tag:blogger.com,1999:blog-70730667281124021912024-03-10T22:23:25.401-05:00ObservationsA personal finance blog that provides historical perspective, emphasizes strategic planning, and uses graphs & spreadsheets to show how financial things work.Unknownnoreply@blogger.comBlogger199125tag:blogger.com,1999:blog-7073066728112402191.post-88589939100135456802020-12-12T20:39:00.005-06:002020-12-17T16:37:03.233-06:00How Much Money Will You Need to Retire?<p style="text-align: left;">This post uses the 4% withdrawal approach to estimate the savings that you will
need in order to supplement your Social Security retirement income; the amount needed is expressed as a simple multiple of your salary. In doing so,
it assumes that you will retire with full Social Security benefits. Just find
your salary on the horizontal/”x” axis, and then look up the savings required on
the vertical/”y” axis. For example, at a salary of $50,000/year you would need a bit more than 8 times your salary in order to generate enough income to supplement your
Social Security income during a 30-year retirement. </p><p style="text-align: left;">This post paints the big picture, using some simplifying assumptions. A companion post, my <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">interactive retirement calculator</a>, allows you to tailor the assumptions to arrive at a more individualized estimate of the retirement savings needed (for example, if you do not qualify for Social Security). That post will also help you calculate the yearly savings needed to accumulate the desired amount by your retirement date. (For more on this approach and my assumptions, see later in the post.). </p><h3 style="text-align: left;">How Much Will You Need to Retire?</h3>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiJCA9XAo7ohGuIWLnfI5Tcvc3uu5UyZHVXYfvA_WuIOwmGdXkfbOUQ9XFoPT7dmiGh2FF-iMK0bBdwGw74b84XMiTGtI1nuay6gtyh7MyQBRRiCm3YWSRkPAjpl_i4JsBa36VhHW75QCB/s960/How+Much+Money+Do+I+Need+to+Retire.jpg" style="display: block; padding: 1em 0px; text-align: center;"><img alt="Retirement savings needed on retirement date with full Social Security benefits" border="0" data-original-height="698" data-original-width="960" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiJCA9XAo7ohGuIWLnfI5Tcvc3uu5UyZHVXYfvA_WuIOwmGdXkfbOUQ9XFoPT7dmiGh2FF-iMK0bBdwGw74b84XMiTGtI1nuay6gtyh7MyQBRRiCm3YWSRkPAjpl_i4JsBa36VhHW75QCB/s320/How+Much+Money+Do+I+Need+to+Retire.jpg" title="How Much Money Will You Need to Retire?" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">How Much Money Will You Need to Retire?</span></b></td></tr>
</tbody></table>
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<h3 style="text-align: left;">With an Average Salary, You'll Need Over 8 Times Your Ending Salary to Retire Comfortably! </h3><p style="text-align: left;">If you follow the 4% withdrawal guidelines, it's easy to estimate how much money you will need when you retire. Basically, you will need (100%/4%=) 25 times the amount you expect to withdraw from your savings in your first year of retirement. To facilitate the computation, I have assumed that your total yearly spending in retirement will equal 75% of your ending salary – and that, <i>adjusted for inflation</i>, your ending salary is the same as your current salary. </p><p style="text-align: left;">However, as you can see from the graph above (click to expand), at $62,500 -- around the average salary in 2020 -- the target is only about 8.5 times your salary. Why isn’t it 25 times salary? For two reasons: a) we are only replacing 75% of the salary, and b) because of the impact of Social Security benefits. </p><h3 style="text-align: left;"> The Effect of Social Security: The Larger Your Salary, the Higher the Multiple You Will Need to Retire </h3><p style="text-align: left;">Using the 4% withdrawal strategy, the savings target for those who will not receive Social Security is (100%/4%=) 25 times their expenses. Assuming their expenses are 75% of their salary, that target is therefore (25 x 75%=) 18.75 times their salary -- regardless of salary level. The reason the line of the graph is not at 18.75 is because of Social Security. If you will receive Social Security, you will need less than 18.75 times your salary to fund your retirement. </p><p style="text-align: left;">In the graph notice how steep this curve is at the lower salaries, and how flat it is at higher salaries. The <a href="https://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">percentage of your salary that Social Security will replace</a> decreases as your salary increases. Whereas Social Security will replace 90% of the salary of the lowest income workers, Social Security will replace only 14% of salary for a person making $250,000, and 7% for those earning $500,000. In fact, the more millions you earn, the closer the percentage gets to zero; we should all have such problems.... </p><p style="text-align: left;">The bottom line is that as your salary increases, the amount that will not be replaced by Social Security increases; therefore, the retirement spending that must be funded by your retirement savings increases -- and, the salary multiple on the graph increases. </p><h3 style="text-align: left;">Some Key Assumptions </h3><div style="text-align: left;">The 4% withdrawal approach was developed assuming that you will spend about 30 years in retirement, and that your retirement savings will be in a diversified (stock and bond) portfolio.
To simplify the calculations, I've further assumed that:
<ul>
<li>Social Security benefits and your salary will both keep pace with inflation</li><li>You will retire at the Social Security full retirement age, receive full retirement payments, and have expenses of 75% of your current annual income (inflation-adjusted) in your first year of retirement
</li><li>You will follow the "4% Withdrawal" guidelines, starting by withdrawing 4% of your assets your first year in retirement and increasing with inflation each year thereafter.
</li><li>Your retirement portfolio will earn a real (i.e., after inflation) return of 5%/year
</li></ul><p style="text-align: left;">
Be aware that, because I have assumed zero inflation, if the chart says that you will need 8 times your salary and that comes out to $400,000 that is $400,000 in <i>current dollars</i>. If your retirement date is, say, 25 years from now and inflation actually averages 3%/year, by then your salary will likely be around $100,000, and 8 times your salary will be $800,000 – which is equivalent to $400,000 in today’s dollars. </p>
The <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">interactive retirement calculator</a> will let you change those assumptions to better reflect your specific circumstances if needed. It will also estimate the annual savings needed to achieve the desired savings goal.
