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For you younger people hoping to retire comfortably - give up the dream.

Dex
edited April 2015 in Fund Discussions
First this is for the younger people. Not the first half of the baby boomers ('14-55) or those older.
Give up the idea of retiring comfortably. You don't have a defined pension plan, little in 401K, social security will be pushed out further, a VAT will be instituted to help with the debt (and Obamacare).

I own my home (no mortgage), truck and travel trailer, single (no debt). I retired in '07 at 51 and since then I averaged $27,000 in spending - that includes health ins and taxes. I'm estimating I will spend an average of $38,000 (includes $30,000 for a new truck) from '16-25.
I did a line item budget for this period. After '25 I grow expenses at 4%

Even with a small pension (13,000) and social security I estimate that only 6 years will be cash flow positive (from pension & SS I'm starting it at 63) starting in '19. I do use conservative estimates for capital growth 5%.

Now the younger people will not have a defined pension and will have to take full SS later or early at a reduced rate. I doubt the workforce will have many 65 y.o. in int or even 62.

The small pension and a good amount of savings that allowed the numbers to work.

So, abandon all hope and enjoy life while you are young. It will suck when you 55+.
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Comments

  • edited April 2015
    "For you younger people hoping to retire comfortably - give up the dream."

    Oh, already done (the given up the dream thing.) Thanks, though.
  • Dex
    edited April 2015
    Here is '15's budget. Not very extravagant and I really just buy what I want. I'm not constricting myself in any way. The total is what is important - it is close in the end.

    Basic Living
    House
    1,981 RE Tax
    2,556 HOA - includes outside mtc - painting etc, water, trash, lawn care.
    489 Electric
    928 Insurance
    300 Misc Purchases
    133 Mail Box
    6,386 Subtotal House

    Car
    138 AAA
    744 Routine Mtc.
    1,164 Insurance
    147 Registration
    1,800 Gas
    3,993 Subtotal Car

    Personal Expenses
    327 Income Taxes
    1,200 Cash
    360 Medical
    340 Cell Phone
    3,300 Food
    600 Wine
    133 Mail Box
    396 Internet Access
    300 Dining Out/Entertainment
    4,230 Health Ins.
    300 Clothes
    - Driving Lic
    -
    11,485 Subtotal Personal Expenses

    21,865 Total Basic Living

    Incremental Living -1
    - Travel Trailer Reg
    492 Storage
    - Good Sam
    492
    Incremental Living - 2
    6,643 Travel/Education/Etc
    Misc Hobbies
    6,643
    7,135 Total Discretionary

    29,000 Total Basic + Incremental
  • scott said:

    "For you younger people hoping to retire comfortably - give up the dream."

    Oh, already done (the given up the dream thing.) Thanks, though.

    Get off my lawn!!!!!!!!!!!!!!!!!!!!!!!
  • Dex, love that someone here has finally talked about their annual expenses in retirement. I live in a real low cost of living region of the country and all my *single* friends that are retired live *very* comfortably off $32,000 to 42,000 yearly. Some even travel to wherever. The key is being debt free. Our only disagreement is about enjoying life when you are young because it will suck at 55+. At 68, life has never been better - both financially and health-wise. No way would I want to go back to my younger years. They sucked!
  • Junkster said:

    Our only disagreement is about enjoying life when you are young because it will suck at 55+. At 68, life has never been better - both financially and health-wise. No way would I want to go back to my younger years. They sucked!

    You get off my lawn also ( the 55+ was for those born after '55).

  • @Junkster, regarding your thoughts on old age, perhaps you are correct in general but remember that stuff happens once you get past the age of 50 or so. I was doing well then all of a sudden I was fatigued. Type 2 diabetes. Diseases have a way of changing your life's course. Anyone can come down with something out of the blue so it's a lottery. I still hold a positive mind though.

    I'm not disagreeing with your statement, just adding some additional thoughts. I don't wish for anyone to get sick.

    Good to see you here more often lately.
  • @Junkster, regarding your thoughts on old age, perhaps you are correct in general but remember that stuff happens once you get past the age of 50 or so. I was doing well then all of a sudden I was fatigued. Type 2 diabetes. Diseases have a way of changing your life's course. Anyone can come down with something out of the blue so it's a lottery. I still hold a positive mind though.

    I'm not disagreeing with your statement, just adding some additional thoughts. I don't wish for anyone to get sick.

    Good to see you here more often lately.

