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What do you really need in retirement

February 4th, 2021 at 06:39 pm

We have a lot of people pondering retirement and what you really need?  The answer?  It's really self dependent.   You can say you need 33x your expenses.  Sounds good.  But here are some questions that influence that.  

1. How old are you when you retire?  

2. Will you take SS and when will you take it?

3. Do you have a pension?

4. Are you retiring early and need to pay for medical insurance?

5. Will you be retiring with a mortgage or without?

6. Do you plan on moving or will be tapping into your home equity?

These few questions alone influence what you need to retire.  I always point out my mom retired at 55 with $200k in her 401k and Roth IRA.  That's it.  Yep not much.  BUT she retired with a COLA pension, which she's not even sure what she makes but it's around $4k/month after withholdings.  Yes my mom doesn't know what she makes but that's a different argument.

They did not have a $1M in savings.  I believe my dad probably had $400k but he was already 75+ and drawing SS.  My parents had medical through the state so my mom at 65 got dual coverage but for years 55-65 she had BCBS from the state employer paid 100%.  My dad already had medicare so he was fully covered.

So there my parents are with $4k pension, $3k SS Dad, RMD of $1500/month, no medical expenses, 2 paid for homes and cars.  What savings did they need?  According to rule of thumb they should have at least $1m saved.  Truth?  NOT even close.

Their monthly haul was close to $8500/month after taxes withheld!  So I think $10k/month pretax not unreasonable or unlikely.  My parents were bringing in $120k/year without touching their savings and they were still earning income.  So the $200k is gravy.  They don't spend close to that a year and have kept on saving.

So the rules of thumb are a bit ridiculous. It also explains how so many people are able to retire without saving more than $100k in 401k.  They have pensions and ss which pay for the bullk of their needs.

Is that a reality for people who are 41 like me?  Nope.  DH and I have no pension.  We'd have to have $1.5M saved to generate the $60k/year my mom gets from a pension.  We might get SS and but then we have to save more in our IRA in order get more RMDs.

I think you have a lot to look at when you retire and a lot of consider individually.  Saying you need a $1m to retire is not realistic.  Maybe the truth is you've never earned a lot, never spent a lot, and have a pension.  So the reality is even $50k is enough to make it.

11 Responses to “What do you really need in retirement”

  1. Wink Says:

    I am single, no kids. I retired last May when I turned 59.5. My strategy to retire was to pay everything off and save as much as possible. I have about $450k in retirement and savings accounts. My condo and car are paid off and I don't plan to move. I have no other debts. I live on just under $1500 a month, and I am very comfortable. My former employer pays about 50% of my monthly healthcare premium. I am pretty frugal, but not deprived in any way. I will take Social Security early, but I am not sure exactly when yet. Everyone's situation really is different. Not everyone needs a million dollars to have a comfortable retirement!

  2. LivingAlmostLarge Says:

    Latestart it's just that $1M or even $500k is a lot of money to have saved and for many it's way more than they will ever need. Just what I've seen but maybe I'm wrong.

    Wink, congrats I remember reading about your retirement. Good work. It appears that you are living on $18k/year year which I'm going to guess will be covered by your SS. My suggestion would be to draw on your SS first and leave the Roth IRA alone because they have no RMD. RMD are not pushed to 72. But drawing your $18k/year for say 10 years is $180k. That still leaves you with a very hefty number say $250k at around age 70 and then collect SS.

    Without more details that's what I would probably do unless of course life expectancy based on family history is death early. If you are potentially long lived I'd wait to 72 then take SS and draw heavily now on IRA and 401k so that you are going to have low RMD at age 72 and less tax on your SS.

    Also depends on how your portfolio is structure. RIGHT now is the time to potentially be drawing out $25k/year and putting it into a taxable account from your 401k/IRA so that you pay minimal taxes and then you have less taxes at 72 from RMD and SS.

    I'd probably pull out the maximum 10% and reinvest what you don't use and don't touch SS.

    That's the plan for us. I'd like to retire at 55, draw down heavily on our 401k and IRA from age 60 and then wait to collect SS. But who knows?

    Today was a good day our portfolio pass $2M

  3. terri77 Says:

    My parents retired with 2 pensions. One for 20 years active duty. They were able to pay all bills with his military income while earning another pension of 20 years working with the state. They didn’t need that much money in the bank, but working 20 years without touching their salaries certainly allowed for it. My mom mostly stayed at home until all of us graduated high school.