For a more detailed discussion of the 4% withdrawal approach and my assumptions, see <a href="https://observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html" target="_blank">Assumptions for the 4% Withdrawal Retirement Graphs</a>. </div><div><p>
</p><h3>Related Posts</h3>
<div style="font-weight: normal;">
<span style="font-family: inherit;"><a href="https://www.ssa.gov/estimator/" target="_blank">Social Security Income Estimator</a> : the official site. For an approximation, <a href="https://www.calcxml.com/do/ret04" target="_blank">see this site</a>, or <a href="https://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">my graph</a>.</span></div>
<div style="font-weight: normal;">
<span style="font-family: inherit;"><a href="https://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html" target="_blank">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="https://en.wikipedia.org/wiki/Trinity_study" target="_blank">Wikipedia</a>.</span></div><div style="font-weight: normal;"><span style="font-family: inherit;"><a href="https://observationsandnotes.blogspot.com/2013/04/what-will-1-be-worth-in-future.html" target="_blank">Inflation Calculator</a> if you want to translate the required savings from current dollars to the equivalent amount on your retirement date</span></div>
<div style="font-weight: normal;">
<span style="font-family: inherit;"><a href="https://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">How Long Will You Live?</a> A look at one of the most vexing issues in retirement planning.</span></div>
<div style="font-weight: normal;">
<span style="font-family: inherit;"><a href="https://observationsandnotes.blogspot.com/2009/01/do-you-need-personal-strategic-plan.html" target="_blank">Do You Need a Personal Strategic Plan?</a>: a process for establishing life priorities</span></div>
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<b>For lists of other posts, by category, see the drop-down list (mobile viewers) or tabs (computer viewers) just below the blog header at the top of the page. There are additional links in the sidebar if your device supports sidebars.</b><br />
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Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-19542573629050544692020-11-28T18:55:00.029-06:002020-12-15T19:53:27.165-06:00Back-of-the-Envelope Retirement Savings Calculator<div>This is my <i>really simple</i> "back-of-the-envelope" retirement calculator. It reduces retirement planning calculations to the bare minimum.</div>
<br />Accounting for all of the variables in retirement planning requires a complicated model. In this post, I've made some simplifying assumptions. I've tried to develop a "bare bones" model so that we can focus better on the big picture, and still get results that are useful.<br />
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<h3>
The Observations Back-of-the-Envelope Retirement Savings Calculator</h3>
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<div>
<iframe frameborder="0" height="575" scrolling="no" src="https://onedrive.live.com/embed?resid=9268A3CEF4BAB4FE%21142&authkey=%21AIHpL98kVGBdybg&em=2&wdAllowInteractivity=False&AllowTyping=True&Item='BOE%20Retire%20Calc'!B2%3AD27&wdInConfigurator=True" width="475"></iframe></div>
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<i>Notes: Enter data only in the peach cells. You can use the arrows and sliders on the side and bottom of the calculator to scroll. On some phones you may need to double click to enter data; it may also be helpful to switch to landscape mode. On some computers, you may have to enter some fields more than once for it to "take." </i><div><i>Please leave a comment if you are having problems.</i><br />
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<h3>
How Much Money Will You Need to Retire?</h3>
The key simplifying assumption was to estimate the savings you will need at retirement using<br />
<a name='more'></a>a simple multiple of your expected expenses in your first year of retirement. This eliminates many of the calculations in traditional retirement models. This approach is consistent with the so-called 4% withdrawal rate approach.<br />
<br />
<h3>
What is a 4% Withdrawal Rate?</h3>
That simply means that in your first year of retirement you withdraw 4% (+/-) of your retirement savings. The assumption is that in subsequent years you will increase your withdrawals to keep pace with inflation. <br />
<br />If a large portion of your retirement income will be guaranteed, a higher than 4% withdrawal rate may be sustainable. For example, at a 5% withdrawal rate, a $1,000,000 portfolio would support a first-year withdrawal of ($1,000,000 x 5%=) $50,000. Conversely, at a 5% withdrawal rate you would need retirement savings of (100% / 5%=) 20 times the initial withdrawal amount. So, in order to support a first-year withdrawal of $50,000, you would need retirement savings of ($50,000 x 20=) $1,000,000.</div><div><br /></div><div><br /></div><div>On the other hand, in an unfavorable investment environment a lower than 4% withdrawal rate may be more judicious. For example, given the extraordinarily low current interest rates in the last half of 2020, and a stock market at above average valuations, some experts are suggesting that a 3% withdrawal rate may be more appropriate. <br />
<br />For more on the 3-5% withdrawal approach, see the links at the end of the post.<br />
<br />
<h3>
How the Model Works</h3>
In the graphic above, the example is for a 25 year old, Pat, making $100,000/year who plans to retire on his 65th birthday. Pat estimates that, <i>in today's dollars</i>, he will spend $70,000 in his first year of retirement (including income taxes). Using <a href="https://www.calcxml.com/do/ret04" target="_blank">this site</a> and given his current $100,000 salary, Pat estimates that he will receive about $30,000 in Social Security and pension income his first year of retirement. That leaves ($70,000 - $30,000=) $40,000/year that his investments need to cover.<br />
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Assuming a 4% withdrawal rate, Pat will need a (25 times $40,000=) $1,000,000 investment portfolio when he retires. Here, we assume Pat has no current retirement savings, so he'll need to accumulate all of it between now and retirement. Note that if Pat already had $20,000 in savings, he'd only need about $904,000, not $980,000, from his new savings since the $20,000 would be expected to grow to about $96,000 by the time he retires. <br />
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<h3>
What Percent of His Salary Does Pat Need To Save Each Year?</h3>
The next step is to calculate how much Pat needs to save each year, in today's dollars. To do so, we need an estimate of what his pre-retirement annual return on investment will be. It's easier if we remove inflation from the equation. Pat expects to earn 7%/year on his total portfolio, and expects inflation to average 3%/year. Thus, he entered (7% - 3%=) 4% as his "real," after-inflation return. Given that, Pat needs to invest $10,500/year in today's dollars. <br />
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The final step is just to calculate how much Pat needs to save and invest as a percentage of his salary. Since the dollar value will change every year, but the percentage does not, it is best to focus on the percentage. $10,500 / $100,000= 10.5%. So, if Pat invests 10.5% of his salary each year, and his investments earn 4%/year after inflation<b>, <a href="https://observationsandnotes.blogspot.com/2011/10/expenses-impact-on-investment-returns.html" target="_blank">expenses and taxes</a></b>, we would expect him to accumulate the needed $1,000,000.</div><div><br /></div><div><br /></div><div>
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<h3>
Summary</h3>
This very simple sequence of calculations shows that if Pat invests 10.5% of his salary each year and earns 4%/year, after inflation, expenses and taxes, by age 65 we expect him to have accumulated about $1,000,000 in today's dollar. According to the 4% withdrawal rate theory, this amount, invested in a diversified portfolio, has a good chance of supporting $40,000/year in withdrawals during a typical 30-year retirement. Combined with his $30,000/year from Social Security and his pension, this will yield the desired $70,000/year in pre-tax income in today's dollars.<br />
<br />
This is a "back-of-the-envelope" approach. It's probably better suited for young investors just getting started. When you're under, say, 45 there are so many unknowns that the critical thing is just to get in the ballpark - to just get started! If you're over 55 or so, consider supplementing it with additional, more detailed, analysis.<br />
<br />
<br />
<b>Notes:</b><br />
Retirement savings are assumed to be invested in a "diversified portfolio" (say, 20-80% equities), and to grow tax-free in retirement accounts (e.g., in an IRA or 401k).<br />
All dollar amounts are in today's dollars. <br />
The 4% rule assumes all of your retirement income is coming from investments. The larger the percentage of your expenses that will be covered by <i>guaranteed</i> income such as Social Security, the better the chances that a higher initial withdrawal rate will be successful.<br />
The 4% rule is designed to support about 30 years in retirement. If you are planning a shorter retirement (or, have already retired), you may be able to increase your withdrawal rate. If you're planning a longer retirement you'll need to <i>reduce</i> your withdrawal rate.<br />
The model assumes you begin collecting your pension and social security as soon as you retire.<br />
<br />
<br />
<h3>
Related Articles & Posts</h3><div><a href="https://observationsandnotes.blogspot.com/2020/12/how-much-money-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need to Retire?</a> A look at the "big picture," using some typical/strawman assumptions.</div>
<a href="http://content.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html" target="_blank">Start Retirement with a 4% Withdrawal Rate</a>: an intro to the 4% withdrawal concept, from Time magazine. For a more detailed discussion, see <a href="https://en.wikipedia.org/wiki/Trinity_study" target="_blank">Wikipedia</a> and, for even more, see<br />
