When Will You Be Able to Retire?

Permit me to introduce a new term into the financial planning lexicon: goals-based budgeting. (Well, a Google search turned up a few other instances of its use, but they're on government websites, so no one has seen them.) I came up with the term after reading through the comments of my last article (“The High Cost of Modern Living”) and reading J.D.'s recent article about his entry into the Third Stage of personal finance, which he explained thusly:

I've paid off my debt, built a cash cushion in savings, and am maxing out my retirement accounts. And after doing all of these things, I have money left over to spend on comic books and travel.

In my previous article, I listed several items we spend our money on — for instance, cell phones, cable TV, chocolate-covered pork fat — that didn't exist in the past, and suggested that the allure of these modern inventions may explain why some people haven't saved enough for retirement.

A few readers rose to defend their expenditures, arguing that many modern devices and services save time, increase efficiency, and replace older/costlier/less-efficient Stuff. Those are all valid points…if those purchases are aligned with your financial goals, or you're saving enough to meet your financial goals and have money left over to spend on thingamajigs, doohickeys, and whatchamaspankits. This is J.D.'s “third stage” — the point at which you can relax a little bit with your spending.

Which brings us to this reader comment appended to J.D.'s article:

Whenever I hear that someone is “maxing out retirement accounts”, a red flag goes up. Depending on how late in life you're starting and how much it will take to sustain your lifestyle, “maxing out” may not be enough. I hope that instead you are looking at how much you'll need to accumulate and feel you are on track with that.

A very important point, indeed. If the analysis cited in a recent Wall Street Journal article is to be believed, nearly three of five baby boomers will run out of money in retirement. These folks have been walloped by stinky stocks, evaporating home equity, and interest rates that pay no interest. But many of them just didn't save enough. For all of them, saving more is the solution.

Running Your Retirement Numbers
How do you know if you're saving enough for retirement, or any other money-reliant goal? The best (though still imperfect) way is to use some sort of financial calculator, be it online tool, software program, or spreadsheet. There are loads of these available. Do a Google search on “retirement calculator” and you get 84,700 hits. No, wait — that's what you get when you search on “Goldman Sucks.”

Well, no matter; you don't need to search for a retirement calculator because I'm going to point out a few in this post. In fact, I'll walk you step-by-step through my favorite among The Motley Fool's calculators. Click on “Retirement,” and then on “Am I saving enough? What can I change?” This calculator can handle all kinds of variables: Social Security, pensions (and whether they adjust for inflation), anticipated spending levels in retirement, and Roth and traditional retirement accounts.

So gather your retirement account statements, pull up the online calculator, and get ready to peer into your possible future.

Getting Cozy With the Calculator
This calculator has input boxes, most of which have been completed with default data. You can get rid of those by typing in your own numbers (or zero if that field doesn't apply). Certain areas are accompanied by a question mark. Click on one, and you'll get an explanation of the desired data. Now, let's start entering.

    • Personal information. The first few fields are pretty self-explanatory. If you plan to work part-time in retirement, enter your expected income and how long you plan to work.

 

    • Social Security benefits. Yes, you will receive Social Security (a topic I will cover in my next post). If you're 55 or older, assume you'll receive your estimated benefits. If you're younger, be conservative by assuming you'll receive 25% to 75% of your projected benefits, depending on the margin of safety you want to build into your analysis. The calculator will estimate your benefit, though you can enter the amount you received from your most recent Social Security statement (which arrived in the mail a few months before your last birthday) or visit the official government Social Securituy calculator to get an estimate.

 

    • Pension or defined-benefit plan. Make sure to indicate if your benefit will increase with inflation. This is also where you'd enter the payments you'll receive from any other source of lifelong income, such as from an immediate annuity, reverse mortgage, or trust.

