Well I don’t think $4m is the low end for a sensible retirement at all. That’s an enormous amount of money. I’ve had plenty of clients retire with much less and be perfectly fine. The thing is, part of the battle for retirees is psychological. They have to be prepared to see that $4m come down. So you can definitely retire on $4m, but if you’re hoping to live a luxurious lifestyle and not deplete the money, you might have a problem. If you are fine to spend that down though (which retirees should be to some extent), then go don’t need $4m and you can have a fantastic retirement for $4m.
As with most things financially, it depends on how much you plan on spending.
Why wouldn't you spend it down? I don't get dying with a stack of money in the bank.
Why wouldn't you spend it down? I don't get dying with a stack of money in the bank.
I also don't understand that, and I think there is a general disconnect between how people think retirement spending goes and what happens in practice. Say you retire today and you're spending $100k a year. You're 63 years old, and you have money in the bank to fund the retirement plus CPP/OAS, and you're fine. Odds are for that first, say, 10 years, you spend more than $100k, but almost surely at least that $100k a year. You've just retired, and you want to do some things, so this is the time.
From there, things get a little murky. Maybe you spend that $100k for another year or two. Maybe you've had some health challenges. Maybe you've just done a lot of the things that you wanted to do and don't really want to do those things again. Seeing the Great Wall was awesome at 67 years old, but five years later, the idea of a 10-hour flight and all that isn't as enticing. So, your spending starts to decline. Maybe now you're spending more like $85k a year.
Another decade down the line, and things have changed. The odds of you taking 10-hour flights around the globe at 82-85 are slim. You likely can't get the health insurance to travel now. You're just doing much less and spending much less. It's likely closer to $60k a year now.
Of course, all of that has to have inflation factored in, and I just base that on someone spending $100k a year, after tax, to begin retirement. But the point is, if you were spending like that (which is more common than people might expect), you don't need $4m at the outset. Some of that money has not been needed for a couple of decades. And when you get there, you probably need less than you did at 63 (in this made-up example). And, of course, a lot can change over that period.
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Well I don’t think $4m is the low end for a sensible retirement at all. That’s an enormous amount of money. I’ve had plenty of clients retire with much less and be perfectly fine. The thing is, part of the battle for retirees is psychological. They have to be prepared to see that $4m come down. So you can definitely retire on $4m, but if you’re hoping to live a luxurious lifestyle and not deplete the money, you might have a problem. If you are fine to spend that down though (which retirees should be to some extent), then go don’t need $4m and you can have a fantastic retirement for $4m.
As with most things financially, it depends on how much you plan on spending.
This is an excellent point that I dont find people give enough consideration.
We spend our lives earning and accumulating and becoming accustomed to the numbers going up. Seeing that steadily decline is somehow just counter-intuitive to our brains and it drives some people nuts.
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This is an excellent point that I dont find people give enough consideration.
We spend our lives earning and accumulating and becoming accustomed to the numbers going up. Seeing that steadily decline is somehow just counter-intuitive to our brains and it drives some people nuts.
My dad could not stand the price tag of the nursing home so we had to force him. Loved it for a while then died suddenly in his underwear. I am sure he was watching the news and Pierre Trudeau appeared on the screen.
The one positive of dying is that you will not give a fata about your finances and loved ones. They can sort it out.
My dad could not stand the price tag of the nursing home so we had to force him. Loved it for a while then died suddenly in his underwear. I am sure he was watching the news and Pierre Trudeau appeared on the screen.
The one positive of dying is that you will not give a fata about your finances and loved ones. They can sort it out.
The thing is that its more about the attitude than anything else.
People will mockingly call out 'Boomers' but they are very literally hoarding wealth. Whether it be stocks, bonds or Real Estate, there is some sort of pathological need to hoard that wealth.
Until they die.
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The thing is that its more about the attitude than anything else.
People will mockingly call out 'Boomers' but they are very literally hoarding wealth. Whether it be stocks, bonds or Real Estate, there is some sort of pathological need to hoard that wealth.
Until they die.
He said it was so that he could transfer it to myself and mostly my brother (who is a brutal money manager).
I can start to see it in myself. I basically dress like a hobo, drive a used Subaru, could be in a way cooler house but I want to be able to give the kids all I can in case I fataed up my parenting.
The thing is that its more about the attitude than anything else.
People will mockingly call out 'Boomers' but they are very literally hoarding wealth. Whether it be stocks, bonds or Real Estate, there is some sort of pathological need to hoard that wealth.
Until they die.
I mean, a whole of people are talking over multiple pages about $4 million dollars not being enough.
I mean, a whole of people are talking over multiple pages about $4 million dollars not being enough.
In fairness and within the context of the conversation, those people are also living in a time where we weathered a pandemic and are experiencing inflation at a rate never before encountered within our lifetimes.
Time and Economics are always relative. Those Boomers went through high interest rates however had historically low housing and education costs...thats economics, its give and take.
So you get someone now who thinks maybe $4M isnt enough they could just be thinking that nobody is going to get a hold on inflation and a candy bar is going to cost $100 or something.
