50K/yr for 20 years, let alone the rest of your life. A 40% downturn in the early years will see you go kaput.
If you want to leave nothing you probably need to provision for 40 years and build a bond ladder yourself (rather than buy in to bond funds). The problem with that though is you're exposed heavily to inflation, which equity will give you some protection from over the long term
A $1M stock portfolio may not service $50K/yr for 20 years, let alone the rest of your life. A 40% downturn in the early years will see you go kaput.
If you want to leave nothing you probably need to provision for 40 years and build a bond ladder yourself (rather than buy in to bond funds). The problem with that though is you're exposed heavily to inflation, which equity will give you some protection from over the long term
4% of 1M is $40k, not 50.
The idea is you withdraw $40k/year and invest in low risk income funds that yield 2-3%/year.
So withdrawing $40k gives you about 40-50 years and that’s safe for most 65 year olds.
The idea is you withdraw $40k/year and invest in low risk income funds that yield 2-3%/year.
So withdrawing $40k gives you about 40-50 years and that’s safe for most 65 year olds.
A 3% nominal yield doesn't even cover inflation, so you're not getting more than 25 years out of that $1M if you draw it down at an adjusted $40K/yr
Use cfiresim or any other retirement calculator and you can choose your length and mix. We don't have to rely on the calculations of someone from 1993...
cfiresim basically confirms the 4% rule over 30 years. That said, if you mix in state benefits things are a lot more favorable for higher withdrawal rates.
You can set your withdrawal rate in the mix of your assets. It does much more than confirm or not the 4% rule.
There's also firecalc which is similar but has a weird user interface.
There's also firecalc which is similar but has a weird user interface.
Despite being well off income-wise, my expenses are under $20k/yr on average. This is with owning a home, buying a car every 5 yrs, and basically buying anything else I might want. I could go as low as $5k/yr in fixed expenses if I had to.
I could spend more, but can't think of any additional products I'd want to clutter up my house with.
Not doing anything too special/weird here (I grow some of my own food and try to repair things myself, but that's about it), so seems strange you'd need so much in retirement.
I could spend more, but can't think of any additional products I'd want to clutter up my house with.
Not doing anything too special/weird here (I grow some of my own food and try to repair things myself, but that's about it), so seems strange you'd need so much in retirement.
$20K/yr is ridiculously low spend. Do you opt out of health insurance or something? I don't know how you could do that unless you are in extreme VLCOL area.
For comparison I'm in MCOL US and my spend this year will probably be about $28K. Taxes, healthcare, groceries, eat up a huge chunk of that. And I buy nothing but essentials (no TV, no streaming, no vacations, drive an old car, no restaurants, starvation level food consumption).
For comparison I'm in MCOL US and my spend this year will probably be about $28K. Taxes, healthcare, groceries, eat up a huge chunk of that. And I buy nothing but essentials (no TV, no streaming, no vacations, drive an old car, no restaurants, starvation level food consumption).
I have health insurance provided by my employer, but when not employed, I skip it and just pay for anything out of pocket. Hasn't been a problem so far, but I can see how people more attached to health care services might find that hard to make work. Their numbers (and perhaps mine later in life) will be different, of course.
I live in WV. Per capita income in my county is $14k, so most here are living on much less. My only fixed costs are power, property tax (which is pretty low here), internet service, some firewood to supplement what I cut myself, some food to round out the garden diet, and a twice a year run to the dump. But, that's only about $5k/yr. The rest are non-essentials, like buying a new car instead of used, trips, hobby supplies, and the occasional video game.
I live in WV. Per capita income in my county is $14k, so most here are living on much less. My only fixed costs are power, property tax (which is pretty low here), internet service, some firewood to supplement what I cut myself, some food to round out the garden diet, and a twice a year run to the dump. But, that's only about $5k/yr. The rest are non-essentials, like buying a new car instead of used, trips, hobby supplies, and the occasional video game.
Ah, you play game of life on easy mode, you have no kids.
I was living on sub-10k$/year in the heart of the most expensive city on planet - Zurich (back then), while owning nothing. That was rather trivial, hiking and walking in the forests is for free, great public swimming pools are cheap and lake was for free in the summer so staying happy and fit was easy to achieve.
But like with all games, playing games on easiest modes aint the idea of most rewarding fun for most folks, and this metaphor is also true for life itself.