 

    • Your projections. For inflation, enter a number between 3% and 4%. Yes, inflation may go nuts down the road, but it hasn't happened yet. What's more likely (nay, inevitable, in my opinion) is that tax rates will rise. Soon-to-be retirees can expect their tax rates to drop once they retire. However, for my analysis, I'm assuming that won't happen to me (I don't plan to retire for 30 years). As for your income, assume it will increase at the same rate as inflation, unless you're on the proverbial fast track. Finally, unless you know the day you're going to die, choose an age between 90 and 100, depending on your health and family history. (If you're looking for an estimate of your life expectancy, visit LivingTo100.)

 

    • Your projected monthly living expenses. The calculator allows you to break up your retirement spending in three phases. Generally, retirees spend more in their first five years as they enjoy their newfound freedom. Then, spending tends to decline in most categories (health care is the notable exception). Plug in the number in today's dollars; the calculator will adjust for inflation. One big determinant of your retirement spending: Will your mortgage be paid off?

 

    • Your future, one-time investments. Expect an inheritance or to sell a business down the road? Enter those windfalls here. Just be realistic — many expected inheritances don't materialize, often due to end-of-life medical expenses.

 

    • Your monthly savings (taxable accounts). This is where you enter the values and contribution amounts to non-retirement accounts, such as savings accounts and brokerage accounts that aren't IRAs.

 

    • Your monthly savings (tax-advantaged accounts). Here's where you input the values and contribution amounts to your retirement accounts. If you or your spouse has a 403(b), 457, or other defined-contribution plan, enter those values in the 401(k) fields. This is important: Enter future contributions to employer-sponsored retirement plans as a monthly amount, but enter future contributions to IRAs as an annual amount.

 

A note on returns: Be conservative when projecting investment returns. Young investors with stock-heavy portfolios shouldn't assume more than 6%, and retirees with a mix of stocks and bonds should cap their assumed returns at 4%. I certainly hope that returns are higher, but I'm not betting my retirement on it.

 

And the Verdict Is…
It's time to score your test. At the bottom of the page, click “get your results.” The analysis will be expressed in months, e.g., “Your living expenses after retirement will be fully funded for 173 months.” Divide that number by 12, and you'll get how many years your savings will last.

If the calculator gives your retirement plan high marks, congratulations! If not, click on the “inputs” tab at the top and adjust the variables to see what combination of increased savings, reduced retirement income, and later retirement age will give your plan an acceptable score.

Don't Take One Tool's Word for It
While I think crunching your numbers is important, the truth is, the analysis will be wrong. There are just too many variables — such your rate of return, the rate of inflation, and how long you'll live — that are unknowable. The best this tool will be able to do is give you a rough idea of whether you're on track. Therefore, it's important to do two things: 1) Run an analysis every year to see if you're still on track, and 2) try other tools to get a second and third and fourth opinion. Here are a few others to consider:

If you're looking for calculators that aren't exclusive to retirement, head to Dinkytown (which, it should be noted, is not as fun as Funkytown).

Each calculator will give you a different result, due to how they run the numbers. You'll be looking to see if a consensus emerges from the tools. If three of four calculators indicate that your retirement plan will succeed, then you're probably on the right track. If three of four say you'll run out of money, it's time to plan to save more or work longer — or both. The same goes for your other financial goals.

Which brings us back to goals-based budgeting: If you're saving enough for your priorities, then go nuts with the rest of your money. But I can tell you that there are millions of people in their 50s and older who wish they could turn back time and trade their purchases of yore for more savings today.

