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How much $ do i need to live to age 80 w/expenses = $30k/yr?

JEDI

JEDI

Lifer
At age 60 i can withdraw from my 401k w/o penalty.

Expenses = $30k/yr
Interest rate = 4% (for simplicity, compounded annually)

How much $ do i need at age 60 so that at age 80, i have $0?

And whats the formula?
 
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(P/A, 20, 4&#37😉

P=A(((1+i)^n-1)/(i(1+i)^n))

P=$30000*13.590

P = $407,709.79

Keep in mind that your expenses are likely to increase with inflation...

Also, that money is going to be taxed.
 
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rcpratt said:
(P/A, 20, 4&#37😉

P=A(((1+i)^n-1)/(i(1+i)^n))

P=$30000*13.590

P = $407,709.79

Keep in mind that your expenses are likely to increase with inflation...

Also, that money is going to be taxed.
Click to expand...

wow..THX! cant believe i forgot about that!

25% fed + 5% state = 30% tax

408k/.7 = 583k

as for inflation... hm.. i could just assume inflation = 4% to negate the 4% rate of return

so $30k/yr * 20yrs = 600k

600k/.7 = $857k is about what i need in my 401k at age 60 to last me 20yrs
 
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JEDI said:
wow..THX! cant believe i forgot about that!

25% fed + 5% state = 30% tax

408k/.7 = 583k

as for inflation... hm.. i could just assume inflation = 4% to negate the 4% rate of return

so $30k/yr * 20yrs = 600k

600k/.7 = $857k is about what i need in my 401k at age 60
Click to expand...




Suggest you revisit your estimate of 25% Federal tax. Unless you have other (significant) sources of income and expect to gross well over $100K a year OR the Government significantly raises the tax rates in the future ... the 25% rate is too high.
 
25% is definitely too high, 20% is probably a better starting point unless there is a bunch of other income you haven't mentioned.

Inflation is something like 3% on average. With conservative investments on your 401k after you retire you should still be able to pull 5% average or so. We can call it +2%/yr and probably be fairly accurate.

$30,000(P/A, 2%, 20)

P = $30,000*16.351

P = $490,543

After tax = $490,543/.75 = $654,057

All we've shown is that these calculations vary widely based on the assumptions you use and you should try to have more than any of these numbers to be safe. Also, 20 years is a seriously short assumption and that has a huge effect.
 
That sounds exactly like one of the questions my sister was going over back when she was getting her CFP at the bank. If you need med calculations done I can help, however this is not in my scope of practice.
 
You could use a Roth IRA and not have to worry about paying taxes on it at retirement. Depending on how much you make now, and if you are willing to bet that you'll pay more in taxes later, its probably a good idea to open one up.
And there's a missing "k' in the title, $30/yr would be very easy 🙂
 
rcpratt said:
All we've shown is that these calculations vary widely based on the assumptions you use and you should try to have more than any of these numbers to be safe. Also, 20 years is a seriously short assumption and that has a huge effect.
Click to expand...

Beyond 20 years being relatively short you probably will have at least a few large expenses over that time. That could be medical expenses above what is covered by medicare, a large home repair if you own a home, or even something fun like deciding to go on a big trip. Don't plan your retirement based on a budget that only covers the bare minimum living expenses, something will happen and you'll chew through a year's worth all at once.
 
rcpratt said:
25% is definitely too high, 20% is probably a better starting point unless there is a bunch of other income you haven't mentioned.

Inflation is something like 3% on average. With conservative investments on your 401k after you retire you should still be able to pull 5% average or so. We can call it +2%/yr and probably be fairly accurate.

$30,000(P/A, 2%, 20)

P = $30,000*16.351

P = $490,543

After tax = $490,543/.75 = $654,057

All we've shown is that these calculations vary widely based on the assumptions you use and you should try to have more than any of these numbers to be safe. Also, 20 years is a seriously short assumption and that has a huge effect.
Click to expand...

thx! 20yrs to age 80 is too short? Avg life span of a US male is 74?


blinblue said:
And there's a missing "k' in the title, $30/yr would be very easy 🙂
Click to expand...

Fixed. :blush:
 
Have you figured in the increasing cost of health insurance? It's averaging 10 percent a year. AND it compounds.
 
Yea at that age, take into account of medical care.

You're better off living in another country where it's cheaper and easier to live with less money.
 
techs said:
Have you figured in the increasing cost of health insurance? It's averaging 10 percent a year. AND it compounds.
Click to expand...
Pretty much everything compounds...

And yes, you need to plan beyond 80. You can't just plan for the average (or slightly higher), you pretty much have to plan for the worst case with these kinds of things. Depending on your personal health and family history, I suppose. Most planners will recommend you plan to at least 90.
 
My theory on retirment:

Traditional 401K and IRA over ROTH: Most likely you will be paying a higher tax rate today than you would in the future. You can put in more today based on the tax savings and that 20+yrs of compounding interest will more than outdo your duture tax payments.

And - you can move to some 3rd world H&B country like Thailand or Panama and never pay US taxes again. Sure you'dd be a fugitive and never come back without penalty but hey - not paying the tax man will be well worth it.

Retirment to age 59.5 - gotta survive on cash
59.5 - 72 - gotta surivie on 401K & IRA
72 - and onward you gotta surivive on SSI

SSI will be trimmed down by the time you retire but it will still be paying out so factor it in.
 
At some point during retirement you can put money into an immediate annuity and "earn" more than 5% on it.

It pays much more interest than a CD, but it does so because your principal is gone and your estate gets nothing. It's like buying a pension. They bet you die when the actuary tables say you will, you bet that you'll live longer.

http://www.immediateannuities.com/
70 year old male, currently paying about 7.8%
 
Fmr12B said:
My theory on retirment:

Traditional 401K and IRA over ROTH: Most likely you will be paying a higher tax rate today than you would in the future.
Click to expand...

This is assuming public health care and SS don't cause a large increase in taxes in 20 or 30 years.

If you want to play it safe max out the ROTH and then put into the 401k (401k is about 3x ROTH at the moment?). If your employer matches the 401k, you should be able to get more into the 401k than the ROTH, ideally maxing it out.
 
Engineer said:
Shit, move in with the kids and live off of them and their credit cards.
Click to expand...



How the hell do you move in with your kids (and live off of them) when they haven't finished living with you?

There is a large number of the "boomerang" generation that are just now coming home after finding out that the world is not the rosy place they were told it was ...
 
dud said:
How the hell do you move in with your kids (and live off of them) when they haven't finished living with you?

There is a large number of the "boomerang" generation that are just now coming home after finding out that the world is not the rosy place they were told it was ...
Click to expand...

Well, I guess you have a point. Generation Y might be the first generation in US history that lives a lower standard of living then their parents....and I'll be damned if I'm not the parent of two of them. Doh! ^_^
 
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