(Topic ID: 286379)

Retirement! Hacks, tips and insights to get there faster.

By DadofTwins

3 years ago


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  • Latest reply 87 days ago by Zambonilli
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Topic poll

“At what age do you plan on retiring?”

  • 45-55 96 votes
    30%
  • 56-65 169 votes
    53%
  • 65 and over..... 53 votes
    17%

(318 votes)

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#325 3 years ago
Quoted from DadofTwins:

I posted this in the stock market thread. Figured it would also be good to drop here.
Serious question...
WHY does the market HAVE to come down/correct itself?
Prior to the onslaught of the pandemic, everything seemed to be going great. Low unemployment, stock market was making new highs, everyone was spending and so on.
The market CRASHED in March, but really that was self inflicted because of virus news and the impending closures and lock downs. It wasn't because of fundamentals and earnings reports. So we go from Dow 29k+ to 18k in no time. Then in a quick turnaround, it starts climbing right back up to all new highs in less then a year.
Also, tell me that wasn't market manipulation to the extreme?
So, now with ALL of these retail investors pouring money in thru daytrading apps, people putting more and more money in 401k/IRA retirement accounts and the general excitement around the ease and low cost of personal investing, WHY does the market have to drop?
If we get to the other side of this pandemic, everyone will look at the world thru different eyes and not take things for granted anymore. There will be more vacations, eating out and other activities people are just ready to get back to doing.
I think we have turned a corner personally. With all of this "new money" coming into the market, getting "freedom" back sometime this year and the economy opening back up, how can we not get right back on track like we were before covid?
With all the advances in technology, science and health care, we are growing by leaps and bounds. I truly think the only thing that would hold us back and cause a drop is the constant news chatter telling us that a recession is imminent, that it has to manifest itself, that we can't keep going upwards.
Yes, we can.

Depends on how all that is financed. Is it through leverage? Interest rates are low now, which encourages borrowing, but what happens when they go up. Stock market looks less attractive when the cost of capital rises. Lots of people haven’t experienced high interest rates.

2 weeks later
#416 3 years ago
Quoted from Meri-cah:

Just retired January 28th. I’m 43. Happily married. Own 9 pins as of now. Trick is to live within your means and pay cash for cars and any toys you want. Never finance anything more than your house.

Congrats, but I don’t understand how paying cash for things gets you closer to retirement. I generally do pay cash and have no debt except a small mortgage, but I financed two new Honda pilots over three years and my interest expense was less than $1000 for both cars combined at 0.9%. The cash I didn’t put into the cars earned me more than the interest expense.

People must have very high income to retire so young, and no kids? Retiring in your 30s or 40s, they could have 40-50 years of life left. Let’s say you need $50000 a year to live, which seems kind of low, you’ll need at least $2 mil saved. To save $2mil by age 43 suggests you have very high income. Let’s say you started saving 20 years ago, you either saved roughly $100k a year, again requiring very high income, or you had very large gains on your investments (which suggests you took higher risk). At the same time, people have paid off mortgages?? no kids, college could set you back $200-$400k if you have 1 or 2. I wonder how many people had help from parents or were left inheritances.

I think people are making it sound too easy to retire in their 30s or 40s. Living within your means of course helps, but you need very high income or fabulous returns on investment (i.e. you took big risk) to do it.

I enjoyed reading this thread and admit I haven’t read the self help materials cited, but unless you have very high income, took big risk, or were gifted/inherited funds, the math doesn’t add up to me to retire so young.

#418 3 years ago
Quoted from rai:

Some people can retire early with pension like military or fire or police department.
A lot of people I’ve seen ‘retire’ from the 9-5 job but might have a side hustle like real estate, consulting or hobbies that can earn money or just take a part time job.

I have family with military pensions, it’s not much, but it’s good if you can get another job and collect it.

I guess id be interested to understand what retiring means. Is it freedom from a 9-5 job to do whatever you want, is it working for yourself and earning side money? Does it mean you have no income from a job and have enough saved to live on?

#425 3 years ago
Quoted from joetechbob:

Lost me at ‘new’
Buy lightly used. Depreciating assets suck. I do 5 by 5. Buy a roughly 5 year old good deal and drive at least 5 years. Saved me 10s of thousands of dollars in depreciation.

i usually keep cars for a long time, 10-15 years so I am ok buying a new car over that interval, that's not going to break the bank for me. One of the pilots replaced a 16 year old car with 140k+ miles that was going to need work. these pilots, one is a 16 and one is a 19, were around $30-35k and were the previous model year. I think I financed half the total, both are now paid off. I won't need to replace the first one until 2030, maybe longer as we take good care of them.

