The Gap Between the Financial Advice You Need and.Short Takes: Robo-Advisors, Retirement Magic Numbe.Telling Us What We Want to Hear about Our Retireme.Short Takes: Optimal Asset Allocation, Foreign Wit.Short Takes: Retirement Magic Number and more.I hope this spreadsheet helps some people, but as always, I can’t guarantee anything about the results it produces. It’s certainly true that many people of all age groups waste money in ways that don’t really improve their lives much, but I think it is also true that older people have less capacity for ultra-frugal living than the young have.Īs always, I’m interested in feedback on these ideas, particularly if you see any problems. I meet few people over 50 who find that their low spending in youth suits them now that they’re older. The need for retirement income is assumed to last through the users projected planning horizon which is assumed to be age 93 unless a different age is specified. While I could go back to living on $2000 or less per month, I don’t want to. The personal retirement number, or retirement goal, is based on purchasing a hypothetical annuity with a discount rate (return) of 4.87 which will last through retirement. I find that some people in their 30s tend to think they can get by on a very low income. Your mileage may vary.Īs with any retirement planning exercise, a challenge is to add the right amount of safety margin. So, for this couple, a million dollars isn’t enough. Their retirement magic number works out to $1,636,000. Once retired, they plan to keep 5 years’ worth of spending in safe investments, and the rest in low-cost index stock funds that they hope will beat inflation by an average of 4% per year. They plan to retire at 55 and will collect $2000 per month in other income (rising with inflation) starting at age 65. The spreadsheet’s example figures are based on a couple seeking after-tax retirement income of $6000 per month (rising with inflation). I threw in some example figures, but you’ll have to change the values in the yellow boxes to customize it to your own situation. (To edit this spreadsheet, you need to go to the “File” menu and “Make a copy”.) I added a second page to this spreadsheet that collects some more inputs from you and calculates your retirement magic number. I added another page to the spreadsheet that computes the percentage of a portfolio that you can spend each year in retirement based on a set of inputs you supply. But we can turn this around and calculate how much you need to save to retire using this spending strategy. The focus was on turning a lump-sum portfolio into an income stream for retirement. Lately, I’ve been writing a fair bit about a proposed strategy for retirement spending in retirement ( first description, adding income smoothing, yearly spending percentages, experimental results using 100 years of investment returns). Here I offer an answer based on a proposed retirement spending strategy that takes into account your unique circumstances. We hear arguments over whether a million dollars is enough, as though there is a single number that applies to everyone. How much money do you need to save to retire? This is an important question that gets a lot of debate but few useful answers.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |