Median boomer retirement account $144,000

[bos]

This is something I've always wondered about. So you're looking to really live it up when you're in your 70s? Do you know people in their 70s?

There has to be a balance. I'm not big on buying toys I can't afford, but would you rather take that expensive trip when you're 30-50 or 70? That's an easy choice to me.

Boomers love the idea of playing 9 holes in the morning and sipping pina coladas with their wrinkly wives in Arizona until they die. It's a weird ideal.

This yes. I wont want to travel aimlessly abroad when Im in my 70's. I would imagine MOST of my travel time will be going to see my kids/grandkids. Absolutely travel now within reason. I really wish I would have done more in my 20's but... didn't really work out that way. We aren't toy people either really. Doesn't mean we dont want to though! . We adopted the experiences over things philosophy the last 10 years or so. The kids wont be at home forever so we really want to have the bonding time.

 

[CapnCy]

I don't know about you, but I'm constantly going back and forth between "Do I have enough?" vs "Am I being too conservative?" I'm mid-30s so I've probably got 30-40 working years left, barring medical/injury events. I get my 15% of gross saved every year between company match, 401k, and IRA contributions. I was luck that for the first 7 years of my career, I had an employer who matched my 6% with 10%, so I was putting away 16% of my pay starting in my early 20s.

That being said, I do wonder if it's too conservative, at times and if I should be doing more to enjoy life now. Like, not being so stingy when looking at new toys or trips for my wife and I, and our family.

I have similar thoughts.....always have been more conservative with the thought that money now and time are my best bets to be comfortable later....but when I do projections with my financial planner, also don't need the bulk of the money to show up when I die for my kids, lol.

 

[SolarGarlic]

Minus the wrinkly wife, I wish I was doing that now.

There are certainly worse options.

 

[CascadeClone]

Definitely. $1M is pretty good today, but when you consider time value, $1M is not near enough in 30 years when I'll need it. More like the $2-3M you state.

If you have no other income (SSI, pension, etc) then yeah, something like $2-3M is right.

Whatever your nest egg is, stay wisely invested, and you can pull out 4% every year (adjusted for inflation) and never* have to touch the principal.

So if you have $2M, you should be able to pull out $80k and live off that, never touch the principal, and pass it all on to whoever. So the egg required is based on how much annual income you need. House paid off and don't like to travel? Maybe $40k is enough. Just bought a Porsche, timeshare in Hawaii, and 5,000 sqft house? Maybe you need $150k per year. Just reverse the math from there to see what size egg required.

Start doing the math and planning now, especially if you are in your 20s. Dollar saved now is worth $100 later. Dollar saved later is worth a dollar.

*highly likely - I've seen studies that show anywhere from 85-95% chance. Personally, I am trying to be able to get enough egg to live off 3% and then it's like 99.9%.

 

[Gunnerclone]

I wonder how inheritance plays in to this. There’s a decent chance that the 55-65 Boomers still have a parent alive? My dad/parents aren’t relying on it but my dad keeps tabs on my grandmas (93 yo) finances just to make sure she isn’t getting scammed or is getting bad advice from the FP so he knows what he’s going to get in a few years (morbid but that’s reality).

 

[Beernuts]

Interesting topic and one for each of us to reflect on.

Wife and I are 50 and if we retired today we would have an annual income around $90,000 before taxes (house / cars / farms all paid) (also have a 401K, cash in the bank, life ins policies - not counting the income from any of these sources)...but..

1) Health Insurance would be a killer - probably would eat up to 1/4th of our annual income.
2) Still have one child with two years of college yet. We committed to helping our kids graduate with no student loans. Kids pay housing / books / fun money - we pay tuition.
3) We simply enjoy working.

Thus $90,000 - $22,500 (health ins premiums) - $18,000 (fed and state taxes) - $15,000 (tuition) = $34,500 / year or $2,875 / month (not that great).

So.. we will work (with the blessing of good health) to retirement age with the hope that medicare is still there for our health ins. and any SS income would be a bonus.

