Simple Work life balance formula

[dullard]

Ahh.. sorry.. 6% for SS instead of 9%.
but it's only ~1.5% Medicare. And employer also contributes 6% ss and 1.5% medicare So 12% SS.

From your 15% savings formula, you already have 12% from SS.
hm.. but that's assuming you take SS at full retirement age of 67.
it'll be 30% lower at age 62 so 12% x .7 = 8%.

A little 401k with employer match would get you to the 15% if drawing at age 62 and icing on the cake at age 67?

SS doesn't give nearly the return that you'd expect from typical investments. The rule-of-thumb was for a geometric mean investment return in the ~5% to ~10% range. Social security returns close to 5% on average. So, if you rely on 12% from SS, your return will be much more meager. Meaning, your total will need to be above 15%. But, then you are counting money that you didn't even have to begin with (work covered it) so do you include that as part of your wages? And there are income limits / minimums, various SS tax plans over the decades, and you already said you aren't counting SS (but now you want to double it in the savings side), blah, blah, blah. It just gets needlessly complicated. And that is before we get into the timings of the market swings, raises, layoffs, major unexpected life events, etc. We aren't going to model everything since most of it is unknown.

Your thread is about simple. Save ~15% of your salary through various means. Enjoy life now as you earn money and after retirement. That is simple.

 

[AdamK47]

There is no one size fits all for retirement. I'm certainly one of the outliers when it comes to that.

I do understand the need to tell Americans the basic guidelines for retirement. Most are in debt with very little saved.

 

[repoman0]

The math is good but I wouldn’t want to rely on the government for the final 6%. They could easily cut benefits or change the retirement age to 70 or something stupid and throw your retirement off the rails. It also feels like a no brainer to take the biggest 401k/IRA tax break you can if one can afford it comfortably. For most that will put them over 15%, but all but guarantees the ability to retire at 59 and a half.

I agree that most people can make the 15% minimum work, and realize that it’s a huge privilege to be able to talk about saving significantly more than that. There is definitely a point though IMO at a relatively small amount of money where buying security and time via VTI and bonds buys more happiness than more spending does.

 

[brianmanahan]

i am aiming for the %2.7 withdrawal rate

 

[JEDI]

i am aiming for the %2.7 withdrawal rate

but your going to die with ALOT more $ than you retired with at 2.7% rate.
(not watching youtube link)

You could have retired years earlier if you did 4% and over a decade earlier if Dullard's 5%

 

[AdamK47]

I'm thinking of doing the 3.98% rule or the 3.6872% rule.

 

[JEDI]

I guess that I'm just not that worried about retiring at 67 and a 10% chance of running out of investments at age 97. I'd still have SS and Medicaid to fall back on. And that 10% chance is only if I blindly spend for those 30 years without any reactions to the actual conditions around me.

But, hey, if 4% scares you, just save 15% per year for 37 years instead (age 30 to 67) and withdraw at a 3% rate.

Who said anything that 4% swr scares me?
it's the opposite in that i think dying with the same amount you start retirement with is too much.

but yeah 10% chance of going to $0 in 30yrs with 5% swr scares me.

So i think something slightly above 4% like 4.3% is good balance for me.
(still 0% chance of running out of $ but dying with low 6 figures instead of high 6 figures)

 

[AdamK47]

How about the "Withdrawal at a percentage appropriate to changing market conditions rule"?

 

[Exterous]

How about the "Withdrawal at a percentage appropriate to changing market conductions rule"?

Yeah I really hope people aren't blindly taking out a set percentage regardless of what the market has done. Honestly the viability of finding healthcare from ~45 till 59.5 (when my wife retires health care kicks in) concerns be way more than 4% vs 3.7% vs 6% because I should be able to adjust the latter

 

[JEDI]

Honestly the viability of finding healthcare from ~45 till 59.5 (when my wife retires health care kicks in) concerns be way more than 4% vs 3.7% vs 6% because I should be able to adjust the latter

Obamacare.
use only Silver plans since they are the only ones with cost sharing

 

[Exterous]

Obamacare.

Sure ...for now. The Rs have made no secret of their desire to repeal or 'fix' it

 

[brianmanahan]

I'm thinking of doing the 3.98% rule or the 3.6872% rule.

i like my withdrawal rate being equal to e percent

 

[dullard]

How about the "Withdrawal at a percentage appropriate to changing market conditions rule"?

Yes. People should withdraw based on the current conditions. But that doesn't translate well into simple numbers. For example: what does Jan 4, 2024's market tell someone who is retired to withdraw this year? 2%? 10%?

Also, making your withdrawals based on the market ignores your personal needs. What if you suddenly have your furnace go out? Just shiver through any year with a bad market?

The 4% "rule" is simply a starting point. It gives a good approximate number to try to live on. If the market is bad, withdraw less. If the market is good, you can withdraw more. I think that is something that translates into numbers well. If someone started at 4% and sees near record high markets on Jan 4, 2024, then they can comfortably withdraw a bit more, say 4.5% or similar, depending on their situation. Same with your needs. If your furnace goes out, you can withdraw a bit more, just remember that you'll have less to withdraw the next year.

In numbers it is even easier. If you have $1 million saved up*, then you can most likely get by withdrawing $40k to $50k the first year (plus you get SS, any pensions, other income, etc). If your expenses exceed that, then you probably need to rethink your lifestyle. In market terms, I really don't know what S&P 500 of 4688 means to someone retired. Does 4688 mean that someone is living too lavishly or too lean?

* Average net worth of someone in the US at retirement is $1.2 million, but wealthy do skew the average a lot so the median person has less.