Financial Planning Talk

[Cruz chic]

Originally Posted by Locke

Ummm....yeah, no. That would be insane severance. If she was over 50 years old she could probably retire on that.

I'm in my mid fifties and I've been out of work for a little over a year. I'm not even close to being able to retire. While I did save money while I worked I also enjoyed nice holidays. The only person I know that retired in his late 50's was an engineer that never went anywhere or spent much. My parents had nothing so all the money I've made is from my hard work. Who can afford to retire it 50 even if they get 3 years pay unless you have/had rich parents that left you an inheritance?

[HockeyIlliterate]

Originally Posted by Cruz chic

I'm in my mid fifties and I've been out of work for a little over a year. I'm not even close to being able to retire. While I did save money while I worked I also enjoyed nice holidays. The only person I know that retired in his late 50's was an engineer that never went anywhere or spent much. My parents had nothing so all the money I've made is from my hard work. Who can afford to retire it 50 even if they get 3 years pay unless you have/had rich parents that left you an inheritance?

This probably isn't the right thread for this, but how much money do you really need in order to live a decent life?

I figure that, with a paid off house and no kids, something around $40,000 is enough. Assuming you want a 2.75% or 3% withdrawal rate, something around $1.5 million in savings should be sufficient.

And, respectfully, I'd expect most professionals to have at least that much saved up by 50 years of age.

[CliffFletcher]

Originally Posted by HockeyIlliterate

And, respectfully, I'd expect most professionals to have at least that much saved up by 50 years of age.

I doubt one in 20 professionals have 1.5 mil saved up by 50.

[taco.vidal]

Originally Posted by hockeyilliterate

and, respectfully, i'd expect most professionals to have at least that much saved up by 50 years of age.

lol.

[Johnny199r]

Originally Posted by HockeyIlliterate

This probably isn't the right thread for this, but how much money do you really need in order to live a decent life?

I figure that, with a paid off house and no kids, something around $40,000 is enough. Assuming you want a 2.75% or 3% withdrawal rate, something around $1.5 million in savings should be sufficient.

And, respectfully, I'd expect most professionals to have at least that much saved up by 50 years of age.

I find many professionals I know are big spenders. Making a lot of money is no indication of people's ability to save.

[Slava]

Originally Posted by HockeyIlliterate

This probably isn't the right thread for this, but how much money do you really need in order to live a decent life?

I figure that, with a paid off house and no kids, something around $40,000 is enough. Assuming you want a 2.75% or 3% withdrawal rate, something around $1.5 million in savings should be sufficient.

And, respectfully, I'd expect most professionals to have at least that much saved up by 50 years of age.

You would be wrong, basically for sure. I don't know statistically, but I work with people for this very purpose and its not "most professionals". I would say a majority don't have that saved up by the time they're 65-70, never mind 15-20 years before that. Like I say though, that is anecdotal, and I don't know statistically.

The $40k figure is probably pretty light as well. Maybe $40k after tax for a good portion of the population, but then again if you're retired at 50 you're probably more active than a guy at 70 in terms of travel, activity and spending.

[HockeyIlliterate]

Originally Posted by Slava

You would be wrong, basically for sure. I don't know statistically, but I work with people for this very purpose and its not "most professionals". I would say a majority don't have that saved up by the time they're 65-70, never mind 15-20 years before that. Like I say though, that is anecdotal, and I don't know statistically.

The $40k figure is probably pretty light as well. Maybe $40k after tax for a good portion of the population, but then again if you're retired at 50 you're probably more active than a guy at 70 in terms of travel, activity and spending.

We must travel in different circles. I can't imagine not having $1.5 million saved up by age 50, and I'd be shocked if most of my friends didn't think likewise. And that's all I'm going to say about that because I don't want to say too much.

But on the spending matter---I track what I spend every month (and have for years), and $40k a year with no rent/mortgage payment would sustain, in my view, a very nice lifestyle. It won't allow for first class flights every week to Paris, but it will allow for plenty of travel and you won't go hungry. Besides, there is only so much stuff that you really need (or, honestly, want) to buy after a while.

As for the tax matter, in the US, if the $40k is from dividends/capital gains, there won't be any federal tax to deal with. As far as the federal tax code is concerned, earned income is for chumps.

[Slava]

Originally Posted by HockeyIlliterate

We must travel in different circles. I can't imagine not having $1.5 million saved up by age 50, and I'd be shocked if most of my friends didn't think likewise. And that's all I'm going to say about that because I don't want to say too much.

But on the spending matter---I track what I spend every month (and have for years), and $40k a year with no rent/mortgage payment would sustain, in my view, a very nice lifestyle. It won't allow for first class flights every week to Paris, but it will allow for plenty of travel and you won't go hungry. Besides, there is only so much stuff that you really need (or, honestly, want) to buy after a while.