We are savers. Drive a early 90's chevy pickup with 180,000 miles (auto's are often retirement killers! Why someone would buy a $50,000+ pickup / SUV is insane if not used heavily for business).

 

[coolerifyoudid]

I don't know about you, but I'm constantly going back and forth between "Do I have enough?" vs "Am I being too conservative?" I'm mid-30s so I've probably got 30-40 working years left, barring medical/injury events. I get my 15% of gross saved every year between company match, 401k, and IRA contributions. I was luck that for the first 7 years of my career, I had an employer who matched my 6% with 10%, so I was putting away 16% of my pay starting in my early 20s.

That being said, I do wonder if it's too conservative, at times and if I should be doing more to enjoy life now. Like, not being so stingy when looking at new toys or trips for my wife and I, and our family.

I'm right in step with your line of thinking. My wife and I have lived very conservatively (our house is modest, our cars have been practical, we bring lunch to work instead of eating out, our vacations have been much less extravagant than others, etc). It's impossible not to second guess yourself and feel a little twinge of jealousy when you see friends with the best of everything while going on European and island vacations 2 or more times a year.

I'm 45 now and (despite the recent bear attack) am sitting in really good shape for retiring early. As long as you invest reasonably well, the more you can amass early, the more that amount works for you. The last few years, we have seen a noticeable boost in our retirement and we would be significantly behind that if we hadn't been as aggressive earlier on.

We have gone on vacations with our daughter, but have kept them fairly low-key while she was younger. Now that she is getting old enough to appreciate things (and realizing that we only have 5 more years before she goes off to college) we will open up the pocket book a bit more.

From a macro standpoint, I'm happy with how we've done things, even if I have had several years of watching others live a little more lavishly than us. In the end, each individual gets to decide whether the trade-offs are worth the sacrifices. The real wild card is health issues. They can make either school of thought look foolish.

 

[throwittoblythe]

If you have no other income (SSI, pension, etc) then yeah, something like $2-3M is right.

Whatever your nest egg is, stay wisely invested, and you can pull out 4% every year (adjusted for inflation) and never* have to touch the principal.

So if you have $2M, you should be able to pull out $80k and live off that, never touch the principal, and pass it all on to whoever. So the egg required is based on how much annual income you need. House paid off and don't like to travel? Maybe $40k is enough. Just bought a Porsche, timeshare in Hawaii, and 5,000 sqft house? Maybe you need $150k per year. Just reverse the math from there to see what size egg required.

Start doing the math and planning now, especially if you are in your 20s. Dollar saved now is worth $100 later. Dollar saved later is worth a dollar.

*highly likely - I've seen studies that show anywhere from 85-95% chance. Personally, I am trying to be able to get enough egg to live off 3% and then it's like 99.9%.

All great stuff. I've put in 15% or more since I started my first job after grad school at 24. Some years more, some years less, but I'd venture to guess I've averaged right around 15%. I just added up all our accounts. Right now, I'm sitting at about 1.8x my annual income in retirement savings. I think 2x income is the rule of thumb for age 40? So I'm ahead of that by a little.

My rough goals are around $80k/yr, maybe $100k/yr in today's dollars. We will make sure to have the house paid off before retirement and while we don't live extravagantly, we will want to travel while we can. I don't have a goal to leave the kids anything substantial, unless it happens by chance. At minimum, I would imagine they will get whatever house we own, belongings, etc (or the cash from them) plus what we have in savings. We have two kids, so if we left $300k behind, that's a pretty decent haul for anyone at any stage of life. Again, talking in today's dollars.

 

[skibumspe]

Just my two cents - Basic financial literacy, basic investing, compounding interest, depreciating assets, credit cards, loans & interest rates, etc. should all be part of the high school curriculum in some capacity....however, that would eliminate the abundant debtor mentality that pervades far too many Americans & it doesn't seem like that would be good for 'business'.

Side note - been working on a book about 're-imagining' high school education for the modern age which includes the aforementioned financial component among a cadre of others relevant work, life, & civic aspects.....after spending a decade teaching at two vastly different Tampa, Florida high schools & fortunate to be born & raised in small town Iowa, there were a number of things that really stuck out to provide a sense of understanding about the real world for students today.