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Mike Piper
Mike Piper
10 years ago

I may be wrong, because I can’t find the calculator’s assumptions anywhere, but it appears to ignore sequence of returns risk. For example, it appears to allow for a 6% withdrawal rate — for an indefinite period — if you put in a 6% rate of return. (To simplify calculations, I put everything in a Roth to ignore taxes.) It allowed me to do it even if I said I was retiring at 40 and would live to be 100. Given the above, plus the fact that the calculator doesn’t ask for your asset allocation at all, I’m guessing that… Read more »

Nicole
Nicole
10 years ago

ooh, I was hoping for a motley fool post! I’m really glad you included the discussion about how there are many different calculators and they all give different numbers or different ranges. Still, there is value to doing the exercise because it can give a ball-park. Or course, if one wants financial independence early, there’s also health care etc. to take into account. My favorite calculators are the ones that take Mike Piper’s (comment #1) concern into account and give probability ranges. Of course, lifespan is also uncertain so there’s calculators that take that into account too. If the calculators… Read more »

Ella @ Frugal Ella
Ella @ Frugal Ella
10 years ago

Ok – so at first I read “baby boomers have been hit with stinky socks” not “stinky stocks” though I know my mom thinks it’s been bad enough to qualify as a barrage of smelly, sweaty footwear 😉 I’m a big fan of underestimating things like return on investment, SS benefits, inheritances etc. If you low ball it, save wisely, learn how to live frugally because you are saving like crazy – you’ll probably be fine. Then if your low ball estimates are wrong, grandma does leave you with $100K, and the SS system doesn’t entirely collapse, you are even… Read more »

Jan
Jan
10 years ago

I would really like a calculator that will help me figure out if I have enough IF my husband (9 years older and a pension) passes before me. That is something no calculator seems to have. It would help me understand if we have enough saved.
I know HE has plenty if I pass.

Mike Piper
Mike Piper
10 years ago

Jan: Does his pension disappear completely when he passes away? Or is there a “survivor benefit”?

Two of my family members have a very similar situation. They’ve decided to own life insurance on the husband even though they no longer have any dependent children, simply because their retirement is mostly made up of his pension (which disappears almost completely when he passes away).

Everyday Tips
Everyday Tips
10 years ago

I hear so many people talking about early retirement as a goal, and it is great to have goals. However, there is a lot of saving to be done to have enough money in non 401K assets to cover health care and life in general for the years of retirement before 59 1/2. I hope people do use the calculators mentioned so they can have realistic goals and not just an arbitrary number.

Rob Bennett
Rob Bennett
10 years ago

The best this tool will be able to do is give you a rough idea of whether you’re on track. I don’t agree. In fact, it is my view (it’s a controversial view but it is indeed my view) is that these calculators will delude you into thinking that you are on track when you are not. The calculators cited do not adjust for valuations. Valuations are emotions. Stocks would obviously never be overvalued if investors were rational. So to say that stocks have become overvalued is to say that investors have become irrational. When we let people know that… Read more »

Dan53
Dan53
10 years ago

By all means, do your retirement planning. But even if you have to be employed beyond the date you hoped to retire, don’t forget to enjoy the ride.

If we spend all our energy working toward a day that might never come, we might not enjoy the days that go past. I more or less enjoy my job, so if I need to work until 70, it won’t crush my dreams.

Kevin
Kevin
10 years ago

Geez, Rob, I’d love to learn more about this “Valuation-informed investing” you’re talking about. Any chance you could recommend a book I could buy to educate myself?

Oh wait, I found one: “Passion Saving: The Path to Plentiful Free Time and Soul-Satisfying Work.” It’s written by … wait a second – this can’t be right: Rob Bennet?

Huh. Well, at least you don’t have any ulterior motives posting here, right?

Edward - Entry Level Dilemma
Edward - Entry Level Dilemma
10 years ago

One of the things I don’t like about retirement calculators is that they assume that, adjusted for inflation, your current income is what you will have when you retire. It assumes that there won’t be any big promotions, you won’t change careers, that you are currently earning your potential. I recently graduated and have been doing part-time and temporary jobs until I find my first “real” job. Then the calculators scold me that I’m not saving enough because I’m being greedy and want to retire at my current standard of living (actually, I want to retire at a higher standard,… Read more »

Rob Bennett
Rob Bennett
10 years ago

Well, at least you don’t have any ulterior motives posting here, right? Reading the book I wrote on saving is not going to help you learn about Valuation-Informed Indexing, Kevin. Valuation-Informed Indexing is an investing strategy. I’m working on a book on investing but it is not available today. If you are suggesting that one of the reasons why I post about investing strategies that I believe to be effective is to spread the word about investing strategies that I believe to be effective, you have me figured out. I view VII as about 50 times superior to Buy-and-Hold. I… Read more »

Raghu Bilhana
Raghu Bilhana
10 years ago

Robert

In your Motley fool calculator, the rate or return on investment is assumed to be 8%. Although I am very optimistic about the future ROR of stocks in general, it is better to forecast only an average rate of return of 7% for the next 30 years.