I was living on sub-10k$/year in the heart of the most expensive city on planet - Zurich (back then), while owning nothing. That was rather trivial, hiking and walking in the forests is for free, great public swimming pools are cheap and lake was for free in the summer so staying happy and fit was easy to achieve.
But like with all games, playing games on easiest modes aint the idea of most rewarding fun for most folks, and this metaphor is also true for life itself.
Can confirm that SWE salary + no kids + modest needs/desires can make for an easy mode life. Myself and some others I'm familiar with in a similar situation use the free the bandwidth to load up on complexity in other areas, like work. Others just enjoy an easy life. Either can be quite rewarding, just as I'm sure procreating sometimes is.
I also didn't have kids and don't regret it. BTW I looked it up and the PA county I'm in is about $42K per capita income, highest in the state, so yeah don't move here lol.
Ah, that makes sense. FWIW I'm one state over in PA, philly suburbs, and the per capita income here I think is the highest in the state or close to it. My SALT alone is $5K. Marketplace health plan is nearly $4.5K just for premiums and the government is kicking in even more than what I pay, but its a PPO so more of a "luxury" plan. The HMO plans here, which I used for a while, are just too much red tape to actually use effectively and they limit you to some, shall we say, budget providers.
I had noted before that WV seems cheaper, though I think if I move out of PA I'll head someplace warmer.
I had noted before that WV seems cheaper, though I think if I move out of PA I'll head someplace warmer.
>I have health insurance provided by my employer, but when not employed, I skip it and just pay for anything out of pocket.
This is a fantastic way to lose everything from something as simple as missing a step and breaking your foot in the US.
This is a fantastic way to lose everything from something as simple as missing a step and breaking your foot in the US.
In that situation, I would just pay for it (and have in the past). If it was one of those nightmare bills you hear about sometimes, I would simply extend my working years by +1 or whatever to even things out. Or, maybe I'd just pretend I lost it in a market downturn and move on with life.
You don't really need $70K, the idea is to keep up with inflation (by investing) and overprovision enough to protect yourself from market volatility (big cash buffer, bond ladders, etc)
Most people right now will probably be considering annuities to offload some of the risk
Most people right now will probably be considering annuities to offload some of the risk
Medical insurance alone would be $20k per year for most people in the US.
That’s pretty fancy insurance. Check out healthcare.gov and you’ll find many plans where the premium plus deductible are much lower than $20k.
"In 2017, the couple sold their vacation home and built a $1.4 million house in Newport with views of the water. Mr. McKinney tiled the kitchen and bathrooms himself."
It sounds like they could have much less house and have had closer to $2M in retirement savings.
It sounds like they could have much less house and have had closer to $2M in retirement savings.
They tiled the kitchens themselves though so really it was quite frugal
Don't forget the bathrooms too
Not in Newport with a view.
"When she was in her mid 50s, Connie Gores got a wake-up call from a financial adviser.
At the time, Ms. Gores had saved about $250,000. The adviser told her that unless she started saving more, she would likely have to live on Social Security alone when she retired.
The conversation shook her into action. By the time she did retire as a university president, she was socking away about 26% of her roughly $250,000 salary."
She had 15 years of saving 26% of $250k to only have $250k??? Yikes. Should have been able to save more, that is insane, because the numbers don't match up.
Age 55 (says "mid 50s")
Savings $250k
Age 65 (retirement "about 3 years ago", now age 68)
Savings $1m
10 years working while saving 26% of $250k = $650k
$250k + $650k = $900k
Add another 10% for investment returns.
Savings $250k
Age 65 (retirement "about 3 years ago", now age 68)
Savings $1m
10 years working while saving 26% of $250k = $650k
$250k + $650k = $900k
Add another 10% for investment returns.
[deleted]
No, she had $250k and was told it wouldn't be enough. So she then started saving more (up to 26% of her annual pay by the time she did retire).
I agree with the parent's GP's interpretation. Woman was making $250k annual. Up to that point had only had a retirement account of $250k. Which strikes me as sheer bananas.
> She had 15 years of saving 26% of $250k to only have $250k???
But that part is just... wrong.
We don't know what the savings rate was before her "mid 50s" - clearly it was LESS than 26% of $250k, and yes, that is bananas. But GGP's text does not match what the article says.
In reality, she started with $250k around 55, and then saved (up to) 26% of $250k for 10 years, retiring at 65 with about $1 million saved.
