Golden Years is a Guessing Game

[Michael G.]

Have you notice when the subject comes up about retirement and savings in
tv, magazines or visiting your financial adviser, you're supposed to know these questions.

They want you to guess how long you're going to live ....WHAT?

They want to know how long your savings will last.....WHAT?

Both these questions for most people are impossible to answer entering into retirement.
How can we even come close to an educated guess?

Your Thoughts

[Garywt]

I generally don’t do the magazine things and we have never had a financial advisor but you are right, who knows the answer to the questions. What do you say, I plan to die in 3 years, 6 months…, no one knows. For me I was forced to retire at 56 which is earlier than planned and went on disability plus my pension. The pension is not as expected since I did not work to 65 but it is a good trade off not working.

No one knows what is next, we just hope that it all works out with the funds we have. We live off the checks and not the savings.

[retiredguy123]

For most people, I think you need to live off your pension and/or Social Security income, plus the income generated from your investment portfolio. Then, it really doesn't matter how long you live. I would not feel comfortable dipping into my investment principal, and hoping to die before I ran out of money.

[Two Bills]

For most people, I think you need to live off your pension and/or Social Security income, plus the income generated from your investment portfolio. Then, it really doesn't matter how long you live. I would not feel comfortable dipping into my investment principal, and hoping to die before I ran out of money.

I would be even more P O. if I died with the the principal intact.:icon_wink:

[davem4616]

over the years I've attended a few of these 'free meal sales seminars' and listened to various financial advisors tell me how screwed I am, and that I'm at risk if I don't hand over all my accumulated wealth to them to manage for me

We've even gone as far as to meet with a few of them afterwards to hear their 'story' of how they're going to 'protect my financial future'

Funny how it always seems to far more about them, than me

[MrFlorida]

One thing is certain, you won't care when your dead.....

[Stu from NYC]

over the years I've attended a few of these 'free meal sales seminars' and listened to various financial advisors tell me how screwed I am, and that I'm at risk if I don't hand over all my accumulated wealth to them to manage for me

We've even gone as far as to meet with a few of them afterwards to hear their 'story' of how they're going to 'protect my financial future'

Funny how it always seems to far more about them, than me

But you do get a nice free dinner.

I like to ask them for their credentials and listen to what they say.

One was a former math teacher who had this financial program that gives him the answer to your situation.

Another was a salesman who told me he took a couple of on line financial courses.

Asked him if he knew what a CFP was and he looked at me as if I had two heads.

Amazing though how many people do sign up for the second meeting one on one.

But the dinners were nice.

[toeser]

Have you notice when the subject comes up about retirement and savings in
tv, magazines or visiting your financial adviser, you're supposed to know these questions.

They want you to guess how long you're going to live ....WHAT?

They want to know how long your savings will last.....WHAT?

Both these questions for most people are impossible to answer entering into retirement.
How can we even come close to an educated guess?

Your Thoughts

I took a different approach. Maybe 25 years ago, I built a giant spreadsheet with all of my assets, all of my income sources, and all of my expenses. I incorporated the ability to make assumptions about inflation and returns on my assets, as well as tax rates.

I used all of that data and my assumptions to project when I would run out of money. Most reasonable scenarios (without selling my houses) put that number at about 105 years of age. At that point I need to be dead or face a significantly reduced standard of living.

As people are seeing today, it is best to have a generous assumption for inflation, because that is the killer of retirement plans, that and bear markets.

[Rwirish]

Actually you don’t know that for certain.

[Bay Kid]

Glad I don't know how long I will live. But you never see a Brinks truck following a Hearst.

[craigrmorrison]

Have you notice when the subject comes up about retirement and savings in
tv, magazines or visiting your financial adviser, you're supposed to know these questions.

They want you to guess how long you're going to live ....WHAT?

They want to know how long your savings will last.....WHAT?

Both these questions for most people are impossible to answer entering into retirement.
How can we even come close to an educated guess?

Your Thoughts

Yes, sometimes you must draw a line in the sand when it comes to setting a benchmark in planning for the future. Life expectancy, genetic disposition, family history and health are good indicators of mortality. However, when it comes to "guessing" how long you need retirement income, the use of a fixed indexed annuity with a guaranteed income withdrawal benefit takes the uncertainty out of the equation. This financial vehicle guarantees income to you (and your surviving spouse) for life, even if your balance goes to zero! A death benefit to non-spousal beneficiaries exists if a positive account balance is present at death.