Although historically, any rolling 30 year period average ROR has never been below 10%, I would still use only 7% in any retirement calculator to be on the safe side.

Bellen
Bellen
10 years ago

As a retired couple we feel the calculators have their place. However, we feel there is lot of info that never seems to come up with planning for retirement. For instance, when we retired to FL we opted to live in a community that included mowing & trimming, offered lots of entertainment/sports opportunities, had a restaurant, and was within easy walking/biking distance of grocery, drug, clothing stores plus other restaurants including a dinner/comedy theater. Saved us car expenses and provided us with exercise. We already owned hand and power tools, sewing machine, small appliances, bikes, tennis rackets,etc. These are all… Read more »

Techbud
Techbud
10 years ago

I just read an article about a study the AARP did and it stated 75% of adults are relying on SS for retirement. That seems like a very high percentage. Sure you need to factor it in as a portion of you retirement income, but not the only source.

Molly On Money
Molly On Money
10 years ago

I can’t think of one piece of technology that saves me money. I love my Roomba vacuum, which I could say saves me time so I don’t have to vacuum my floor. An alternative that would save me time and $ would be NOT to vacuum my floor so much!

Andrea Pokorny
Andrea Pokorny
10 years ago

All very sophisticated, complicated yet required information, I know.

…Just starting to manage my money (for the first time in my life). I will come back to this. I’m grateful to have a resource I trust, Thank You!

elisabeth
elisabeth
10 years ago

I think we have been lucky to see how well our older relatives have lived in retirement — on much less than various predictors would have told them to save. It seems that if one has been living a frugal lifestyle for a long time (and if you’re trying to save, you probably are frugal…) there’s no reason to expect that you’ll suddenly go spendthrift in retirement! Because of illness, I retired well before social security. But I had saved a significant amount in non-retirement funds which I can access without penalty. I have found that despite hefty health costs,… Read more »

Kent @ The Financial Philosopher
Kent @ The Financial Philosopher
10 years ago

Much of financial planning today perpetuates the mistaken belief that retirement is achieved and defined only by monetary means. Even those retirees today who have diligently saved for retirement are finding that “doing something meaningful” has greater value than money. If you enjoy what you do, and you get paid something to do it, there will be much less concern over how much retirement savings you have accumulated. Financial planners will serve their clients much better by urging them to make career planning a part of their financial planning. Stay healthy, enjoy life today, find work that provides meaning and… Read more »

Adrienne
Adrienne
10 years ago

I think these retirement calculators are only useful as a rough, rough, rough guide — especially for those of us who are young (20s and 30s). Think about all of the assumptions that these calculators are built on: 1) Inflation rates, which can (and will) change 2) Tax rates, which will almost certainly go up 3) Social Security benefits 4) Rates of return on your portfolio, as others have mentioned 4) Income appreciation – many of these calculators assume a steady 2% or 3% increase in salary year after year. What’s more common for most folks is small cost-of-living increases,… Read more »

bon
bon
10 years ago

I love the goals-based budgeting concept, but…

“If you’re saving enough for your priorities, then go nuts with the rest of your money”

…this only works if planning for health emergencies, long-term care, and other things that as a young healthy person you may not be focusing on are factored into priorities.

Jason @ Redeeming Riches
Jason @ Redeeming Riches
10 years ago

I shudder when I see posts talking about how you should assume 10% rates of return. I’m so glad you made a point about tempering expectations (6% for younger investors and 4% for those close to retirement).

