Gosh, the last 6 months since I posted that has been a test (really, its been the last 3 months).
I looked at my retirement/savings balance a year ago. Up 33% in 12 months. Shit feels like it is getting real quick.
So, assuming a quick estimate of my regular spending, and assuming I pay off, stay in my current house, and the 529 accounts cover colllege, I’m at 5.8% spend rate. If I have a similar savings level for 3 more years and 0 stock growth, that falls below 4%.
If I sell my current home, push half into savings, cut my tax/insruance bill in half, I am at just over 4%…today.
Now, that’s somewhat bullshit, because I haven’t factored in medical expenses or a car payment, but I might have about 1k a month of padding in the expense number I am using as a quick estimate.
I plan to use 50% of the benefit currently promised to me as my expectation of SS income in retirement.
If it actually sticks around then cool. However, like @Mathman I don’t expect SS to go away. I expect it to be weakened and potentially made into a public-private partnership of some sort so somebody can profit off of it.
Between federal income tax, state income tax, OASDI tax, medicare tax, medicare surtax, imputed tax on my “free” corporate life insurance, property tax on my home, sales tax on every dollar I spend, Obamacare NIIT tax, and the excise taxes I pay on my imported liquor, and anything else that I cannot think of right now, I believe that I am overtaxed, and I find that taxing.
This is especially true when the peeps like me, 80th to 90th percentile income like a lot of actuaries, see that the 95th through 99.9th percentile guys aren’t paying their fair share because of their available tax avoidance schemes
Here’s a hypothetical question to get back on topic…
Let’s say you reach your retirement net worth goal, and you intend to sell your home and move to a preferred location for your retirement years, whatever/wherever that may be. You add the proceed of the old home’s sale to your net worth, but prepare to pay cash for your final home.
Without necessarily getting specific about dollar amounts, what specific portion of your total net worth would you plan on spending on your retirement home?
I am thinking about 25% give or take, meaning the remaining 75% is the investment base from which to withdraw my annual spending requirements.
A few questions need be answered.
Will you be using the final home sale to fund your last years in a retirement home? If so, then go check them out now and get a handle on the price tag of what you feel comfortable with. That’s the nut you’ll need…whatever the % is.
The price of the house is less important than the annual expense. Snow removal, lawn, cleaning? Everyone has their own idea of retirement.
So many unknowns. Hard to have a very concrete plan.
90th percentile household income is 235k which is around what a fellow with 10 years experience makes. 95th is 285k. Practically any actuary with a FT working spouse will be in that top 5%.
But we do all get that from wages, which is the worst from a tax perspective.
it’s a lot less about how.much taxes I pay, and more about what I get for taxes. yeah there’s waste but I see a lot of value in what I get, and there’s areas I would like to see increased. I think our disability social safety net leaves people living at undignified levels, and would like them to have a minimum standard of living. and that’s worth paying taxes for.
the struggle is whether the tax money is being spent efficiently, not how much. I have a clear view of the social benefits I get from paying taxes.
I definitely think more money could be going to people who are disabled, but I also think there should be less going to a lot of seniors. It doesn’t make sense for seniors with incomes over $100k to get OAS. Also, if you’re traveling out of country I’m not sure you should be getting OAS.
Within my own work, I swear the department would get better value for money if they had a relatively low paid admin handling travel organization/reporting vs. having highly paid staff fighting with the software once or twice a year. Someone who used our travel software everyday could probably perform these tasks in a tenth of the time it takes me.
I don’t know the UK system well enough to comment.
My impression of the Canadian system is it’s overly generous to well off seniors and not generous enough to low income ones. On the other hand, how much should we penalize people for poor planning and how do we distinguish seniors who are poor due to poor planning from seniors who are in poverty because of unfortunate circumstances?
There seems to be an expectation by many reasonably well off seniors in Canada (and Australia) that they shouldn’t have to pay for their living expenses out of their personal assets. As a result we often ignore a person’s assets when it comes to payung for long term care homes, etc.
My experience has been that Canadians happier paying taxes than Americans as we see results.
There is also the expectation factor. An example would be the earnings-related social security pension systems of our two countries. The Canada Pension Plan was put on a path to sustainable funding almost thirty years ago and Canadians are not worried about getting CPP benefits. In contrast, Americans and their employers pay high OASDI contributions but full benefits will only be able to be paid if there is a massive future contribution to its modest fund.
As far as tax increases to fund future initiatives, I think the Canadian public might accept a higher consumption tax to help fund increased military spending. When there is a general acceptance that money must be spent, Canadian taxpayers are more willing than their American counterparts to pony up. In the US, the political discussion tends to be around decreasing taxes even when deficits are ballooning.
I appreciate that it was easier for my generation to retire young (primarily because of lower housing costs) but am optimistic that the younger actuaries here can also do this.
I overestimated the amount of funds needed to have a comfortable retirement. When I retired at age 58, I expected that I would immediately start drawing down capital. 16 years later, that has not happened despite giving a whack of money to my kids. I would add that I only had an average actuarial career, compensation wise.
We are currently able to spend heavily on travel. Once you get to be mortgage-free and no longer funding your kids’ education, it is amazing how much disposable income you have!
We have always chosen to live downtown in large cities so have little need of a car. We have a 2008 Honda Civic for the rare occasion we drive a car. I hate buying depreciating assets so we have saved a lot over the years by only having one car at a time and keeping it a long time. Only two of our four kids have a car.
Two caveats:
A big unknown is the future investment return on our assets. I was overly conservative in my planning and have benefited from greater than expected returns since retirement. However I continue to be conservative about the future.
Another unknown is the cost of long term nursing care. I have not set aside funds for that as I figure the sale of my home would cover it.
I’ve had a good career in a reasonable COL area, but I’ve also not gotten caught up on growing my lifestyle with each promotion along the way. I’m spending much less than 50% of what i take home.
I bought my current home in 2010. I stretched financially at the time to get it, but it was more than enough house than i would ever need, and the market was depressed, so good timing on that. A bigger outcome was this was also a fairly short commute to work, 15 miles round trip. 1) cars can last a long time when your annual commute is only 4k miles. 2) since you aren’t spending much time in your car, it becomes a lot less important in life. Many others choose a longer commute for the fancier house in the outer suburbs and end up forever in car debt.
Calculated our annual spend finally. We’re sitting at about $75,000 last year and $96,000 this year, with this year having had much more in the way of vacations and home renovation. Taking out the mortgage, it’s more in the area of $55,000-$76,000.
I think the higher end of that is more representative of where we want to spend the remainder of our lives. Still, looking at a 4% withdrawal rate for a total of $1.9M, that’s looking like an earlier possible retirement than I’d been previously thinking. Or at least, financial independence.
I still have time to dial things in, but I’m not comfortable with the idea of >4% on a retirement plan of 30+ years. I might change my mind. It’s still far enough out that Social Security won’t matter in the end, it just changes the end date.
Having thought some more, I think my number is sitting closer to $2.25M to be comfortable. Either way, I’d previously been looking more at the area of $2.75M or even $3M. Acknowledging it might ultimately be difficult to convince myself not to go another year to stack up some security and spending money.
Looking at my spending the last couple years, I seem to be running about 5k a month in CC charges, which includes almost everything by my mortgage/escrows and utilities. So any vacation spending, medical expenses (reimbursed from HSA), insurance, furniture, and any DIY home projects. Escrows and utilities are ~1500 a month.
That includes expenses related to having kids in the house, but excludes health insurance or a car payment (or amortized purchase adj). Maybe I can expect those to wash out?