Assuring that cost control measures for funding your health care costs are in place is one of the benefits of a Medicare Advantage or Medigap health insurance policy, supplemented by a stand-alone COMPREHENSIVE dental and vision plan.

When it comes to "how much", you should always maintain some liquidity for those months that your pension, social security, and the annuity doesn't measure up to your income needs. A realistic budget, taking into consideration the timing of your withdrawals and periodic increases in costs (inflation). Your individual history is usually the best indicator of future needs.

[MidWestIA]

Trump killed the fiduciary rule. Sales of questionable investment products soared - Los Angeles Times (https://www.latimes.com/business/la-fi-fiduciary-rule-investment-products-20190507-story.html)

[billethkid]

Nothing more needed than one's best GUESS to use in retirement duration calculations.
No mystery.
No right or wrong.

Not an advocate of any businesses that use the offer free anything to come and listen to their pitch. There is always, ALWAYS a hook. Always!

[Uphillputt330]

You’re absolutely right neither end if life nor investment life are certain, but here are some thoughts.

Your best predictors of your life span are your parents and grandparents due to your genes etc. I know my parents and grandparents all lived to approximately the same ages. The one study I read indicated that, by not including any parents or grandparents who died of accidents, war, etc., if you add 4 years to the age of your parents when they each died, and 8 years to each of your grandparents, the average is your best prediction of end of life.

As far as investment returns, in the long term, the stock market (as a whole) returns 9 or 10% annually. Fixed income investments are down in the 2-to-4%. Netting a balanced portfolio against average inflation you’re looking at 3-to-5% maybe? The old rule of thumb of spending 3-4% annually of your portfolio means that your investments will last your lifetime?

Just some thoughts. Lots of variables

[toeser]

You’re absolutely right neither end if life nor investment life are certain, but here are some thoughts.

Your best predictors of your life span are your parents and grandparents due to your genes etc. I know my parents and grandparents all lived to approximately the same ages. The one study I read indicated that, by not including any parents or grandparents who died of accidents, war, etc., if you add 4 years to the age of your parents when they each died, and 8 years to each of your grandparents, the average is your best prediction of end of life.

As far as investment returns, in the long term, the stock market (as a whole) returns 9 or 10% annually. Fixed income investments are down in the 2-to-4%. Netting a balanced portfolio against average inflation you’re looking at 3-to-5% maybe? The old rule of thumb of spending 3-4% annually of your portfolio means that your investments will last your lifetime?

Just some thoughts. Lots of variables


"the stock market (as a whole) returns 9 or 10% annually"

Starting points are huge in that calculation. We have been in probably the longest bull market in history. Valuations are roof level. I don't think we are done yet, because I have not seen what I consider to be a blow-off top. However, we are building stock market bubbles, housing bubbles, debt bubbles, and crypto-bubbles. When this mess tops, we are going to have a very bad decade follow. It's my biggest concern for retirement planning.

[manaboutown]

Inflation is now the worst in 40 years; interest rates are on the rise; the stock market now up in the clouds is likely going to take a serious hit and come back to earth in the near future. Throw in shortages of every stripe. We are in for some tough times ahead.

[Decadeofdave]

Don't use financial adviser, I have a fiduciary for an hourly fee of 8hrs for 1000 dollars. This works well, usually 8 hrs lasts 1.5 to 2 years depending on my need for calculation, information or advise.

[rsmurano]

This isn’t rocket science. You don’t need to guess when you will die. I would rather error on leaving more money in my investments when I die than to come up short.
A few things you can do:
1) use the “standard” 4% withdrawal rate from your investments which is designed for your portfolio to outlast your life
2) have a retirement report done that will calculate the probability of your portfolio outlasting your life. This report uses age 95 as your goal, so if you think you will live past 95, this report will tell you how much you will have with a 50-90% probability (varying results).

Also, you will need to make money on your investments while in retirement and in my opinion, I don’t like bonds or money market investments, they might be safer but you don’t make money. Up until a couple weeks ago, I was fully invested in great index funds, etf’s and a couple of stocks that I rode thru 2008 and 2020 downturns, and came out with huge gains (over 60% last year, over 33% average this year) and I implement the “bucket” methodology where I don’t have to sell any shares while we have a correction/recession.
For decades I never sold off investments because of a recession/downturn but this current environment we are in scares me so I sold all of my non-taxable investments and will be keeping those proceeds in cash for the next year or so. My taxable accounts I do tax harvesting to withdrawal enough each year to stay under the income caps for tax filing.