Of course, we’d love to see it more, but like you said don’t bank your retirement on it!

squished18
squished18
10 years ago

I believe the concept of retirement is one of the biggest scams in the game. I’ve seen numerous examples of people in my parents’ generation that have retired but find they have lost their sense of purpose in life. Retirement is essentially saving up enough money to maintain your standard of living without needing a paying job. Retirement is NOT a worthwhile goal and it is certainly not what the financial institutions promote it all to be. From what I’ve seen in older family and friends, it’s actually a pretty empty way of living. A much more worthwhile goal seems… Read more »

Robert Brokamp
Robert Brokamp
10 years ago

@squished18 A few comments: 1. I agree that retirement isn’t the best idea for many people. In fact, I wrote about it here: https://www.getrichslowly.org/what-if-you-dont-plan-to-retire-save-anyhow/. 2. That said, I know plenty of people who have retired and absolutely love it. For example, Doug Short, who spends his new free time operating this successful site: http://dshort.com/. Put another way, if retirement is such a bad idea, why do most people in their 60s and older do it? 3. The woman profiled in this article would agree with you: http://moneywatch.bnet.com/saving-money/blog/devil-details/unemployed-at-83-retirement-is-dead/2018/. Unfortunately, she also can’t get a job. I hope she’s built up enough… Read more »

Jan
Jan
10 years ago

Mike- the pension completely disappears. We thought about life insurance- but it would be pretty expensive at this point. I am thinking life insurance until he is 67 (seven years) and then I will be eligible for SS dependent- which would hold me over.
I just wish there were a calculator out there. I think that 50% of the women my age and older have this type of situation. We followed their career and never developed a pension for ourselves.

Casper The Ghost
Casper The Ghost
10 years ago

My gripe is that the retirement calculators never consider my 5% asset allocation for good Scotch Whiskey and fine wines… since I want to spend my retirement completely sozzled !

Des
Des
10 years ago

@squished18

Your ideal only works if your “life purpose” is one that can be monetized. If not (and I expect for a lot of people it is not) then people need alternative funding for their dreams – that is their retirement savings.

squished18
squished18
10 years ago

Thanks for your reply Robert. I think we agree on the main principles. 1. Yes, I agree that saving is necessary. 2. This comes down to the definition of retirement. To be a bit pedantic, I would say the case of Doug Short is not one of retirement. He just changed his job. 3. She can’t get a job, but she created her own. Kudos to her! What I’m asking you to do is to stop using the word ‘retirement’ because of its connotations with a sense of finishing the journey and stopping productive work. Continue to encourage to save,… Read more »

Budgeting in the Fun Stuff
Budgeting in the Fun Stuff
10 years ago

Mr. BFS and I use calculators like this to make sure we’re on target for our early retirement at 52. They give you good ballpark ranges, but don’t seem to take into account that we’ll need major cash on hand to cover age 52 to 59 1/2. Thankfully we save for that as well, but it is a thought to keep in mind (like Everyday Tips mentioned above).

Mike Piper
Mike Piper
10 years ago

Jan: Yes, that is a tricky situation with the pension disappearing entirely. And you’re right about life insurance being expensive — especially as the insured person gets older. The typical rule of thumb for how much you can safely take each year from a portfolio is 4%. So to use that rule, let’s say (ignoring taxes for the moment) that you need $40,000 of income per year if your husband passes away. Subtract from $40,000 however much you’re expecting social security to pay — thereby giving you the amount of income you need to provide each year from your investments.… Read more »