But that part is just... wrong.
We don't know what the savings rate was before her "mid 50s" - clearly it was LESS than 26% of $250k, and yes, that is bananas. But GGP's text does not match what the article says.
In reality, she started with $250k around 55, and then saved (up to) 26% of $250k for 10 years, retiring at 65 with about $1 million saved.
I think we were focusing on different parts. Yes, she was originally saving << 26% of her salary. My interest was strictly on her high salary and seemingly non-existent retirement strategy.
Since it wasn't clear, I was responding to this part of their comment:
> She had 15 years of saving 26% of $250k to only have $250k??? Yikes.
Which was a gross misinterpretation of the text they had just quoted. Yes, it's bananas that making that much she only had $250k in savings for retirement. But that's not what I was responding to. She did not save 26% of $250k for a decade and only end up with $250k in savings.
> She had 15 years of saving 26% of $250k to only have $250k??? Yikes.
Which was a gross misinterpretation of the text they had just quoted. Yes, it's bananas that making that much she only had $250k in savings for retirement. But that's not what I was responding to. She did not save 26% of $250k for a decade and only end up with $250k in savings.
She began with $250k and after 15 years of saving 26% ended up with somewhere over a million.
> $1 million nest egg can replace about 85% of a $70,000 median household income.
While property taxes depend on zip code, if the mortgage is paid, why does a couple need this much income?
While property taxes depend on zip code, if the mortgage is paid, why does a couple need this much income?
Paying for enjoyment. Most people don’t live near their kids or grandchildren in retirement and want to travel to see them and otherwise. The popular idea of retirement is about leisure which has a cost. On top of this, most money goes to medical costs due to age.
Long term care is incredibly expensive (much more than those college bills) and medicare doesn't cover all of that. They recently started offering long term care insurance so you can sign up for that when you're younger and get the cheaper rates (of course you have to determine how long you want to save vs how much you'll be saving).
No one needs this much, but lots of people want this much or even a lot more. Some folks have expensive tastes while others are content with reading library books in a cabin in the woods.
Medical costs keep growing as you get older.
Doesn't Medicare cover most of that?
Medicare covers a lot, but excludes a lot (glasses, hearing aids, long-term care, for example). Add in Medicare premiums, supplemental premiums, and co-pays, and it's not inexpensive.
Thankfully, glasses and hearing aids have been disrupted recently.
And the most costly supplements have now been disrupted by Mark Cuban (along with Medicare able to negotiate).
And the most costly supplements have now been disrupted by Mark Cuban (along with Medicare able to negotiate).
Most but depending on how healthy you are it can be very expensive.
You will pay $170 a month for Medicare Part B premium and then IIRC my mom pays around $400 a month for Medicare supplement because Medicare often pays like 80% of the bill until you hit deductable.
https://www.medicare.gov/basics/get-started-with-medicare/me...
You will pay $170 a month for Medicare Part B premium and then IIRC my mom pays around $400 a month for Medicare supplement because Medicare often pays like 80% of the bill until you hit deductable.
https://www.medicare.gov/basics/get-started-with-medicare/me...
no.
Property taxes in Texas are large enough to be half a mortgage payment, but the appraisal can be stopped when someone hits 65
"With interest rates rising, Mr. McKinney believes bonds are a bad bet and has all of the couple’s portfolio—now worth $700,000, due to withdrawals—in stocks. He favors stocks with high dividends and trades ETFs that rise when the market falls."
Seems bold.
Seems bold.
Probably took losses on the bond portfolio when he saw rates rising. Should’ve just held steady.
personally my retirement strategy is a triplex (multi-family home with 3 units). for better or for worse multi-family owner occupied housing in the united states is too lucrative. especially if you bought before covid.
the problem with equities or bonds alone is that even with a good allocation it's hard to protect yourself completely from retiring into a recession.
if the usa allowed multi families by right this would be something that could help lower housing costs and help retirees.
regarding the article, it's crazy how people making 6 figures don't properly save for retirement. Americans truly have a spending problem. based on the professions of some of the people in the article, I would expect them to have more money but it's hard to say without knowing when and how much they made.
the problem with equities or bonds alone is that even with a good allocation it's hard to protect yourself completely from retiring into a recession.
if the usa allowed multi families by right this would be something that could help lower housing costs and help retirees.
regarding the article, it's crazy how people making 6 figures don't properly save for retirement. Americans truly have a spending problem. based on the professions of some of the people in the article, I would expect them to have more money but it's hard to say without knowing when and how much they made.