As for the tax matter, in the US, if the $40k is from dividends/capital gains, there won't be any federal tax to deal with. As far as the federal tax code is concerned, earned income is for chumps.

Yeah well the circle I'm talking is my profession of working with people to plan their retirement. So sure, some people have saved and will have more, but its not the majority. Like I say, its anecdotal, and it depends on what kind of income you earn and how you live. I have clients who spend more in a month than my parents made in a year, so clearly some people might be able to live on less than others.

I'd be curious to know your situation though. Like how young are you, how many kids and that sort of thing. I don't mean that as a shot at all, its just that I have some clients who are single with no dependents and for them a couple grand a month is totally enough. For people with families and other commitments its likely not though. Then you throw in things like the costs of travel increasing as you age (because you're older and just plain want better accommodations and things like that). And the big point here....inflation. So for you to say that you can't imagine not having $1.5 could be totally the case, because you might want closer to $4mm. I couldn't say for sure, but there are a lot of factors.

[Fuzz]

Saving 1.5 million by the time you are 50 means saving $60 000 a year for 25 years excluding any interest gains. How many people do you honestly think are putting that amount away, since they were 25? Alberta median family income is $97 390, so subtract living expenses, taxes etc, there is no way the median Albertan could do that. I'd be surprised if even 10% of the population puts $20 000 away a year. I'm not sure what circles you hang out in, but I can assure you, you are in the 1%.

[Cruz chic]

Originally Posted by Fuzz

Saving 1.5 million by the time you are 50 means saving $60 000 a year for 25 years excluding any interest gains. How many people do you honestly think are putting that amount away, since they were 25? Alberta median family income is $97 390, so subtract living expenses, taxes etc, there is no way the median Albertan could do that. I'd be surprised if even 10% of the population puts $20 000 away a year. I'm not sure what circles you hang out in, but I can assure you, you are in the 1%.

No kidding. I don't think I've been earned that in my lifetime much and I was pretty well paid. That said what I think is well paid and what others think is two different things. I don't know a single person that has that much saved. People are dreaming.

[chemgear]

Originally Posted by Fuzz

I'm not sure what circles you hang out in, but I can assure you, you are in the 1%.

Wait, I thought all of CP was in the 1%. There was a test before you sign up for an account . . .

We used to have a survey thread back before the NDP got here. I wonder what it looks like now - what percentage would be out of work completely?

[Temporary_User]

Come on guys, it was obviously a troll attempt. No one is smart enough to save 1.5 million dollars and yet stupid enough to think that is an easy thing to do and that everyone does the same.

Although I must say, that one reads close to Realtor1's post back in the day about mortgages not being debt.

[Ozy_Flame]

Retirement is an odd thing; if you like what you do, why not continue to make money doing it? Seems odd to just stop what you're doing, ready for retirement or not, because some commercial told you that Freedom 55 is the gateway to freedom.

[Locke]

$1.5M by 50?

Yes sir, and I'd like to dine alongside the Unicorn as Falkor takes me to Valhalla!

[ranchlandsselling]

Originally Posted by Fuzz

Saving 1.5 million by the time you are 50 means saving $60 000 a year for 25 years excluding any interest gains. How many people do you honestly think are putting that amount away, since they were 25? Alberta median family income is $97 390, so subtract living expenses, taxes etc, there is no way the median Albertan could do that. I'd be surprised if even 10% of the population puts $20 000 away a year. I'm not sure what circles you hang out in, but I can assure you, you are in the 1%.

I started to type a similar thing but got distracted.

I seriously think that some people who earn a lot of money, or were given money by family or a combo of both (house paid for, or significant gifted downpayment, family vacations paid for, etc.) have no idea how the majority live. I've got groups of friends who some make $300k plus and they all hang out together. I honestly don't think they have a clue what month to month would mean or feel like. Not to mention lots of these people came from money already.

[bsimms]

Originally Posted by ranchlandsselling

I started to type a similar thing but got distracted.

I seriously think that some people who earn a lot of money, or were given money by family or a combo of both (house paid for, or significant gifted downpayment, family vacations paid for, etc.) have no idea how the majority live. I've got groups of friends who some make $300k plus and they all hang out together. I honestly don't think they have a clue what month to month would mean or feel like. Not to mention lots of these people came from money already.

Yes... absolutely. I have a sister in-law who literally got a house given to her when she was 25, and then just "can't understand" how people don't get ahead in this wonderful city. ... silver spoon my dear, silver spoon.

[Sliver]

Originally Posted by bsimms

Yes... absolutely. I have a sister in-law who literally got a house given to her when she was 25, and then just "can't understand" how people don't get ahead in this wonderful city. ... silver spoon my dear, silver spoon.