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With $4 million in liquid investments, I too would probably keep working. I'd be working part time for a few years to ease out of work mode and I'd train my replacements well to ensure proper transition. I'd also do so, so that my mind doesn't quickly turn to mush.
Continuing to work doesn't mean you haven't transitioned toward retirement. Those that end up with a windfall, stop working for a few years, then start a company out of boredom... you're not retired. You have a gap in your working history.
I come from an industry where we often hear stories of guys that just randomly drop dead within a few years of retirement. I've also seen first hand, people that transitioned out of retirement too fast and in a nutshell, I'd describe it basically like the shell shock of the pandemic quarantines. The risk of heart attack/stroke for our industry is just too high for people going straight from full workload to full retirement and honestly speaking, people usually ignore it and just assume it was bad luck. I was chatting with someone in a different industry and he mentioned the stats were higher in his, but no one talks about it either. If I won the lottery, I'd primarily ease myself out of my role for health reasons, but for other reasons as well.
I've contemplated what I'd do if I won the lottery. I'd want to fly under the radar as much as possible. I'd spend money to maintain as normal of a middle class existence as possible while still enjoying the occasional luxuries it can afford me. If I retire and my peers are not/I have few friends who are also retired, that's a lonely existence IMO. Life is more fun when you have friends with you and friends you can relate to. I wouldn't want friends to feel uncomfortable in the difference in net worth, I wouldn't want my kids to wonder why their parents have a totally different day to day than 90% of all other parents out there etc.
I wouldn't be able to throw myself into an aimless existence. I need some semblance of direction and opportunities for spontaneity. I wouldn't be able to just going into an aimless wanderlust, sit at home playing video games, buy a crazy car and just drive in an unknown direction... that'd turn me into a zombie quickly or a messed up decision paralysis/hopeless state of ennui in little to no time.
$4MM low end retirement... WTF, my calculations with a house paid off (I guess it's worth 1 million by retirement) and 2 liquid investments of $1 million to 1.5 million paying out 5% in passive income annually have me comfortable for my family of 4 AND frequently adding small top ups to the retirements of our 4 parents AND there should be a nice chunk remaining as intergenerational wealth by the end.
My parents and kids better not be draining me to the tune of a part time job each when I am age 60. My house currently requires $50-70K a year, but it should drop by $40K a year once the mortgage is finally paid off.
$50K x 2 annual passive income ($100K total, but both below $50K threshold)
- $15K taxes
-$20-30K expected average cashflow for housing costs (includes budget for significant repairs)
- $30K ish a year for kids and parents ($5K each annually average)
= $25K remain for living and travel for two people ($2K a month, modest).
= assume modest $50-75K of annual investment value drain from age 60-65 for random things ($4-6K per month) (ie: vehicle, unanticipated renos, travel and travel top ups, experiences etc.)
However, investments double every 10 years or so with modest risk and low effort.
Expect to add another $15-20K a year each (after tax) in CPP/OAS starting at age 65. We'd assume that maybe our investments dip down into the $750K each by age 65, but then CPP/OAS/other unanticipated pension amounts juicing up the difference means we'd likely never have to touch the base investments again and it'll grow on an annual basis.
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Why wouldn't you spend it down? I don't get dying with a stack of money in the bank.
Part of the problem is you want a 95% success rate on your retirement. So you set your withdrawal rate at 3.5-4% per year adjusted for inflation.
Well over half the time you end up with more than you started but in 5% of cases you go bust. So because of sequence of returns risk most plans using a 4% withdrawal rate assume capital drawdown in many of the scenarios.
People will mockingly call out 'Boomers' but they are very literally hoarding wealth. Whether it be stocks, bonds or Real Estate, there is some sort of pathological need to hoard that wealth.
Quote:
Originally Posted by chemgear
I mean, a whole of people are talking over multiple pages about $4 million dollars not being enough.
Speaking of which, there was a recent study (American mind you) that asked what each generation what number they think equals "financial success" in terms of salary and net worth.
Interestingly, the boomers came in a lot lower than everyone else. Not sure if they only surveyed TikTok influencers or kids in Silicon Valley, but that Gen Z one is hilarious.
Why wouldn't you spend it down? I don't get dying with a stack of money in the bank.
Some people plan to leave money to their kids? Hard to build generational wealth if you die penniless and leave them nothing more than memories and tales of hard work.
Now the childless people? Sure keep yourself a little bumper in case you outlive your retirement but yeah definitely die broke. Get one of those reverse mortgages too and let your nonexistent next of kin deal with it that's what I say.
Interestingly, the boomers came in a lot lower than everyone else. Not sure if they only surveyed TikTok influencers or kids in Silicon Valley, but that Gen Z one is hilarious.
Brain rot from social media? Seeing hourly grifts and financial comparisons probably ####s you up.
Speaking of which, there was a recent study (American mind you) that asked what each generation what number they think equals "financial success" in terms of salary and net worth.
Interestingly, the boomers came in a lot lower than everyone else. Not sure if they only surveyed TikTok influencers or kids in Silicon Valley, but that Gen Z one is hilarious.
I think this based in the fact that Gen Z knows how expensive the world is when you start from scratch. The Boomers on the other hand are probably still stuck in the idea that you can just buy a house for 63,000 and pay it off in three years.