The problem with real estate is your retirement plan for a triplex may not materialize if you own in Detroit, and it's the 1970s and car manufacturing won't ever decline. It's putting a lot of eggs in one basket. You have no way of knowing if the location will fall out of favor. At least with the stock market, there are many other actors who have a shared interest in its success.
Though you're not wrong, most places did not see such a collapse such as Detroit. In the end though, you're hedging greatly with the fact that it's a multi-family. So even if it did fall out of favor, you're paying a fraction of what you would otherwise due to the rental income gained from the other units.
Most importantly, you were going to spend money to live somewhere anyway.
Most importantly, you were going to spend money to live somewhere anyway.
> the problem with equities or bonds alone is that even with a good allocation it's hard to protect yourself completely from retiring into a recession
I've never understood this logic... Even if I retire in a recession, I only draw down say 5% of my equities each year. Recession lasts say two years. So only 10% of my holding is liquidated when valuations are low.
I've never understood this logic... Even if I retire in a recession, I only draw down say 5% of my equities each year. Recession lasts say two years. So only 10% of my holding is liquidated when valuations are low.
a good portfolio will be liquidated from equities to bonds as you get older. if there is a recession while this process is happening you both reduce your holdings and are at risk. not to mention that there's no guarantee that it will ever go back to what it was.
The beauty of real estate is that you can live off the income rather than having to draw down the principal like in a traditional stock/bond portfolio which doesn’t have a very strong current yield. But, as you age you need a manager and that takes a bite out of it.
[deleted]
Wonder how much expats in retirement will increase when people realize they have no chance at living with their savings here.
It’s already happening with retirees moving to Mexico, Portugal, and Southeast Asia. Agree you’ll see it pickup as more folks retire and can’t make ends meet in the US.
Half of retirees over 55 have no retirement savings whatsoever, and will rely solely on Social Security income.
https://www.cnbc.com/2022/11/02/retire-abroad-in-these-10-ci...
https://www.aarp.org/retirement/retirement-savings/info-2019...
Half of retirees over 55 have no retirement savings whatsoever, and will rely solely on Social Security income.
https://www.cnbc.com/2022/11/02/retire-abroad-in-these-10-ci...
https://www.aarp.org/retirement/retirement-savings/info-2019...
Is this new though? I don’t think people in the past saved much either
It's a lengthy discussion topic to say the least. High level, pension coverage and associated healthcare plans have declined over the decades, 401ks (they were initially designed as a tax shelter for the wealthy) were parroted as the solution when they weren’t, and with the healthcare arrangement in the US, what might have been sustainable previously no longer is. Hence, people bouncing from an extraction economy to enjoy higher standard of living during the last chapter of their life (because it ain’t getting fixed in the US in a timeframe that matters to them). Florida was the default for a lot of retirees because of no state income tax, warm weather, and low cost of living, but those days are long gone with the residential insurance market collapsing, the price of real estate at all time highs, and the extreme shortage of doctors, RNs, CNAs, and care home aides.
Similar to college costs, the amount of total capital required to retire comfortably is accelerating away (due to underlying cost inflation, compressed future capital market returns, and longer expected lifetimes) from the capability of the mean worker to accomplish the necessary level of wealth accumulation during a work lifetime. Very few levers to pull besides earning more or finding somewhere to live that costs less.
Similar to college costs, the amount of total capital required to retire comfortably is accelerating away (due to underlying cost inflation, compressed future capital market returns, and longer expected lifetimes) from the capability of the mean worker to accomplish the necessary level of wealth accumulation during a work lifetime. Very few levers to pull besides earning more or finding somewhere to live that costs less.
So the wealthy are sheltering a modest value every year in their 401k?
(the contribution limit this year is ~$20,000, which hey, good for people that can set that much earned income aside, but I'm not sure they are "the wealthy" that you mean. Even the considerably higher overall contribution limit for catchup contributions doesn't seem like something "the wealthy" would be worried about for tax sheltering)
(the contribution limit this year is ~$20,000, which hey, good for people that can set that much earned income aside, but I'm not sure they are "the wealthy" that you mean. Even the considerably higher overall contribution limit for catchup contributions doesn't seem like something "the wealthy" would be worried about for tax sheltering)
https://news.ycombinator.com/item?id=31326933
https://news.ycombinator.com/item?id=29780629
https://www.bogleheads.org/wiki/Mega-backdoor_Roth
https://www.washingtonpost.com/outlook/2022/04/20/retirement...