<a href="https://www.schwab.com/resource-center/insights/content/beyond-4-rule-how-much-can-you-safely-spend-retirement#:~:text=One%20frequently%20used%20rule%20of,withdraw%20to%20account%20for%20inflation." target="_blank">Beyond the 4% Rule: How Much Can You Spend in Retirement?</a> </div><div><a href="https://observationsandnotes.blogspot.com/2013/04/what-will-1-be-worth-in-future.html" target="_blank">Inflation Calculator</a> if you want to translate the required savings from today's dollars to the equivalent amount on your planned retirement date</div><div><a href="https://www.ssa.gov/estimator/" target="_blank">Social Security Income Estimator</a>: the official site. For an approximation, <a href="https://www.calcxml.com/do/ret04" target="_blank">see this site</a>, or <a href="https://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">my graph</a>.<br />Many versions of Quicken include a basic retirement calculator (see Planning - Financial Calculators in the Quicken menus).</div><div><a href="https://observationsandnotes.blogspot.com/2009/08/importance-of-starting-to-invest-early.html" target="_blank">Start Investing for Retirement When You're Young</a>: Graphs showing the surprising impact of starting at age 25 vs 35 or 45.<br /><a href="https://observationsandnotes.blogspot.com/2010/10/20-year-stock-market-returns.html" target="_blank">What Will $100,000 be Worth Invested in the Stock Market for 20 Years?</a>: a look at the variability of market returns (a key reason withdrawal rates must be kept low).<br /><div><a href="https://observationsandnotes.blogspot.com/2012/08/lifetime-immediate-income-annuity.html" target="_blank">Build Your Own Pension Using Immediate Annuities</a>: A way to mute the impact of market variability.<br /><a href="https://observationsandnotes.blogspot.com/2009/01/do-you-need-personal-strategic-plan.html" target="_blank">Do You Need a Personal Strategic Plan?</a> a process for setting goals and establish priorities. </div></div><div><br /></div><div><br /></div><div>
<b>Additional easy-to-use graphs</b> based on these concepts:<br />The graphs are helpful for giving a "big picture" perspective and understanding trends. Note that graphs below may be slightly out-of-date if Social Security benefits have changed significantly since the graphs were created) </div><div><a href="https://observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html" target="_blank">Assumptions for the "4% Withdrawal Rate" Retirement Savings Graphs</a> <ul>
<li><a href="https://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: for typical worker</li>
<li><a href="https://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should Higher Income Earners Save For Retirement?</a></li>
<li><a href="https://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html" target="_blank">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: w/o social security</li>
<li><a href="https://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">How Much Should You Have in Retirement Savings - Average Incomes</a></li>
<li><a href="https://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">How Much Should High Income Earners Have in Retirement Savings?</a></li>
<li><a href="https://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should You Have in Retirement Savings? by age</a>, w/o social security</li>
</ul>
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</div></div>Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-26175435444809777832020-08-26T15:36:00.002-05:002020-08-30T19:18:38.528-05:00 Do All Black Lives Matter? <p class="MsoNormal">Too many people are now suggesting that while there are huge
outcries within the Black community when a Black man or woman is killed by a white
person – especially a policeman – the community seems not to care about Black
on Black murder victims. “Why is that?”, they ask. Shouldn’t <i>all</i> Black
lives matter? Spoiler alert; they do.<o:p></o:p></p><p class="MsoNormal">One reason some crimes result in smaller outcries within the
Black community is because <i>all</i> communities find some homicides more
outrageous than others – it’s human nature. However, being “less outraged” by a
particular person’s death does not mean that you think that person’s life is
less valuable – that his or her life matters less. The extent of one’s reaction
is usually more a reflection on the how and why of the death than on the “worth”
of the deceased. So, for example, we are saddened when a baby drowns; we are
outraged if it drowns at the hands of its own mother. Clearly neither baby’s
life is less valuable than the other; it’s the same baby.<o:p></o:p></p><h2 style="text-align: left;">Some
factors affecting the decibel level</h2><h1><o:p></o:p></h1><p class="MsoNormal">There are many reasons why some homicides are mourned or
protested more loudly, or broadly, than others– for example…. <o:p></o:p></p><a name='more'></a><p class="MsoNormal">Innocent victims receive more sympathy than those who are
perceived, rightly or wrongly, as being somehow complicit in their own death; their
deaths are likely to elicit more protests.
During a gang conflict, the death of an innocent bystander will generate
more sympathy than that accorded a participant.<o:p></o:p></p><p class="MsoNormal">All things being equal, the closer our ties to the deceased,
and the easier it is for us to imagine ourselves “in his shoes,” the more the
tragedy will resonate. People who do not live in the inner-city are more likely
to be galvanized into action by police misconduct than by gang homicides.<o:p></o:p></p><p class="MsoNormal">Some of the most abhorrent homicides are those where the
perpetrator seems completely unremorseful, or where the crime is particularly violent
or inhumane. Or, homicides where, like the baby in the opening section of this
post, the victims are murdered by someone who is entrusted with their care – by
someone who is supposed to protect them! <o:p></o:p></p><p class="MsoNormal">In short, It would be unreasonable to expect the Black community
to react to events like the George Floyd homicide, which checks pretty much all
of the above boxes, the same way it reacts to a “routine” shooting.<o:p></o:p></p><h2 style="text-align: left;">Some factors affecting perception</h2><h1><o:p></o:p></h1><p class="MsoNormal">The broader community’s perception of how the Black
community reacts to Black on Black homicides is also significantly impacted by
the media. Most homicides within the Black community receive little or no
mainstream media coverage. The difference in the level of coverage accorded one
of those “routine” homicides and one that the media deems “newsworthy” is huge.
The difference in coverage likely magnifies the apparent difference in
sentiment within the Black community. This misperception is further compounded
by the fact that incidents that the media does publicize are more likely to attract
white protestors – and thereby, in a kind of virtuous news cycle, become even
more newsworthy and more publicized. <o:p></o:p></p><h2 style="text-align: left;">But,
is that really the issue?</h2><h1><o:p></o:p></h1><p class="MsoNormal">Honestly, in my view, this “What about Black on Black
murders” line of questioning, like its sister retort “All Lives Matter,” is
primarily meant to deflect and distract. Rather than emanating from a sincere
concern about the Black on Black crime victims, it is meant to change the
subject away from racial inequity and police misconduct. It’s an attempt to discredit the Black Lives Matter movement as
being racist, and to delegitimize the complaints about Blacks being
killed by the police. <o:p></o:p></p><p class="MsoNormal">Perhaps one could argue that the “What about Black on Black
crime” response is not so much suggesting that Blacks seem to overvalue <i>individual</i>
lives killed by policemen, as much as it is suggesting that Blacks are overly
concerned with the relatively small number of such deaths <i>in total</i>
compared to much larger number of Black on Black homicides. I’m not convinced. When
white people are up in arms after Newtown or Parkland, people don’t ask why
white people seem not to care about the many more white lives lost to suicides
- or opioid overdoses. It’s not the way concerned human beings react. </p><p class="MsoNormal">And, as Troy Smith says in a recent
article on <a href="https://www.msn.com/en-us/news/us/stop-using-black-on-black-crime-to-deflect-away-from-police-brutality/ar-BB15sMQi">Cleveland.Com</a> “<span style="background: white; color: #333333;">When
someone commits an act of terrorism against in the United States, which
rightfully leads to anger and sadness, no one asks, ‘Well what about how many
Americans kill other Americans each year?’ Because that would be crazy, now
wouldn’t it?”<o:p></o:p></span></p><h2 style="text-align: left;">Related Articles</h2><h1><o:p></o:p></h1><p class="MsoNormal"><a href="https://www.washingtonpost.com/nation/2020/07/08/gun-deaths-affect-more-white-men-than-black-men/">What
the “Black-on-Black crime” fallacy misses about race and gun deaths</a>, from
the Washington Post.<br /><a href="https://www.nytimes.com/2020/07/04/opinion/soledad-obrien-racism-journalism.html">Soledad
O’Brien: A Me Too Moment for Journalists of Color</a>, from the New York Times.
More discussion on the role of the media.<br /><a href="https://blog.tomevslin.com/2020/07/all-black-lives-should-matter.html" target="_blank">ALL Black Lives Should Matter</a> - One of the more rational of the articles, posts and talking heads that motivated me to write this post.<br /><a href="https://www.milwaukeeindependent.com/featured/stop-accusing-black-lives-matter-movement-ignoring-called-black-black-crime/">Stop
Accusing the Black Lives Matter Movement of Ignoring So-called “Black on Black”
Crime</a>, from the Milwaukee Independent. Some of the statistics may surprise
you. <br /><a href="https://www.vox.com/policy-and-politics/2015/11/25/9800940/fox-news-chicago-black-on-black-crime">Vox
article on Black on Black crime</a> – especially re simultaneous over and under-policing.<o:p></o:p></p><div style="text-align: left;"><p class="MsoPlainText"><o:p></o:p></p></div>
<p style="text-align: left;"><b>For lists of other posts, by category, see the drop-down list (mobile viewers) or tabs (computer viewers) just below the blog header at the top of the page. There are additional links in the sidebar if your device supports sidebars.</b></p>
Copyright © 2020 Last modified: 8/30/20<h3>Share This Article</h3>
To share via Facebook, Twitter, Pinterest, etc., see below except on mobile devices (where you share in the normal way).
<p></p><p></p>Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-55091603411626093982020-07-29T14:00:00.002-05:002020-10-19T16:30:21.328-05:00I’M BACK!<p class="MsoNormal">As some of you may have noticed, I have been on an extended
vacation from blogging. During that time, I had fun doing all kinds of things
that it is no longer safe to do…. So, what is one to do when just going outside
can put your life at risk? Stay inside and blog, of course! The current plan is
to tidy up some of the existing posts, and broaden the topic areas covered in
future posts; that could change.<o:p></o:p></p><h1>Clean-Up<o:p></o:p></h1><p class="MsoNormal">Over the next month or so I plan to tidy things up a bit. I
hope to fix the broken links to web pages of years past. In addition, Google, Blogger,
and others have made some technical changes that have negatively impacted the
blog. I’ll try to clean that up too. <o:p></o:p></p><p class="MsoNormal">Some other posts are technically fine, but the data needs to
be updated. A prime example is the calculator that computes inflation from any year
in the past (beginning in 1900) to “now.” It uses the CPI-U at the beginning of
each year to do the computation. I need to add recent years. Unfortunately, I
suspect some legacy posts may prove too difficult to bring up-to-date to be worth
the effort that it would take to do so. We’ll have to see. <o:p></o:p></p><p class="MsoNormal">{October update: This is waaay more work than I ever imagined. It will take at least six to twelve months to get everything updated! If you want to be kept up-to-date on new and updated posts, follow me on Twitter at <span style="background-color: white; color: #657786; font-family: system-ui, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Ubuntu, "Helvetica Neue", sans-serif; font-size: 15px; white-space: nowrap;"><b>@Obsandnotes</b> }</span> </p><h1>Broader Focus<o:p></o:p></h1><p class="MsoNormal">Finally, I intend to begin posting about topics outside the
realm of finance; I’ll include things which are more related to current events.
In the past, I have almost always attempted to be as objective as possible in
my posts and avoid expressing my opinion. In future posts, not so much.<o:p></o:p></p><p>
</p><p class="MsoNormal">As always, thanks for reading!<o:p></o:p></p><p><br /></p><p>
Copyright © 2020 Last modified: 10/19/2020</p>Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-16593965094871097692013-04-18T14:00:00.009-05:002020-09-23T18:36:39.835-05:00What Will $1 be Worth in the Future? (calculator)<br />
<b>This calculator:</b><br />
<br />
<ul>
<li><b>Converts current prices to equivalent prices any number of years in the future</b></li>
<li><b>Compares purchasing power today to purchasing power in the future</b></li>
</ul>
<div>
Enter an amount, how far into the future you want to compute, and the inflation rate you want to assume. Below we see that at 5% inflation for 20 years, an item that costs $100,000 now will cost over $265,000. That means that 20 years from now the purchasing power of $100,000 will have been reduced by over 62%; $100,000 then will only be able to buy what we can buy now for about $37,000. Be sure to enter inflation percentages as decimal amounts -- that is, 0.05 for 5%, 0.025 for 2.5%, etc. </div>
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<div>
<br /></div>
<div>
<iframe frameborder="0" height="450" scrolling="no" src="https://onedrive.live.com/embed?resid=9268A3CEF4BAB4FE%21133&authkey=%21AEs-Iw2C9odKQ2g&em=2&wdAllowInteractivity=False&AllowTyping=True&ActiveCell='Future%20Inflation%20Calculator'!C9&Item='Future%20Inflation%20Calculator'!B2%3AH18&wdInConfigurator=True" width="445"></iframe></div>
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</h3><br />
Notes: Enter data <i><b>only</b></i> in the tan cells. On some phones you may need to double click to enter data. On some computers, you may have to enter some fields more than once for it to "take." Please leave a comment if you are having problems.<br />
<h3>
<a name='more'></a></h3>
<br /><br />
<h3>
Related Posts</h3>
<div>
<a href="https://observationsandnotes.blogspot.com/2013/01/what-will-100-be-worth-in-20xx-future.html" target="_blank">What Will $100 be Worth in 10-20 Years?</a> Graphical version. Will give you "big picture" perspective.<br />
<a href="https://observationsandnotes.blogspot.com/2013/02/help.html" target="_blank">Inflation Calculator: Convert Dollars from 19xx to Now</a> Similar calculator, but converts from past to current.</div><div><br /></div>
<b>For lists of other posts, by category, see the drop down list (mobile viewers) or tabs (computer viewers) just below the blog header at the top of the page. There are additional links in the sidebar if your device supports sidebars.</b><br />
Copyright © 2013 Last modified: 7/30/2020<br />
<div>
<br /></div>
<div>
Appendix: (below is just an image, not a calculator. The calculator is above.)</div>
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioBmrzCI-6VPnJotcHdi4xIzk7bbtYj8js_g8YXH_nelSc_FN8ARWCwJ5iWOF3M7yOhPslMP33zDZPgsfUxmBizA2KEx7q-pshYv1sYfXUOQideWSbFaO928qRELFthCCyGmlzisJt5256/s1600/Future+Inflation+Calculator.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="What will $1 be worth in the future inflation calculator" border="0" height="294" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioBmrzCI-6VPnJotcHdi4xIzk7bbtYj8js_g8YXH_nelSc_FN8ARWCwJ5iWOF3M7yOhPslMP33zDZPgsfUxmBizA2KEx7q-pshYv1sYfXUOQideWSbFaO928qRELFthCCyGmlzisJt5256/s320/Future+Inflation+Calculator.jpg" title="" width="320" /></a></div>
<div>
<br />
<br />
<h3>Share This Article</h3>To share via Facebook, Twitter, Pinterest, etc., see below except on mobile devices (where you share in the normal way). </div>
Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-29683933513884959332013-03-09T14:00:00.006-06:002020-09-23T19:17:26.510-05:00How Much Will Your Bond/CD be Worth in N Years? (calculator)<h3>
This Calculator Computes the Future Value of Your Bond/CD for Any Amount, Number of Years, and Interest Rate</h3>
<br />
Enter data only in the colored cells below. <br />
Note: normal/annual compounding is once a year; semi-annual is 2 times/year; quarterly is 4 times/yr; etc. Be sure to enter interest rates as decimal amounts - 0.03 for 3%, 0.025 for 2.5%, etc.<br />
<br />
<iframe frameborder="0" height="350" scrolling="no" src="https://skydrive.live.com/embed?cid=9268A3CEF4BAB4FE&resid=9268A3CEF4BAB4FE%21131&authkey=ALTuxEcegTvs_TI&em=2&wdAllowInteractivity=True&AllowTyping=True&ActiveCell='Sheet1'!F9&Item='Sheet1'!D5%3AH17" width="423"></iframe><br />
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<br />
<a name='more'></a><br />
<br />
<h3>
Related Posts</h3>
<a href="http://www.observationsandnotes.blogspot.com/2013/02/help.html" target="_blank">Convert Dollars From One Year to Equivalent Dollars in Another Year</a>: Similar calculator to this one.<br />
<a href="http://observationsandnotes.blogspot.com/2011/04/what-will-10000-be-worth-in-10-years.html" target="_blank">What Will $10,000 be Worth in 10 Years? (Bonds/CDs)</a> graph version of results for 10 years. Useful for seeing the bigger picture.<br />
<a href="http://observationsandnotes.blogspot.com/2011/07/what-will-my-bondcd-worth-in-5-years.html" target="_blank">What Will My Bond/CD be Worth in 5 Years?</a> graph version of 5-year bond investment.<br />
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b><br />
Copyright © 2013 Last modified: 7/30/2020 <br />
<br />
Appendix: (below is just an image, not a calculator. The Calculator is above)<br />
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUHCoUC6EAGTPbTdg79_9n5KXmSyfdEPLVyRcwU5X1eQBz6IczKuk4IVbXS-pNJ5SLt04APPHDh-ESbbf4mlIj2YW7UwNYeocSH7moaaZSI2QaNqxhtURkmINlJ-s93QJx5XznCwhcu5PE/s1600/Compound+Interest+Calculator.jpg"><img alt="Calculate bond CD value for any number of years at any % interest" border="0" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUHCoUC6EAGTPbTdg79_9n5KXmSyfdEPLVyRcwU5X1eQBz6IczKuk4IVbXS-pNJ5SLt04APPHDh-ESbbf4mlIj2YW7UwNYeocSH7moaaZSI2QaNqxhtURkmINlJ-s93QJx5XznCwhcu5PE/s320/Compound+Interest+Calculator.jpg" title="The Observations Compound Interest Calculator" width="200" /></a></div>
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</h3>
<h3>
Share This Article</h3>
To share via Facebook, Twitter, Pinterest, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-35449607574463392092013-02-22T12:30:00.002-06:002020-12-05T18:35:06.651-06:00How Much Will You Receive in Social Security Income?<div><span style="font-size: x-small;">(Last updated December 2020)</span></div>Social Security is a key component of most people's retirement plan. Here's a quick estimate of the retirement benefits under the current rules.<br />
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<h3>
Percent of Salary Replaced by Social Security Retirement Benefits</h3>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6fNjescY8LfeV13M9n0qloOQcbijMSV6cEjJu23jzEapxHY_KfSvPTJq4Yqmr3nf72SkHehlZQcsalHDYnGSnBdnMgQp6D7c8G1rnmq2KLE2yJhFq4lJbhof-ZhaQh2DHg3QV-O_mf471/s960/Percent+of+Salary+Replaced+by+Social+Security.jpg" style="display: block; padding: 1em 0px; text-align: center;"><img alt="How much will I receive in Social Security? what percent of my income will Soc Sec replace? 2020" border="0" data-original-height="698" data-original-width="960" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6fNjescY8LfeV13M9n0qloOQcbijMSV6cEjJu23jzEapxHY_KfSvPTJq4Yqmr3nf72SkHehlZQcsalHDYnGSnBdnMgQp6D7c8G1rnmq2KLE2yJhFq4lJbhof-ZhaQh2DHg3QV-O_mf471/s400/Percent+of+Salary+Replaced+by+Social+Security.jpg" title="Percent of Salary Replaced by Social Security" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">Percent of Salary Replaced by Social Security (approx)</span></b></td></tr>
</tbody></table>
<br />
<br />
<h3>
The Percentage of Your Salary Replaced by Social Security is Determined by Your Salary Level</h3>
The chart above (click to expand) shows the approximate percent of your salary that Social Security will replace if you take full retirement at age 66. The actual calculation is complicated, and is based upon your lifetime earnings. For these estimates, I have assumed that you earn your current salary, adjusted for inflation, for the duration of your career (all previous and future years). The point here is to see the big picture; for an estimate specific to your situation see the links at the end of the post.<br />
<a name='more'></a><br />
As you can see from the graph there are huge differences in the percent of your salary that Social Security replaces, depending upon your salary. At the low end of the scale, for salaries below $10,000, retirees receive around 90% of their eligible salary. That appears to be the <i>maximum</i> salary replacement level.<br />
<br />
At the high end, the maximum Social Security retirement income is around $35,000 a year. And, it's the same for everyone earning over around $120,000/year. On the graph, at $120,000, Social Security replaces 29% of salary. Since the maximum payment is fixed, the percent replaced declines steadily from that point forward. For those earning $250,000 the replacement rate is about 14%; for those earning $500,000 (not shown on the chart) the replacement rate is about 7%. There is no <i>minimum</i> salary replacement level.<br />
<br />
<h3>
Using Percent of Salary vs Actual Social Security Income/Benefits</h3>
I've used percent of salary rather than actual dollar amounts of your Social Security retirement benefits so that we don't have to worry about inflation. If we tried to calculate your actual salary and Social Security income, we'd need to know when you plan to retire, how much inflation will be between now and then, etc.<br />
<br />
Instead, we have just assumed that your salary will keep pace with inflation, and that Social Security benefits will do the same.<br />
<br />
<h3>
Caveat</h3>
So, that's the rub. All of the calculations are based upon current rules. However, as we know, in order for Social Security to remain solvent, the rules will have to change at some point. Still, I think it's a good starting point for seeing the big picture.<br />
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<br />
<b>Social Security Related Links</b><br />
<a href="https://www.ssa.gov/estimator/" target="_blank">Social Security Income Estimator</a> : use this official SSA site for more accurate personal results. <div>I used the approximations from <a href="https://www.calcxml.com/do/ret04" target="_blank">this site</a> to develop the graph above.<br />
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<h3>
Related Materials</h3>
<a href="https://observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need to Retire?</a><br />
<br />
<b>What Percent of Your Salary Should You Save for Retirement? (by starting age)</b><br />
<ul>
<li><a href="https://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">% to Save for Retirement, by starting age, with Social Security</a></li>
<li><a href="https://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">% to Save for Retirement: High-Income, with Social Security</a></li>
<li><a href="https://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html" target="_blank">% to Save for Retirement, Without Social Security</a></li>
</ul>
<div>
<b>How Much Should You Have in Retirement Savings? (by age)</b></div>
<ul>
<li><a href="https://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">How Much Should You Have in Retirement Savings?</a></li>
<li><a href="https://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">How Much Should You Have in Retirement Savings? high-income</a></li>
<li><a href="https://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should You Have in Retirement Savings? w/o Soc Sec</a></li>
</ul>
<b>For lists of other posts, by category, see the drop down list (mobile viewers) or tabs (computer viewers) just below the blog header at the top of the page. There are additional links in the sidebar if your device supports sidebars.</b><br />
Copyright © 2013 Last modified: 12/5/2020<br />
<h3>
Share This Article</h3>
To share via Facebook, Twitter, Pinterest, etc., see below except on mobile devices (where you share in the normal way). </div>
<br />
Archives<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHjm9w0bOFx6SZ5nSZ0Tqv0gZ29X45Zkb4o1XvWz0YHrQHB-bWOC_W8HlY1qWoYhfr5lnZEx82DRhCpNHht-_u4ZZrAhHLUxHlz9yJjfGUM8I7F8yuv08sImlf9n1U57eptsxCnt9pU8eA/s1600/Percent+of+Salary+Replaced+by+Social+Security.jpg" style="margin-left: auto; margin-right: auto;"><img alt="How much will I receive in Social Security? what percent of my income will replace?" border="0" height="75" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHjm9w0bOFx6SZ5nSZ0Tqv0gZ29X45Zkb4o1XvWz0YHrQHB-bWOC_W8HlY1qWoYhfr5lnZEx82DRhCpNHht-_u4ZZrAhHLUxHlz9yJjfGUM8I7F8yuv08sImlf9n1U57eptsxCnt9pU8eA/s400/Percent+of+Salary+Replaced+by+Social+Security.jpg" title="Percent of Salary Replaced by Social Security" width="75" /></a>Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-85794348391919746192013-02-09T16:17:00.006-06:002020-09-23T18:18:58.033-05:00Inflation Calculator: Convert Dollars from 19xx to Now<i>Last updated Sept. 2020</i><br />
<h3>
Convert Dollars From One Year to Equivalent Dollars in Another Year<br />
Calculate Inflation Rates Between Two Years</h3>
<div>
<br /></div>
This calculator is especially useful for converting salaries and asset values.<br />
<br />
The brown/tan cells are input fields. For example, enter the start and end years and immediately see the inflation rate between the two years. Enter a price and convert between the start year price and end year price (e.g., from 1900 to 2019 dollars -- or vice versa).<br />
<br />
<iframe frameborder="0" height="403" scrolling="no" src="https://skydrive.live.com/embed?cid=9268A3CEF4BAB4FE&resid=9268A3CEF4BAB4FE%21129&authkey=ANNbeP4wJ7KPP60&em=2&wdAllowInteractivity=True&AllowTyping=True&ActiveCell='Inflation%20Calculator'!C6&Item='Inflation%20Calculator'!B2%3AH17" width="494"></iframe><br />
<br />
Notes: On some phones you may need to double click to enter data. On some computers, you may have to enter some fields more than once for it to "take." Please leave a comment if you are having problems.<br />
<a name='more'></a><p style="text-align: left;">In the example above, we see that as of January 1900 the CPI was 7.9, and inflation for the year was -2.4% (deflation), whereas in 2019 the CPI had risen to 251.7 and yearly inflation was 2.5%. The inflation rate between the two dates is shown as averaging 3.0%.</p><p style="text-align: left;">Using the projected price feature, we see that we would expect that something that cost $0.05 in 1900 would cost $1.59 in 2019. Or, if we had entered $1.59 in the 2019 column we would have found that something that cost $1.59 in 2019 would have cost approximately $0.05 in 1900. Note these are just theoretical, average numbers and do not apply to any specific goods or services. </p><p style="text-align: left;">Finally, the purchasing power feature shows that $100 in purchasing power in 1900 gets reduced to $3.14 by 2019, a 96.9% decrease in purchasing power.</p><div><p style="text-align: left;">Please leave your comments in the comment section at the bottom of the post if you have problems. Include hardware, operating system and browser if possible.</p>
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<br />
<h3>
Related Posts</h3>
<div>
<div class="MsoNormal">
<a href="https://observationsandnotes.blogspot.com/2013/04/what-will-1-be-worth-in-future.html" target="_blank">What Will $1 be Worth in the Future? (calculator)</a> Like this calculator but converts from now to future.<br />
