Bloomberg posted a robust retirement guide based on how many years you have until you plan to retire, gift link.
First, here is a table that came up several times, adjusted throughout the article based on age.
Those numbers either resonate and/or seem realistic or they don't but whatever you end up with is your reality and what you need to work with. If someone at 65 making $125,000 has $700,000, $2 million or is right on this table at $1.14 million, their accumulated piece of money can kick off 4-5% pretty sustainably. If you're 65 and 4-5% of your accumulated piece of money is $40,000-$50,000, that is your math. For better or for worse, that is your sustainable number. Is your number enough? If not, what are you going to do? You need to figure something out.
Obviously, social security will be part of the equation. Will you have other income streams? Do you need other income streams? If so, have you figured out where those will come from?
Maybe one partner will get $3000/mo from Social Security and the other will get $2000/mo. Then maybe a safe withdrawal rate from retirement accounts adds up to $45/yr ($3750/mo). Figuring out $8750/mo was easy enough. What are expected expenses This work is a little trickier because forgetting things as you sit down in front of a spreadsheet is probably going to happen. One that would be easy to forget for my wife and me is road maintenance. We have to maintain our road. To just have it graded is $600-$700 but could be a good bit more if we need to buy material (dirt/composite). I'm sure everyone has their version of getting the road graded.
Ok so regular monthly expenses, other non-monthly regular expenses (car insurance as an example), what is your health situation and how expensive is that, are there other regular lifestyle expenses that are more discretionary in nature like paying for a hobby, how about more expensive fun like trips and what about emergencies? Did I leave anything out? Probably, but you get the idea.
What's that all add up to? How does that compare to your SS plus reliable portfolio income, the $8750 we used above? Sticking with the $8750, framing, if all those expenses above add up to $8500, ok, that's good but there's not much room for error. That doesn't mean you should turn your life inside out but it is important to understand how slim of a difference that is.
There was a snippet in the article about figuring out how to build some flexibility into your portfolio withdrawal strategy, I think that is a good idea. There was more time spent on addressing sequence of return risk. My answer is sell some holdings while times are good, maybe put enough aside to cover expenses equal to the number of months of the average bear market. That used to be 18-30 months but it has been awhile since we had one that long.
Maintaining good health was in the 10 Years To Go section, invest in your health it said. Pushups are a good indicator of health. Here's a table from AI that I am going to bring up at fire training on Saturday.
How old are you? How many can you do? If you can do a good number based on the table, then chances are you'd do well with other physical indicators like grip strength or dead hang.
Of course the Fidelity study about lifetime healthcare costs was brought up. Staying fit to the point of very few or no prescriptions will bring the Fidelity number down considerably. The guy in our fire department who is 70 and can still pass the arduous pack test takes no prescriptions. If he lives to 100, even if he needs to start any prescriptions soon, he's made it a decent chunk of the way through his retirement without spending money on prescriptions.
It is not too late to get diet and exercise dialed in. The chronic maladies that many people take medication for can be reversed (google it). Fix your blood sugar, lose the gut and build some muscle mass.
A 57 year old was cited talking about the high cost of health insurance being an obstacle to her retiring early. Yes, it might be very expensive, but maybe not. Low income levels are still very cheap through the government market place. We looked at this earlier, right around $84,000 of income for a couple is the Mendoza line for it being very cheap versus being expensive. Google Mendoza line if you're not a baseball fan.
In 2025 and this year, $709/mo covers both of us. Yes, it is crappy insurance, I think we'd have to pay $15,000 out of pocket if something awful happened, but we are very fortunate to not need anything but annual physicals.
The article talked kind of a lot about 85% of Social Security being taxable above a certain income level. Realistically, if you're interested enough in investing to read a blog like this, you should plan on your Social Security being taxable. This will be unpopular but I wouldn't spend the time calculating the 15% you won't owe taxes on. Let your accountant's software just tell you how much to pay (estimated) every quarter. You're not not planning, you're letting your accountant figure it out for you.
Not enough time, in my opinion, was devoted to figuring out what you will do with your time. We probably all know retirees who seem to be very busy all the time and others who sit in their Lazy Boy yelling at their television or maybe something else.
It's not for me to say what someone else should want to do, like yell at a cloud, but it is important to figure out ahead of time what your retirement looks like.
A lot of this post is yet another reiteration of what we've been talking about for 20 years, literally. The overriding idea to all of this is that retirement is an equation that needs to be solved. The more time we all put into planning our idea of retirement, the more successful we will be.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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