Quoted from pinzrfun:

This is the "saving to retire" vs "creating income to retire" argument that's been well documented in this thread already.
My brother bought his first rental property at 19, flipped it, bought another - by the time he was 25 he had a dozen of them. At 43, he had been in real estate 24 years already. By that time he had expanded into residential development as well as commercial properties, including a storage unit facility and a golf course. He did this while working full time at a lumberyard w 3 kids. He's the only child in the family that didn't go to college - he's also the only one with a custom built house on a lake, and the only one that's retired.
If you need 50k a year to retire and have 25 rental units each clearing 2k a year, you're there. Not only that, most likely those houses have appreciated, and best of all, your tenants have paid them off for you.

this makes a lot of sense to me and I could see this working well. But being a landlord is not for everyone, definitely not for me.

Quoted from Hench4Life:

Military pensions can be quite large for officers. Like any other pension, depends on time in service and highest salary.

one of the members of my family retired as a lt colonel, vietnam vet. I think his pension is maybe $2k a month, maybe less. that's around the poverty line. He's been retired for probably 25 years. His wife still works and I think he does some part time teaching. I'm assuming he collects SS too, but I don't know his finances in detail.

this is a very interesting discussion and I appreciate all the responses, makes me think a bit more about it, but I'm not convinced retiring in your 30s and 40s is that easy by just living within your means.

#441 3 years ago
Quoted from arcyallen:

It's not so much a direct mathematical benefit as a behavioral one. If you have $20k cash invested and growing, you might be more likely to take $5k out to buy the next car and leave $15k to keep working for you. If you buy it on credit, you're waaay more likely to spend more.

I have no kids, but many people who retire early do. Justin at https://rootofgood.com/ lays out his monthly income and expenses, which is interesting to see. My married household income has ranged from $60k-$160k at its brief peak. But my wife and I have always spent about $60k/yr regardless of our income. Most people who retire early save 30-70% of their income, and living ridiculously decadent lives doing it. Here's a great example post: https://www.mrmoneymustache.com/2017/05/19/2016-spending/ And for what it's worth, this site changed my life. Not hyperbole. It literally changed my life.

Simple, but not easy. It means always spending way less than you make, which I've done since I was 15 making minimum wage. The marketers want you to own a bigger house and nicer car than you need or really want. The hard part for most is blocking out that noise and doing what's right for you, not them.
If you're invested in stock based investments and stay the course you historically will see about a 10% return. Plan on less, but that's been the last century or so. And the exact return of the markets during my working years.

No inheritance here. Just keep spending way less than you make, and "pay yourself" the difference by investing it. Here's a quick calculator: http://mustachecalc.com/#/calcs/time-to-fi

Interesting calculator, guess I should have retired years ago as I met FI according to it.

1 month later
#479 2 years ago

Very few mutual funds beat the S&P 500 index over time, especially when fees and taxes are taken into account. Mutual funds tend to have distributions at the end of the year because the fund manager has churned positions, incurring a tax liability for shareholders. S&P Index funds are very low cost, have lower tax liabilities and outperform almost all active fund managers over time. Vanguard is a good one.

7 months later
#523 2 years ago

i am finding the difficulty with retiring early is the cost/coverage of healthcare. People retiring in their 40s or 50s. what are you doing for healthcare? Healthcare from an employer is pretty affordable and has good coverage, but once you go out on your own the costs skyrocket and coverage becomes an issue. One major illness and without coverage or good coverage, you could be bankrupted. It's probably the main issue that prevents me from retiring early.

#545 2 years ago
Quoted from Ribs:

Move to another country? I am hoping by the time I am old enough this country will have universal healthcare. It would be super nice if we could plan for retirement like the rest of the world, but some people think it's really important to preserve the freedom of going bankrupt from 1 accident. Most on this forum will probably think that is one of the most offensive suggestion you could make, but idk it seems like an apparent and obvious problem, just as you laid out, that most of the rest of the world has already figured out.
Being able to retire without having to worry about the cost of healthcare.....who wouldn't want that!? Lots of people apparently...

