Is $200,000 enough to retire on?

[Cattlegod]

It shows I will only have 200k after 30 years when I'm ready to retire. Currently I'm investing 10% of my salary and the regression line is averaged over the past 2 years of performance. The R squared value is .995, so it is a very good fit. 200k doesn't seem like enough to retire on though.

Thoughts?

finances.JPG

edit: I used a linearl curve fit, if I use polynomial and the R squared is .996, even better than the linear, it shows about 700k at retirement. anyone know the correct one to use?

 

[Cooler]

Originally posted by: Cattlegod
It shows I will only have 200k after 30 years when I'm ready to retire. Currently I'm investing 10% of my salary and the regression line is averaged over the past 2 years of performance. The R squared value is .995, so it is a very good fit. 200k doesn't seem like enough to retire on though.

Thoughts?

finances.JPG

you need 1/2 mill

start investing 25% or more.

 

[radioouman]

It is not enough to retire on.
You'll probably live on roughly 10% of your "nest egg" per year.
Calculate inflation of your current salary for when you want to retire.
If that value is more than 10% of the value that you have saved, you'll need more money.

I predict that you'll need about 1,000,000 to retire on. That means that you'll have $100,000 per year.

 

[dullard]

Unless you have crappy investments, investing isn't linear. Your linear extrapolation is highly suspect.

 

[Viper GTS]

$200K is not anywhere near enough.

$1 mil wouldn't even be enough if you plan on living for a while & living well.

Oh and I just noticed your graph. WTF makes you think it would be linear?

Go use a real investment calculator & see what it turns out.

Viper GTS

 

[K1052]

Simple answer: No (unless you are moving to a 3rd world country for your retirement).

 

[iversonyin]

How old are you? If you are 30+, you better throw more into that nest egg.

 

[Cattlegod]

Originally posted by: Viper GTS
$200K is not anywhere near enough.

$1 mil wouldn't even be enough if you plan on living for a while & living well.

Oh and I just noticed your graph. WTF makes you think it would be linear?

Go use a real investment calculator & see what it turns out.

Viper GTS

the thing that worries me is the R squared value is .995, which is very good. does this mean that either 1 - I don't have enough data points or 2 - my investments suck?

 

[dmw16]

I've heard numbers in the 1-2.5 million range. But like the above poster said - interest compounds on itself. I dont know how old you are, but if put just 7% of my current salary in a resonably stable 401K @ 65 it will be worth about 1.25mil and that isnt figuring in raises and other investments. Starting young is the best way to invest. You should read a book called "The Young, Fabulous, and Broke" by Suze Orman. She has a lot of good advice for those starting out (again not knowing your age).

 

[Cattlegod]

I'm 24 years old BTW

 

[GTaudiophile]

Let's say you're 55. You're still married and your kids are through college and out of the house. You've scaled down some, living how you want to live, and you need $80K/year to live this way. You plan on retiring at 65 and will most likely live until 85. Therefore, you need $1.6 million (80K x 20) in savings as your nest egg I would say. If you invest this priniciple in a low-interest-bearing account, giving you a 5% ROI, then that would give you the $80K/year you need...without ever touching the principle.

 

[0roo0roo]

in mexico?

 

[kranky]

The theories on this are all over the place.

Most retirement calculators assume you will need 70-80% of your current income in retirement. If you save 10% of your income, will be in a lower tax bracket, have your house paid off, etc., you surely won't need that much to live at a comparable level. Social security is the wildcard, though. It greatly depends on whether you are counting on it or not.

What rate of return are you assuming for the next 30 years of investing? I don't understand what the graph is supposed to show, or what linear vs. polynomial is supposed to mean WRT investment return.

Try this retirement planner and see what you come up with.

 

[FoBoT]

no
you'll need over $1 million unless you retire after age 70, then you might not need that much

 

[dullard]

Originally posted by: Cattlegod
the thing that worries me is the R squared value is .995, which is very good. does this mean that either 1 - I don't have enough data points or 2 - my investments suck?

R squared values are meaningless. Take some statistics courses. Ignore it. Investments are not linear like I said above. Heck, fit a quadratic to it and you'll find a better fit, a lot more accurate future predictions, and if you really need it, an even better R squared value. Note: investing is not quadratic either.

Looking at your data I see approximately this:
[*]Annual income ~$67,000.
[*]Investing ~$560/month which is 10% of the salary.
[*]Assuming a 7% return (roughly what a good investment will get you now, the days of 10% are long gone).
[*]After 30 years, you'd have $683,000.
[*]Inflation adjusted that is $251,000 of today's dollars.

