What's the number?

[54-46]

Vanguard has a risk assessment questionnaire that is helpful. Also, you can go to portfolio allocation models and see:

- avg historical return
- best year's return
- worst year's loss
- # years with a loss in last 90 years

History is no guarantee moving forward, but it's a data point to consider.

See:

https://personal.vanguard.com/us/fun...recommendation

https://personal.vanguard.com/us/ins...io-allocations

[GeezerSteve]

An informed setting of the number requires an analysis of anticipated SS payments. Hypothetical example: Married couple has a paid-off residence and no debt. Husband retires at full retirement age (FRA) and can get $2500/mo. SS immediately, but can get $3,200/mo. SS if he delays taking SS at age 70. (Wife, 4 years younger and still working part time, will get similar monthly SS benefits.) Couple has $1,200,000 in savings and retirement. Couple decides to tap $200,000 of savings in next 4 years, supplementing wife's part-time work income to allow husband to take SS at age 70. Fast forward 4 years: Couple has $1,000,000 and elects to start taking SS, total $5,700/mo. ($68,400/year). Paid-off house, no debt and modest frugality allows couple to live comfortably on $68,000/year (subject to future COL increases), drawing on retirement and savings occasionally for a vacation, unexpected circumstances, etc. If savings and retirement are conservatively invested, couple reasonably anticipates that return on savings and retirement will exceed draw downs. Alternatively, less frugal couple annually draws anticipated 3% return on savings and retirement ($30,000/year) for total of $98,400 yearly income. Under either scenario, when husband dies wife gets higher ($3,200/mo.) SS benefit, has a paid-off house and $1,000,000 or more in savings and retirement. For this couple, the $1,000,000 number pencils out if H takes SS at 70 and wife takes SS at FRA.

AARP calculator factors in anticipated SS payments.

The file and suspend strategy for married couples is no longer available. But the 70/FRA strategy is still the best play for a married couple with sufficient liquid assets such that the older spouse can draw on savings and retirement to delay taking SS until age 70.

[The AD]

Couple has $1,200,000 in savings and retirement. Couple decides to tap $200,000 of savings in next 4 years, supplementing wife's part-time work income to allow husband to retire at age 70. Fast forward 4 years: Couple has $1,000,000.

So they aren't going to accrue any interest on that $1,000,000+ over four years?

[GeezerSteve]

So they aren't going to accrue any interest on that $1,000,000+ over four years?

They should and that'd be nice, although it doesn't materially change the point of the hypothetical, i.e., that $1,000,000 at retirement is a reasonable number for that hypothetical couple per 70/FRA SS strategy.

[Benny Profane]

When you have won the game. Stop

http://whitecoatinvestor.com/bernste...-win-the-game/

Easy to sleep at night. I've seen enough crashes to respect the opinion.

But, you've seen the market bounce back after all those crashes, right? Or, a simple way to look at it is, just don't panic and sell when times get tough, just cut back on spending. Don't do that trip to Italy when the market's down, and live with whatever ski quiver you have.
We're up, what, over 150% since '08? Now we have this Trump bump, of all things, at the same time those "safe" bonds tanked a bit. Won't last, but, who the fuck can predict these things? Just split it up 60/40 or 50/50 in a low cost fund provider and go skiing.

Inflation should be pretty non existent for years, I'm guessing, but, again, who the fuck can predict the future? After all, Rick Perry is going to run the energy department. Oopsy!

[GeezerSteve]

Inflation should be pretty non existent for years, I'm guessing. . . .

Are you talking about general inflation or sector inflation? Big difference. Some sectors are flat or deflating, e.g., some commodities, fuel, stuff made by cheap labor, but there is and likely will be significant inflation in sectors that are most important to retirees, i.e., food, pharmaceuticals and medical care. If Trump triggers a trade war, more sectors could inflate. Furthermore, re general inflation, Trump's proposals -- specifically big tax breaks for the wealthy and big spending on infrastructure jobs (likely to be crony capitalism siphoned through private sector contractors) -- are inflationary.

[The AD]

They should and that'd be nice, although it doesn't materially change the point of the hypothetical, i.e., that $1,000,000 at retirement is a reasonable number for that hypothetical couple per 70/FRA SS strategy.

I just can't believe that you'd need to continue working till your 70 if you've got over one million dollars in retirement savings.

