So, how much are you trying to save for retirement?

[Snave]

Disney Steve, I'm with you. 100% of what? I've looked at the numbers and we certainly live off of a lot less. By the time I retire, I won't be: saving for retirement, saving for college, paying a mortgage, etc... which drops me down to that 65-70% of pre-retirement income that we are actually usimg today. I guess I am still shooting for the 100% + number though, b/c it would be nice to use that other 30-35% on some things that we have never done. Who knows, maybe I won't be as frugal knowing that the money is there!

[Snave]

There is a Question/Answer on Money.com today under the Personl Finance section that asked about the 2010 Roth conversion from a regular IRA to Roth. I know this came up in a couple threads the last few days and can't find which ones. I figure posting it on the "how much are you saving" seems appropriate. It talks about the 2010 conversion and how you actually have 3 years (through 2012) to spread the tax hit. So, for those of you that seem to get a refund every year and haven't changed your deductions, this will really be great for you. You'll never feel it.

[jIM_Ohio]

My thought is many of you here will "oversave" if you follow the plans you lay out here for an amount needed prior to retirement. It is easier than that.

If you are older than 45 yo, and have 25X current expenses saved, you can pull the plug and retire if you want to. Money will last you between 40 and 60 years (based on past market performance). By the time you get to 33X expenses saved, then money will probably last your whole life without ever touching principal.

If you don't have 25X current expenses saved, you save until your nest egg is equal to 25X current expenses. If you are more conservative, 33X expenses will work. 25X or 33X invested at 60% stocks and 40% bonds.

Again this is theory based on the trinity study (which back tested withdraw rates for retirement). 25X number has 90%+ success rates. 33X number has 100% type success rates.

There are people which retire on less than 25X and do just fine, the issue is how they control expenses during significant market downturns like 2000-2002.

Base everything on the starting withdraw rate (4% of assets=25X expenses saved; 3.33%=33X expenses saved) and the amount will be controlled by your expenses. When you have the amount saved which is a multiple of current expenses, you can retire.

Because the 60-40 portfolio will run out of money in 40-60 years, if you are younger than 45, I suggest planning for a lower starting withdraw rate (like 3.5%) to allow portfolio to last longer.

So you need to know your current expenses. For some people, knowing their take home is good enough. Some people might change their expenses (travel, paid off mortgage). As long as you know your expenses, then multiply it by 25X. You can even use a slider scale to suggest expenses ages 45-70 are one thing (high travel) and expenses 70-90 are much lower (no travel). As a few posters have pointed out, they have little desire to travel. From a planning perspective this makes their task easier than mine, as their expenses won't change much.

[disneysteve]

expenses 70-90 are much lower (no travel).

Who says we won't be travelling after age 70? I know many retirees over 70 who still travel regularly. My 77-year-old mom took a 9-day Caribbean cruise just 2 months ago, and if you told her she could take another one today, she'd have her bags packed in no time.

We're nowhere near that 25 times expenses number, nor will we be for probably 18-20 years (which is why I'm shooting to retire at 62) so I guess it is all academic at this point.

[Scanner]

DisneySteve,

You'll be too busy with scheduled visits to your chiropractor and family doctor and dentist to take 9 day cruises at 77

Seriously, I think we have all developed sort of a virtual "friendship" among us here.

I"m going to tell you something as a friend - pick 3 top places you want to visit and visit them before you are 50 with your wife, DisneySteve.

You have a six-figure sum saved and you live frugally - you deserve it.

Anything else at 77 is just "cake."

To me, your retirement "fund" is just a cushion, and only a cushion - it's not some "state of existence" that you'll pass into when 65 and the SSI check arrives.

[LivingAlmostLarge]

My dad still travels at 78 and my grandma is visiting me this summer from hawaii is 80. Um, I don't think travelling until 85 is unreasonable. Get on plane, get on boat (cruise), see sights and wowsa.

[jIM_Ohio]

Who says we won't be travelling after age 70? I know many retirees over 70 who still travel regularly. My 77-year-old mom took a 9-day Caribbean cruise just 2 months ago, and if you told her she could take another one today, she'd have her bags packed in no time.

We're nowhere near that 25 times expenses number, nor will we be for probably 18-20 years (which is why I'm shooting to retire at 62) so I guess it is all academic at this point.

I was listing the range as an example, not a rule (meaning adjust expenses downward after a certain age). I agree at age 70 I still want to be skiing in winter and white water rafting in the summer.

And as you look at expenses, you see you are not near the 25X mark. So you keep plugging away. Neither you nor I could predict the 25X "amount" in 18-20 years, so you (and I) keep plugging away. But a good 3 year bull market in about 10 years might change our minds. (the kind which double our money in 3 years).

We can only hope.

edit: It should also be noted this is where the compounding curve kicks in. I have 2.5X expenses set aside now in 401ks/IRAs. 2 years ago it was around 1X expenses. Took me 8 years to get 1X expenses, 2 more years to get 2X, then last year to get 2.5X. It is within reason that 1X expenses or more is added each year even though my contributions are only .18X expenses (18%). Compounding does the work with early contributions.

[disneysteve]

I"m going to tell you something as a friend - pick 3 top places you want to visit and visit them before you are 50 with your wife, DisneySteve.

You have a six-figure sum saved and you live frugally - you deserve it.

Thanks. Don't think, though, that we are waiting for "someday" to do our traveling. We travel now and enjoy it immensely. Just look at my daughter's track record. She is 12. She has been to Disney World 14 times. She has visited 16 states. She has been on 3 cruises and visited several countries (Canada, Mexico, Bahamas, Virgin Islands, Puerto Rico, Dominican Republic, etc.) so we aren't sitting around saving our pennies hoping to see the world when we retire, though we do hope to see more of it when we've got more free time.

[Broken Arrow]

All I want to know is if Steve is adopting....

[Snave]

Get in line Broken Arrow!

[LivingAlmostLarge]

Me first! Although I shouldn't complain, I think I travelled as much as his daughter as a kid.

[disneysteve]

Sorry, folks. Our family size is staying at 3. No adoptions are available. Besides, if we had more "kids" we couldn't afford to do all that stuff.

[maat55]

I'll do the chores, let me in.

[Scanner]

I could be the crazy uncle who lives above the garage who buries silver bullion in your backyard.

[scfr]

The "Encore" (focuses on retirement) section of today's Wall Street Journal mentioned an interesting article that addresses withdrawal rates in retirement. It was written by the man whose research, according to the WSJ "gave rise to the 4% rule."

Woth taking a look, IMHO:

FPA Journal - Baking a Withdrawal Plan 'Layer Cake' for Your Retirement Clients