Comments on: Will A Million Dollars be Enough to Retire On?

By: Kevin M

Kevin M — Wed, 24 Aug 2011 21:41:10 +0000

Hi Charlotte–Pensions are really the major difference between the retirees of 20 years ago and now. The ones who retired back then usually had pension. But those pensions have gone away for most workers today so we need to be prepared for a very different type of retirement.

You’re right, pensions need to come back, but the reality is that the probably won’t. That’s what this article is about!

Thanks for weighing in.

By: charlotte j

charlotte j — Wed, 24 Aug 2011 18:21:49 +0000

I had a different takeaway from Dee’s note – the main thing that stuck in my mind is that her dad had…A PENSION. My dad also has a pension, so he’s not having to blast through his retirement savings nestegg on “trivial” expenses like medical care and taking care of his house quite so fast. Pensions need to make a comeback in this country…they’re the only thing that has allowed secure and relatively worry-free retirement for MOST older people I know.

By: Kevin M

Kevin M — Tue, 12 Apr 2011 03:27:36 +0000

Dee – Exactly! Your parents lived comfortably in their later years not because they had a huge retirement nest egg, but because they could live within their means. The mindset today is that you build a massive retirement portfolio so that you can have a luxurious life. Most people won’t, and there’s a related implication that they’ll have a dreary life as a result. With some creative planning and a smart lifestyle, we can still be quite comfortable. BTW, I was a kid at the time, but yes, I remember “Esso”!

By: Dee

Dee — Mon, 11 Apr 2011 23:57:33 +0000

Oh, for goodness sake! My dad passed away last year at the age of 94. He retired with virtually NO SAVINGS, he owned a very small house, received soc. sec., (as did my mother) and a very small pension. When he died he had been retired for more years then he had worked for Exxon (which was called Esso when he worked for them). My parents didn’t have an elaborate lifestyle, but they enjoyed their simple life and their family. Aim to retire with your home paid for, no debt, and as much as you can reasonably save. Do not spend your time worrying yourself into an early grave.

By: Kevin M

Kevin M — Mon, 28 Mar 2011 00:50:49 +0000

Raven – You make an excellent point. Health coverage is a major retirement investment, and walking away from Medicare could be a stragegic mistake.

That being said, we have to wonder if Medicare will be worth sticking around for. It’s already in deficit and we can only speculate where it will be in 10, 20 or 30 years. My suspicion is that it will become something of a welfare plan, covering only minimal services, with the better coverage coming from private plans.

At that point, moving to another country that has a more affordable health system may be back on the table.

What you’ve identified is the true X factor in the retirement equation. It could render all other future projections moot.

By: Raven

Raven — Sun, 27 Mar 2011 21:59:53 +0000

It is impractical to consider living in another country when you retire because medicare only covers you if you live in the United State

By: Kevin M

Kevin M — Fri, 28 Jan 2011 03:32:42 +0000

Jennifer – All good ideas, in my opinion. Since we can’t know what the future holds, the best strategy is one comprised of multiple approaches–not at all unlike an investment portfolio.

I agree with you on precious metals. Any portfolio that isn’t diversified in a true sense could face serious problems. Stocks and bonds alone don’t offer the diversification most would like to believe, and often even move in tandem. That’s no diversification at all.

Also agree on real estate, when the time comes. In the meantime, caution!!!

By: Jennifer Barry

Jennifer Barry — Thu, 27 Jan 2011 18:43:47 +0000

Hi Kevin, I think this is a very important set of points you bring up. Most people aren’t saving enough at all. I read that that most seniors have less than $136K in their retirement funds, so I guess they are going to depend on Social Security. Due to the $202 trillion in unfunded liabilities for SS and Medicare, this isn’t a good bet. They are already scrapping the cost of living adjustments.

I also agree with you that the retirement calculators are very optimistic about rate of return for stocks and real inflation. Add to this the fact that people are retiring earlier while living much longer, and you have a recipe for being destitute in your 80s.

I definitely plan to have multiple income streams throughout my life. Right now the winning investment IMO is precious metals, but that will change sometime this decade. My husband and I also have business investments, job income, and almost no debt. Eventually we will jump into the real estate market again, but I’ll give that a few years. I also like the idea of living in a cheaper country where my money goes farther.
Jennifer Barry´s last [type] ..Whole Foods- How to Alienate Customers in 6 Easy Steps

By: Kevin M

Kevin M — Sat, 18 Dec 2010 22:48:05 +0000

Mike – You’re already at the million dollar mark, and that’s plenty for now. The point of the post is that it probably won’t be nearly enough 20-30 years from now, no matter how impressive a sum it is now.

John – The fact is the number of millionaires currently in the US is only a single digit percentage of total households (somewhere between 3% and 8% depending on the criteria and who is supplying the numbers). It’s impirical then that most people won’t get there.

Also, worth considering is how many current millionaires got there via retirement plans; what ever number that is, it’s substantially below the number of millionaires in the country. We might only be talking 1-2% of households actually achieving a million dollar-plus retirement plan.

The majority will need to diversify income sources to live a reasonably comfortable lifestyle. More important, the point of the post is that all of the assumptions about easy to achieve seven figure retirement accounts rest on that historical 8% stock market return performing reliably (we know that it doesn’t–Exhibit A: the market from 2000 to present), as well as perfect world conditions.

I especially wouldn’t bet on that last one!

By: John

John — Sat, 18 Dec 2010 03:51:58 +0000

Ludicrous. If we were to believe you then only a tiny fraction of people can retire. The math contains many errors including the historical rate of return (8%) in the market and then cherry picking inflation from recent data. Another major error is showing that inflation chews up 50% of your returns over 25 years so you only have half your investment. Note that carries someone to 90 which is very conservative for a lifetime estimate. By your math you have 1.2 MM when you retire but conservative estimates only allow for a 4% return. You then half that amount because of what is chewed up by inflation but that inflation occurs over 25 years. In year one even by your assumptions you have 4% of 1.2MM which is over $100 k / year. This allows further investment which isn’t accounted for. If I assume you mean the 25 years of inflation is from 40 to 65 instead of 65 to 90, then you have effectively assumed that inflation eats away at your savings/investments but does nothing for salaries or maximum IRA contributions over that time which is patently unrealistic. Look at minimum wage over a 25 year period. Finally and just as important as other factors is that there is nothing said about a house. Lets say you buy your house when you are 40 and lock in an interst rate. Now inflation is working for you as this is a fixed cost and your salary is inflating (not to mention likely growing in a real sense for at least 1/2 those years). Real inflation for the country is much higher than you will experience since a good portion of your expenses (mortgage payment) is fixed and will not inflate. If you are a renter then I agree this is real but in the example the person is max’ing out their 401k which I believe is more likely a person that either owns or has a mortgage on their house.