 

[bos]

Just my two cents - Basic financial literacy, basic investing, compounding interest, depreciating assets, credit cards, loans & interest rates, etc. should all be part of the high school curriculum in some capacity....however, that would eliminate the abundant debtor mentality that pervades far too many Americans & it doesn't seem like that would be good for 'business'.

Side note - been working on a book about 're-imagining' high school education for the modern age which includes the aforementioned financial component among a cadre of others.....after spending a decade teaching at two vastly different Tampa, Florida high schools & fortunate to be born & raised in small town Iowa, there were a number of things that really stuck out to provide a sense of understanding about the real world for students today.

So much this. It would change the trajectory of many Americans. Heck, I would love for there to be local classes for adults as refreshers.

 

[throwittoblythe]

I'm right in step with your line of thinking. My wife and I have lived very conservatively (our house is modest, our cars have been practical, we bring lunch to work instead of eating out, our vacations have been much less extravagant than others, etc). It's impossible not to second guess yourself and feel a little twinge of jealousy when you see friends with the best of everything while going on European and island vacations 2 or more times a year.

You sound very similar to my way of thinking. We generally make "quality of life" type decisions. We're lucky that I make enough that my wife can stay home with our two kids and still live comfortably. We originally made that decision out of necessity (daycare cost), but we've since grown to enjoy the benefits that come with it.

We were $120k in debt right out of college. We followed the Ramsey plan and got out of all that within about 6 years. It was tough passing up vacations, cars, dinner out, etc, but we still managed to enjoy life a lot (even took some vacations!) while digging out of that giant hole. We even kept contributing to retirement while attacking those loans, as well.

Our vacations with our young kids will be modest because they won't remember most of them. But as you said, when they get old enough to appreciate things, we'll start to do more involved vacations so they can see more of our country and the world.

Every year I think we should be putting more than 15% to retirement. I think we should strive to max out IRAs, etc, but then I realize that would cut deeper into enjoying our day to day lives and I try to strike a balance between the two.

 

[throwittoblythe]

Side note - been working on a book about 're-imagining' high school education for the modern age which includes the aforementioned financial component among a cadre of others relevant work, life, & civic aspects.....after spending a decade teaching at two vastly different Tampa, Florida high schools & fortunate to be born & raised in small town Iowa, there were a number of things that really stuck out to provide a sense of understanding about the real world for students today.

Getting off the finance topic, but I saw a fascinating thing on a recent season of This Old House. There is a college in Charleston, SC called the "American College of the Building Arts." Students there get a liberal arts degree, but they also learn a trade at the same time such as: timber framing, blacksmithing, or fine carpentry. Many of them go on to work in the historic restoration industry in Charleston and the surrounding region.

I thought that was such a unique and wonderful idea. You can learn the liberal arts, but then you pair that with a tangible skill that you can then go out and immediately start earning an income. So, you don't end up with $100k in debt and a "useless" degree.

 

[Beernuts]

Just my two cents - Basic financial literacy, basic investing, compounding interest, depreciating assets, credit cards, loans & interest rates, etc. should all be part of the high school curriculum in some capacity....however, that would eliminate the abundant debtor mentality that pervades far too many Americans & it doesn't seem like that would be good for 'business'.

Side note - been working on a book about 're-imagining' high school education for the modern age which includes the aforementioned financial component among a cadre of others.....after spending a decade teaching at two vastly different Tampa, Florida high schools & fortunate to be born & raised in small town Iowa, there were a number of things that really stuck out to provide a sense of understanding about the real world for students today.

I would love to read your book and your thoughts on education. I fully agree on the need for financial management teaching in our school system. Problem is (quite honestly) "teachers" are not the best choice for this type of class. It should be taught by local successful retirement couples that share real life successes and pit falls.

Also...I always thought our education system is failing in teaching the basics of education. I was on a local scholarship selection committee and the writing skills for most students is embarrassing on the applications. I would like to start a charter school with an emphasis on basic education, music and industrial education type classes. Science, Math, English / Writing, History - no fluff.

