How do you plan for retirement?

[rcpratt]

Poll coming.

I'm a spreadsheet dork so I like to track my retirement goals that way. Probably doesn't give me the same tools that a financial adviser would have, but it also doesn't take a 1% cut from me and gives me a better understanding of the situation.

How do you do it?

(Note: Yes, I made up a random salary.)

 

[CrazyAznDriver]

We got a financial adviser after my wife finished her residency. Been a big help imo.

 

[dullard]

I a numbers junkie. I have my estimated balances for everything projected out DAILY until my wife's retirement (happens later than mine).

With each bill/statement that comes in, I plug in the actual numbers for that monthly bill/statement. Then everything automatically updates for me. So, while what I have is just an estimate, it gets better every time a piece of mail comes to my house. Every time I make a major decision (big expenditure, large donation, new job etc) I update my forecast.

I have no need for a financial advisor, but as soon as I qualify for a free one from Vanguard, I'll take his/her advice just to see what they have to say. I need to get to $500k at Vanguard for that which is going a bit slow since neither I nor my wife's 401k is at Vanguard.

Wells Fargo and US Bank have both offered free financial advisors a couple of times (I had my investments in cash temporarilly and they were trying to woo me to keep it there), but with brief discussions with Wells Fargo's advisor, it was clear that his advice wasn't any better than what I was doing on my own. I haven't taken US Bank up on the offer.

 

[SandEagle]

i paln of having a dozen kids. the odds of one of them taking care of me when im older would be higher

 

[Saint Nick]

I don't have a real FT job yet, but once I do, I'll start planning for it...seems quite overwhelming but it's probably not that bad.

 

[rcpratt]

Wells Fargo and US Bank have both offered free financial advisors a couple of times (I had my investments in cash temporarilly and they were trying to woo me to keep it there), but with brief discussions with Wells Fargo's advisor, it was clear that his advice wasn't any better than what I was doing on my own. I haven't taken US Bank up on the offer.

What kind of things did they ask/tell you? Everything I've heard just makes them sound so basic and useless.

 

[Elbryn]

we do it ourselves. cut out the financial adviser 1+% cut. mostly index funds, with a sprinkle of a few low cost vanguard active funds. spent alot of time at the bogleheads forum to get the basics figured out and in general use conservative numbers.
goal is to use a 3% withdraw rate versus the standard 4%. figure inflation at about 3% so cost of living will be around 2x what it is now when we retire. so whatever we thought we would need in today's money, multiplied by 2, divided by .03 to get to our desired end goal. also spent time on working out our separate investment styles to come to a consensus for asset allocation and risk tolerances. that drove the examination of the various retirement vehicles available to us be it 401k, roth ira, pension, 457, 403b. only requirement was the 457 which allows early withdraw without the 10% penalty in case we retire early. we also assumed no contribution from social security to be more conservative.

we dont bother projecting too far into the future, but have used tools like firecalc, the financial engine @ vanguard, and various flash calcs out there that are around to play with numbers. firecalc is pretty good in that it's a monte carlo over various years of return data from something like 1900 to give you an idea based on various up and down periods in history. in the end, we save as much as we can into our retirement funds based on our asset allocation. re-balance yearly, more if there's heavy swings that result in a +/- 5% deviation from the preset levels. we'll do this until we either reach our number or get old enough to the point where we think we want to stop and make the appropriate adjustments to our income expectations.

our goal: go part time at age 50, work part time through 55 and then retire.

 

[dullard]

I don't have a real FT job yet, but once I do, I'll start planning for it...seems quite overwhelming but it's probably not that bad.

It isn't difficult. A general rule-of-thumb is that ~15% of what you have to spend (earning post-tax and post-savings) needs to go to retirement savings. Be sure to include your retirement matching from your company when you do the math.

I think most people fall short of that target though. They'll have to either retire poorer than they were when working or they'll have to retire much later than they wanted.

 

[Wyndru]

I used to just put aside 15% total (after tax, but including employee match), but now that I have a pension I only put aside 5%.

 

[JulesMaximus]

I'm investing in guns, boats, and motorcycles. What could go wrong?

 

[highland145]

I put $$ into my FICA account. I've been promised vast returns on my investment. The best part...my employer matches 147%.

Heh, top that.

 

[TecHNooB]

I just save as much as I can. I hardly spend on anything besides food.

 

[KaOTiK]

Just keep stuffing cash underneath the mattress.

 

[dullard]

What kind of things did they ask/tell you? Everything I've heard just makes them sound so basic and useless.

This was my experience at Wells Fargo late March 2010:

My personal banker (generally you need $100k in any combination of Wells Fargo products to get a personal banker, but they'll bend that in half that if you seem like a good customer) asked if I wouldn't mind talking to an investment banker. I said yes and a few minutes later was whisked away to a meeting room with the three of us. He asked about income, goals, investment styles, conservative vs aggressive, tax strategy, etc. He wanted to know the exact balances of every account (401k, savings, checkings, taxable investments, IRAs, etc) and how those were invested.

Then he described various types of investing that was available and his investment strategy. He made several suggestions (TIPS and gold) after seeing my goals which at the time were short-term stability while the stock market was on its way down. Then when the stock market was down he suggested some of Wells Fargo's mutual funds.

