How do you plan for retirement?

[rcpratt]

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.

Not all of those are what I'd actually expect to use. That's not my salary, and I wouldn't really expect to need 1.15x my retirement salary through retirement, either.

Of course, your spending one of two things you can actually adjust at your retirement and make any difference (the other being working longer). Lowering it to 80% of my salary still provides me with (a) almost my exact salary today in 2011 dollars, and (b) a positive balance through 98. I could live fantastically comfortably on that.

 

[Doppel]

Combination of doing my own stuff and hoping/guessing. I contribute as much to my retirement now as I want to. It's less than professionals say we should and a fvckload more than most of the people out there, so when they're eating ramen at least I can eat SPAM.

 

[highland145]

I considered a smartass social security option

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

Me neither @ 47. I and my employers have been paying in for 30 years. I've got 20 more until "full benefits"(67). Wonder how well I could do if I could opt out of the system and banked the 13.3% fica until 67?

 

[Texashiker]

How do you plan for retirement?

I would like to own some land in a rural area. On this farm I would like to have some chickens, maybe a couple of cows, garden and fruit trees. I would also like to have a deer blind overlooking that garden, so that when the deer come in to eat my fall peas I can harvest a deer or 2.

My parents have 25 acres that is supposed to be left to my brother and I, but I would like to have a couple more acres for rental property.

My wife and I are planning on getting a couple of rent houses moved the the land we are hoping to buy.

Whatever I get from SS will be fine, but I hope to supplement that income through other sources.

In short:

Self sufficient lifestyle with supplemental income.

 

[gevorg]

Welfare and kids will take care of me.

 

[NoCreativity]

I don't have a specific retirement tracker. I do have a spread sheet that shows all of my assets and their growth/decline. I think it's about time to start keeping track of where I am relative to where I need to be.

One question, why is your retirement income 15% higher than working income? Thought most "experts" recommend something like 70-80%, not 115%.

Oops, you already answered it.

 

[Scarpozzi]

I've been with ING since 2002. Back when I first opened my account they gave me a slide rule thing that had 2 sets of numbers. On one side, it has rates of return if you put back $X per year and tells you how much you'll have after the number of years at an estimated rate of return. On the other side, it tells you what 3%-6% inflation estimates will end up making your money worth based on the number of years you have before retirement.

Aside from that, I have a pension at work that I've been paying into for almost 10 years and a few IRAs. It really pays to start putting back a few hundred or thousand as you can now...

 

[Doppel]

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.

lol what the hell industry are you in that 3 or 3.5% raises are typical? For the rest of us, they aren't. I agree with other guy who said OP's numbers are crazy. I think they are blissfully optimistic. Average middle class person right now can expect no better raises than inflation. General exceptions would include a promotion (which many never get). This is me going back decades to include the reality now that middle and lower classes are more or less flat. Obviously if you keep moving up in corporate or other environments your salary will follow. I work with a ton of older people and they're middle class and working in the same position as people decades younger, so the typical cost of living raise is all they've ever gotten.

BTW the only financial adviser worth sh*t is one paid hourly who couldn't care less where you put your money. The rest are shills trying to screw you on a margin somewhere. I'd say they're worse than just googling "retirement tips"

I would like to own some land in a rural area. On this farm I would like to have some chickens, maybe a couple of cows, garden and fruit trees.

The last fvcking thing I'd want to do while retired, with the body of a senior, is milking the cows and feeding the chickens each day.

 

[dullard]

lol what the hell industry are you in that 3 or 3.5% raises are typical? For the rest of us, they aren't. I agree with other guy who said OP's numbers are crazy. I think they are blissfully optimistic. Average middle class person right now can expect no better raises than inflation.

So, you are laughing at 3% raises and then say you can expect no better raises than inflation. Well inflation is 3.25% historically. So, 3% is no better than inflation. You laughed at me for using a number then ended up saying the same number yourself.

LOL - at you.

Plenty of companies and government jobs offer COLA raises. Often the raise is COLA plus or minus your performance review result. Do better than average at any of those companies and you'll do better than inflation. Do worse than average at your job and you'll do worse than inflation.

Personally, my wife and I are both in healthcare. Medical device for me and pharma for her. Our raises have been quite pleasing. Promotions only make it better.

 

[AstroManLuca]

I'm socking away 10% of my pre-tax income into a 403(b) plan. My employer gives a shitty match (1/4 of what I put in up to 5%) so it only works out to 11.25% of my income, but oh well, better than nothing.

No idea how much it'll end up being worth when I retire. Probably end up changing jobs a few times anyway so I don't really have a way of knowing.

 

[Drako]

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

Good luck with 3.5% wage increase average.

 

[NAC]

I do my own calculations.
You posted calculations about how much to invest, and you can monitor against it to see if you are progressing. I do similar ones.

But the key thing you need to decide on is asset allocation – how to invest. Spend more time on that then the fun compounding spreadsheet you posted. It is up to you to decide if you know enough about asset allocation to do better than a financial advisor. IMO, the answer to that is also probably yes.