 

[Sigmapolis]

Minus the wrinkly wife, I wish I was doing that now.

I wouldn't mind.

To quote Benjamin Franklin...

https://www.swarthmore.edu/SocSci/bdorsey1/41docs/51-fra.html

In the dark, all cats are gray.

2% is pretty low. Inflation has been low last 15-20 years but historical is closer to 3%

View attachment 72807

You are correct, but most projections have them lower going forward.

So much this. It would change the trajectory of many Americans. Heck, I would love for there to be local classes for adults as refreshers.

I have been working for ~9 years now in a very quantitative capacity.

Not once has anybody ever asked me to find the length of a side of a triangle with the Pythagorean theorem and/or how to balance a checkbook.

I have told this story before but your penny wise pound foolish story of the day...

My wife's step-grandfather died last year, and my father-in-law and I took over the daily management her grandmother's finances and estate. While the deceased was not adverse to credit cards, he had a meticulous habit of requesting a receipt for every transaction with one, stored them carefully, and compared them with paper statements coming in the mail every month. He was convinced that the credit card companies were going to "screw him" unless he kept this up forever. And he did, every month, like clockwork.

He basically believed in a modified version of the plan from Office Space. Nobody checks their statements, so the credit card companies can add a cent or two to the transactions covertly and, at scale across thousands of customers, then pocket the millions. I asked him how many incorrect transactions he ever found... it was zero... but he was still going to do it, come hell or high water, and he did until the month he died.

Then when my FIL and I started looking over their finances, they had $600,000 sitting in a checking account earning practically zero interest -- no return on that!

I almost choked at the hundreds of thousands of investment returns (or more) that could have been if kept in equity markets or a productive investment (e.g., buying a rental property and renting it out) for the past 20 years. Me and him have still not told the rest of the family about that level of financial foolishness. It cost them all a lot.

He and my wife's grandmother were successful people -- the account balance alone proves that. But that did not mean they knew a thing about personal finance.

We still get frantic calls and texts from her that we need to "SELL EVERYTHING! I TOLD YOU PUTTING MY MONEY IN THE MARKET WAS A BAD IDEA! I WILL BE HOMELESS!" every time the ticker on Fox News shows the S&P having a moderately bad day.

 

[skibumspe]

So much this. It would change the trajectory of many Americans. Heck, I would love for there to be local classes for adults as refreshers.

Absolutely agree....your adult refresher classes should definitely be in there, too, possible stipulation of any divorce.

 

[skibumspe]

Getting off the finance topic, but I saw a fascinating thing on a recent season of This Old House. There is a college in Charleston, SC called the "American College of the Building Arts." Students there get a liberal arts degree, but they also learn a trade at the same time such as: timber framing, blacksmithing, or fine carpentry. Many of them go on to work in the historic restoration industry in Charleston and the surrounding region.

I thought that was such a unique and wonderful idea. You can learn the liberal arts, but then you pair that with a tangible skill that you can then go out and immediately start earning an income. So, you don't end up with $100k in debt and a "useless" degree.

Such an awesome idea & definitely something that I would hope catches on across the country.

BTW - A guy like Mike Rowe would be a phenomenal Secretary of Education!

The idea that a college degree is the only way to achieve success is such a terrible line we keep telling every-single-high school-student! So many trades/skilled labor jobs are always hiring & paying well but it's not perceived as being a 'success'.

 

[Sigmapolis]

Best to retire and die before 2032 based on this analysis --

https://www.cbo.gov/publication/54868

How Changing Social Security Could Affect Beneficiaries and the System's Finances

Social Security is the largest single program in the federal budget. In fiscal year 2018, outlays for Social Security benefits totaled $977 billion, or almost one-quarter of federal spending. The benefits are paid from two designated Social Security trust funds. On the basis of the analysis described in The 2018 Long-Term Budget Outlook, which incorporates the assumption that current law generally does not change, the Congressional Budget Office projects that those trust funds combined would be exhausted in calendar year 2031, requiring the amounts scheduled to be paid in 2032 to be reduced by 26 percent.