[tophcfa]

I took a different approach. Maybe 25 years ago, I built a giant spreadsheet with all of my assets, all of my income sources, and all of my expenses. I incorporated the ability to make assumptions about inflation and returns on my assets, as well as tax rates.

I used all of that data and my assumptions to project when I would run out of money. Most reasonable scenarios (without selling my houses) put that number at about 105 years of age. At that point I need to be dead or face a significantly reduced standard of living.

As people are seeing today, it is best to have a generous assumption for inflation, because that is the killer of retirement plans, that and bear markets.

Sounds like we both put together the same spreadsheet and with similar results. The only flaw with my projections is that I never assumed a totally irresponsible Federal Reserve would allow inflation to run at multiple times higher than what a responsible saver could earn on relatively safe fixed income investments. We should hopefully still outlive our savings, but with much less wiggle room. Unfortunately , the one assumption that is impossible to predict or model is health (or the associated cost). Because of that, if you can afford to retire now, then do it because you never know? I would rather do as much as possible right now while still relatively young and healthy then work longer to be sure I have enough money to pay someone to whipe the drool off my chin when I’m too old to do it myself.

[JoMar]

over the years I've attended a few of these 'free meal sales seminars' and listened to various financial advisors tell me how screwed I am, and that I'm at risk if I don't hand over all my accumulated wealth to them to manage for me

We've even gone as far as to meet with a few of them afterwards to hear their 'story' of how they're going to 'protect my financial future'

Funny how it always seems to far more about them, than me

My mother gets invited to several "free meal sales seminars" a couple time year. Her only problem with attending is she died in 2002. The invitation comes to our house so my wife and I will probably try and get a meal one of these days. Gotta love marketing.

[CoachKandSportsguy]

Models are just models, so start with 85, which is the current avg life span in the US, roughly. Then just add 5 years at a time, and see the results. Models are just models, which is how they are used. The are not definitive, but are estimates.

We did it at the moment with less than 50 % in equity starting now, and we can just get to 85. . after that. . who knows. . .

However, the 4% rule is an old heuristic, because it was designed for taxable investments, and based upon stock market returns, :blahblahblah:

The difference now is that many have retirement accounts which can have huge balances after years of savings. With retirement accounts, there is forced distributions, and different tax brackets based upon that and social security . . .

The TV house expenses for a full year are about $20K before food and vehicle, including bond and taxes and lawn service. Remove the bond and add in the rest, and its about $30K per year, which is about one of our two social security checks. The other social security check is for fun. . and then one gets forced retirement RMDS. So, the options are that the RMDs are back into the taxable investment accounts until needed. . .

So the real starting point is building a forecast of expenses, and don't forget additional health insurance, car, air conditioner, refrigerator and washer dryer replacements every 10 years. See how much is covered by social security first, and then see if you have enough IRA / 401K savings to cover the remainder. Estimate inflation at 4% per year, including social security, then 5% per year in a copy model, and keep the equity market returns at 6%, and bond interest at 1% less than inflation, and tax rates at the current rate. And don't forget some offspring gifts for grandchildren, etc, as those can be large, and uncertain. . .

Its more about when do you run out of money, and a confounding factor is that as you get older, everyone slows down, and there will be less expensive vacations, less travel, etc. and even saving money from downsizing, . . which are generally not taken into account. . . and try to stay healthy is about keeping weight down and walking regularly or other constant motion activity.

The final modeling scenario is to kill off one spouse at 75, which results in a huge decrease in social security with the same expenses, and see when you run out of money. . for that scenario, you might be surprised, most likely one of two, either run out early or never . .

oh, and one annual lottery ticker per year with the same number forever. . (dead serious) that reminds me, i have to check mine. . .

I haven't reproduced the fidelity model, but I can with time, and when available, i will offer it to anyone interested. . . just this stupid 10 hr per day weekday interruption

[jmaccallum]

"the stock market (as a whole) returns 9 or 10% annually"

Starting points are huge in that calculation. We have been in probably the longest bull market in history. Valuations are roof level. I don't think we are done yet, because I have not seen what I consider to be a blow-off top. However, we are building stock market bubbles, housing bubbles, debt bubbles, and crypto-bubbles. When this mess tops, we are going to have a very bad decade follow. It's my biggest concern for retirement planning.

I don’t think so…. Nobody is going to sell that much, nor can run that far away. Gains in the stock market (and loses, too) are point to point, and sector by sector. But one thing we do know is that historically the stock market is up. Can’t say that about many other investment vehicles. 3 - 4% on portfolio plus SS and any pension is a proven rule, no matter how long your parents or grandparents lived. :1rotfl:

[Boomer]

Note: Please ignore that winking emoticon at the beginning of this post. I bumped it accidentally and I cannot make it go away. I am not winking at you.