Taxes are very high in other countries to pay for it. The VAT in Germany is 19%, 25% in Sweden. I don’t see that kind of a sales tax rate ever being accepted here in the US.

#607 2 years ago
Quoted from madtown:

Just do major medical, $10,000 deductible. It will cover you for major illness (cancer, ect.). Just dont go to the hospital for little stuff. Cant keep the full med/dental in retirement, too expensive. prople that want fill coverage will go broke or never be able to retire.

For family? Or just individual? Have a link to a plan? I would have met that deductible this year, unfortunately.

1 week later
#627 2 years ago
Quoted from gjm7777:

Making the frugal and responsible choices now is what allows you to retire for the future. Most rich people who are smart lease cars, and only buy the ones which are destined to go up in price - and BMW is one of the fastest depreciating vehicles you could possibly own.

I don’t see any advantage to leasing if your goal is to retire early.

Take a 2022 Honda Pilot lease, $4300 down, $499/month payment, 36 months. Comes to about $618/month over life of the lease.

You can buy that same pilot for $42000 if you pay msrp. If you keep it 10 years, it costs you about 350/month (42000/120) AND the car has residual value, perhaps a quarter to a third of the purchase price you can recoup if you want to sell it. There will be some maintenance/repair, but you are saving $270/month (618-350), which is over $30k during that 10 year period. Pilots are pretty reliable so maintenance/repair should be pretty reasonable (you can buy an extended warranty from Honda out to 8 years/120k miles for about $1000 if repairs scare you). If you finance the vehicle, the numbers will go up in the first three years of the loan to account for interest (assuming 36 month loan), but still much lower than a lease.

Leasing only is desirable if you want that new car every three years, which is not consistent with many of the approaches discussed in this thread and does not put you closer to retirement relative to buying.

#636 2 years ago
Quoted from Hench4Life:

I agree with your financial analysis, and overall conclusion. I have never leased a vehicle, and probably won’t ever lease. However, I do think you’re missing a consideration of how someone values their time. I don’t think this applies to MOST people, but I do think that some people would consider the value proposition of time spent dealing with maintenance vs time they could be making money.
This is why I think the “transportation” question is never a one size fits all approach.
I for one really hope this autonomy shit gets going so I can skip owning a vehicle all together!

well, you have to do maintenance on a leased vehicle too, and you have to sit in a dealership for many hours and haggle with them every three years on a new lease. If you buy a reliable car with a long track record (like an accord or camry), repairs should be pretty minimal. if you buy these newer untested cars, you could be in for an expensive ride. I'd never want to own a tesla beyond the warranty period.

I do my own maintenance and repair when I can, saving me a ton of money, but I realize most don't want to or can't. I was in an acura dealership one time and the service advisor was telling the customer in front of me he needed to have his cabin filter replaced at a cost of $130. I almost fell out of my seat as the filter is $8 on amazon and takes 3 mins to replace. The customer said yes.

9 months later
#716 1 year ago

You can make money in real estate speculation, but it’s not all it’s cracked up to be. Lots of fees, taxes, insurance to deal with. Repairs, carrying a second mortgage, bad tenants, assessments if you have a property in a community, damage if you have storms. and appreciation is very cyclical so you could go years where prices go down and then it takes many more years to recover. If you have the stomach for it, go for it, it’s not for me.

9 months later
#791 8 months ago
Quoted from starfighter:

Yes on collecting at 62 ...
Here's an interesting video, skip ahead to 4:00 and watch from there.

Thx, basically have to consider how long you expect to live and what you might do with the money taking it early. The payoff point in his example is about 14 years. So in his example, once they both hit about 81 years old, collecting at 67 becomes more advantageous. I am personally thinking I’d rather have the funds at 62, and just in invest the money in an interest bearing account. Traveling and spending the money I’d guess won’t be quite so easy at 81, if I’m lucky enough to live that long.

The bigger issue as some here have been discussing is IRA/401k distributions, this is a really troublesome issue because of the tax implications. I haven’t quite figured it out yet, but am thinking about how I’ll approach it and have been consulting with an advisor/accountant. I think ultimately there may be years where my tax bracket gets bumped up.

#802 8 months ago
Quoted from DadofTwins:

Aren't RMD'S at age 72 now? At that point you will be collecting S.S. anyway no matter when you chose to start collecting.

