What is your magic retirement number?

[QofQuimica]

How much money do you think you will need to accumulate before feeling comfortable enough to retire?

At what age do you plan on retiring? Do you plan on slowing down and working part time at a certain age?

Basically you are able to afford to retire once your nest egg is ~25-30x your yearly spending. I'm 40 now, and I will be able to retire altogether within five years. But I expect to continue working part-time because I think age 45 is too young for me to be retired altogether. I'll retire altogether when I feel like it.

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[mvenus929]

Sometimes I hear of doctors passing away in their 80's and they hadn't retired yet, they were still working! That is so sad to me....I would want to have at least 10 years of not working and being retired before I pass....Also people assume they are going to live into their 90's, doesn't always work out that way....life expectancy in USA=78.7 years....

I am amazed people want to have millions to retire....why do you need some kind of crazy high class lifestyle when you are so old? The majority of people spends the last 5 years of their lives basically in and out of the hospital (essentially living in the hospital)....what kind of lifestyle does a 90 yr old have? seriously.....

Some people have no desire to retire. They enjoy working, so they continue doing so. To each his own.

Your retirement savings should ideally last 25+ years. If you plan on living on $50K per year now, you're talking $1.25M needed in savings to last 25 years. Granted, ideally you won't have a mortgage or other debts to pay by the time you retire, but upkeep on your own, children's education, travel, healthcare expenses, etc, can all creep into that amount. And I've seen a number of extremely healthy 80-90 year olds. I believe your risk of death per year actually goes down once you cross the 75 year mark.

 

[Plastikos]

Untrue, youre just as likely to die after 75 as the day you were born....ha

What you're referring to is the difference between the widely quoted (as a poster above did) average american lifespan which literally averages in all neonate and young deaths, etc.....if you have made it to 65 you are likely to live much longer than that 78.7 years. Its best to use actuary tables to estimate your longevity which takes all of these realities into account, and will keep you from not planning correctly.

 

[James Martin]

I prefer to use an alternative to the replacement rate, using something called the expense method. The expense method asks you to estimate the budget you will have in the first year of retirement (ignoring onetime expenses, like that trip around the world). More often than not the expense method budget calculation comes out to be 60% to 80% of final salary anyway…on the other, hand the exercise of calculating your budget for the first year of retirement is an eye-opening experience. Retirement preparedness is elusive for many. But you need a plan for providing a paycheck in retirement. Calculating the amount you need, heeding the rules of thumb, and taking the required actions to accomplish your goal will provide a good start.

 

[Mman]

http://www.firecalc.com

You can use this to determine your success of retiring on a given amount with your money in the market, as it calculates literally every potential time your money could have entered the market since the dawn of modern stocks. You don't just draw down money that is invested at 0% interest in retirement- you leave it in a conservatively invested portfolio with an estimated 7% return and draw down 4% a year, with 3% left over to account for inflation. Basically, your money grows in pace with inflation and you literally never run out of cash, because you draw down at a rate that is equal to your returns.

That's not entirely true. It ignores the effects of taxes on the withdrawals and/or returns unless you are including them in the 4% you are living on. For example if you are pulling money out of a 401K, you'll be paying taxes on that money so you can't live on all of it. You either need to withdraw more than 4% or you need to live on less.

Inflation is the great destroyer of wealth when it comes to retirement planning. For example, if you currently live on 100K after taxes per year and wanted to do the same retiring 30 years from now, with 4% inflation you'd need roughly $325K per year to live on after taxes. That's a sizeable jump for people that aren't thinking of it when planning how much they will need to retire.

 

[Mad Jack]

That's not entirely true. It ignores the effects of taxes on the withdrawals and/or returns unless you are including them in the 4% you are living on. For example if you are pulling money out of a 401K, you'll be paying taxes on that money so you can't live on all of it. You either need to withdraw more than 4% or you need to live on less.

Inflation is the great destroyer of wealth when it comes to retirement planning. For example, if you currently live on 100K after taxes per year and wanted to do the same retiring 30 years from now, with 4% inflation you'd need roughly $325K per year to live on after taxes. That's a sizeable jump for people that aren't thinking of it when planning how much they will need to retire.

I really can't tell if you're being intentionally obtuse or if you are literally just incapable of basic math. You certainly put strong evidence forth for the idea that medicine is the path for all of the people who are good at science but terrible at anything having to do with mathematics.