So, anyway. . .

There is a program each week on PBS called WealthTrack, hosted by Consuelo Mack who does interviews with big names in finance.

The most recent episode was an interview with Christine Benz who is Morningstar’s Director of Personal Finance.

You can find the interview on WealthTrack’s YouTube channel. I think it would be well worth spending the time to watch it — less than a half hour. You will pick up some good information and a lot of things to think about — so the ROI is definitely there from that standpoint.

This WealthTrack episode is titled, “You’re Retiring. Now What? Retirement Planning: A Reassessment [2022] “

Even long-retired posters might find the interview interesting. And I would say that considering her position with Morningstar, she definitely has credibility. She hits several points in a short time about things to know — as best you can — when deciding at what age to retire.

Boomer

[Laker14]

You’re absolutely right neither end if life nor investment life are certain, but here are some thoughts.

Your best predictors of your life span are your parents and grandparents due to your genes etc. I know my parents and grandparents all lived to approximately the same ages. The one study I read indicated that, by not including any parents or grandparents who died of accidents, war, etc., if you add 4 years to the age of your parents when they each died, and 8 years to each of your grandparents, the average is your best prediction of end of life.

As far as investment returns, in the long term, the stock market (as a whole) returns 9 or 10% annually. Fixed income investments are down in the 2-to-4%. Netting a balanced portfolio against average inflation you’re looking at 3-to-5% maybe? The old rule of thumb of spending 3-4% annually of your portfolio means that your investments will last your lifetime?

Just some thoughts. Lots of variables

My mother died the same year as her mother. Both of natural causes. One was 93, the other 75. My dad lived to an age 30 years older than his mom, and 20 years older than his dad. All from natural causes. My dad passed away at 88. His little brother still going at 93.
My mom, dead from cancer at 75. Her little brother still going at 93.

My mother-in-law is 93. She has buried two of her children (cancer and a heart attack), and has another daughter who not likely to outlive her.

In other words, it's a crap shoot.

[Gigi3000]

Trump killed the fiduciary rule. Sales of questionable investment products soared - Los Angeles Times (https://www.latimes.com/business/la-fi-fiduciary-rule-investment-products-20190507-story.html)

I felt this pressure when a relative died.

[CoachKandSportsguy]

"the stock market (as a whole) returns 9 or 10% annually"

Starting points are huge in that calculation. We have been in probably the longest bull market in history. Valuations are roof level. I don't think we are done yet, because I have not seen what I consider to be a blow-off top. However, we are building stock market bubbles, housing bubbles, debt bubbles, and crypto-bubbles. When this mess tops, we are going to have a very bad decade follow. It's my biggest concern for retirement planning.

correct, and here is a graph of market returns by decile of valuations, or categorization of valuation into 10 equal buckets of counts.

we are at the far right 10 on the X axis. The problem with this valuation analysis is that the market overvaluation scenario counts at this level is few and far between. So when these levels do come, the graphs shows with the negative bar that the next 5 year returns are expected to be negative.

The market has already started to correct, the number of stocks which are at 50% of their top price is huge in the speculative space. See CVNA, one of my favorite shorts. 300% returns on puts captured last week. see Freshpet, and a bunch of others. . . in the small cap space, so eventually some of this will get to the sp500 but slowly. .

The market up days to down days is heavily weighted to the up days, because the down days are bigger, and often times much bigger, as price declines come from NO buying, and price increases come from buying. . asymetrical and non linear.

good luck for the next 5 years, utilities and energy are the best long term investments, because the world needs both, and the world is slowly starting to run out of dense energy sources. . .

[nn0wheremann]

Have you notice when the subject comes up about retirement and savings in
tv, magazines or visiting your financial adviser, you're supposed to know these questions.

They want you to guess how long you're going to live ....WHAT?

They want to know how long your savings will last.....WHAT?

Both these questions for most people are impossible to answer entering into retirement.
How can we even come close to an educated guess?

Your Thoughts
Most folks wind up in a nursing home. The difference between a private pay bed and a Medicaid bed, at that stage of life, is likely none at all. Don’t sweat the future. What will be, will be.

[golfing eagles]

Glad I don't know how long I will live. But you never see a Brinks truck following a Hearst.

Would that be William Randolph or Patti????:1rotfl::1rotfl::1rotfl: