That's not my experience, they very much worked with me, to understand my spending habits, and explained different approaches and how that would work for me. He's also told me he spends a lot of time telling clients to spend their money, as per the first post, and I can see him doing that with me down the line, but there isn't much I want.
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Thinking about retirement?
- Thread starter ahofer
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I don't know about the UK, but in the USA, the "4% Rule" is often cited, though it's since been revised to 4.7%. So in theory, you might start by figuring out how much money you need to live comfortably, then doing a simple bit of arithmetic. For the way I've lived to date, $50,000 USD/year is pretty generous, particularly since, unlike when I was a wage-earner, there are no deductions for Social Security, or for my retirement plan. And neither do I have work-related expenses, such as transportation, outside meals, and the like. And so:
$50,000/0.047 = $1,063,830.
But at some point, I expect to receive Social Security payments, and that could further reduce my need for savings such that <$500,000 USD in savings could be generous. And this assumes that I actually spend the money, which is more money than I've ever habitually spent.
Soandso
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Unless I'm mistaken about "alcohol" it is illegal for individuals in the USA to distill it, even privately in the home. Fermented "brew" of naturally low alcohol beverages like beer, mead and cider are generally legal in the home (although am uncertain if any States still regulate beer brewing for private consumption). [I recall a legal glitch when the 'health" drink Kombucha (microbial consortia fermented tea) started being commercially marketed in the USA because if it's residual alcohol content.]
Like a lot of things there the law seems to vary from state to state.
More fun if it's illegal
A conservative approach, from my American perspective and as mentioned above, is to take 4% of retirements savings as income each year. The idea is that will keep the savings from diminishing, on average.
I will couple that with social security and the defined benefit portion of my employer's retirement program to figure out what my retirement income will be.
Upping that to 4.7% is okay with me. But I can take more than that each year if I don't mind running out when I'm 100.
Rick "whose income will stay about the same, assuming no more house payments" Denney
Soandso
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Why is that the goal? It's ok if you have plenty and want to leave an inheritance, but if you don't you cannot take it with you.
You can model pension drawdown in Excel with some basic assumptions...
*edit* There's an on-line calculator that makes similar assumptions to my spreadsheet here: https://www.pensionbee.com/uk/pension-calculator
Make sure you read through the Pension Calculator FAQs to understand what it is modelling.
You can create a simple model in Excel with some basic assumptions about inflation, portfolio growth and pension rises (and what the state pension will be in 2035)...
*edit* There's an on-line calculator that makes similar assumptions to my spreadsheet here: https://www.pensionbee.com/uk/pension-calculator
Make sure you read through the Pension Calculator FAQs to understand what it is modelling.
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We started out our retirement (now 10 years and running smoothly) with that plan but came upon another factor for those of us who have saved with a 403B (academic equivalent of a 401K), the Required Minimum Distribution. "The RMD amount is calculated by dividing your retirement account's balance from the previous year's end by a life expectancy factor provided by the IRS" and, as the name says is a mandatory withdrawal of funds. In practice, it, along with Social Security and some investment income, has been quite sufficient for us and, so far, our earnings still surpass our withdrawals.
Soandso
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I'm retired now but before that promised my parents wouldn't put them in nursing homes. Each had particular needs in their last years which at some point required my hiring people for assistance. For mother eventually it was 24 hours daily. That expenditure ended years ago so I'll just reference how for now-a-days (in California) an AI estimate is that it would be an outlay of about U$27,000 per month for round the clock attendants (in work shifts), amounting to U$324,000 a year.
Based on those immediate family experiences I'm not drawing down my capital nest egg at any regular % rate because figure I may well need to pay for variable levels of assistance later in my life at an unknowable (due to inflation) hourly wage. Maybe an appropriate cautionary example is if one has geriatric urinary incontinence where need timely help cleaning up with fresh undergarments]/bedding which is essential for removing urine crystals from potentially abrading skin into sores/bed sores (painful and prevention is better than trying to stop their progression).
Yeah, RMDs are a double or triple whammy, because they're mandatory after you reach the RMD age, because they are taxable as wage / short-term gain income rates, and if you have traditional IRA accounts you must take RMDs even if you're still working once you reach the mandatory age. (You can avoid RMDs with your current employer's 401K (or equivalent) pre-tax savings plan, but for previous employers you left 401Ks with you're stuck with RMDs even if you're still working.) The Roth 401K and IRA plans are awesome for younger workers (you fund them with post-tax dollars, and pay no future taxes nor have RMDs), and I've strongly recommended them to my children.
Roth conversions are lately a popular strategy with investment advisors even for people in their 60s, but my advice to my friends is "Do the math!". I'm always amazed by the brilliant engineers I've worked with who can't manage their own retirement financial strategy without an expensive "wealth advisor". What is it with these people who (for example) aren't afraid of calculating a complicated loss budget, but are afraid of managing their money?
Being completely non-nationalistic,
The best way to handle extreme rudeness like this is to teach them a lesson on politeness, like handing out a good butt kicking.
Soandso
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You don’t know how long you are going to live, and it’s hard to predict what the financial returns will be, too. Living off the average gain is not much less cash flow than using it all up in 30 years.
Rick “notwithstanding having an estate to pass on” Denney
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Being completely non-nationalistic,
The best way to handle extreme rudeness like this is to teach them a lesson on politeness, like handing out a good butt kicking.
The interesting thing is when you confront them, they do back off and they act as if it's not a big deal. I suppose such rudeness is just a common way of life there.
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I think of underspending as buying freedom from money worries.
Being tight I lived off savings until I was 75 and the pension was no longer free from death duty then started paying myself just under the 40% tax threshold from my pension. I am told the fund will run out when I an 116 - so should be OK but maybe I'll have to up the payments if it isn't enough and suck up the 40%.
Yes it is hugely less than when working...
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