Very simply, your retirement income goal should be your PRE-TAX drawdown goal. So if you want to draw down 100k pretax, you have to have $2.5 million saved. Now, as to inflation- it is not the destroyer of wealth when it comes to retirement planning, for reasons I already explained. You invest to make 8% a year, on average. You draw down 4% of that, leaving 4% to be added to your nest egg. That 4% covers your inflation, and then some. Let's look at how this works over a four year period:

Year 1, $2,500,000
Nest Egg after 8% Gains: $2,700,000
Draw down (4%): $108,000
Nest Egg after Drawdown: $2,592,000
Value of 100k after 1 year of 3% inflation: $103,000

Year 2, $2,592,000
Nest Egg after 8% Gains: $2,799,360
Draw down (4%): $111,974.40
Nest Egg after Drawdown: $2,687,385.60
Value of 100k after 2 years of 3% inflation: $106,090

Year 3, $2,687,385.60
Nest Egg after 8% Gains: $2,902,385.60
Draw down (4%): $116,095.06
Nest Egg after Drawdown: $2,786,290.54
Value of 100k after 2 years of 3% inflation: $109,272.70

Year 4, $2,786,290.54
Nest Egg after 8% Gains: $3,009,193.78
Draw down (4%): $120,367.75
Nest Egg after Drawdown: $2,888,826.03
Value of 100k after 2 years of 3% inflation: $112,550.88

Your nest egg grows faster than inflation, even with the 4% drawdown. That's why it is used, and why it was determined to be the ideal drawdown rate by a mathematician/financial planner/MIT educated rocket scientist. We get it, you want to live a lavish lifestyle and never retire and that's fine. But don't say retiring is impossible- it's very easy to do, and the math is extremely simple. You just don't want to live the lifestyle that comes along with early retirement. I'm fine with 50k a year pre-tax, 100k is actually pretty extravagant for my tastes, hence my personal 2.5-3 million goal.

 

[Mman]

I really can't tell if you're being intentionally obtuse or if you are literally just incapable of basic math. You certainly put strong evidence forth for the idea that medicine is the path for all of the people who are good at science but terrible at anything having to do with mathematics.

Hmm, didn't realize we were being pissy. But since you asked, don't be so stupid.

The majority of people (including physicians), think of what income they will need in retirement as POST-TAX. They don't think, gee I'd like to live on 75K a year, but that's after tax so I guess I need more. They think of what they actually spend. So for the majority of people planning retirement, when they think they need a nestegg that lets them draw down 4%, they think of that 4% as being the after tax value of what they need.

The majority of people (including physicians) that think of what income they will need in retirement also fail to adequately account for inflation. They think gee, I'm living on $X a year right now and that'd be fine in retirement, so I just need a nest egg of X times 25 or 30 to be able to retire. That's just inane. They forget that $X a year right now is worth substantially less 20 or 30 or 40 years from now.


So while mathematically you can draw down 4% a year from a lump sum of money invested at a reasonable rate and never run out, the MAJORITY of people planning for retirement both incorrectly calculate what that X is with taxes included and even if they do so they forget about inflation in the calculation.

That's my point. Don't be so insulting of such an important point.

As to living on 50K a year, be my guest. As for my retirement, don't worry about me. I'll be retired long before age 60 and probably only working part time by 50 or 55.

 

[Mad Jack]

Hmm, didn't realize we were being pissy. But since you asked, don't be so stupid.

The majority of people (including physicians), think of what income they will need in retirement as POST-TAX. They don't think, gee I'd like to live on 75K a year, but that's after tax so I guess I need more. They think of what they actually spend. So for the majority of people planning retirement, when they think they need a nestegg that lets them draw down 4%, they think of that 4% as being the after tax value of what they need.

The majority of people (including physicians) that think of what income they will need in retirement also fail to adequately account for inflation. They think gee, I'm living on $X a year right now and that'd be fine in retirement, so I just need a nest egg of X times 25 or 30 to be able to retire. That's just inane. They forget that $X a year right now is worth substantially less 20 or 30 or 40 years from now.


So while mathematically you can draw down 4% a year from a lump sum of money invested at a reasonable rate and never run out, the MAJORITY of people planning for retirement both incorrectly calculate what that X is with taxes included and even if they do so they forget about inflation in the calculation.