I think the rmd age goes up to 75 in 10 years so if you are in your 50s that’s the number to focus on,

Quoted from DadofTwins:

Wouldn't you have to have an AGI of over 300k to have a tax burden of over 30%? Obviously some will, but a majority of us taking S.S. and withdrawals from accounts would be nowhere near that. I mean 50k in S.S. and a 50k withdrawl=100k- the Federal standard deduction of approximately 26k, takes the AGI down to 74k and the 12% tax bracket. Am I missing something?
[quoted image]

Yes, you are missing some things. First, many people have pensions, which might be $60-100k. Second, if you are 55 now, you have 20 more years of gains for your IRA, which could result in your IRA being more than double what it is now. Third, some people may have income from a side business to contend with. The 24% tax bracket for these people won’t be too hard to reach and when you add in state tax, you are around 30%, which is quite a hit to your distribution.

Then there will be IRMAA surges because of the higher income.

Best thing to try to do is get funds into a Roth. I still haven’t figured out the best course yet because my tax bracket isn’t currently favorable and I’m not sure when or if it ever will be.

#807 8 months ago
Quoted from xsvtoys:

Exactly right. I’ve looked at it from all angles, including Roth conversions. I don’t think there is a way out, they are going to get their money eventually one way or the other. All you can do is try to control the hit as much as you can, and this requires solid knowledge of where you are sitting in the tax brackets and also the IRMAA brackets.
Of course, you can just let all of your tax deferred money sit where it is and you won’t have to pay any tax at that moment. Just put it off as long as you can. At some point you will have to at least take the RMDs. But if you want to take a bigger chunk out for whatever reason, you are going to lose a good bit of it to taxes.
Another thing to think about is that if your time comes and your heirs inherit tax deferred accounts like 401ks and IRAs, it becomes a bit of a pain to deal with those, taxwise. That also will depend on specific circumstances, but for example if they are younger in life high earners, they will have to pay more taxes as they comply with the withdrawal rules for those inherited accounts.

Yep, if you leave it to your kids, you will send them into a much higher tax bracket and they have 10 years to get it out.

Quoted from pinballcorpse:

In 20 years, if the IRA only doubles, (assuming no withdrawals) that is either very conservative investing or something went sideways in the economy.

Yes, I am assuming a very conservative return in my example, like 4% return. There is no need to swing for the fences in retirement as time works against you to recover losses and you are likely no longer dollar cost averaging. I’ll have most (70%) of my retirement money in fixed income. All I need my investments to do is kick off enough income to cover my expenses, any interest or dividends above that will get reinvested back into fixed income. I’ve been almost 100% invested in equities since the early 90s, added to it each month and NEVER sold. In retirement, that allocation will flip toward fixed income.

#818 8 months ago
Quoted from BrewersArcade:

Wow just now finding this thread. This is my type of non pinball topic!
I have a wife and three kiddos here. Paid off our house at age 39 as a fixer upper we bought for $150k in 2008. Refi'd down to a 20 year fixed at 3.75% in 2011 and then started making extra principal payments. Some of that due to flipping arcade and pinball machines! I'll have 30 years at my gov't job in 2035 but hoping somehow to retire earlier than that. No debt but need that sweet pension and health insurance.

Not sure how old you are now, but can’t you get retiree health insurance from a government job at like 50 or 55?

#822 8 months ago
Quoted from nwpinball:

All the people outside the US don't have to worry about this, it's an American problem.

Yeah, but they pay in other ways, like very high VATs. Or rationed healthcare.

1 week later
#861 8 months ago
Quoted from JohnTTwo:

Anyone have a good social security calculator. Wife is the same age, but way lower monthly check. I want to get the most out of it and learned the payouts are actually balanced against average death age. The only way to kind of game the SS system is to somehow have my wife get more then she earned through me.
Any help would be greatly appreciated.
Thanks in advance.

Try this one…I think it will tell you that your wife should take it at 62, you wait til 67.

https://opensocialsecurity.com/

#871 8 months ago
Quoted from swampfire:

This. My only regret is being too conservative (cash-heavy) since the 2007-8 crash. I’d have been able to retire at 58 instead of 62 if I’d had more faith in the market. I’m mostly in index funds, and I don’t try to be too clever. My individual stock picks have been hit or miss, but I never gamble more than 5% on any one of them.