    I don’t envision myself retiring early even though I could. I have enjoyed my career & am king forward to achieving more. I have the age 60 in mind, which is still plenty young. I will have 30 years with the federal government so a good pension, SS supplement until age 62, and SS after that if it’s still available. I will probably wait until full SS age to withdraw depending on my health. I should have several million in my own retirement accounts as well. I am on track to be mortgage free many years prior to retirement, but I am planning to sell soon.

  4. disneysteve Says:

    What rule of thumb says you need $1M to retire? The most common rule of thumb is that you need 25X your annual expenses that aren't already covered by other sources. If you have a pension, that factors in. If you will be collecting SS, that factors in. If your medical is paid for, that factors in. It's 25 times whatever annual spending you will be responsible for out of pocket. For your parents, it sounds like that number was quite low. Also, the 25 x expenses calculation is based on a 30-year retirement. If you don't retire until 75, odds are you aren't going to be around in 30 years.

    For most people today, pensions aren't a thing, as we talked about on your forum post. I won't have one. I also plan to retire long before I take SS. So from day one of retirement, I will need our nest egg to cover 100% of our expenses. If we spend $7,000/month, that means we need at least $2.1M. And we actually need more because we need to account for taxes on the withdrawals.

  5. LivingAlmostLarge Says:

    The number is 0 DS with the pension and SS. So they probably didn't need to save a penny.

    I am unsure what we will need. I am going to guess more than I think. But maybe I'm wrong.

  6. My English Castle Says:

    This is really on my mind too. I think I have about one more yer of teaching left in me and my state pension is nice, but not huge. My DH is younger and will likely work for 8 or so more years. But our house is paid off and we own out cars. We have enough for our DD's tuition and a fair amount in Roths and 401k and 403B.

    I'm pondering now whether I need to get some advice from a CFP or whether I should try to figure things out myself. I worked in brokerage for a long time, so I'm fairly money savvy, but many things have changed. Many of the fee-only CFPs want clients with MUCH more money than we have. I just don't know. Thoughts about finding a reasonable CFP?

  7. disneysteve Says:

    "The number is 0 DS with the pension and SS. So they probably didn't need to save a penny.

    I am unsure what we will need. I am going to guess more than I think. But maybe I'm wrong"

    Sure, if their pension and SS covered all of their needs, then any savings was gravy. That's an exceedingly rare situation to be in today.

    As for you, use that rough calculation that corn gave on the forum thread. Figure out how much income you'll need and how much income you'll have. The difference is what you need to save.

    We're actually just about at that number ourselves but that doesn't include the cost of healthcare if I retire at 60. So for now, I'm going to plan to work until 60 (4 more years) as that will let our portfolio grow more and cover healthcare and any other unanticipated costs.

  8. livingalmostlarge Says:

    MEC do a run yourself and then talk to a cfp. Ask here. Lots of smart people.

    Okay so do I am on a $185k budget for the next two years. So I guess that's my spending budget. That's about $4.5M in a portfolio. I think I'd like to have $200k but that's 5M. I am no even sure about $200k. I wonder if we can make do on less? I think so. It seems crazy to think about that much.

  9. disneysteve Says:

    My English Castle, what sort of info would you be looking for the CFP to provide? I'd say there's pretty much no question that you can't get intelligently answered either on the forums here or at

  10. PatientSaver Says:

    I have gotten by comfortably for many years now with about $40,000 in expenses annually. Sometimes it's a few thousand more or less. That includes a lot of discretionary spending on home improvements and other purchases. It feels very comfortable, probably because I paid off the mortgage a long time ago.
    I don't feel deprived, but I don't go crazy with the spending in any big way, either. I'm at sort of a happy medium.

    But even then, if you multiply $40k by at least 20 more years' life expectancy for me (probably more), that totals $800K, so I shudder to think how anyone could get by with just $50k in servings.

    I don't plan to take Social Security at 62 (that's this year for me), and I may not even take it at full retirement age, just to maximize my monthly benefit.

  11. LivingAlmostLarge Says:

    PS but you don't need $800k to generate that $40k year if you have SS. That will cut down the number. And then if you were to tap your home equity that would also lower the savings number and instead rent.

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