That's my point. Don't be so insulting of such an important point.

As to living on 50K a year, be my guest. As for my retirement, don't worry about me. I'll be retired long before age 60 and probably only working part time by 50 or 55.

I just really couldn't tell if you were being serious.

When people say, "I want to make 100k a year" they generally don't mean post-tax. They generally mean pre-tax. The same thing generally applies to retirement- when people say "I want 100k a year coming in when I retire," they often mean pre-tax- 100k coming in from investments, stocks, or their 401k. Now, also keep in mind that to get to 2.5 million, much of your investments will not be in 401k/403b accounts, they will be in investments that net you capital gains and their favorable 15% tax treatment, as well as the ability to offset many of your gains with capital losses, which can (if done correctly) net you a negligible tax rate. Ideally you won't even touch your 401k until your 60s. Finally, if you've actually paid your house off prior to retirement, you'll have negligible expenses in retirement (this is where the 80% rule of retirement comes in- you aren't paying as much in rent/house payments and the like, so you should require less money to live off of). Couple your less-than-15% tax rate with expenses that are 20% lower than you had when you were working, and living off of any given amount takes you much further.

 

[Mman]

I just really couldn't tell if you were being serious.

Yes, I was serious. When providing retirement advice to a broad audience, you need to be specific. Most people don't worry about the details. They think if they spend $X a month (or year) right now and will want the same level of money to spend in retirement that's all they need to know. They forget they will need a large amount more for the same spending power factoring in inflation. They also don't fully account for the tax implications of relying on various sources of income like Roth or traditional IRA, 401k/403b, etc.

I'm fairly sophisticated. I maintain spreadsheets with balances, savings rates, expected growth rates, and estimates of future tax rates alongside estimates of inflation going forward for my 401K, Defined Benefit, Roth IRA, and after tax savings. All four account types have different amounts I can save in each year, they also have different expected returns going forward, and they have different tax treatments in retirement. For example, I can project what amount I'd need to withdraw from any account 30 or 40 years from now (to the year) to have an after-tax purchasing power of whatever number I'd like. A few quick tweaks here or there and I can adjust the anticipated rates of inflation, effective tax rate, or rate of return on investment to see how that changes things. The average person contemplating saving for retirement (physicians included) will look at you like you are speaking a foreign language if you get detailed on that.

That's why when people get simple and say if you withdraw 4% you will be fine long term I get irritated. It's too simplistic for most people to understand and it won't help them plan for retirement effectively.

When in doubt, save more than you think you will need. Higher inflation, higher taxes, or lower returns can all throw your math off in the wrong direction.

 

[Mad Jack]

Yes, I was serious. When providing retirement advice to a broad audience, you need to be specific. Most people don't worry about the details. They think if they spend $X a month (or year) right now and will want the same level of money to spend in retirement that's all they need to know. They forget they will need a large amount more for the same spending power factoring in inflation. They also don't fully account for the tax implications of relying on various sources of income like Roth or traditional IRA, 401k/403b, etc.

I'm fairly sophisticated. I maintain spreadsheets with balances, savings rates, expected growth rates, and estimates of future tax rates alongside estimates of inflation going forward for my 401K, Defined Benefit, Roth IRA, and after tax savings. All four account types have different amounts I can save in each year, they also have different expected returns going forward, and they have different tax treatments in retirement. For example, I can project what amount I'd need to withdraw from any account 30 or 40 years from now (to the year) to have an after-tax purchasing power of whatever number I'd like. A few quick tweaks here or there and I can adjust the anticipated rates of inflation, effective tax rate, or rate of return on investment to see how that changes things. The average person contemplating saving for retirement (physicians included) will look at you like you are speaking a foreign language if you get detailed on that.

That's why when people get simple and say if you withdraw 4% you will be fine long term I get irritated. It's too simplistic for most people to understand and it won't help them plan for retirement effectively.

When in doubt, save more than you think you will need. Higher inflation, higher taxes, or lower returns can all throw your math off in the wrong direction.

I can't fully expound upon a comprehensive retirement strategy and all the nuances and contingencies that will apply to every potential retiree in a single post. My post was more geared toward people that already understand the topic than those that don't know a damn thing- the sorts of people that are into early retirement generally know the basics already. And those of us that want to retire early are living well below our means and intend to retire similarly- this isn't a retirement plan for the everyday physician, it's one for people who want to gtfo of the race as quickly as possible and do as they please for the next 30-50 years of their life with a nice, secure cushion of 100k or so coming in per year.