<a href="https://observationsandnotes.blogspot.com/2011/04/quickie-inflation-calculator.html" target="_blank">The Observations Inflation Calculator/Spreadsheet</a> The original post -- includes descriptions of all of the fields, plus some additional capabilities beyond those in the calculator.</div>
<div class="MsoNormal">
<a href="https://observationsandnotes.blogspot.com/2011/05/what-10000-in-19xx-equal-today.html" target="_blank">What Would $10,000 in 19xx be Equivalent to Today?</a> The graph version. Very handy for looking at the big picture, and for a fuller discussion.<br />
<a href="https://observationsandnotes.blogspot.com/2011/04/100-year-declining-value-of-us-dollar.html" target="_blank">The Decrease in Purchasing Power of the U.S. Dollar Since 1900</a> graph comparing 1900 dollars to now. Again, handy for seeing the big picture, and a discussion.<br />
<a href="https://observationsandnotes.blogspot.com/2013/01/what-will-100-be-worth-in-20xx-future.html" target="_blank">What Will $10,000 be Worth in 10-20 Years?</a> The flipside. The impact of inflation <i>going forward</i>.<br />
<a href="https://observationsandnotes.blogspot.com/2013/03/what-will-my-bond-cd-be-worth-in-years.html" target="_blank">How Much Will Your Bond/CD be Worth in N Years? (calculator)</a> Similar to this calculator. </div>
</div>
<b>For lists of other posts, by category, see the drop down list (mobile viewers) or tabs (computer viewers) just below the blog header at the top of the page. There are additional links in the sidebar if your device supports sidebars.</b><br />
<br />
<b>Data Sources</b><br />
Pre-1913: <a href="http://www.econ.yale.edu/~shiller/data/ie_data.xls" target="_blank">Robert Shiller "Irrational Exuberance" data</a> <br />
1913 forward: <a href="https://research.stlouisfed.org/fred2/series/CPIAUCNS/downloaddata?cid=9" target="_blank">Consumer Price Index for All Urban Consumers: All Items</a> (CPI-U) from the U.S. Department of Labor: Bureau of Labor Statistics.<br />
<br />
Copyright © 2013 Last modified: 8/28/2020<br />
<br />
Appendix: (below is just an image, not a calculator)<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiy0iiru7wWHEEtqt4fQWz3vuylvIwdvVYq3GAc1Uiwy5wCmwPEw_503yF8_QKh_tZEm5cP-S1nXFYZQm1eOsYGBA6_q4UJd86b4tQO26tW1qq4NxZvBa5-FoWt-EAHY0rjvjRkOLjUvSZ8/s1600/Inflation+Calculator.jpg" style="margin-left: 1em; margin-right: 1em;"><img alt="Calculate inflation rates, & convert dollars/prices between any 2 years" border="0" height="169" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiy0iiru7wWHEEtqt4fQWz3vuylvIwdvVYq3GAc1Uiwy5wCmwPEw_503yF8_QKh_tZEm5cP-S1nXFYZQm1eOsYGBA6_q4UJd86b4tQO26tW1qq4NxZvBa5-FoWt-EAHY0rjvjRkOLjUvSZ8/s200/Inflation+Calculator.jpg" title="Inflation Calculator, Price Converter" width="200" /></a></div>
<br />
<h3>
Share This Article</h3>
To share via Facebook, Twitter, Pinterest, etc., see below except on mobile devices (where you share in the normal way). </div>Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com11tag:blogger.com,1999:blog-7073066728112402191.post-64932185278093132982013-01-25T10:00:00.000-06:002020-07-19T17:27:46.205-05:00What Will $100 be Worth in 10 - 20 Years?This post estimates the future value of a dollar for the next 1-50 years, for inflation rates ranging from 1% to 10%. The chart works not just for $100, but for <i>any</i> amount -- $1, $1,000, $10,000, $100,000.... And, it works for 5, 10, 20, 30 ... anything up to 50 years. (This is a companion to a <a href="http://www.observationsandnotes.blogspot.com/2011/05/what-10000-in-19xx-equal-today.html" target="_blank">previous post</a> which compares today's dollar to <i>earlier</i> years.)<br />
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Inflation is one of the biggest risks that current and future retirees face. Given <a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">today's life expectancies</a>, even relatively low rates of inflation can devastate the purchasing power of a pension or uninvested cash during your retirement years. How great could the impact be? See below.<br />
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<span style="color: red;">Try my new <a href="http://observationsandnotes.blogspot.com/2013/04/what-will-1-be-worth-in-future.html" target="_blank">interactive future inflation impact calculator</a>. It does the same calculations as the graph below, but for <i>any</i> number of years, and for <i>any</i> inflation rate. Then come back to this post; graphs are still better for seeing the big picture.</span><br />
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<h3>
What Will $100 be Worth in 5, 10, 20, 30... 50 Years?</h3>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhK8HQsBvAbXtSDyhAF-sH2CFWWl-RGXs0KMUR3beah3Io485YKgO4gwbgMVvEokWN8ONH0X5VGOLz_oAp_BNt31H8-3PBiM7suXRusHH2KWNzsd4CDj6NRYQQpw4Iqb-EHopULkWHciF9f/s1600/What+Will+100+be+Worth+in+N+Years.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="What will a dollar be worth 5, 10, 20, 30 years from now in future?" border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhK8HQsBvAbXtSDyhAF-sH2CFWWl-RGXs0KMUR3beah3Io485YKgO4gwbgMVvEokWN8ONH0X5VGOLz_oAp_BNt31H8-3PBiM7suXRusHH2KWNzsd4CDj6NRYQQpw4Iqb-EHopULkWHciF9f/s400/What+Will+100+be+Worth+in+N+Years.jpg" title="What Will $100 be Worth in N Years?" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">What Will $100 be Worth in N Years?</span></b></td></tr>
</tbody></table>
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<h3>
The Impact of Inflation on the Future Purchasing Power of a Dollar</h3>
Over the last <a href="http://observationsandnotes.blogspot.com/2011/03/100-years-of-inflation-history.html" target="_blank">100 years, U.S. inflation</a> has averaged about 3%/year. As you can see from the graph above (click to expand), even at these apparently benign rates (the blue line), within 20 years the purchasing power of a fixed pension will be almost cut in half. Twenty years is not a long retirement these days; most advisors recommend that you plan for thirty. Some retirements last even longer.<br />
<a name='more'></a><br />
As I suggested in the above linked post, inflation hurts those on fixed incomes (pensions & annuities) and those holding cash (or near cash) most.<br />
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<h3>
Example: What Will $10,000 be Worth in 10 Years? </h3>
How much will your pension or "stash" be worth in 10 years? Obviously, it depends upon the future rate of inflation. Inflation has been as high as 20%, and as low as <i>minus</i> 10% (i.e., <i>deflation</i>) for a single year. (For chart, see the inflation post) However, for periods of five or more years, the range has been around 1.5% to 10%; for ten years or more, it's more like 2.5% to 7.5% (I'm excluding the deflationary periods). The long-term average is about 3%.<br />
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As you can see from the above chart, if we experience average inflation (the blue line), in 10 years $100 will be worth about $75 (the actual number is $74.41). It follows that $10,000 will be worth about $7,500. And, a monthly pension or annuity of $1,000 would be equivalent in purchasing power to about $750/month in today's dollars. (You can calculate the exact numbers using the <a href="http://observationsandnotes.blogspot.com/2011/04/quickie-inflation-calculator.html" target="_blank">Inflation Calculator</a> that I used to prepare this graph.<br />
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<h3>
What Will $10,000 be Worth 20 Years From Now if There is Low Inflation?</h3>
Lately, inflation has been somewhat subdued. For example, from 2002-2012 it averaged 2.5%/year. Suppose that for the next 20 years inflation only averaged 2% (the green line). In that case, twenty years from now your $10,000 would be equivalent to $6,730 in today's dollars.<br />
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<h3>
How Much Will $100,000 be Worth in 20 Years?</h3>
On the other hand, suppose inflation ticked up to 5%/year (the orange line) -- a seemingly small increase. In 20 years the $100,000 that you have stashed away in your safe deposit box for an emergency would only be worth about $38,000. Maybe more relevantly, every $1,000/month you are currently receiving in a non-cost of living adjusted pension or annuity would only be worth $380. The $10,000 in the paragraph above would be equivalent in purchasing power to $3,800 in today's dollars instead of $6,730.<br />
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<h3>
What Will $1,000 be Worth 30 Years From Now if we Have High Inflation?</h3>
The worst inflationary period I have experienced was between 1977 and 1982; inflation averaged 10%/year! If we were to have that level of inflation (the red line), in 30 years $1,000 would be reduced to the equivalent of less than $60 ($57.31) in today's dollars!<br />
