Money Matters
AprilZ81
member
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Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Retirement Question: How much is enough?
I hope this doesn't come off as bragging, but I've been crunching retirement numbers today and if the calculators are correct my mind is blown. I would like some outside perspective to the situation too see if I'm crazy or not.
With what DH and I currently have in retirement funds if we assume a 7% annual rate of return we could have 1.5 million in retirement accounts in 30 years (DH would be 67 and I would be 64). That is if we do not contribute one more penny to retirement and doesn't include any other assets (house, non-retirement mutual funds, stocks, etc). If those funds get 8% return we would have just over 2 million.
Assuming we receive a TOTAL of $1,000 a month from Social Security (it could be much higher based on calculations of earnings, but I don't quite believe SS will be available when we retire) we could be drawing $5,800 a month in joint income (pre-tax) and it would last us 30 years. (7,000/month from 2 million in assets) This assumes that we both retire at the same time when DH is 67 and I am 64 and assumes the online calculator I found is correct.
We live in a moderate cost of living area and without a mortgage that is almost more money than I can conceive of spending (that would be almost equal to what we made last year with both of us working) unless we bought a second home and became snowbirds.
Would you consider slowing down retirement contributions to focus on paying down a mortgage or traveling more? We would never stop it all together, but not having to "worry" about maxing out two ROTHs and contributing to 401(k) accounts would be pretty awesome.
Not having to worry about retirement contributions would also allow me to be a stay-at-home mom with less guilt because I would know we would be okay when we retire without my additional contributions.
It is also possible that we could inherit a decent amount of money from parents but we aren't counting on that at all because they could leave it all to charity for all we know (I doubt it, but it is their decision). That would just be more padding to our accounts or we could use it to pay for college educations for our future kid(s).
ETA: Both income calculations include 3% increases each year.
Formerly AprilH81
Re: Retirement Question: How much is enough?
Well, over time we all know how the cost of things increases, so $1.5M or $2M in 30+ years may not actually be very much money when you consider how costs of daily living expenses go up.
For example, in today's dollars, my parents are retired (Dad is 71 and Mom is 63) both just retired this year and both plan on having part-time jobs just to stay busy, but they have between $1.5M and $2M and own their home outright. Each also earns SS and each has a pension. But, I know my dad wonders, "Is this enough?" Conceivably, they could each live another 25 years and either one knows how costly their medical expenses may be as they age (long-term care???).
I know you said you would have other assets and that you may get money from the ILs and your parents.
Personally, I would keep trucking along with retirement savings. Yes, you should have peace of mind for your nest egg as it stands and you CAN afford to take trips, and stay at home with children. But, I wouldn't begin throwing the retirement party yet!
Also, another way you can look at it is how much money do you need to have saved in order to just live on the growth? That way you can pass your nest egg down to your children.
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Our personal goal is to have $100,000 saved before baby is here, so that absolute worst case scenario, we'll have $1.6 million at 75. Again, that'd be what we could reasonably assume to have without adding another dime after starting a family. However, I don't think we'd truly be comfortable at that age with anything less than $3 million. But, family is more important than money, so it'll be worth the sacrifice if for some reason we don't make it to that number.
Also, we're personally not banking on the expectation of social security, but that's just us.
I know how you feel, April. It is so hard to balance saving for the future with enjoying the present. I get everyone's concern on being sure you are prepared. But, then I also want to enjoy the present a little too.
We've decided to strive for 15% to 20% of our income towards retirement. Our income is kinda low, so we will still not be maxing out our ROTHs (like we could be doing if we cut out all travel,, eating out, and waited until we were like 40 before having kids) Anything more than the 15% is just not worth it to me...I feel confident that it will be enough, and I think it is a good balance to me.
As far as $1 million goes, I know that sounds like a lot, but it is not. I've calculated that we should have about $3 million total saved for retirement (but that is for both of us to live on). From the calculators I've seen, that should be enough for us but we will not be living fancy. With that amount, we will be able to maintain our current standard of living IF our mortgage is paid off.
I read an interesting stat back when all that Affordable Care debate was going on. By and large, everyone's medical expenses cost virtually the same amount over the course of their lifetime.
For example, someone with a pre-existing condition might cost more to take care of as a young adult than a similar aged person without a condition...but then they will typically die younger, whereas their similar cohort will start costing big bucks as they become elderly.
:-/