The silver-spoon types always think, well if I didn't get ahead the way I got ahead, I would have got ahead another way. They truly believe they've earned/deserved whatever they have. Or they think it's just in their wiring to be successful.

We're all like that to varying degrees, though. It's just dumb luck I'm sitting here safely in Calgary warm and well fed instead of scrambling around in a refugee camp fleeing Syria. I rarely stop to think about the giant leg up I've had relative to much of humanity.

[bizaro86]

Originally Posted by Fuzz

Saving 1.5 million by the time you are 50 means saving $60 000 a year for 25 years excluding any interest gains. How many people do you honestly think are putting that amount away, since they were 25? Alberta median family income is $97 390, so subtract living expenses, taxes etc, there is no way the median Albertan could do that. I'd be surprised if even 10% of the population puts $20 000 away a year. I'm not sure what circles you hang out in, but I can assure you, you are in the 1%.

Is there any particular reason why you would want to exclude gains? Seems like if you were going to try and save $1MM+ investing it would be a good idea.

By comparison, if you saved for 28 years (22 to 50) and earned an 8% return, you'd have to save $14,428 per year to end up with $1.5 MM at age 50. While I 100% agree that is tough, it's a heck of a lot different than $60k per year. It's about 15% of the median family income you posted above.

[bizaro86]

I truly believe people would save more if they understood compound interest.

Age Earnings Savings Interest Nest Egg
22 $31,500 $3,150 $- $3,150
23 $32,445 $3,245 $252 $3,497
24 $33,418 $3,342 $280 $7,118
25 $34,421 $3,442 $569 $11,130
26 $35,454 $3,545 $890 $15,565
27 $36,517 $3,652 $1,245 $20,462
28 $37,613 $3,761 $1,637 $25,860
29 $38,741 $3,874 $2,069 $31,803
30 $39,903 $3,990 $2,544 $38,338
31 $41,100 $4,110 $3,067 $45,515
32 $42,333 $4,233 $3,641 $53,390
33 $43,603 $4,360 $4,271 $62,021
34 $44,911 $4,491 $4,962 $71,474
35 $46,259 $4,626 $5,718 $81,818
36 $47,647 $4,765 $6,545 $93,128
37 $49,076 $4,908 $7,450 $105,486
38 $50,548 $5,055 $8,439 $118,979
39 $52,065 $5,206 $9,518 $133,704
40 $53,627 $5,363 $10,696 $149,763
41 $55,235 $5,524 $11,981 $167,268
42 $56,893 $5,689 $13,381 $186,339
43 $58,599 $5,860 $14,907 $207,106
44 $60,357 $6,036 $16,568 $229,710
45 $62,168 $6,217 $18,377 $254,303
46 $64,033 $6,403 $20,344 $281,051
47 $65,954 $6,595 $22,484 $310,130
48 $67,933 $6,793 $24,810 $341,734
49 $69,971 $6,997 $27,339 $376,070
50 $72,070 $7,207 $30,086 $413,362
51 $74,232 $7,423 $33,069 $453,854
52 $76,459 $7,646 $36,308 $497,809
53 $78,753 $7,875 $39,825 $545,509
54 $81,115 $8,112 $43,641 $597,261
55 $83,549 $8,355 $47,781 $653,397
56 $86,055 $8,606 $52,272 $714,274
57 $88,637 $8,864 $57,142 $780,279
58 $91,296 $9,130 $62,422 $851,831
59 $94,035 $9,403 $68,147 $929,381
60 $96,856 $9,686 $74,351 $1,013,417

Hopefully the table will format, but it shows what saving 10% of your income will do. I started the income at $31,500 at age 22 right out of school, or $15.75/hour for one person working full time. Not exactly 1%. I assumed a 3% raise every year, which gets you close to the median family income in Alberta by retirement at age 60. The family in this example never earns more than the median family income in AB, so again, not 1%. If they save 10% of their income and earn 8% return, that ends at over $1MM, which if you can pay off a house would allow for a more than comfortable lifestyle, imo.

Maybe you don't like 8% as an assumption. If you don't, I had to extend out to age 66 to get to $1MM at 6% returns. However, at 67 your OAS kicks in, and you could start taking CPP as well, so the $1MM would go further.

I didn't have to assume someone gave you $$, but I did have to assume diligent savings from day 1. On the other hand, if you set it up automatically every paycheck, you miss it a lot less.

[Cruz chic]

Originally Posted by bizaro86

Is there any particular reason why you would want to exclude gains? Seems like if you were going to try and save $1MM investing it would be a good idea.

By comparison, if you saved for 28 years (22 to 50) and earned an 8% return, you'd have to save $14,428 per year to end up with $1.5 MM at age 50. While I 100% agree that is tough, it's a heck of a lot different than $60k per year. It's about 15% of the median family income you posted above.

Is it possible to get an 8% return?