    Could not agree more. And keep that positive mind! Superb health or not, I realize I am just as susceptible as any other old timer to a heart attack or stoke or whatever at my age. Still, would never want to relive my youth as life is far better now than ever.
  • edited April 2015
    Junkster said:

    @Junkster, regarding your thoughts on old age, perhaps you are correct in general but remember that stuff happens once you get past the age of 50 or so. I was doing well then all of a sudden I was fatigued. Type 2 diabetes. Diseases have a way of changing your life's course. Anyone can come down with something out of the blue so it's a lottery. I still hold a positive mind though.

    I'm not disagreeing with your statement, just adding some additional thoughts. I don't wish for anyone to get sick.

    Good to see you here more often lately.

    Could not agree more. And keep that positive mind! Superb health or not, I realize I am just as susceptible as any other old timer to a heart attack or stoke or whatever at my age. Still, would never want to relive my youth as life is far better now than ever.

    I agree with you there. My older years have been great. I would not want to go back either.

    Comment: I wish we could just get the last part of a message using the quote function instead of copying the whole thing. I'll post a comment in tech side. ( I see that it does display what I want. It looked like the whole thing was going to post )
  • Dex
    edited April 2015


    Comment: I wish we could just get the last part of a message using the quote function instead of copying the whole thing. I'll post a comment in tech side. ( I see that it does display what I want. It looked like the whole thing was going to post )

    Just delete the part you don't want to quote.

  • beebee
    edited April 2015
    Hi Dex,

    I made a decision to take an early pension (defined benefit) at age 51 after 27 years of service. If anything will be different for those younger than you and I it will be that defined benefits will not be a common component of retirement.

    I will not qualify nor did I significantly contribute to SS. I needed to combine my "defined benefit" with a one time opportunity to buy and "extra annuity" to make my budget work. Budgeting, saving and thriftiness is what has allowed me to consider retirement at 51 and it will be that same attention to personal finances that will serve me well going forward.

    I moved to a no income tax state, bought a condo in 2012 for $35K that has tripled in value in three years. I drive multiple 20-25 year old cars...that's plural. I furnished my place mainly by finding good deals on Craigslist and the like.

    After 50 I started reminding my 50+ year old friends that:

    "Today is our last best day...and tomorrow will be our next last best day."

    In other words, If you have a desire to do something...do it today. There are no guarantees when it comes to tomorrows.

    Thanks for the thread.
  • bee said:

    If anything will be different for those younger than you and I it will be that defined benefits will not be a common component of retirement.

    In a way defined benefits were never a common component for retirement. People didn't get it if they didn't stay with a company long enough, companies went bankrupt etc. I think at its peak only 25% of workers had defined pensions (again they may not have received it.).

    The best place to get a defined pension now is the US Gov't.

  • edited April 2015
    I wish we could just get the last part of a message
    @JohnChisum- In your new "Leave a Comment" box, Just click the blockquote first. Then copy whatever you want and paste it between the blockquote beginning and end gizmos.
  • I'll keep working on it. I also try to use italics as it defines the quote better but on the iPhone that function is under the copy and paste function that pops up. Desktop is much easier for these things.
  • I think you mean well Dex but I can't help but wonder how that mindset would have worked coming out of Black Tuesday (Great Depression), Black Monday (crash of 1987) the last Great Recession or any number of hard times. Truly some will give up at anything but the majority will push through and find solutions.

    Will it be as good as you feel you have it? Who knows. We all have different hopes and dreams. I live similar to Bee and am quite content. I travel extensively on half your yearly budget. Which one of us, you Dex, or me has more fun or enjoyment. What I'm trying to say is that it's all relative.

    I have two sons in their 30's and two daughters in their 20's. I would never tell them to give up. When it gets tough they've been counseled to keep going. People find solutions.
  • My mindset was shocked by Black Monday 1987. After a year of investing into a plain stock mutual fund I saw over $2000. dwindle to about $800 overnight. What did I do? I pulled out my money and started educating myself. Within six to eight months I was back in the market, this time better diversified and I knew what to look for. I continued to read and listen to radio financial programs, including Bob Brinker. I didn't always see eye to eye with Mr Brinker but I built a foundation. I felt the tech bubble and saw the euphoria before it burst. My moves saved my portfolio a lot as I was only down about 18%. Then, years of dollar cost averaging. I learned that it is not the amount of money you earn, but the amount of money you spend that matters. Money not spent is more for investing.