[4matic]

Vanguard has a risk assessment questionnaire that is helpful. Also, you can go to portfolio allocation models and see:

- avg historical return
- best year's return
- worst year's loss
- # years with a loss in last 90 years

History is no guarantee moving forward, but it's a data point to consider.

See:

https://personal.vanguard.com/us/fun...recommendation

https://personal.vanguard.com/us/ins...io-allocations

I really don't like any backward looking predictors. I've read that the best predictor is forward returns. With 30y risk free at 3.1% that is your best predictor of future returns.

Go back and look at 30y bond rates and see the forward return. As they have trended lower for 35 years so have forward returns.

[GeezerSteve]

I just can't believe that you'd need to continue working till your 70 if you've got over one million dollars in retirement savings.

No, I didn't say that. You're conflating retirement age with SS start age. In my hypothetical the husband stops working at 66 (FRA) but delays taking SS until age 70. You get 8% for each year you delay taking SS. Here are some real numbers:
-- take SS at age 62: $1,849/mo.
-- take SS at 66 years, 4 months (FRA for a 60 y.o. guy today): $2,583
-- take SS at age 70: $3,364

ETA: You and I agree that the numbers most people are posting on this thread are high.

I concur that many couples get by just fine with considerably less than my hypothetical couple. I recently talked with the hubby of a retired couple 71/68 with paid-off house, no debt, $500,000 savings & retirement and getting combined SS of $4,000/mo. ($2,800 him, $1200 her). They drew down on their retirement so that he could delay taking SS until 70 so that the surviving spouse will get $2,800/mo.

A different hypothetical: Single guy has $500,000 at age 62, house paid off, no debt, same SS numbers as above, has had it with The Man, decides to retire. Unless he has very good reason to believe that he will die before predicted life expectancy (c. 79) his best play is to draw down on his principal (say, $45K/year) and delay taking SS until age 70. Even if that leaves him with, say, only $200,000 at age 70 he'll be better off waiting to take $3364/mo. starting at age 70 than taking lesser amounts earlier because taking SS at 70 is the better hedge against living past age 79.

That strategy is doubly in play for a married couple with liquid assets sufficient to delay taking SS until age 70 (even if he or she retires earlier) because the surviving spouse takes the higher benefit of the two, and odds are that at least one of the two will live past their forecasted life expectancy.

General rule: If you've got the money, single individual or older spouse should take SS at age 70 as best hedge against running out of money if you outlive your forecasted life expectancy.

[dunfree]

So they aren't going to accrue any interest on that $1,000,000+ over four years?

I just can't believe that you'd need to continue working till your 70 if you've got over one million dollars in retirement savings.

If you assume real interest rates near zero you aren't earning any interest. A 4 or an 8 year draw has a real effect.

[Benny Profane]

Are you talking about general inflation or sector inflation? Big difference. Some sectors are flat or deflating, e.g., some commodities, fuel, stuff made by cheap labor, but there is and likely will be significant inflation in sectors that are most important to retirees, i.e., food, pharmaceuticals and medical care. If Trump triggers a trade war, more sectors could inflate. Furthermore, re general inflation, Trump's proposals -- specifically big tax breaks for the wealthy and big spending on infrastructure jobs (likely to be crony capitalism siphoned through private sector contractors) -- are inflationary.

I think that a major factor for non inflation (as opposed to deflation) is the great end game for the Boomers, which is in full swing and will last for twenty years. Most have no or very little savings, and this is the same generation that spent like drunken sailors since about 1980, as they went through adulthood. So, you know, can't get blood from a stone if you start upping prices on drugs and food. The younger working generation is saddled with well over a trillion in student debt, can't afford what is still an expensive housing market where good jobs are, and aren't exactly watching the high paying jobs come their way, especially if they have no degrees. As far as this infrastructure spending, well, paving roads and building bridges is somewhat automated these days too, and it's not as though the Republicans, who will be in charge for a while, are going to be spending trillions for the rabble to dig holes and fill them back again. Nope, from what I see of that cabinet, they're just going to make themselves even richer, and throw some bread and circus at the masses to keep them quiet. Like that education secretary. What a joke. Much evidence is out there about how investments in education are vital for modern economies, and he appoints a fabulously rich woman who has already failed the Detroit school system with her advocacy. Sorry, but only the richest school systems, like mine, are going to produce successful kids. The rest are doomed. And won't fuel inflation, for sure.

