Comments on: How Much Do I Need To Retire?

By: Liz

Liz — Tue, 16 Mar 2010 20:11:32 +0000

The retirement the article recommend doesn’t work. I changed the current saving to zero, the result still showing as I don’t need any more saving for retirement.

By: –› Holiday Challenge, Retirement, and Saving

–› Holiday Challenge, Retirement, and Saving — Thu, 03 Dec 2009 14:22:24 +0000

[...] How Much Do I Need To Retire? [...]

By: Lawrence @ CRB

Lawrence @ CRB — Fri, 27 Nov 2009 15:57:51 +0000

This is a great topic for people to learn about early in life. The problem is that most people don’t take retirement seriously until it’s too late.

By: Hot Deals

Hot Deals — Fri, 27 Nov 2009 08:00:26 +0000

if my expenses were $3000 per month, I would need only $75,000 total to retire. Hmm, I think that would be committing financial seppuku. How would 75K generate 3k of income per month?

By: Todd R. Tresidder

Todd R. Tresidder — Wed, 25 Nov 2009 03:40:26 +0000

@midwest bird – Thanks for trying my retirement calculator.

It is designed for quick and easy creative scenario analysis. The idea is to be able to vary one or more inputs while leaving everything else fixed to see how it affects the results. My experience is the key in retirement planning is not tweaking the details but in varying the critical assumptions.

After reading this article you will likely notice what a huge impact the various assumptions have on the end result.

It can be a very productive approach to solving people’s retirement planning problems.

By: cathleen

cathleen — Wed, 25 Nov 2009 03:01:35 +0000

I’m counting on inheritance. No kidding

By: Sid in Missouri

Sid in Missouri — Wed, 25 Nov 2009 02:36:27 +0000

Todd, thanks for the answers. I consider my time well spent…and based upon the advice you give and the time it took you to read and write these comment vs. your standard hourly earning, I consider myself to have come out ahead in the bargain. A frugalista to the end.
Ok, I did play hardball with you, but no more hardball than I would with anyone who purports themselves to be a financial expert. I say that now conviced that you have made your case, you have ’showed me’. Either that, or you’re a really good smoke blower…it’s hard to tell unless someone is willing to open their books up to you.
I’m not asking for anymore–and per your last response it sounds like I wouldn’t get any more. You will–undoubtely–encounter many such super scrutinizers such as myself throughout your career if you haven’t already. I’ve found the only way to separate the winners from the losers in the arena of financial planners is through tough questions. When I choose someone to advise me on finances, they better be able to prove to me–through rigorous analysis and math–that they’re worth the sizable chunk of change I’m preparing to set at their feet (and the commissions I’m preparing today). They get paid whenever I take the class or buy through the brokerage account whether I win or lose. So they better frickin’ know what they’re doing. Maybe my tough questions/assumptions are not what you’re used to, but believe me it’s no more than I’d ask anyone else.
And by the way, I thought about your comment about ‘going for the jugular’ more on the way home from work. In the rough and tumble arena of personal finance, I want an advisor who goes for the jugular. I don’t want some 2nd class ‘nice guy’. Now, I also don’t want a crook or an immoral weasel, but like you observed, there are tons of ‘average, passive’ investors and I find that’s true for advisors as well. I want a high-octane advisor. Maybe that’s someone like you.
So thanks for your time and willingness to answer some questions. I hope I didn’t needlessly offend you. I still think you probably made more money as a hedge fund manager than I ever will as a computer programmer, but perhaps the shovel argument is best laid aside (for now). Cheers.

By: Financial Samurai

Financial Samurai — Wed, 25 Nov 2009 01:41:24 +0000

Almost There – Good catch. Sorry, ANNUAL income requirement X 25. So $36,000 X 25 = $900,000. Or, divid $36,000 by 4%, which is the realistic risk free rate of return.

Seppuku, I like that. May have to start a series!

By: almost there

almost there — Wed, 25 Nov 2009 01:16:25 +0000

Samurai, so if my expenses were $3000 per month, I would need only $75,000 total to retire. Hmm, I think that would be committing financial seppuku. How would 75K generate 3k of income per month?

By: Todd R. Tresidder

Todd R. Tresidder — Wed, 25 Nov 2009 01:08:58 +0000

@Sid From Missouri – I guess that is why they call Missouri the “show me” state…

I will provide one last comment reply to respect your inquiry, but I have to end this dialogue and get other things done. I hope that is reasonable.

In your last comment you quoted passive investment, buy and hold type returns from equities as your benchmark for analysis. Again, your assumption does not apply. I think that is part of what is causing the trouble here. The assumptions being made are inaccurate.

(Funny, because that was the whole point of the article… Hmmm, maybe there is something to that?)

I did not earn a “bulldozer” income as you claim and I’m not a buy and hold investor as you assumed above.

I am an active investor. The reason is because I do not believe the risk to reward ratio from passive investing is acceptable except during periods of low market valuation. At that point, “buy and hold” is the best strategy in town. Unfortunately, those conditions have not yet existed in my adult lifetime so I have had to learn how to manage risk actively to achieve my investment goals.

For example, buy and hold investment returns for the last 10 years is zippo or negative give or take a few percent. I would be broke long ago if I had to live off that.

During that same period I have had years in excess of 100% gains and other years with very small losses (but no major losses). For example, in 2008 during the asset meltdown my portfolio had roughly a 17% return. That is all investment accounts and positions put together – winners and losers combined. Hopefully that gives you the hard numbers you are looking for.

As I said earlier, my wealth was not from a fat income. It is primarily from investment skill compounding over many years combined with prudent, frugal management of personal finances.

As I said in the pior comment, that is the only way I know that you can build a portfolio that exceeds your total lifetime taxable earnings (without inheritance, trust fund, or winning the lottery).

If you really want to twist your brain around the numbers try this one on for size – all the numbers I am telling you include the fact that I have been living off my assets since 1997 supporting a middle class family of four on the west coast (expensive) with kids in private school (expensive).

Just imagine what my asset position would be if I had been earning a decent income during that time period rather than primarily living off the assets. A huge difference.

Finally, Sid, I will close with this comment. I was not born a skilled investor. I’ve had to work hard to learn these skills. I’ve read literally hundreds of books on investment strategy. So many in fact that I auctioned several hundred on Ebay a few years back just to make room for the new stuff.

I spent ten years programming and testing computerized trading and risk management systems to understand the markets.

I’m a perpetual student and have paid a price for my knowledge. You could do the same if that was your priority. Everything I learned is publicly available information. I have no investment “secrets”. The price of entry is determination and work.

This might also be why we have such differing opinions on the relevancy of this article.

I find great freedom in the points made in this article. Once I understood how the calculators worked and the invalidity of the assumptions (similar to the assumptions you are making in these comments) it allowed me the freedom to rework the whole retirement planning model.

For example, my investment returns completely change how much money I need to retire because the spread between inflation and my returns is so wide. The flip side of this same equation is it puts tremendous pressure on my investment activities to perform without error. There is no free lunch.

People reliant on passive returns face a very different picture. The spread between investment return and inflation is so small that a lot of assets are required to provide an acceptable income plus the risk is much higher because the return stream is irregular.

Anyway, there are many creative ways to play with the numbers once you fully understand how the models work and shift the assumptions. Investment returns was my approach. Others choose frugality to reduce expenses. Still others choose lifestyle businesses to bring in additional income. The choices are limited only by your creativity.

Hope that helps, and best of luck to you.