    I believe bleak moments in history show a path.
  • It is a shame that you didn't enjoy your younger years. I try not to tell myself, "just wait until retirement", but I do try to make the most of the present.
  • 00BY said:

    It is a shame that you didn't enjoy your younger years. I try not to tell myself, "just wait until retirement", but I do try to make the most of the present.


    OK, maybe I exaggerated a tad. But my 20s did suck. I was a lost and aimless person that lived in abject poverty. But the 1980s were among my best living in the Sierras with sunny days almost 365 days a year. Still, I was the poster boy for "not living in the present" since all I did was focus on the future and retirement. I am just thankful and very blessed that mindset worked so that now I can enjoy the "precious present" as much as I do.
  • Dex
    edited April 2015
    Mark said:

    I think you mean well Dex but I can't help but wonder how that mindset would have worked coming out of Black Tuesday (Great Depression), Black Monday (crash of 1987) the last Great Recession or any number of hard times. Truly some will give up at anything but the majority will push through and find solutions.

    Please go back and read my post. Those incidents do not have anything to do with what I wrote and do not apply. It has nothing to do with the stock market but trends and economics.

    Also, one post can not include the all the reasons. For, example, I left out most have little or no savings, the middle class shrinking since the '70s and wages flat since the '70s, employer provided health benefits reduced or eliminated, defined pension plan gone, little in 401K, social security will be pushed out further, older workers (55+) eliminated by companies because they make too much, companies don't like to hire older workers, VAT will be instituted to help with the debt (and Obamacare).

    In short the conditions that have allowed a comfortable retirement are gone for most and new challenges will make it even less likely.

    Add it all up and my conclusion is valid.

    I think you mean well for your children, prepare them for the future - not the past.
  • Hi Guys,

    Wow!

    When I first started thinking in terms of an early retirement, I was approaching 60. Thinking and planning for a mid-50s retirement was never in my playbook. Congratulations if you want and can execute that major league feat.

    Every case is highly personal, and therefore singularly different.

    In my case, my earning and saving career only started after completing graduate school and doing some military service. I was 30 before mustering out of the Army. At that time, my wife and I packed our entire belongings in an old Chevy and headed for California with the back seat still partially empty. No way could we manage retirement in just a little North of 20 years.

    But that’s our story, and I’m sure each of you have your own compelling versions. For you younger folks, retirement will be a life changing event, and warrants careful and painful study before a decision is made. I say painful because of the many component uncertainties that feed that decision process.

    One tool that addresses some of these uncertainties is Monte Carlo simulators. Monte Carlo analyses were specifically designed to assess risk probabilities under uncertain environments. During World War II, they played a significant role in the development of nuclear weapons. Within the last 2 decades, Monte Carlo simulations have been developed to facilitate retirement planning. These simulators are now readily accessible for all to exploit.

    All the large mutual fund outfits offer this tool: Vanguard, Fidelity, T Rowe Price and others provide versions of differing complexity and differing input requirements. They all do yeomen work. I suggest you do a web search using Monte Carlo retirement planning as key words. You can choose your own poison from a long list of options.

    One of my favorites is found at the MoneyChimp site. It is certainly not the most eloquent nor is it the most comprehensive option. But it is likely the easiest to input with instantaneous outputs from 1000 randomly selected cases. Here is the Link:

    http://www.moneychimp.com/articles/volatility/montecarlo.htm

    One of the benefits from these simulators is that what-if scenarios are quickly input and evaluated. Portfolio survival probabilities as a function of retirement time is the graphic output.

    Test how significant the anticipated retirement length is to the portfolio survival likelihoods. Check out sensitivity to savings rate. Examine the survival impacts of guesstimated portfolio annual returns and their volatility by inputting various levels for each parameter. All of these sensitivity studies can be completed in quick time.

    All Monte Carlo analyses only output probabilities. They don’t predict the future. That’s the nature of future uncertainties. But they provide the user with a feeling for the robustness of his plans and provide guidelines for more attractive options. Please give this working tool a try.

    By the way, Monte Carlo simulators might also help retirees to make better informed portfolio asset allocation and drawdown decisions. None of this is perfect, but in the investment universe, nothing is ever perfect.

    Best Wishes for wise decision making.
  • MJG said:


    Best Wishes for wise decision making.

    Those are all good suggestions. I'd say another step most people forget is doing a basic line item budget and project it into the future. Then determine if their investment profile and assets can support that level of spending.

    A second, item is cash flow. The Monte Carlo simulators are good but with understanding cash flow and implementing it properly you can reduce investment risk even more - e.g. budget minus dividend/interest income = $ to or from investments. And you can put several years of estimated spending into low risk investments.