[GeezerSteve]

^ ^ ^ 90% polyasshat rant

Fed sees some general inflation coming. It's beyond argument that pharmaceuticals, HC and food have been inflating and there's no reason to see that trend change. Other sectors will not inflate or actually deflate, but retired people aren't buying recycled steel.

Yeah, sure, if the next generation cannot afford housing in NYC, SF, Seattle, Denver and other booming cities, then demand should subside and prices soften, no?

Flat general inflation is a two-edge sword for retirees: Stuff stays affordable (see above re exceptions) but super safe bond yields stay near zero.

[El Chupacabra]

While past performance doesn't guarantee future returns, IMHO it's the best thing we've got to predict it for planning purposes.

I agree with Big Steve's comments above, and add in regards to Soc Sec -- for anyone considering retiring early, yet waiting to collect SS benefits until FRA or 70, I found it interesting that it doesn't really make much difference in your projected SS benefits if you work 25 years or 40 years. Research SS "bend points" for an explanation:

https://www.ssa.gov/oact/cola/bendpoints.html

An early retirement blog goes into more detail and runs through some example numbers:
http://rootofgood.com/early-retirement-social-security/


Basically, once you've qualified for SS benefits, you can calculate out the remainder of your SS earnings window by entering a bunch of zeroes for years in which you aren't contributing to SS, and see what happens:
https://www.ssa.gov/retire/estimator.html

[Benny Profane]

^ ^ ^ 90% polyasshat rant

Fed sees some general inflation coming. It's beyond argument that pharmaceuticals, HC and food have been inflating and there's no reason to see that trend change. Other sectors will not inflate or actually deflate, but retired people aren't buying recycled steel.

Yeah, sure, if the next generation cannot afford housing in NYC, SF, Seattle, Denver and other booming cities, then demand should subside and prices soften, no?

Flat general inflation is a two-edge sword for retirees: Stuff stays affordable (see above re exceptions) but super safe bond yields stay near zero.

I think it's much more demographics and technology, not politics, but, that helps. You and I just spent our lives in quite possibly the best period evah in history for the average schmoe, maybe never to be equaled for a century or two. I really can't see a lot of inflation happening when jobs become scarce and 50 million Boomers die off slowly with no money besides SS. The Fed has proven many a time that they are stuck in a clueless bubble, so, I wouldn't watch them for guidance. I mean, watch what happens if they jack rates. The market will lose 10% overnight, and the mortgage market will nearly freeze. Nobody has any money. They just have debt.

[GeezerSteve]

Well, again, you're talking about general inflation. There is considerable inflation in some sectors and in some areas, deflation in other sectors. Sector inflation is germane to the subject matter of this thread.

All indication is that The Fed will raise rates today. Do you predict a 10% drop in the S&P tomorrow? Really? Are you shorting?

[The AD]

No, I didn't say that. You're conflating retirement age with SS start age. In my hypothetical the husband stops working at 66 (FRA) but delays taking SS until age 70.

OK, I think you made an error in your original scenario then:

...supplementing wife's part-time work income to allow husband to retire at age 70.

[GeezerSteve]

OK, I think you made an error in your original scenario then:

No error. In my hypothetical H retires at 66. W, 62, works part time, couple taps their retirement to supplement wife's part-time work income for 4 years until W (66) retires and H (70) takes SS. Both retire at age 66. H is 4 years into his retirement when he takes SS.

Anyway, it's just a hypothetical offered to make the point about drawing down on principal of savings/retirement so that older spouse can delay taking SS until age 70.

Another hypothetical might have an individual with $250K at age 62 -- or a couple with $400K with the older spouse at 62 -- with a plan to work part-time to tread water until taking SS at age 70. Or a 62 yo individual with $400K or a couple (older spouse 62) with $600K with the plan to retire and live low to the ground for 8 years until taking SS at 70. All those hypothetical cases (which assume house paid off and no debt) lead to the same place: If possible, individual or older spouse should take SS at 70 if possible unless they are pretty damn certain they will die before age 80 or so.

[The AD]

No error. In my hypothetical H retires at 66. W, 62, works part time, couple taps their retirement to supplement wife's part-time work income for 4 years until W (66) retires and H (70) takes SS.

Not to belabor the point, but you said "...allow husband to retire at 70." 70 isn't 66.