 

[sazerac]

I assembled my F--- You fund in the late 1990s, and I have been living off of it for almost 20 years now. It funds all basic needs and life's frivolities like vacations and medical school. I've been withdrawing 4% of principle every year (well, 1% per quarter) ever since I established the fund. It continues to grow against inflation. I've survived two market crashes. Sure there were a couple years where the 1% of principle was a smaller check than last quarter, but then I'm just tightening my belt like everybody else is doing.

MadJack has the right idea here, even if his attitude is a little brash. Withdrawing 4% a year (or equivalently if you want to live the lifestyle of $X salary per year starting today, you need 25 time $X in the bank) works, it has worked, and statistically it will continue to work.

Taxes have been minuscule, because my income comes mostly from long term capital gains sales. There is some dividend income (reinvested), but that has been taxed a low rate too. While my taxes have run somewhere between 5% and 10% of my "income", recent life changes like getting married dropped my federal income taxes to zero last year. That's right, every dime I paid in estimated taxes I got back in April.

For the tax year 2014 I had another child, and I will have a negative income tax rate. The government will basically be paying me (and my family) to exist. I'm a welfare queen.

 

[Postictal Raiden]

I really can't tell if you're being intentionally obtuse or if you are literally just incapable of basic math. You certainly put strong evidence forth for the idea that medicine is the path for all of the people who are good at science but terrible at anything having to do with mathematics.

Very simply, your retirement income goal should be your PRE-TAX drawdown goal. So if you want to draw down 100k pretax, you have to have $2.5 million saved. Now, as to inflation- it is not the destroyer of wealth when it comes to retirement planning, for reasons I already explained. You invest to make 8% a year, on average. You draw down 4% of that, leaving 4% to be added to your nest egg. That 4% covers your inflation, and then some. Let's look at how this works over a four year period:

Year 1, $2,500,000
Nest Egg after 8% Gains: $2,700,000
Draw down (4%): $108,000
Nest Egg after Drawdown: $2,592,000
Value of 100k after 1 year of 3% inflation: $103,000

Year 2, $2,592,000
Nest Egg after 8% Gains: $2,799,360
Draw down (4%): $111,974.40
Nest Egg after Drawdown: $2,687,385.60
Value of 100k after 2 years of 3% inflation: $106,090

Year 3, $2,687,385.60
Nest Egg after 8% Gains: $2,902,385.60
Draw down (4%): $116,095.06
Nest Egg after Drawdown: $2,786,290.54
Value of 100k after 2 years of 3% inflation: $109,272.70

Year 4, $2,786,290.54
Nest Egg after 8% Gains: $3,009,193.78
Draw down (4%): $120,367.75
Nest Egg after Drawdown: $2,888,826.03
Value of 100k after 2 years of 3% inflation: $112,550.88

Your nest egg grows faster than inflation, even with the 4% drawdown. That's why it is used, and why it was determined to be the ideal drawdown rate by a mathematician/financial planner/MIT educated rocket scientist. We get it, you want to live a lavish lifestyle and never retire and that's fine. But don't say retiring is impossible- it's very easy to do, and the math is extremely simple. You just don't want to live the lifestyle that comes along with early retirement. I'm fine with 50k a year pre-tax, 100k is actually pretty extravagant for my tastes, hence my personal 2.5-3 million goal.

How much money are you planning to put away per year, and for how long, until you reach your retirement goal?

From reading your posts, I see that we will both graduate with a significant amount of debt (mine is a little higher). Therefore, I'm interested In knowing how someone in our situation could manage to payoff the debt, live decently and still build a healthy retirement fund.

 

[Mad Jack]

How much money are you planning to put away per year, and for how long, until you reach your retirement goal?

From reading your posts, I see that we will both graduate with a significant amount of debt (mine is a little higher). Therefore, I'm interested In knowing how someone in our situation could manage to payoff the debt, live decently and still build a healthy retirement fund.