J.D. Roth
J.D. Roth
10 years ago

@squished18 Yeah, I have mixed feelings about the notion of “retirement”. And as I may share in the near future, I’m even having trouble with my current program of “downshifting”! I’ve gone from being a doer to being a talker, and I hate that. I need to find a balance between working 80 hours a week and working 10. There’s a happy, purpose-filled medium, right? I understand your argument against the notion of retirement, but what word would you use in its place? Is downshifting good? For many people, retirement is a goal. And it’s what the rest of the… Read more »

squished18
squished18
10 years ago

@JD Perhaps there isn’t a “medium” when your life is purpose-filled? If there is purpose, then even when you take a break it is for the benefit of recharging so that you can rededicate yourself to the purpose when you start up again? Maybe that’s part of the blessing/curse of having a fulfilling purpose, that you are “on” all the time even when you are “off”. I’m not saying that people with purpose will automatically lack balance. It seems to me that people with great purpose often have better balance, because they have a focal point around which they can… Read more »

Jan
Jan
10 years ago

Thanks Mike. First time I have seen it worked through. I am right on track with a bit to spare. Whew!

Mike Piper
Mike Piper
10 years ago

Jan: I’m happy to hear that! 🙂

One last thing to point out is that I simplified the above analysis by ignoring taxes. In real life, depending upon what type of account your savings are in (Roth, traditional IRA, or taxable), you’ll likely have to pull out more than $X per year to provide $X in after-tax money to spend. Exactly how much more depends on your tax bracket.

Tyler Karaszewski
Tyler Karaszewski
10 years ago

As a relatively young person (for those that don’t know, I’m 29) I find it immensely difficult to care about the question posed in the title of this article. Before I even get to asking things like “is retirement even a worthwhile goal?” I think “Eh, in a long time, I’ll worry about it later.” Much more relevant questions to me personally are things like: “When will you be able to buy a home?” “When will you be able to have children?” The home question is especially relevant to me — retirement advice is almost always directed toward people who… Read more »

Nicole
Nicole
10 years ago

Completely disagree with Tyler K. I’m in my very early 30s and I think retirement is a tremendously important question, especially for someone young. Far more important than buying a home and much more expensive than having children. I’ve felt that way gee, since I graduated from college and maxed out my IRA at 3K for the year. I like being able to live life as a journey precisely because my future is taken care of. And current me is constantly happily surprised with decisions that previous me made in terms of money. I will not have to give things… Read more »

Shane
Shane
10 years ago

@squished18 Retirement isn’t about not working anymore, or being at the end of the journey. I love working. I work probably about 90% of my awake time, but there’s one job I don’t like doing, and it’s the one that pays my bills. To me, retirement is about not having to worry about your bills so you can focus on the work you really want to do. I cofounded a startup that hasn’t monetized yet. I put about 50 hours a week into it on top of my other job, plus the daily work in my life. If I was… Read more »

Ron C
Ron C
10 years ago

I see this “Max Out my Retirement Investment” A Red Flag goes on in my mind.

Just what do you Mean by That?

Just because the Government puts limits on PreTax contributions to retirement account, that is not all there is to Retirement Investing.

Maxing out the 401K/IRA/ROUTH are the BARE minimum you should do cause if that that’s all you are doing for retirement you will be in for a big surprise latter in life.

I have been at those IRS Maximums for 25 years now and still have another 15 years to go before thinking about retirement.

Chris
Chris
10 years ago

Jan, I’m in a similar situation. Husband is 8 years older and has a measurable pension – while mine is miniscule. I’ve entered shorter life spans for him in those calculators that let you do that and noted no survivor benefit. I’m not sure if the T rowe Price or the motley fool one lets you do that. Also if he hasn’t already taken his pension, check to see about survivor benefits. My husband took a somewhat smaller pension so that I would get a survivor benefit. This may be an option for you as well. Another thing that I… Read more »

Pirate Jo
Pirate Jo
10 years ago

You might as well just forget about it and spend your money now.