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<h3>
The Rule of 72 & the Impact of Inflation on the Future Value of a Dollar</h3>
Here's a handy shortcut. The rule of 72 says that if inflation is N%/year, prices will double in <i>approximately</i> 72/N years. For example, at 3% inflation, prices will double in (72/3=) 24 years, and at 2% prices will double in (72/2=) 36 years. If prices double, what you used to be able to buy for $50 costs you $100. As a result, your purchasing power would be cut in half; $100 would have the purchasing power than $50 has now. If you check the chart, you will see that the 3% (blue) line reaches $50 at about 24 years and the 2% (green) line gets there at 35 years.<br />
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<h3>
Related Posts</h3>
<a href="http://observationsandnotes.blogspot.com/2011/05/what-10000-in-19xx-equal-today.html" target="_blank">What Would $10,000 in 19xx be Equivalent to Today?</a> Similar to this post, but comparing today's dollar to dollars <i>in the past</i>, using actual historical inflation rates.<br />
<a href="http://observationsandnotes.blogspot.com/2011/04/what-will-10000-be-worth-in-10-years.html" target="_blank">What Will $10,000 be Worth in 10 Years? (Bonds/CDs)</a> Similar to this, but if the money is <i>invested</i>.<br />
<a href="http://observationsandnotes.blogspot.com/2011/03/100-years-of-inflation-history.html" target="_blank">100 Years of Inflation Rate History</a>: Includes 100-year chart & a fuller discussion of the impact of inflation.<br />
<a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">The Life Expectancy Problem: How Long Will You Live?</a> Why inflation is so important to retirees.<br />
<a href="http://observationsandnotes.blogspot.com/2011/04/quickie-inflation-calculator.html" target="_blank">The Observations Inflation calculator/Spreadsheet</a> The spreadsheet used for the calcuations in this post<br />
<b>For lists of other popular posts see the sidebar to the left or the blog header at the top of the page.</b><br />
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Copyright © 2013 Last modified: 7/19/20<br />
<h3>
Share This Article</h3>
To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com2tag:blogger.com,1999:blog-7073066728112402191.post-30251037352283906402012-12-22T11:30:00.007-06:002020-12-15T18:59:51.189-06:00How Much Money Will You Need to Retire?<div>**Note: There is a <a href="https://observationsandnotes.blogspot.com/2020/12/how-much-money-will-i-need-to-retire.html">newer version of this post here</a>. **</div><div><br /></div>This post uses the 4% withdrawal approach to calculate savings needed to retire at age 65 for those who earn from $10,000 to $250,000 or more and will be eligible to receive full, or nearly-full, Social Security benefits.<br />
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Previous posts established retirement savings benchmarks/targets <i>from age 25 to 65</i> for a <a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">typical average income worker</a> and a <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">typical high-income worker</a>. This post only calculates the target at age 65, and, as a result, is appropriate for <i>all</i> salary levels. <br />
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<h3>
How Much Will You Need to Retire?</h3>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJrm2qoV6zXzVtQmcr7IsrWt0azuXACITNYLHyMFvPeL3syPv-LsnAk0l81cexpvF_fWLKJbFXO9jI_3RxcjjjnUD00OV23VMcWkEY2Bik2t9vaQUIwuard0jlqAjwcoohWjBeaJLaUDxV/s1600/How+Much+Money++Will+I+Need+to+Retire.jpg" style="margin-left: auto; margin-right: auto;"><img alt="Retirement savings needed on retirement date at age 65" border="0" height="268" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJrm2qoV6zXzVtQmcr7IsrWt0azuXACITNYLHyMFvPeL3syPv-LsnAk0l81cexpvF_fWLKJbFXO9jI_3RxcjjjnUD00OV23VMcWkEY2Bik2t9vaQUIwuard0jlqAjwcoohWjBeaJLaUDxV/s400/How+Much+Money++Will+I+Need+to+Retire.jpg" title="How Much Money Will You Need to Retire?" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">How Much Money Will You Need to Retire?</span></b></td></tr>
</tbody></table>
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<h3>
With an Average Salary, You'll Need Around 9 Times Your Salary to Retire</h3>
If you follow the 4% withdrawal guidelines, it's easy to calculate how much money you will need in order to retire at age 65. Basically, you will need (100%/4%=) 25 times the amount you expect to withdraw from your savings in your first year of retirement. To facilitate the computation, I have assumed that your total<i> </i>yearly spending in retirement will equal 75% of your current salary, adjusted for inflation.<br />
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However, <br />
<a name='more'></a>as you can see from the graph above, at $40,000 -- around the average salary -- the target is only about <i>9 </i>times your salary, or $360,000 in today's dollars. Why is that? (Note: the 7 times salary calculated in an <a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">earlier post</a> is lower because it assumed a <i>5%</i> withdrawal rate.)<br />
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<h3>
The Effect of Social Security: The Larger Your Salary, the Higher the Multiple You Will Need To Retire</h3>
The target for those who will <i>not</i> receive Social Security is 25 times their expenses. Assuming their expenses are 75% of their salary, that target is therefore (25 x 75%=) 18.75 times their salary -- regardless of salary level. The thing that jumps out at you about the graph above (click to expand) is how steep this curve is at the lower salaries, and how flat it is at higher salaries. That's the effect of Social Security.<br />
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<a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">The percentage of your salary that Social Security will replace</a> decreases as your salary increases. For salaries below $10,000, Social Security benefits are approximately 78% of your qualifying salary. However, that percentage decreases as your salary increases. In fact, under current rules, anyone making over about $115,000 receives the <i>same</i> maximum Social Security payment of about $27,000/year.<br />
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The bottom line is that as your salary increases, the amount that will <i>not</i> be replaced by Social Security increases; therefore, the retirement spending that must be funded by your retirement savings increases -- and, the salary multiple increases.<br />
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<h3>
Retirement Savings Needed at $100,000</h3>
<span style="font-weight: normal;">If you go a little further out on the curve, you can see that those with $100,000 salaries have a target of 12-13 times their ending salary. The target continues to go up from there. </span>Social Security will replace only 14% of salary for a person making $250,000, and 7% for those earning $500,000. In fact, the more millions you earn, the closer the percentage gets to <i>zero</i>; we should all have such problems....<br />
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<h3>
Manual Method: If You Make More Than $250,000, Less Than $40,000, Have a Pension, Don't Trust Social Security, Or ...</h3>
I've "only" extended the graph out to $250,000. If you're lucky enough to be "off the chart," you can easily calculate these benchmark/target savings manually; <i>see the appendix at the end of this post</i>. The manual method is worth checking out <i>even if</i> you're unlucky enough to earn less than $250,000/year.<br />
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For example, you may prefer to replace more or less than 75% of your salary based upon your lifestyle. (I'm especially concerned that 75% may often not be adequate at salary levels below the average.) Or, you may want to exclude some or all of your scheduled Social Security income -- just to be safe...; the manual method can do that too.<br />
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<span style="font-weight: normal;">Final note: I</span>f I extended the graph out far enough beyond $250,000, the line would get closer and closer to 18.75, the target for those without Social Security.<br />
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<h3>
Some Key Assumptions (short version)</h3>
<div style="font-weight: normal;">
<span style="background-color: white; font-family: inherit;">I've assumed that:</span></div>
<ul style="font-weight: normal;">
<li><span style="font-family: inherit; text-indent: -0.25in;">Your annual raises will keep pace with inflation</span></li>