[GeezerSteve]

Not to belabor the point, but you said "...allow husband to retire at 70." 70 isn't 66.

Oh, okay, I see the disconnect. Before that I wrote "Husband retires at full retirement age (FRA)," which currently is 66 y.o. (It'll be 66 + 4 mo. for me). I meant to then say "allow H to take SS at 70," which would be 4 years after he retires. I corrected that ambiguity.

[El Chupacabra]

Chup, inflation is going to be pretty much of a non-issue for a long time in my opinion (which ain't worth much but hey). Second, as 4M said, his advice is definitely age-dependent and he doesn't advocate dumping all equities for a person in mid-career, he's suggesting you take some out when they're up and sit when they're down and gradually build a safe platform, hopefully equivalent to 20x your take-home pay, eventually.

"Take some out when they're up and sit when they're down" = market timing. Fine, if that's the desired approach, but not for me.

This aspect is the part I disagree with, because it shows poor behavior on the part of the investor -- a quote from Bernstein from 4matic's link, where I suppose he's trying to support his market timing theory of "stop when you've got enough":

"A lot of people had won the game before the [2008] crisis happened: They had pretty much saved enough for retirement, and they were continuing to take risk by investing in equities.

Afterward, many of them sold either at or near the bottom and never bought back into it. And those people have irretrievably damaged themselves."

Those investors screwed themselves. If they hadn't panic-sold during the drop, and if they had owned broadly-diversified funds, they would have recovered fully in two years. And if they had continued to do absolutely nothing (i.e. no panic selling), they would've seen their money not only recover but grow to new heights in the next couple years. If Bernstein had a crystal ball and foresaw the 2008 drop, then he could've made a fortune by selling high (before the drop) and buying low (at the precise bottom).

In addition, I don't know where Bernstein suggests investors should put their money in order to generate an absolutely safe 4% annual return, in today's market. No CD, money market, or deposit account will generate that.

[dunfree]

It's beyond argument that pharmaceuticals, HC and food have been inflating and there's no reason to see that trend change.

There's a strong argument for the end of HC and pharmaceutical inflation - we can't support the continued growth of the sector. I'd look at the behavior of Valeant as an example of how much work is going into inflating pharmaceuticals now. Not sustainable for the term of your life. Food inflation's not growing that fast right now either. Actually deflated for Sept & Oct.

Of course what matters is the prices of goods you care about, not the sector, and that's likely gone up.

[GeezerSteve]

Of course what matters is the prices of goods you care about, not the sector, and that's likely gone up.

Agree. For The Wife and me they've mostly gone down because we moved out of Seattle to a small town where many things are less expensive.

In addition, I don't know where Bernstein suggests investors should put their money in order to generate an absolutely safe 4% annual return, in today's market.

No shit. PM me if you figure that out.

[Benny Profane]

Well, again, you're talking about general inflation. There is considerable inflation in some sectors and in some areas, deflation in other sectors. Sector inflation is germane to the subject matter of this thread.

All indication is that The Fed will raise rates today. Do you predict a 10% drop in the S&P tomorrow? Really? Are you shorting?

Yeah, but, we're being small minded by thinking about just the American economy, and it's just our old people buying drugs or food. China will be another great contributor to worldwide low growth/recession as they slowly sink into Japan II, and it's already happening, crashing Brazil and other raw material exporters. Their great stimulus, along with our bank bailout, prevented another great depression, but that's losing steam and hitting it's minsky moment, at the same time the one child policy will make that country very old very fast. They have their own issues, because 70% of that population are still peasents, and they're making more robots than anybody. Nope, Europe ain't going to suddenly take up the slack, either, with their money and immigration issues.

Down somewhat today, but, yeah, ten percent if they persist in being stupid. Nobody has any money.

[4matic]

"

In addition, I don't know where Bernstein suggests investors should put their money in order to generate an absolutely safe 4% annual return, in today's market. No CD, money market, or deposit account will generate that.

Don't believe a specific return was ever mentioned. Just a draw rate.

[Coño Frío]

For a 50 YO, white male, former smoker, 5'10", 186 lbs, married, with a college degree, that has more than 8 drinks a week, and only works out 1-2 times per week, in decent current health with no diabetes....

the number is $8,597,033.63*

and you will die penniless, but happy as F#@$, at 88


* assumes spending $100k principal per year adjusted for 4% inflation