There's a big difference between you and me- you have a family, and I don't and never will. That gives me a lot of flexibility, and really lowers my expenses. Regardless of field, my debt isn't a big issue- if I keep living like I've been living for the last 12 years, I can pay it off in less than 4 years, regardless of specialty. The specific details of how I'm going to hit the magic number will largely depend on what I end up going into specialty-wise though. I'll probably post about my **** you fund a bit on here as time goes on and the plan starts to come together.

 

[drkristy85]

Some people have no desire to retire. They enjoy working, so they continue doing so. To each his own.

Your retirement savings should ideally last 25+ years. If you plan on living on $50K per year now, you're talking $1.25M needed in savings to last 25 years. Granted, ideally you won't have a mortgage or other debts to pay by the time you retire, but upkeep on your own, children's education, travel, healthcare expenses, etc, can all creep into that amount. And I've seen a number of extremely healthy 80-90 year olds. I believe your risk of death per year actually goes down once you cross the 75 year mark.

ok first of all, i disagree with the 25 yr nonsense. If u retire at 50, then yea, i would save for 25+ yrs. But if u retire closer to 65-70 (very old, almost dead really), then 25 yrs brings you to 95. Very few people live to 95. And at 95, you are probably living in a hospital at that point, or long before.

Also, children's college? what are you talking about? when you're old enough to retire, your children should already be done with college....Even if you have kids late, at 35 let's say with advanced maternal age, then they are done with 4 yrs of college when you are 57. so no you are not paying for college at this point. you are not paying for mortgage. You need money for food, cinema w/discounted senior admission, Skype, church donations, gardening tools, some travel, maybe golf (I don't play golf) so yea $50, 000 per year + spouse $50,000 per year=$100, 000 sounds more than good, maybe even excessive

 

[Mman]

So on one hand you say...

I really can't tell if you're being intentionally obtuse or if you are literally just incapable of basic math. You certainly put strong evidence forth for the idea that medicine is the path for all of the people who are good at science but terrible at anything having to do with mathematics.

And on the other hand you say...

I can't fully expound upon a comprehensive retirement strategy and all the nuances and contingencies that will apply to every potential retiree in a single post. My post was more geared toward people that already understand the topic than those that don't know a damn thing- the sorts of people that are into early retirement generally know the basics already.

Which is it? Are you speaking to an audience full of people so stupid that they are "literally incapable of basic math" or are you talking to "people that already understand the topic"? You confuse me. If retirement advice is save more, spend less, blah blah blah; then it is fine to be generic. If you want to start getting into actual math and tax rates and withdrawal rates you gotta step up the specificity a bit or else you end up with this...

Withdrawing 4% a year (or equivalently if you want to live the lifestyle of $X salary per year starting today, you need 25 time $X in the bank) works, it has worked, and statistically it will continue to work.

Which implies if I'd live on $100K today I need 25x that in the bank ($2.5M) when I retire which ignores the effects of inflation unless retirement starts exactly today. Some people can misinterpret that and think it also applies 10 or 30 years from now to what salary they can live on today.


The devil is in the details.

 

[Mad Jack]

So on one hand you say...



And on the other hand you say...





Which is it? Are you speaking to an audience full of people so stupid that they are "literally incapable of basic math" or are you talking to "people that already understand the topic"? You confuse me. If retirement advice is save more, spend less, blah blah blah; then it is fine to be generic. If you want to start getting into actual math and tax rates and withdrawal rates you gotta step up the specificity a bit or else you end up with this...



Which implies if I'd live on $100K today I need 25x that in the bank ($2.5M) when I retire which ignores the effects of inflation. It's more like if you retired in 30 years and wanted to live on the salary equivalent to $100K right now you'd need about $10M in the bank at retirement or so (I didn't work out the actual math with an inflation rate, just ballparked it).


The devil is in the details.

Physicians aren't my audience. The people in the finance and investment forum are, and they are largely well-versed in the topic already.

 

[Mman]

Physicians aren't my audience. The people in the finance and investment forum are, and they are largely well-versed in the topic already.

Okey dokey

 

[Gpan]

Where do you get these 8% compound interest from ?

 

[rl2]

I am little concerned by the numbers. A $2 million dollar nest egg throws off about $80,000 in income. However this income will be taxed if it's in retirement accounts. If you are not already living on the equivalent income you are going to have a hard time downgrading your life. The other issue is what are you going to do all day? Life gets pretty meaningless without goals and purpose.