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3997927
https://www.epi.org/publication/retirement-in-america/
https://www.census.gov/library/stories/2022/08/who-has-retir...
https://news.ycombinator.com/item?id=29780629
https://www.bogleheads.org/wiki/Mega-backdoor_Roth
https://www.washingtonpost.com/outlook/2022/04/20/retirement...
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3997927
https://www.epi.org/publication/retirement-in-america/
https://www.census.gov/library/stories/2022/08/who-has-retir...
Okay, do I need to read through all that and find out how your definition of "the wealthy" aligns with the contribution limits?
Roths aren't even vaguely related to the origin of 401ks, so I guess no need to look at those.
Roths aren't even vaguely related to the origin of 401ks, so I guess no need to look at those.
Whether you read them is up to whether you value citations for my thesis. I have no preference either way, as nothing material will result from me attempting to prove the thesis in this thread. I hope the links are helpful to whomever encounters the thread in the future.
If I didn't believe my thesis was on a solid foundation of facts, I wouldn't have asserted it.
If I didn't believe my thesis was on a solid foundation of facts, I wouldn't have asserted it.
Whether you read them is up to whether you value citations for my thesis. I have no preference either way, as nothing material will result from me attempting to prove the thesis in this thread. I hope the links are helpful to whomever encounters the thread in the future.
If I didn't believe my thesis was on a solid foundation of facts, I wouldn't have asserted it.
401ks were absolutely initially designed as a tax shelter (a way to defer taxes on income). It may have been a "loophole" at the beginning, but regulation and legislation quickly embraced it.
My contention is that a tax shelter that is subject to relatively modest contribution limits was not initially designed for the wealthy.
Defined benefit plans are great for the recipients, but we have also sort of proved that we are terrible at properly funding them. Making the future pay for present day promises isn't likely to be sustainable.
If I didn't believe my thesis was on a solid foundation of facts, I wouldn't have asserted it.
401ks were absolutely initially designed as a tax shelter (a way to defer taxes on income). It may have been a "loophole" at the beginning, but regulation and legislation quickly embraced it.
My contention is that a tax shelter that is subject to relatively modest contribution limits was not initially designed for the wealthy.
Defined benefit plans are great for the recipients, but we have also sort of proved that we are terrible at properly funding them. Making the future pay for present day promises isn't likely to be sustainable.
I believe we’ve equally proven that defined contribution plans are fairly worthless compared to pensions, when 50% of retirees have no retirement savings and the median balance of these accounts is in the low five figures, no? Workers are simply not lucky enough (to have the financial means), nor financially savvy enough, to manage this themselves across a lifetime.
From my last link:
> The median value of 401(k)-style accounts was $30,000 and the median IRA or Keogh value was $30,820 — not statistically different.
> The median total amount employees contributed in 2020 to their own IRA or Keogh account was $2,514. The median amount they contributed to their 401(k)-style accounts ($3,599) and pension plans ($3,257) was slightly higher. Future research will examine employer contributions in combination with employee contributions.
Come on, based on available data this isn’t a functioning asset accumulation system for worker retirement, it’s theater to keep the hoax going. Outliers are going to trot out their six and seven figure account balances, but they are just that: outliers.
From my last link:
> The median value of 401(k)-style accounts was $30,000 and the median IRA or Keogh value was $30,820 — not statistically different.
> The median total amount employees contributed in 2020 to their own IRA or Keogh account was $2,514. The median amount they contributed to their 401(k)-style accounts ($3,599) and pension plans ($3,257) was slightly higher. Future research will examine employer contributions in combination with employee contributions.
Come on, based on available data this isn’t a functioning asset accumulation system for worker retirement, it’s theater to keep the hoax going. Outliers are going to trot out their six and seven figure account balances, but they are just that: outliers.
It's not like every job came with a pension before 401ks (apparently it peaked at about 50%). And partially vested pensions have their own issues (deferring compensation and then not receiving it).
I'm not actually arguing that 401ks are a solution to retirement though. I'm arguing that they weren't initially designed as a tax shelter for the wealthy.