Dollar cost averaging each month takes away the risk. There will be ups and downs, but you’ll be buying throughout and the market has always come back. Main thing is not to sell when the market drops, or ever unless you really need the funds. Keep in mind too that even if you retire at 55-65, you still have a lot of years ahead of you to invest and recoup losses. Individual stocks are akin to gambling, you are unlikely to outperform the overall market consistently with them

3 months later
#908 4 months ago
Quoted from JBtheAVguy:

With CD's at a decent rate right now, what's the concensus on contributing to a CD this year or my IRA?

Depends. Some of those CDs are Callable. Compare rates to treasuries and decide. Treasuries also provide more liquidity.

#911 4 months ago
Quoted from swampfire:

When do you need the money? If it’s in the next few years, buy a penalty-free CD on raisin.com. If it’s for retirement, stash it in your IRA.
I parked some cash in a 5.4% penalty-free 16-month CD, which feels like the best place for it right now. But I’ve also maxed out my 401-k (I make too much to contribute to an IRA).
If you want ready access to your money, get a high-yield savings account (HYSA). I’m getting 4.6% with SoFi, but I don’t expect that rate to last, which is why I’m also buying CDs.

You could get the same rate or better in treasuries AND they are free from state income tax (assuming it’s not in a tax deferred account). CDs are rarely the best choice. I’ve been buying 3-month treasuries for much of the past 8 months with the cash portion of my portfolio, average ytm of about 5.5%.

Check money market funds at your brokerage. I am getting 5.26% in a Schwab mmf. It is a prime fund, but even their govt fund is offering 5.06% (mmf symbols SNOXX OR SWVXX).

#914 4 months ago
Quoted from Zambonilli:

Can someone explain when a bond fund goes up? I've done the three-fund portfolio,with my age in bonds, for 20 years and I've lost my ass on BND. You're saying once interest rates drop, then the BND finally does something? Should I sell then? Should I just buy silver ? I always thought the BND was to keep a floor of growth for the three-fund portfolio but when stocks crashed it lost as well.

Interest rates go up, bond prices go down. Personally, I don’t buy bond funds, rather own an individual security so I know exactly what I’m buying. The reason bnd didn’t do well is because stocks went down as interest rates were rising.

#916 4 months ago
Quoted from Spelunk71:

An alternative to buying treasuries is a fund like TBIL for more liquidity. I’ve also been putting some cash in a long term U.S. bond fund (TLT). It may be a bit more risky, but if interest rates stay steady or drop (likely at this point), the fund will increase nicely.

If I am looking at the correct security, TLT has been awful down 10% past year and -4% annualized past 5 years, not sure why you are in it. I dont speculate on where rates are going, just in bonds to capture yield. Tbil has been better, but you would do a lot better in individual securities. Tbil has returned a little over 4% past year less the .15% fee the fund charges. You could have been rolling 3 month treasuries at 5.4-5.5% with state tax free. Not sure if Tbil offers state tax free since it’s a fund.

#920 4 months ago
Quoted from swampfire:

I did the comparison. The 5.4% CD has no interest rate risk, because it’s no-penalty CD. GA’s tax rate of 5.75% knocks my yield down from 5.4% to 5.09%. The 2-year treasury yield is 4.88%, and if rates go up the value of that note goes down. Of course if rates go down, its value goes up. But for holding to maturity, the CD wins here - I just wish it was 24 months, not 16.
I bought a little bit of TLT in my IRA last week, which is pretty much a pure gamble that rates will fall.

That’s a pretty good rate for a no penalty cd. An 18 month treasury yields about 5.1%, 5.25% for one year. I’ve just been rolling 3 month bills as rates have been rising, but does seem rates may have peaked for now, which should bode well for equities or maybe buying longer term treasuries.

3 weeks later
#953 3 months ago
Quoted from swampfire:

Is anyone taking profits or changing their allocation for 2024, now that we’re back to all-time highs? I cashed out 1/3 of my S&P index fund on Friday, and I’m planning to roll that into VTV (Value index etf) next week. I also swapped my QQQ over to QTEC, which is a NASDAQ 100 equal weight fund. Less exposure to the “magnificent 7” which are highly overvalued at the moment.

No. Taking profits generates taxes, unless you are in a tax deferred account. The most reliable and low cost long-term strategy is to buy the sp500 via dollar cost averaging and never sell unless you need the funds. It’s debatable how valued the magnificent 7 really is, but if the market drops, you get to buy in at a lower level. You cannot reliably time the market.

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