Retirement Goal

fine dude
Posts: 590
Joined: Tue Dec 18, 2012 7:12 pm
Location: SE Asia

Retirement Goal

Post by fine dude »

If you have to come up with a round figure target for the total cash savings (including investments in equities, index funds etc., but excluding real estate) before you retire, what would that be in USD?
sid
Posts: 1277
Joined: Sat Dec 02, 2006 11:44 am

Re: Retirement Goal

Post by sid »

2.5 to 3 million in personal investments, presuming no retirement income from other sources like the government or past employers.
fine dude
Posts: 590
Joined: Tue Dec 18, 2012 7:12 pm
Location: SE Asia

Re: Retirement Goal

Post by fine dude »

Wow, I need to move into senior management to save that kind of money. Thanks, sid.
Psychometrika
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Joined: Sun Nov 20, 2016 10:08 pm

Re: Retirement Goal

Post by Psychometrika »

A nice round $1 million for me. With a 4% withdrawal rate that will give me 40,000 annually in addition to my modest social security income.
sid
Posts: 1277
Joined: Sat Dec 02, 2006 11:44 am

Re: Retirement Goal

Post by sid »

It’s quite a personal number, of course. Family circumstances and size, lifestyle preferences, country of residence, whether your country of citizenship or residence will have your back if your finances or medical situation go pear shaped. Don’t presume that my number is relevant to you.
shadowjack
Posts: 2054
Joined: Sat Oct 06, 2012 9:49 am

Re: Retirement Goal

Post by shadowjack »

Wow. Honestly, you can think cash. But 600,000 will buy you property and housing. Housing can be rented. Property may go down in value, but it doesn't go 'poof' like stocks or bonds. Property generates monthly revenue without dipping into your principal, and if you have chosen the right market, property pays its own mortgage. In the end, you own it clear and free, put nowhere near its value in (of your own money) and it continues to generate revenue - but you can still sell it. And if the market goes down and rents decline, if you have paid off the mortgage, you can lower your rents temporarily and STILL get a monthly remit from it. Lastly, when you get old, you can put your kids as joint on it, meaning no inheritance fuss, or you can sell it and splurge in your last few years or months. That, balanced with cash for investment and use, is IMHO the way to go.
mysharona
Posts: 198
Joined: Thu Jan 13, 2011 1:25 am

Re: Retirement Goal

Post by mysharona »

We're starting our next phase with $1,500,000 and hope that the 4% rule holds true.
buffalofan
Posts: 313
Joined: Wed Jan 06, 2010 11:08 pm

Re: Retirement Goal

Post by buffalofan »

Ideally 1M, but the more I do the math on this (had a lot of time to play around with some projections during lockdowns) I think 2/3 of that would be more than fine given that I plan to retire in a place with low cost of living.
sid
Posts: 1277
Joined: Sat Dec 02, 2006 11:44 am

Re: Retirement Goal

Post by sid »

shadowjack wrote:
> Wow. Honestly, you can think cash. But 600,000 will buy you property and
> housing. Housing can be rented. Property may go down in value, but it
> doesn't go 'poof' like stocks or bonds. Property generates monthly revenue
> without dipping into your principal, and if you have chosen the right
> market, property pays its own mortgage. In the end, you own it clear and
> free, put nowhere near its value in (of your own money) and it continues to
> generate revenue - but you can still sell it. And if the market goes down
> and rents decline, if you have paid off the mortgage, you can lower your
> rents temporarily and STILL get a monthly remit from it. Lastly, when you
> get old, you can put your kids as joint on it, meaning no inheritance
> fuss, or you can sell it and splurge in your last few years or months.
> That, balanced with cash for investment and use, is IMHO the way to go.

You're not wrong. To be fair, nor is your answer complete.

Let's take it step by step.

First, the OP is looking for a number, some amount you need set aside. Is 600,000 your number? It's hard to tell. You mention buying property and also mortgages, so it's not clear. I have doubts that 600,000 buys enough property outright to generate the income needed for a retirement, so perhaps the 600,000 represents down payments and the rest covered by mortgages/debt. Not everyone would be comfortable with taking on that much debt, nor with carrying significant debt into retirement. I certainly wouldn't. Leveraging funds for a bigger payoff is a legit investment strategy, but not everyone can sleep at night if they're using it. And if 600,000 represents your down payments, that's still a pretty large amount that someone must amass in order to follow your plan.

[quote=shadowjack post_id=61071 time=1617821479 user_id=98854]
Property may go down in value, but it doesn't go 'poof' like stocks or bonds
[/quote]
Individual stocks/bonds sometimes, but only rarely, go "poof". The risk of that "poof" goes down massively if you're properly diversified, such as in index funds. And for the long-haul investor, ups and downs are just what happens. We don't look at the value from day to day, but from year to year or decade to decade. And history proves that stocks/bonds over time are pretty durn reliable investments. Same as property.
Property does indeed go "poof" sometimes. A fire, flood, tenant damage or eminent domain can wreak havoc with the value of your property from one day to the next. You can insure against some of that, but insurance is not a cost I have to assume with stocks and bonds.