I would like to suggest a two step process. Step one is the ability to walk away from what you are doing that you don't enjoy and instead move toward a work life you do. You may not make as much but if your nest egg is well funded and you can work another 15 years while it continues to grow on it's own that will create better stability. So you walk away at 50 create a lifestyle and income that you love and you let the nest egg continue to grow until 65 untouched. That would allow for 1 - 2 more doubles in your investment.

 

[Mman]

I am little concerned by the numbers. A $2 million dollar nest egg throws off about $80,000 in income. However this income will be taxed if it's in retirement accounts. If you are not already living on the equivalent income you are going to have a hard time downgrading your life. The other issue is what are you going to do all day? Life gets pretty meaningless without goals and purpose.

I would like to suggest a two step process. Step one is the ability to walk away from what you are doing that you don't enjoy and instead move toward a work life you do. You may not make as much but if your nest egg is well funded and you can work another 15 years while it continues to grow on it's own that will create better stability. So you walk away at 50 create a lifestyle and income that you love and you let the nest egg continue to grow until 65 untouched. That would allow for 1 - 2 more doubles in your investment.

Your thinking is on the right track. For me personally, I'll probably go all out until I'm 50 and then back off to part time for the next 10 or 15 years. At my current job I could probably either turn that into working 2 days a week or "job share" with another colleague and work full time but only 22 weeks per year. It'd let me keep the health benefits and maintain enough income while still letting the retirement savings bulk up before needing to start dipping into them.

 

[deleted126335]

Your thinking is on the right track. For me personally, I'll probably go all out until I'm 50 and then back off to part time for the next 10 or 15 years. At my current job I could probably either turn that into working 2 days a week or "job share" with another colleague and work full time but only 22 weeks per year. It'd let me keep the health benefits and maintain enough income while still letting the retirement savings bulk up before needing to start dipping into them.

Almost exactly my plan. Except I will either go part time - 0.75 FTE or get out of the night call system at our next contract renewal. I will be 57 then.

 

[Cooperd0g]

I am little concerned by the numbers. A $2 million dollar nest egg throws off about $80,000 in income. However this income will be taxed if it's in retirement accounts. If you are not already living on the equivalent income you are going to have a hard time downgrading your life. The other issue is what are you going to do all day? Life gets pretty meaningless without goals and purpose.

I would like to suggest a two step process. Step one is the ability to walk away from what you are doing that you don't enjoy and instead move toward a work life you do. You may not make as much but if your nest egg is well funded and you can work another 15 years while it continues to grow on it's own that will create better stability. So you walk away at 50 create a lifestyle and income that you love and you let the nest egg continue to grow until 65 untouched. That would allow for 1 - 2 more doubles in your investment.

Anyone who is "bored" in retirement without work has a serious lack of imagination. Hiking, hunting, fishing, backpacking, road trips, flying, sailing, travel.

As far as money goes, if you show up at your retirement age, whatever that is, with your home and toys paid off you no longer have to service the debt on them. You also no longer have to save for retirement. So $80k without a mortgage, car payment or investing is actually a lot of money.

 

[Mman]

So $80k without a mortgage, car payment or investing is actually a lot of money.

Depends on your definition of a lot of money. 30 years from now, $80K will have the same purchasing power as about $32K does right now. Can you live on it? Sure. Of course. But nobody would call it a lot of money.

 

[Cooperd0g]

It's all relative. My retirement is only 12 years away, not 30. Also, most financial and retirement planning books/guides recommend you plan based on today's value. That way you understand the purchasing power. Your investment strategy should be such to cover inflation plus gains for your growth phase. So a nest egg that provides $80,000 now still has the same purchasing power at virtually any future time period if your money grows at at least the rate of inflation. I don't plan on putting all of my money in my couch cushions when I retire.

 

[QofQuimica]

I live on $30,000 per year comfortably and anticipate needing the same (after taxes) when I retire. I don't want to bust my butt working resident hours for another decade or two to save ever more millions of dollars. At this point in my life, I value having time to spend as I choose more than I value making more money. And fortunately, my hobbies are cheap and can be done anywhere. Even traveling can be done cheaply (and can be paid for if combined with work). That being said, again, I agree with those who comment that I'll be too young to retire completely in my 40s, and I do plan to go to part time for a while until I get tired of it. Still, big difference between working cause you want to and working cause you have to, and I do want to be FI ASAP.

