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How much I need to save for retirement?

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  • #16
    I have a slightly different take on retirement saving that I'm sure will raise some eyebrows.

    I have no idea how much I'm going to want to spend in retirement. I'm guessing less than I do now but who knows? I also don't really know how long I want to work.

    I'm also in a field (EM) where I think my retirement will be "squishy." By that I mean that I don't think I've have a big party, get the gold watch, and then not come to work again. I think I'll slow down gradually -- drop nights, got to 75%, 50%, 25%, and frankly probably will still work at least in some capacity as long as I am physically and mentally capable.

    We have saved a lot for retirement (right at a benchmark where 95% of America would consider us to have "made it") and we still save a huge pile of money every year. No we do not have a 55% savings rate. We are actually cutting back slightly on savings as we get into the kids/schools/etc part of life. We're going to be fine. I don't know what # to multiple by 25X so I don't really try. Quite frankly if we stopped doing everything but our 401ks from now on and worked another 20 years while drastically increasing our lifestyle we would still be fine.

    Everyone reading these threads has to remember that the regulars on this forum are the A-team of saving and investing. We have serious conversations about "is $10M enough for me to retire?" or about if we can cut back when we hit $5M in taxable with a paid-for house. I think a lot of people who regularly post here are going to die with tens of millions of dollars in their estate.

    OP you are saving 2X the average annual household income in America every year. You are crushing it. Calculators are great but you don't need one to tell you that you are winning.

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    • #17




      I have a slightly different take on retirement saving that I’m sure will raise some eyebrows.

      I have no idea how much I’m going to want to spend in retirement. I’m guessing less than I do now but who knows? I also don’t really know how long I want to work.

      I’m also in a field (EM) where I think my retirement will be “squishy.” By that I mean that I don’t think I’ve have a big party, get the gold watch, and then not come to work again. I think I’ll slow down gradually — drop nights, got to 75%, 50%, 25%, and frankly probably will still work at least in some capacity as long as I am physically and mentally capable.

      We have saved a lot for retirement (right at a benchmark where 95% of America would consider us to have “made it”) and we still save a huge pile of money every year. No we do not have a 55% savings rate. We are actually cutting back slightly on savings as we get into the kids/schools/etc part of life. We’re going to be fine. I don’t know what # to multiple by 25X so I don’t really try. Quite frankly if we stopped doing everything but our 401ks from now on and worked another 20 years while drastically increasing our lifestyle we would still be fine.

      Everyone reading these threads has to remember that the regulars on this forum are the A-team of saving and investing. We have serious conversations about “is $10M enough for me to retire?” or about if we can cut back when we hit $5M in taxable with a paid-for house. I think a lot of people who regularly post here are going to die with tens of millions of dollars in their estate.

      OP you are saving 2X the average annual household income in America every year. You are crushing it. Calculators are great but you don’t need one to tell you that you are winning.
      Click to expand...


      I LOVE the squishy description! And, honestly, if the people who ask and answer these questions could get a good view of what a real financial planner can show you and the depth of conversations and detail, they would have a lot better understanding of world of difference from rules of thumb and an actual plan that is based on your goals, margin of safety, FI date, and other areas that aren’t even considered in the “25 x spending” such as “how much do I need to have to be able to spend 100k/yr on travel for 10 years?”, whether it is feasible to have a 2nd home, asset protection, cut back to .5, succession planning, and so much more.

      The 25x is a very weak indicator that causes some to work longer than necessary and others to undershoot. It always makes me nervous when this is thrown out. Everybody’s goals are different and a plan in not homogenous. There are some excellent recommended planners on this site. Please consider that you may be cutting yourself short by using simple ROTs for multi-million dollar retirement needs (not to mention, planning for other goals).
      Financial planning, investment management and CPA services for medical professionals | 270-247-6087

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      • #18







        If you’d like the equivalent of $3.5 million in about 25 years, and you’re setting aside about $100,000 a year, a compound interest calculator will tell you whether or not you’r on track. Use real (inflation adjusted) returns by subtracting 3% from nominal returns to account for inflation.

        Looks like you’ll need real returns of 3% to 4% (~6% to 7% nominal returns assuming 3% inflation) to reach your goals, depending on investment fees, tax drag, etc…

        You may want to up that savings rate a bit to account for unforeseen changes. A lot can change in a quarter century.

        See also: How Much Money Does a Doctor Need to Retire?

         

         
        Click to expand…


        This calculator is super helpful… thank you

        Do you have a calculator for withdrawals to know how long the money will last during retirement?
        Click to expand...


        The range will be incredibly wide based on both the returns we see and in the timing of them (sequence of returns). FIRECalc is a nice graphical display of a myriad of possibilities based on three variables: how much you spend annually, how much you have saved up, and how many years into the future you want to look.

        Cheers!
        -PoF

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        • #19


          The 25x is a very weak indicator that causes some to work longer than necessary and others to undershoot.
          Click to expand...


          I find that is is a very useful number to shoot for early on but I realize that it will take a lot of fine tuning along the way.

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          • #20
            Right now you are spending $320,000 a year. How sure are you that your annual spending will drop to the $140,000 a year implied by your $3.5 million number?

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            • #21
              Originally posted by chrisg202 View Post
              thank you for all the answers. We track our spending

              So if 25 x annual spending for us is = 3.5 millions

              How do I know if we are saving enough?
              You spend $140k a year? That’s the first thing you need to address IMO.

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              • #22
                3 kids + college - that's the bulk of spending and costs into the future IMHO. House is already baked into the equation it seems in 2 of 30 year term.

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                • #23
                  Originally posted by Lordosis View Post
                  <blockquote class="d4pbbc-quote">
                  <div class="d4p-bbp-quote-title"><a href="https://www.whitecoatinvestor.com/forums/topic/how-much-i-need-to-save-for-retirement/page/2/#post-254111">jfoxcpacfp wrote:</a></div>
                  <div class="d4p-bbp-quote-body">The 25x is a very weak indicator that causes some to work longer than necessary and others to undershoot.
                  <div class="d4p-bbp-quote-expand">Click to expand...</div>
                  </div></blockquote>
                  I find that is is a very useful number to shoot for early on but I realize that it will take a lot of fine tuning along the way.
                  ROT are very useful starting points. Johanna’s point is extremely pertinent, especially for highly compensated people. Take housing for example. A common guide is 30-33% of gross is the maximum. Mortgage companies use it.
                  The rules of thumb are based on “average” and base level living expenses are relatively fixed, a much smaller percentage for HCE. Would it make sense to “rent” for $150k just be cause you gross $450k? Even starting out, the ROT need to be challenged or at least put in context.
                  Correcting misconceptions at the beginning are probably more important than at the ending.

                  I looked for budgeting models by income level.
                  Crickets!

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                  • #24
                    How do taxes affect the withdrawal rate? 25X is spending, but you'll need quite a bit more if most of your retirement assets are in traditional IRAs or 401-Ks. I assume spending as after tax. Those of us older docs had only traditional IRAs and 401-Ks, as Roths did not exist for our tax bracket for most of our careers, hence most of our retirement is tied up in accounts that will be taxed as income when withdrawn. Your number will have to be quite a bit larger than 25X if you take taxes into account.
                    - Dr. Scott

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                    • #25
                      Originally posted by Dr. Scott View Post
                      How do taxes affect the withdrawal rate? 25X is spending
                      yes. 25x includes everything. like taxes. like AUM fees. everything.

                      Comment


                      • #26
                        Consider reading up on an Investment Policy Statement on WCI or bogleheads.
                        Kind of like an Assessment/Plan to guide your financial life.
                        Adjust as each new test/result comes back.

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