[quote=shadowjack post_id=61071 time=1617821479 user_id=98854]
Property generates monthly revenue without dipping into your principal, and if you have chosen the right market, property pays its own mortgage.
[/quote]
Stocks and bonds can also generate monthly revenue without dipping into your principal (see the 4% rule referenced above).
Property can, if chosen well and managed properly, pay its own mortgage. That takes active management, either by you or some company you pay for the privilege. It also takes consistent tenants, which is by no means assured. Having a property sit empty is a massive problem, and you still have to pay the mortgage. Having some bad tenants can really dampen your enthusiasm for using properties to fund retirement (remind me to tell you stories some time, taking tenants to court while losing out on months of rent and countless hours of paperwork and lawyer's fees). I really don't want to spend my golden years chasing tenants. And paying a management company to do it for me just eats the profit margin.

[quote=shadowjack post_id=61071 time=1617821479 user_id=98854]
In the end, you own it clear and free, put nowhere near its value in (of your own money) and it continues to generate revenue - but you can still sell it.
[/quote]
Stocks and bonds are also owned free and clear, and continue to generate revenue. And can be sold.

[quote=shadowjack post_id=61071 time=1617821479 user_id=98854]
And if the market goes down and rents decline, if you have paid off the mortgage, you can lower your rents temporarily and STILL get a monthly remit from it.
[/quote]
If you've paid off the mortgage. What if you haven't?
Stocks and bonds also have periods where they produce less income. It's very similar, except without the mortgage.

[quote=shadowjack post_id=61071 time=1617821479 user_id=98854]
Lastly, when you get old, you can put your kids as joint on it, meaning no inheritance fuss, or you can sell it and splurge in your last few years or months.
[/quote]
You can do the same, or quite similar, with stocks and bonds.

There are many strategies for preparing for retirement. I still own a couple properties, but I am increasingly fond of my stocks and bonds. They require no attention at all. Low-cost index funds. Buy and hold. Check the balance every 6 or 12 months. Done. The hassle of property, and the challenge of paying a mortgage when there are no tenants, bad tenants, or a pandemic... it's just a pain in the tuckus.

To each their own. For me, minimal property. Lots of low-cost index funds.
nathan61
Posts: 79
Joined: Tue Nov 05, 2013 11:08 pm

Re: Retirement Goal

Post by nathan61 »

It depends when you are buying into the market, and what your timeline looks like. Were I going to retire in five years I would not be that excited about putting money into stocks right now. Past performance does not predict future success. I am a very careful type, and to me a well balanced portfolio will include some rental income and physical assets, along with stocks/bonds. Of course brokers are going to tell you to put everything into the market.
marieh
Posts: 201
Joined: Mon Feb 11, 2013 11:33 pm

Re: Retirement Goal

Post by marieh »

As a married couple with no children - $1,000,000 in investments and a paid off house. That would allow us to walk away from teaching and either live frugally or continue working in a different industry and move towards FatFIRE. 3 years to go.
fine dude
Posts: 590
Joined: Tue Dec 18, 2012 7:12 pm
Location: SE Asia

Re: Retirement Goal

Post by fine dude »

sid is right. There is no one-size-fits-all rule as the context and family situation varies. Owning modest property is feasible, but investing 600K in one property sounds pretty risky.
Healthcare will be a major cost for all. One million sounds like a good starting point. If I were to retire in SE Asia or South America, I might manage with little less than a million provided there is a little bit of additional monthly income on the side.
nathan61
Posts: 79
Joined: Tue Nov 05, 2013 11:08 pm

Re: Retirement Goal

Post by nathan61 »

It matters a lot how old you are at retirement. To retire at age 40 I would want more than 2 million. To retire at age 65 I could probably feel OK with half that.
Heliotrope
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Joined: Sun May 13, 2018 1:48 am

Re: Retirement Goal

Post by Heliotrope »

I'm aiming for 1.5 million, for me and my partner.
Plan to retire at 60.
shadowjack
Posts: 2054
Joined: Sat Oct 06, 2012 9:49 am

Re: Retirement Goal

Post by shadowjack »

If you buy property and have a long term plan, then 600,000 can buy a LOT of property if used proper-ly :-) You can purchase several properties and carry a mortgage. If you have gauged your location correctly, you will do OK. I know I've been lucky - in 20+ years of renting, I've only had one tenant dun me for a period of months and then leave, where the property required quite a big injection of $$ to bring it up to snuff - which was fine as it hadn't really had any touchups in 15 years, except roof and decking. That was paid for out of rental revenue - even though when the house was purchased, my cost was under $50,000 down. My tenants paid for my mortgage, interest and management fees are tax write-offs, as were the improvements put into the home. Even if I took some of my savings and bought a condo in a university town for $125,000 - I can generate income immediately - and in the university town I am thinking of, I can generate $15,000 to $22,000 gross, less than that net, but still add to my nest egg, but now with two properties contributing over 3K a month. In two or three years you have enough to purchase a third property if you choose. As Sid said, there are headaches with it - but at the same time, if you have a good management company they do a lot of the work for you, and you sit back and let the money accumulate or watch your mortgage decline and your house value increase. Still - diversify! Just don't exclude property entirely.
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