 

[deleted307836]

Depends on your definition of a lot of money. 30 years from now, $80K will have the same purchasing power as about $32K does right now. Can you live on it? Sure. Of course. But nobody would call it a lot of money.

I've assumed that when people talk about what they "need" to retire that they are talking in terms of real dollars. As in, if one says they "need" $1M to retire but they're not planning on retirement for another 25 years, then what they are really referring to is $1M "in today's dollars." Someone please correct me if I'm wrong, but I've always assumed that the 4% rule takes inflation into account (though there is now debate about whether this rule needs to be adjusted to 3-3.5% for perpetuity of inflation-adjusted income).

 

[Plastikos]

I've assumed that when people talk about what they "need" to retire that they are talking in terms of real dollars. As in, if one says they "need" $1M to retire but they're not planning on retirement for another 25 years, then what they are really referring to is $1M "in today's dollars." Someone please correct me if I'm wrong, but I've always assumed that the 4% rule takes inflation into account (though there is now debate about whether this rule needs to be adjusted to 3-3.5% for perpetuity of inflation-adjusted income).

Yes, this is exactly what they mean (even if they dont necessarily know it) and is common and standard practice. Inflation works both ways and has lots of effects (one of which is to make fixed rate loans cheaper), the nominal numbers dont matter, only the purchasing power of your nest egg does. That was just a bit of a pissing match.

 

[W19]

My magic number will be $2 million...and I will keep my expenses as low as I can...

 

[kratos99]

I'm 35, and I have a net worth right now of 1.4m (in Canadian dollars), as a primary care physician in Canada. I am salaried by the local medical school doing 4 days a week and also in private practice part time (I make close to 480K pre-tax; yes primary care docs make a lot in Canada). Having a child soon will put a dent in my savings rate but right now I save at least 15-20K a month. I don't know what my magic number is but I figure I can probably retire in a year or two. Right now we generate about 34K in what I call 'non working income', rent checks and dividends. I suppose when this number reaches 100K, I can retire comfortably, probably in another 10 years or so. Re-investing dividends has allowed my wealth to grow quite quickly.

 

[W19]

I'm 35, and I have a net worth right now of 1.4m (in Canadian dollars), as a primary care physician in Canada. I am salaried by the local medical school doing 4 days a week and also in private practice part time (I make close to 480K pre-tax; yes primary care docs make a lot in Canada). Having a child soon will put a dent in my savings rate but right now I save at least 15-20K a month. I don't know what my magic number is but I figure I can probably retire in a year or two. Right now we generate about 34K in what I call 'non working income', rent checks and dividends. I suppose when this number reaches 100K, I can retire comfortably, probably in another 10 years or so. Re-investing dividends has allowed my wealth to grow quite quickly.

That is impressive since you are only 35! Did you have any student loan? Do you have a significant other that also has an income? How many years have you been a practicing physician? I was told that high income earner pay close to 50% income tax in Canada, so it is impressive that you are able to save that much per month.

 

[kratos99]

That is impressive since you are only 35! Did you have any student loan? Do you have a significant other that also has an income? How many years have you been a practicing physician? I was told that high income earner pay close to 50% income tax in Canada, so it is impressive that you are able to save that much per month.

My wife works but she doesn't make that much as an office assistant part time (maybe 13k a year). Taxes are higher but I am incorporated so my private practice tax rate is in effect 14% and even lower when I dole out dividends to my wife. The only student loans I have are from my parents who I'm giving 800 bucks a month to as repayment so I'm lucky in that regard. I started work as a doc in 2008 but it has only been the last three years where I've accelerated my savings and earnings since I branched out to education as essentially another job. The one mistake I made coming out was spending 60k buying a BMW when I graduated which I sold last year for 17,500 and promptly invested in dividend paying equities (the value of which is now worth about 19k excluding the divvies). I now prefer to bike and take the bus. (Healthier for you too)

What I've learned is that it's not the money you make but how you spend and invest that determines how rich you really are. I wouldn't trade my soon to have financial freedom for anything else in the world.

 

[Hospt]

This is always a hot topic. If you know some personal finance rules, you can easily retire in luxury. There is no magic number here. It depends on several factors. The more the better. Be frugal. Save maximum. Start investing early. I also have some more points in my blog.