I'm not sure what an improved system looks like. Probably something like a pension where the employer is not allowed to be the entity responsible for paying out the benefit (so that present day promises can't be funded with future contributions).
I'm not actually arguing that 401ks are a solution to retirement though. I'm arguing that they weren't initially designed as a tax shelter for the wealthy.
I'm not sure what an improved system looks like. Probably something like a pension where the employer is not allowed to be the entity responsible for paying out the benefit (so that present day promises can't be funded with future contributions).
Around 15% of my apartment building here in Medellín, Colombia are retirees that moved from the US. Cost of living being 1/5 of of the US I would be doing the same.
This is all perfectly fine.
The wealthy years of the 20th century (driven by ludicrous amounts of fossil fuel exploitation) are an incredible anomaly in human history anyway. We're just reverting back to the mean when the vast majority of people never retired. It was good enough not to die of hunger.
This is going to continue until we start decoupling more of the economy from fossil fuels.
The wealthy years of the 20th century (driven by ludicrous amounts of fossil fuel exploitation) are an incredible anomaly in human history anyway. We're just reverting back to the mean when the vast majority of people never retired. It was good enough not to die of hunger.
This is going to continue until we start decoupling more of the economy from fossil fuels.
This is a super narrow pessimistic viewpoint that is rife with agenda pushing. We do not know if the wealthy years of the 20th century are over yet. Neo-feudalism is possible, but unlikely to be the same conditions as the middle-ages standard of work until you drop dead.
Not every single problem in society is fixed by getting off fossil fuels. "Decoupling" the economy from fossil fuels will not be a magic solution in this case.
Not every single problem in society is fixed by getting off fossil fuels. "Decoupling" the economy from fossil fuels will not be a magic solution in this case.
The past several decades saw a massively booming economy that allowed for big pensions and huge gains on real estate.
Don’t you lose social security if you move outside the us?
You’re entitled to your Social Security benefits regardless of where you reside globally. You don’t have Medicare coverage outside of the US though.
Typically, your Social Security is your passive/pension/monthly income that qualifies you for a long term retirement visa.
A hack you can do if you can work remotely is collect Social Security out of the country while working remote; this increases your income and if your annual income replaces previous lower income years on your Social Security wage record, your monthly benefit will go up over time as the SSA re-evaluates your benefit annually (not to mention cost of living adjustments).
Typically, your Social Security is your passive/pension/monthly income that qualifies you for a long term retirement visa.
A hack you can do if you can work remotely is collect Social Security out of the country while working remote; this increases your income and if your annual income replaces previous lower income years on your Social Security wage record, your monthly benefit will go up over time as the SSA re-evaluates your benefit annually (not to mention cost of living adjustments).
It's kind of wild to think about that these people are portrayed as living somewhat frugally (although so are the ones from the $2m article linked inside).
Most people couldn't dream of accumulating that much money over their lifetime and would be considered crazy rich in most countries.
Costs a lot to expatriate though. Deemed disposition on exit = capital gains.
Needing $1M has not been needed to retire comfortably for a great many people. While Canadian-focused, book The Sleep-Easy Retirement Guide has good numerical examples:
* https://findependencehub.com/qa-with-author-david-aston-abou...
In Table 5-1, he lists some real-life example of couples spending, with the average basics (shelter, groceries, vehicles, etc) totalling CA$ 42K and with average extras (entertainment, travel, etc) going to CA$ 72K. A "modest" couple spends CA$ 56K per year, and an "affluent" example couple spends $112K. In Table 5-2 he does the same thing for single retirees: the average single retiree spends $27K on basics and with extras $42K total; an "affluent" single retiree spends $90K.
Then in Table 12-1 he lists what nest egg is needed for each of those: a couple with a modest income needs of $42K needs to have $420K saved to retire at age 60 and $150K to retire at age 67. A deluxe lifestyle couple ($100K) needs $2M saved to retire at 60, and $1.3M to retire at 67. For singles, an average lifestyle ($43K) needs $810K to retire at 60 and $510K to retire at 67; a deluxe single ($80K) needs $1.8M to retire at 60 and $1.4M to retire at 67.
The book gives the arithmetic supporting these conclusions. But for a quick example, for the 'basic' lifestyle ($42K) couple: the author assumes each person gets $18K/year in CPP (Social Security) and OAS, which totals $36K just from government benefits. This is a pretty reasonable assumption, as the average OAS is $600/mo and the average CPP is $700/mo, for $1300/mo ($15,600/year):
* https://www.qtrade.ca/en/investor/education/investing-articl...