 

[Squisher]

I wanna party with the OP when he turns 62, with that much bank and all that free time it's gonna be hookers and blow much of the week.

 

[rcpratt]

lol what the hell industry are you in that 3 or 3.5% raises are typical? For the rest of us, they aren't. I agree with other guy who said OP's numbers are crazy. I think they are blissfully optimistic. Average middle class person right now can expect no better raises than inflation. General exceptions would include a promotion (which many never get). This is me going back decades to include the reality now that middle and lower classes are more or less flat. Obviously if you keep moving up in corporate or other environments your salary will follow. I work with a ton of older people and they're middle class and working in the same position as people decades younger, so the typical cost of living raise is all they've ever gotten.

The great thing about spreadsheets is that you can change them to fit your needs and expectations. The raise number that I assumed works for my expectations, and is in fact conservative to my expectations. Maybe something will change; I can adjust accordingly.

Calling it "crazy," though, is well, crazy. The difference between inflation and the raises I assumed are next to nothing. If I never get a promotion (although I already have...) I'd shoot myself in the face for sucking at my job and wouldn't need a retirement.

Anyways, the assumptions I made weren't really the point here.

But the key thing you need to decide on is asset allocation – how to invest. Spend more time on that then the fun compounding spreadsheet you posted. It is up to you to decide if you know enough about asset allocation to do better than a financial advisor. IMO, the answer to that is also probably yes.

I do that separately, I have a few different sheets.

 

[Doppel]

So, you are laughing at 3% raises and then say you can expect no better raises than inflation. Well inflation is 3.25% historically. So, 3% is no better than inflation. You laughed at me for using a number then ended up saying the same number yourself.

Except often you won't even match inflation, like in this environment. And that doesn't even include if you lose your job, which at some point is highly likely for a lot of people.

 

[jupiter57]

Been there, done that.
20 years in the Union, worked enough overtime to have the required credits in 20 years, but all those 12 hour days & 7 day weeks took it's toll.
Did another 12 as PM for an Open Shop after that.

Oh, and I saved every single penny I could during that entire time.

 

[Red Squirrel]

"Guess and hope it works out."

For now. I buy RRSPs every year, and have a retirement plan through work. Though I'm not really counting on that plan because one of these two things are bound to happen by the time I retire: 1) Company taking away our retirement or 2) company closing down. Every union contract, we have something taken away from us. This year it was our bonus. Eventually, it will be the retirement. there's also the threat of the company that owns us closing us down. They've been closing lot of centers and laying off lot of people.

So idealy, I need to find a way to make enough money to live on without depending on work, and keep doing this when I retire. Something like web hosting or make a game like Evony or something.

 

[highland145]

Been there, done that.
20 years in the Union, worked enough overtime to have the required credits in 20 years, but all those 12 hour days & 7 day weeks took it's toll.
Did another 12 as PM for an Open Shop after that.

Oh, and I saved every single penny I could during that entire time.

Meaning non-union?

 

[ichy]

I put away 15% of my salary into my 401(k) and my employer matches another 4%. In addition to that I max out my Roth IRA every year. If I keep that up I figure I'll be fine.

 

[DaveSimmons]

I'm fortunate to be paid well and to not mind living below my means, so I can put more than 15% towards retirement while still doing the odd bit of charity work (see you in November to Child's Play 2011).

I don't use an adviser, and don't bother to project since I think I'll be fine and wouldn't change my behavior even if I'm wrong.

 

[dullard]

I put away 15% of my salary into my 401(k) and my employer matches another 4%. In addition to that I max out my Roth IRA every year. If I keep that up I figure I'll be fine.

You are possibly over-saving, unless your salary is quite small now and you expect it larger later. You might be "fine", but you might also be missing out on life while you are young enough to enjoy it. Oh and look into an HSA, it might be better than putting that much into the 401k and Roth.

 

[rcpratt]

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.

Interesting. Little bit more involved than what other people have told me.

 

[ichy]

You are possibly over-saving, unless your salary is quite small now and you expect it larger later. You might be "fine", but you might also be missing out on life while you are young enough to enjoy it. Oh and look into an HSA, it might be better than putting that much into the 401k and Roth.

I don't feel like I'm over-saving. I don't make crazy amounts of money, but I do make a comfortable middle-class salary. Combine that with the fact that I have no debt other than my mortgage (and a roommate to help pay that), no wife and no kids I can put away a decent amount into retirement savings and still have money leftover to do fun things.

 

[SpunkyJones]

I had kids and I keep telling them that they should make sure to have a in-law apartment in any house they buy.

 

[dud]

OP, I believe the rates you used are too optimistic. I developed a similar spreadsheet 20 years ago for my 401K. All I can say is that I will have nothing near what I had hoped to have in the 401K if I ever retire. I pump the max allowed into it and it dosen't seem to go anywhere very fast (unless the market drops).