    I thought I would be spending $40,000 after taxes. As you can see I'm spending less.

    Also, with a projected line item budget you can adjust it annually for changes.
  • Only a handful of people working for my employer are over the age of 55. But I've learned that there is always an option!

    Nobody on this board is aware of this fact, but I was born and spent my first 12 years of life living in Bangkok, Thailand as my father was the S.E. Asia GM for a large multinational and was based in Bangkok . I speak, read and write fluent Thai, which my parents say I learned before I learned English. My Mandarin isn't bad either, although I haven't used it for over 10 years... @JohnChisum ~ I reckon that you live in Manila? Been there many times and always enjoyed the musical abilities of the Pinoys, as well as their penchant for having fun!

    Retirement for this young PopTart is a few decades off, but my wife and I reckon that we could retire to Thailand (probably Chiang Mai as Bangkok is a more expensive city) and enjoy the same quality of life (if not better) as in the USA for a much cheaper cost. Foreigners aren't allowed to own property in Thailand, but condos are available for purchase (after alot of haggling of course!). My wife and I figure on roughly $1000/mo. in expenses as we live cheaply. But nobody really knows what costs will be like 18+ years from now...

    Will we actually retire to Chiang Mai? As I mentioned earlier, retirement is still a long ways off as we're raising two young children and have 18 years before we could obtain a Thai "retirement" visa at the age of 50. It's a dream for now, but retiring overseas, especially to a cheaper country which one knows well and likes, is an option to the bygone era of the "American dream".

    Peace.
  • Wouldn't give up my younger years (oh the good times) for anything, EXCEPT if I knew then What I know now about investing, I could have retired a very wealthy YOUNG man, instead I retired 60ish with all the money I will ever need...OH Well.....
    Maybe carefree young AND financial secure retirement is still the way to go..seems to be working...
  • edited April 2015
    Dex, I read your post clearly the first time. I guess I used a poor attempt at an illustration of how are we ever going to be able to retire to show problem solving and for lack of a better term, the American Way. Forgive me if I do not go out and tell my kids now to just give up.
  • edited April 2015
    :)
  • EVERY kid in the U.S. has an "insurance Plan" for a comfortable if not rich Retirement......
    Show it to them...
  • Mark said:

    I guess I used a poor attempt at an illustration of how are we ever going to be able to retire to show problem solving and for lack of a better term, the American Way.

    I don't know what that sentence means.

  • edited April 2015
    Thanks Dex. Very instructive. Wonder how long you've operated on this budget? Ours is set up a little differently and has not failed us over the 20+ years since we developed it.

    Three areas:
    1. Anticipated Income (for the year)
    2. Recurring monthly expenses*(X12)
    3. Major itemized expenses

    *For #2 we throw in a monthly sum called "pocket money." Covers everything we don't care to log every time we buy it: gas, food, entertainment, incidental purchases, etc. Would drive you nuts trying to log such frequent small outlays.

    #3 is a list of things that are large, but paid-out less frequently. Includes vacations, heating fuel, clothing, taxes, home improvements, auto repair, etc. Also a few K in an emergency or reserve fund. I keep a separate page in the budget book for each of these major areas and faithfully record every expenditure. Amounts allocated to some areas, like auto repair, are best-guess estimates.

    We maintain an ongoing fund for area #3 by dividing the total amount by 12 and making monthly deposits in that amount into a separate checking account. Wouldn't have to be a separate account. One could work that out on paper. But, running a separate account for those major outlays is much easier.

    Probably sounds confusing as hell. Evolves over time and really becomes simple.:)





  • Dex
    edited April 2015
    hank said:

    Thanks Dex. Very instructive. Wonder how long you've operated on this budget?

    Dex said:


    I own my home (no mortgage), truck and travel trailer, single (no debt). I retired in '07 at 51 and since then I averaged $27,000 in spending - that includes health ins and taxes. I'm estimating I will spend an average of $38,000 (includes $30,000 for a new truck) from '16-25.
    I did a line item budget for this period. After '25 I grow expenses at 4%

    I think we are very similar. I broke it down into basic and incremental. Basic, is just staying home and incremental is travel and discretionary.
  • Dex you said "For you younger people hoping to retire comfortably - give up the dream." I'm saying that people will find a way. It may not be your way or my way but they will find a way.

    As for my poor example, following those market crashes or other hard times, many have found a way to pick themselves up and carry on. Giving up just doesn't work for me. Don't keep doing the same stupid stuff of course, find a new direction.
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