* https://www.wealthsimple.com/en-ca/learn/how-much-cpp-retire...
Getting to $18K is not a stretch, if (a) you get a little above average, and (b) get more by delay taking the benefit to >65. For a couple, that is $36K per year, so getting to the desired $42K is "just" another $6K per year. With the common "safe withdrawal rate" of 4% we get $6K÷4% = $150K retirement nest egg.
A summary by the author is in:
* https://pmac.org/wp-content/uploads/2014/05/07-02-series-ari...
* https://www.macleans.ca/economy/money-economy/heres-the-real...
Fred Vettese, a now-retired actuary, also has two good books with similar conclusions:
* https://lifeworks.com/en/resource/essential-retirement-guide...
* https://lifeworks.com/en/resource/retirement-income-life
* https://rationalreminder.ca/podcast/104
* https://en.wikipedia.org/wiki/Frederick_Vettese
A lot of folks also use the (supposed) rule of needing 70% of your pre-retirement income: in fact as little as 40% may be needed, per Vettesse:
* https://www.theglobeandmail.com/globe-investor/retirement/re...
* https://archive.ph/tQp2L
* https://findependencehub.com/qa-with-author-david-aston-abou...
In Table 5-1, he lists some real-life example of couples spending, with the average basics (shelter, groceries, vehicles, etc) totalling CA$ 42K and with average extras (entertainment, travel, etc) going to CA$ 72K. A "modest" couple spends CA$ 56K per year, and an "affluent" example couple spends $112K. In Table 5-2 he does the same thing for single retirees: the average single retiree spends $27K on basics and with extras $42K total; an "affluent" single retiree spends $90K.
Then in Table 12-1 he lists what nest egg is needed for each of those: a couple with a modest income needs of $42K needs to have $420K saved to retire at age 60 and $150K to retire at age 67. A deluxe lifestyle couple ($100K) needs $2M saved to retire at 60, and $1.3M to retire at 67. For singles, an average lifestyle ($43K) needs $810K to retire at 60 and $510K to retire at 67; a deluxe single ($80K) needs $1.8M to retire at 60 and $1.4M to retire at 67.
The book gives the arithmetic supporting these conclusions. But for a quick example, for the 'basic' lifestyle ($42K) couple: the author assumes each person gets $18K/year in CPP (Social Security) and OAS, which totals $36K just from government benefits. This is a pretty reasonable assumption, as the average OAS is $600/mo and the average CPP is $700/mo, for $1300/mo ($15,600/year):
* https://www.qtrade.ca/en/investor/education/investing-articl...
* https://www.wealthsimple.com/en-ca/learn/how-much-cpp-retire...
Getting to $18K is not a stretch, if (a) you get a little above average, and (b) get more by delay taking the benefit to >65. For a couple, that is $36K per year, so getting to the desired $42K is "just" another $6K per year. With the common "safe withdrawal rate" of 4% we get $6K÷4% = $150K retirement nest egg.
A summary by the author is in:
* https://pmac.org/wp-content/uploads/2014/05/07-02-series-ari...
* https://www.macleans.ca/economy/money-economy/heres-the-real...
Fred Vettese, a now-retired actuary, also has two good books with similar conclusions:
* https://lifeworks.com/en/resource/essential-retirement-guide...
* https://lifeworks.com/en/resource/retirement-income-life
* https://rationalreminder.ca/podcast/104
* https://en.wikipedia.org/wiki/Frederick_Vettese
A lot of folks also use the (supposed) rule of needing 70% of your pre-retirement income: in fact as little as 40% may be needed, per Vettesse:
* https://www.theglobeandmail.com/globe-investor/retirement/re...
* https://archive.ph/tQp2L
I'm 33 and planning ahead for my retirement, thanks for the input. Is 1.3M figure intended as 2022 money? That's a lot of saving that need to happen!
Nominal dollars when the book was published. Real values will be dealt with real returns over time.
HN still needs a [paywall] for posts that are "on the internet, but not really".
If you've managed to pay down your mortgage by the time you've retired, I see no problem to stress on a $1m nest egg. The most important part of senior planning in my opinion is buying a LTC insurance plan ahead of time. I've seen people run down huge retirement accounts paying $6000 a month for those places.