The problem for me was that Wells Fargo's funds were too limited in choice and had high overhead fees. I thought TIPS weren't going to cut it for me and at the time thought gold couldn't go any higher. I eventually kept it in money market accounts for 4 months, then plunged it all into stocks in Vanguard in July 2010. Waiting was good, and I got in at the lowest point in the last ~3 years. I'm up about 20% on that money in 1.5 years.

If I kept his advice, I'd be up nothing on the TIPS and I'd be up 60% on the gold. If I had gone in 50/50 with his advice I'd be up 30%. In the end he would have done a bit better than I did. But I doubt that I would have had the guts to stay in gold up to $1800/ounce and likely would have gotten far lower returns. That and I was up over 40% not too long ago on my own and will be again if the stock market returns.

As for US Bank, I was at a retirement reception for my father and their investment banker knew I was looking for investments. We chatted at the retirement reception and he invited me to talk, but I declined for now.

 

[JEDI]

Poll coming.

I'm a spreadsheet dork so I like to track my retirement goals that way. Probably doesn't give me the same tools that a financial adviser would have, but it also doesn't take a 1% cut from me and gives me a better understanding of the situation.

How do you do it?

(Note: Yes, I made up a random salary.)

6figures in 20yrs?!
$200k salary by retirement?!?!?!?!?!

u r delutional/suicidal using these figures, unless u work for the govt estimating our country's future

 

[Sluggo]

I'm going to let the government handle it of course, they know whats best for me.

 

[biostud]

State pension + union pension

 

[dullard]

6figures in 20yrs?!
$200k salary by retirement?!?!?!?!?!

u r delutional/suicidal using these figures, unless u work for the govt estimating our country's future

3.5% raises are fairly typical. It isn't much higher than inflation and including a promotion or two should be quite obtainable.

Had he been banking on 10% yearly raises, I'd agree with you. But his numbers are fairly typical. For my own projections I estimate 3% for me and 3.5% raises for my wife (she has a more stable position).

That said, his inflation rate estimate is too low (3.25% is the historical average), his return on investment of 8.5% is possibly a bit too agressive but not unreasonable (I use 8% myself), but I think his retirement age might be too low. Running out of money at 86 is concerning, simply because 86 is probably his life-expectancy. There isn't any room for error.

 

[Elbryn]

What kind of things did they ask/tell you? Everything I've heard just makes them sound so basic and useless.

i've met with a few financial advisers just for grins. some were where we got a free meal to sit and listen then graciously refuse a followup meeting. another was a friend of a friend who we met as a favor. only decent one i saw was the free one provided by our 457 fund. he actually asked appropriate questions, talked about varying asset allocations as you aged, and was conservative in responses. the rest offered the standard "let me ask a few questions about yourself. here's what we would recommend for you, <insert higher expense funds based upon preset allocations tables> no offense, but if you're job is to regurgitate basic stuff that's not tailored specifically to me with sound reasoning, i aint buying it. some when asked about indexing relied by saying, this is what we do. it's our job, we know what we're doing. oddly enough, noone would let me invest with them, but have them reimburse me for any losses beyond the index and give me half of any profit above index returns. heh i might have had a bad run of advisers but i doubt i'll ever use one.

 

[Dr. Detroit]

ROI is too high and 3.5% raises for life - yeah not gonna happen

 

[poopaskoopa]

I do my own calculations.

I was once dumb enough to hire a "financial advisor" out of Ameriprise, and, for someone like me with simple finances(single, no child, 401k/stocks/IRA/side biz, no property besides car), it was a complete waste of money.

This advisor had a mission to tell me how great I'm doing, how much I have to lose, and I need to buy various forms of insurance to protect what I have. And she always had the brochures for them handy.

I can recall being told these things:
1. Cut out wasteful spending in my life.
2. Max out 401k.
3. Max out ESPP.
4. Max out IRA contributions.
5. Buy term-life insurance(unmarried at the time with no kid)
6. Buy investment-grade life insurance.

I haven't been back since the 2nd or 3rd visit and it was a waste of money after she got all aggressive about points 5 & 6. I do recall being given graphs (in color and on high-quality paper) of my assets that look similar to what I could get out of MS Money or something similar. I'd imagine this might be different if you have some properties or are wealthy, but for someone in my situation this advisor was completely unnecessary. So I'd recommend doing some research on what type of advisor you'll be talking to because he/she might be an insurance agent in disguise.

 

[Elbryn]

I do my own calculations.
I haven't been back since the 2nd or 3rd visit and it was a waste of money after she got all aggressive about points 5 & 6. I do recall being given graphs (in color and on high-quality paper) of my assets that look similar to what I could get out of MS Money or something similar. I'd imagine this might be different if you have some properties or are wealthy, but for someone in my situation this advisor was completely unnecessary. So I'd recommend doing some research on what type of advisor you'll be talking to because he/she might be an insurance agent in disguise.

you know why she pushes those points? those are the ones that she makes money on. selling insurance, she gets a cut. a big one if she can sell you on something like whole life insurance. small one for term life.

 

[CrazyAznDriver]

fee only financial adviser ftw

 

[rcpratt]

I put $$ into my FICA account. I've been promised vast returns on my investment. The best part...my employer matches 147%.

Heh, top that.

I considered a smartass social security option

I'm certainly not counting on any government assistance at my age.

 

[rcpratt]

6figures in 20yrs?!
$200k salary by retirement?!?!?!?!?!

u r delutional/suicidal using these figures, unless u work for the govt estimating our country's future

Inflation would like to speak to you. As you can see, that's only assuming 3.5% annual raises, barely more than inflation.