There are some fun calculators on the CBO website.

You all should go and play with them.

Younger people are going to have to pay a whole heap lot more in taxes than their parents and grandparents did to hope to receive the same benefits.

 

[skibumspe]

I would love to read your book and your thoughts on education. I fully agree on the need for financial management teaching in our school system. Problem is (quite honestly) "teachers" are not the best choice for this type of class. It should be taught by local successful retirement couples that share real life successes and pit falls.

Also...I always thought our education system is failing in teaching the basics of education. I was on a local scholarship selection committee and the writing skills for most students is embarrassing on the applications. I would like to start a charter school with an emphasis on basic education, music and industrial education type classes. Science, Math, English / Writing, History - no fluff.

1. Hoping to have a rough version mostly completed by the end of the year.

2. Definitely second this thought....heck, probably 30-50% of the 'teachers' I worked with should not have been teaching but that's what happens when the perception of teachers as legitimate professionals is so poorly viewed by so many & the pay (at least in IA & FL) doesn't encourage younger generations to do it for more than a few years.

3. Sadly, this doesn't surprise me & certainly wouldn't be limited to writing alone.

4. Love the charter school idea!! I go back & forth about returning to the States & doing something like this but I really have a hard time giving up all benefits I get from teaching overseas....and salary (aside from two years in Vietnam for an Australian university) isn't even in the top 10!

 

[qwerty]

All great stuff. I've put in 15% or more since I started my first job after grad school at 24. Some years more, some years less, but I'd venture to guess I've averaged right around 15%. I just added up all our accounts. Right now, I'm sitting at about 1.8x my annual income in retirement savings. I think 2x income is the rule of thumb for age 40? So I'm ahead of that by a little.

Here is what I have found and use. I started out a little slow but am catching up.

 

[Gunnerclone]

I wouldn't mind.

To quote Benjamin Franklin...

https://www.swarthmore.edu/SocSci/bdorsey1/41docs/51-fra.html

In the dark, all cats are gray.



You are correct, but most projections have them lower going forward.



I have been working for ~9 years now in a very quantitative capacity.

Not once has anybody ever asked me to find the length of a side of a triangle with the Pythagorean theorem and/or how to balance a checkbook.

I have told this story before but your penny wise pound foolish story of the day...

My wife's step-grandfather died last year, and my father-in-law and I took over the daily management her grandmother's finances and estate. While the deceased was not adverse to credit cards, he had a meticulous habit of requesting a receipt for every transaction with one, stored them carefully, and compared them with paper statements coming in the mail every month. He was convinced that the credit card companies were going to "screw him" unless he kept this up forever. And he did, every month, like clockwork.

He basically believed in a modified version of the plan from Office Space. Nobody checks their statements, so the credit card companies can add a cent or two to the transactions covertly and, at scale across thousands of customers, then pocket the millions. I asked him how many incorrect transactions he ever found... it was zero... but he was still going to do it, come hell or high water, and he did until the month he died.

Then when my FIL and I started looking over their finances, they had $600,000 sitting in a checking account earning practically zero interest -- no return on that!

I almost choked at the hundreds of thousands of investment returns (or more) that could have been if kept in equity markets or a productive investment (e.g., buying a rental property and renting it out) for the past 20 years. Me and him have still not told the rest of the family about that level of financial foolishness. It cost them all a lot.

He and my wife's grandmother were successful people -- the account balance alone proves that. But that did not mean they knew a thing about personal finance.

We still get frantic calls and texts from her that we need to "SELL EVERYTHING! I TOLD YOU PUTTING MY MONEY IN THE MARKET WAS A BAD IDEA! I WILL BE HOMELESS!" every time the ticker on Fox News shows the S&P having a moderately bad day.

Same thing with my grandma, she had around that much in a SINGLE checking account. Had no clue about FDIC insurance. She said she wanted to write a check for 100k for each grandkid when she thought the lights were going to go out so her kids wouldn’t **** with it when she died.

She wasn’t having it when I told her that she should be writing a 13,999.99 check to each grandkid every Christmas (this was back quite a few years ago) I think the limit has increased.