Note: you'll probably get raises in this time frame. If we do the same calculation, assuming a 3% raise per year, and you still invest 10%, you'll have:
[*]After 30 years, $934,000
[*]Inflation adjusted, that is $342,000 of today's dollars.

 

[Mallow]

Nothing anyone has said matters unless they know how long you want to live. If you plan on retiring at 70 and dying at 75 then yes it is more than enough. However, if you plan on living 10+ years after retirement, you better start saving and investing b/c you are in trouble

 

[Cattlegod]

Originally posted by: kranky
The theories on this are all over the place.

Most retirement calculators assume you will need 70-80% of your current income in retirement. If you save 10% of your income, will be in a lower tax bracket, have your house paid off, etc., you surely won't need that much to live at a comparable level. Social security is the wildcard, though. It greatly depends on whether you are counting on it or not.

What rate of return are you assuming for the next 30 years of investing? I don't understand what the graph is supposed to show, or what linear vs. polynomial is supposed to mean WRT investment return.

Try this retirement planner and see what you come up with.

below are the results

cnn.JPG

 

[Tiamat]

You need at least 1500k$ depending on your lifestyle.

 

[FelixDeCat]

Well it took 15 years to reach $110k and I know $200k is inadequate. I lost a bundle in 2000. Look at the 10 year graph on VWUSX. When a MF declares a massive cap gain get the f out ASAP! That lesson cost $39k. Ive been in/out of VEXMX ever since. Im hoping for $1M by 48.

You wouldnt believe the number of people out there with no savings at all. So anything will definitely help.

 

[kranky]

Originally posted by: Cattlegod

Originally posted by: kranky
The theories on this are all over the place.

Most retirement calculators assume you will need 70-80% of your current income in retirement. If you save 10% of your income, will be in a lower tax bracket, have your house paid off, etc., you surely won't need that much to live at a comparable level. Social security is the wildcard, though. It greatly depends on whether you are counting on it or not.

What rate of return are you assuming for the next 30 years of investing? I don't understand what the graph is supposed to show, or what linear vs. polynomial is supposed to mean WRT investment return.

Try this retirement planner and see what you come up with.

below are the results

cnn.JPG

You're in good shape, then, as long as you invest in accordance with what you indicated when you went through the calculations. You have a 98% chance of meeting your goals. Just remember that calculator assumes Social Security will be available, so if you might want to build in some extra protection in case that doesn't work out.

 

[IronWing]

As stated above you need to adjust for interest compounding. You also need to adjust for inflation compounding. The inflation factor is essential as it will apply to both your future salary and the value of your investments. Retirement calculators help you do both. Also, you might have too short of record. Returns on investment and inflation rates have been not been in line with historical averages over the period you have data.

 

[dullard]

Originally posted by: ironwing
Returns on investment and inflation rates have been not been in line with historical averages over the period you have data.

Um, inflation rates are almost EXACTLY matching historical values over that time period (Not that it really matters in this discussion though.) Data for calculations. Last 92 year inflation average: 3.29%. 2004 inflation average: 3.3%. 2005 inflation average: 3.4%. His two sample years of 2004 and 2005 couldn't be much closer to that historical average.

 

[kranky]

Originally posted by: FelixDeKat
Well it took 15 years to reach $110k and I know $200k is inadequate. I lost a bundle in 2000. Look at the 10 year graph on VWUSX. When a MF declares a massive cap gain get the f out ASAP! That lesson cost $39k. Ive been in/out of VEXMX ever since. Im hoping for $1M by 48.

You wouldnt believe the number of people out there with no savings at all. So anything will definitely help.

I don't see why a large cap gain distribution would be a reason to exit the fund.

 

[mephiston5]

The equation for your line is just odd. But apart from that, how many years of past data are you using in this model? I would be willing to bet, since you are so young, that you are not using much data at all. Forecasting tools are neat, but they are only as good as the data they are built with, and the more the better. I bet if you run a regression in 20 years with 20 more yearly data points that you will get a much more ?accurate? number, though I use the term accurate loosely, since forecasts are almost always off.

 

[Kelemvor]

Investments won't ever be a straight line likein your chart. Assuming you pick a standard percentage rate and assume it never changes, you're still adding more money all the time which makes the interest more. It should be a curve.

Just go online and use a 401k calculator and it will give you far more accurate results.

EDIT: Here's one:
http://www.bloomberg.com/analysis/calculators/401k.html