http://matterhornassetmanagement.com/2010/08/16/there-will-be-no-double-dip/

babysteps
babysteps
10 years ago

Jan & Chris- one other thing to keep in mind, if you (are able to)choose a survivor benefit for a pension and the non-pensioned spouse (unexpectedly) dies first, the pension-earning surviving-spouse can often get their pension payment *raised*. This happened with my parents – my mother’s family was generally long-lived and her parents died at 96 and 101. My father’s family was more mixed in longevity and his parents died at 62 and 73. So they chose the survivor-benefit pension option. My father is now 80 and healthy (still hiking!); my mother died at 75. You just never know… It… Read more »

elisabeth
elisabeth
10 years ago

returning to suggest again that women nurture their friendships and talk with their women friends about old age — this is going to be particularly important for women who choose not to have children, or who do not have good relationships with their children. Planning for one’s old age isn’t just a matter of money, it should also include building one’s relationships and thinking outside of the “blood relations” box.

Jessica
Jessica
10 years ago

I am with Casper the Ghost. 🙂 Thanks for posting, I am going to try this out myself.

Sarah
Sarah
10 years ago

Retirement is a weird concept. We like to think that we control when we work and that it’s temporary, but it seems like for most people you either end up unable to work sooner than planned (because of your health or your skill set) or you end up having to work much longer than planned. I hope that I can work a long time, but I won’t mind if “work” is something other than reporting to a company 5 days a week. I’m sort of with Tyler at this point. My hub and I each contribute 6% to our 401ks,… Read more »

Project Management Tools That Work (Bruce)
Project Management Tools That Work (Bruce)
10 years ago

Purpose: Financial Independence not Retirement
Goal: Live – actively – to 100
Planners: Quicken & ESPLanner
Assumptions: 8% long term growth (3% inflation)

Tools like Quicken (planner) & ESPlanner are great for long term planning and answering the “what if” questions. For 20 years they (or tools like them) have kept me sane through the ups and downs. (See hubpages.com/hub/Quicken-Is-A-Great-Project-Management-Tool for specific examples).

Jaime
Jaime
10 years ago

I like the idea of retirement, and many people do. Don’t stop writing just because some are critical about it. I think either these are people who didn’t prepare for it, or don’t like the idea of aging. Retirement to me is not about wavering and doing nothing. To me its about pursuing my life passions without going to work for THE MAN. My passions are writing, drawing, graphic design, spending time with friends, family, & volunteering. I also like to travel occasionally. I don’t get the person who wrote that he sees red flags when people maximize their account,… Read more »

Luke
Luke
10 years ago

I’m also loving the concept of specific asset allocation to buy fine wine and whisky (to a lesser degree) – now all you need’s a smoking jacket and a comfortable armchair beside a roaring open fire 🙂

Sarah
Sarah
10 years ago

Jaime – I think the point was that “maxing out” your retirement accounts might not be enough if you waited until your 40s to start saving for retirement.

schmei
schmei
10 years ago

“Yes, you will receive Social Security”

My husband and I are both 28, and we laugh every time we hear this one. No, we won’t receive Social Security, even though we’ve both been paying into it since we were teenagers.

I’ll be interested to see what you write about it, but I simply don’t believe it… and I can’t think of one of my peers who expects SS to still be around when we’re retirement age. Call us bitter.

Gal @ Equally Happy
Gal @ Equally Happy
10 years ago

I think this approach should be used on every financial decision. I call it “run the numbers!” and I apply it anytime someone gives me a catch phrase like “Max out your retirement accounts” or “buying is always better than renting.”

Just run the numbers. Use a spreadsheet, figure out the various cash flows, put in some conservative estimates for interest rates (or just download any of the dozens of free spreadsheet solutions out there for pretty much any financial decision) and voila!

squished18
squished18
10 years ago

@JD,

After a bit of thought, I think “downshifting” does work in a couple of different ways.

1) The natural tendency is to think that downshifting means slowing down, which is what people associate with retirement.
2) If it actually means changing your job to something that is more meaningful to you, the term also works. Downshifting when driving a standard transmission means putting it in lower gear so that you can accelerate faster. So you may be downshifting to be more productive, which I think is pretty cool.

Cheers,

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