<li><span style="font-family: inherit; text-indent: -0.25in;"><i>Inflation-adjusted</i> Social Security benefits remain unchanged; they will increase in line with inflation (this is not likely)</span></li>
<li><span style="font-family: inherit; text-indent: -0.25in;">You will retire at age 65, and spend 75% of your current annual income (inflation-adjusted) each year of retirement</span></li>
<li><span style="font-family: inherit; text-indent: -0.25in;">You will follow the "4% Withdrawal" guidelines, starting by withdrawing 4% of your assets your first year in retirement.</span></li>
</ul>
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<span style="font-family: inherit;">For a more detailed discussion of the 4% withdrawal approach and my assumptions, see <a href="http://www.observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html">Assumptions for the 4% Withdrawal Retirement Graphs</a>.</span></div>
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<h3>
Related Posts</h3><div><br />
<span style="font-family: inherit;"><a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a> an interactive calculator that does the same calculations used to generate the graphs below. However, he graphs below are better for seeing the big picture.</span></div><div style="font-size: medium;"><br />
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<b>How Much Should I Have in Savings <i>at my current age</i> to be on target?</b></div>
</div>
<ul>
<li><a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">How Much Should You Have in Retirement Savings?</a></li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">How Much Should You Have in Retirement Savings? high-income</a></li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should You Have in Retirement Savings? w/o Soc Sec</a></li>
</ul>
<div>
<b>What Percent of My Salary Should I Save? by starting age</b></div>
<ul style="font-weight: normal;">
<li><span style="font-family: inherit;"><a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: for typical worker</span></li>
<li><span style="font-family: inherit;"><a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should Higher Income Earners Save For Retirement?</a> </span></li>
<li><span style="font-family: inherit;"><a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: w/o social security</span></li>
</ul>
<div style="font-weight: normal;">
<span style="font-family: inherit;"><a href="http://www.ssa.gov/estimator/" target="new">Social Security Income Estimator</a> : the official site. For an approximation, <a href="http://www.calcxml.com/do/ret04" target="new">see this site</a>, or <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">my graph</a>.</span></div>
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<span style="font-family: inherit;"><a href="http://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="http://en.wikipedia.org/wiki/Trinity_study" target="new">Wikipedia</a>.</span></div>
<div style="font-weight: normal;">
<span style="font-family: inherit;"><a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">How Long Will You Live?</a> A look at one of the most vexing issues in retirement planning.</span></div>
<div style="font-weight: normal;">
<span style="font-family: inherit;"><a href="http://observationsandnotes.blogspot.com/2009/01/do-you-need-personal-strategic-plan.html" target="_blank">Do You Need a Personal Strategic Plan?</a>: a process for establishing life priorities</span></div>
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<h3>
Appendix: How Much Money/Savings Does it Take to Retire?</h3>
You don't even need a spreadsheet for this! Here's how to calculate how much you'll need. <br />
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1. Estimate your total expenses in your first year of retirement, including taxes, in today's dollars (I'm assuming that the first year is representative of all of your remaining retirement years). If you don't have a good feel for what your expenses will be, assume that they will be 70-80% of your salary; for this series, I assumed 75%. Example: $40,000 salary; expecting retirement expenses of $30,000/year.<br />
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2. Subtract your expected Social Security income, again in today's dollars, from your expected expenses. (Note: Links to the Social Security estimators are in the section above. When using these, use the numbers that are in <i>today's</i> dollars and/or specify 0% inflation. If you want to be conservative, you may want to reduce the scheduled amount. ) Example: For a $40,000 salary, Social Security payments are estimated at $15,720/year; therefore, $14,280/year remains to be covered.<br />
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3. If you have a <i>pension with a cost of living adjustment</i>, treat it the same as Social Security. That is, subtract your annual pension, in today's dollars, from the number above. Your annual expenses minus your Social Security, minus your pension payment will tell you how much of your expenses your investments have to cover. Example: No pension, so $14,280/year has to be covered by investments.<br />
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4. To use the 4% withdrawal approach, multiply the result from step 3 by 25. That's it. Example: $14,280 x 25 = $357,000 in savings needed at retirement. (If you plan on withdrawing 5%, you would multiply my 20; that result is $285,600.)<div><a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a> will do the above for you if you prefer.<br />
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<b>For lists of other popular posts see the sidebar to the left or the blog header at the top of the page.</b><br />
Copyright © 2012 Last modified: 12/15/2020<br />
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Share This Article</h3>
<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. </div>Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com2tag:blogger.com,1999:blog-7073066728112402191.post-9627219722705359012012-12-15T17:00:00.001-06:002020-12-01T11:34:05.251-06:00How Much Should You Have in Retirement Savings? - average incomes<div style="font-size: medium; font-weight: normal;">
This post uses the "4% withdrawal" approach to retirement savings to estimate how much most people should have in savings -- by age. And, <i>given how much you actually have, what percent you should save going forward</i>.<br />
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This post is designed for those earning approximately $40,000/year who are eligible for Social Security. Earn more? See <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">higher income</a>, or <a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">not eligible for Social Security</a>.<br />
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<h3>
Retirement Savings Targets for Those Eligible for Social Security</h3>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjHG7P-RKosis_mwij30SqkhTEPoMux54fmQs7E6BfnwMye-vVWSl_lSg8yfR6D-jah27SXIoZF-QoP2Os5fPwJ01cuQKjlrVmT4HqYE9ByvywtO-fQrZdtQGcdKxVQ0lAoKrko3vREqDbc/s1600/Retirement+Savings+Multiple+of+Salary+-+w+ss.jpg" style="margin-left: auto; margin-right: auto;"><img alt="How much need in savings age 35, 40, 50, 60. 5-30 years before retirement" border="0" height="271" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjHG7P-RKosis_mwij30SqkhTEPoMux54fmQs7E6BfnwMye-vVWSl_lSg8yfR6D-jah27SXIoZF-QoP2Os5fPwJ01cuQKjlrVmT4HqYE9ByvywtO-fQrZdtQGcdKxVQ0lAoKrko3vREqDbc/s400/Retirement+Savings+Multiple+of+Salary+-+w+ss.jpg" title="Retirement Savings Targets, by age" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">Retirement Savings Targets, by age</span></b></td></tr>
</tbody></table>
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Have I saved enough for my retirement? Am I on track? Here's an easy-to-use graph to help those with earnings around $40,000/year plan for retirement. An <a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">earlier post</a> calculated the percent of your salary you should save each year, depending upon when you start your retirement savings plan. This one provides some benchmarks to monitor your progress along the way.</div>
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<a name='more'></a><br /></div>
<h3>
How Much Will You Need to Retire? The Average Person With Social Security Will Need At Least 7 Times Salary</h3>
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As you can see from the chart above (click to expand), <i>no matter when you start saving</i>, by the time you're 65 you'll need about 7 times your "then-current" salary in retirement savings. That is, assuming you want to maintain approximately the same standard of living in retirement that you could afford during your working years. Then-current just means it's times your salary <i>at that time</i>, not your current year's salary. </div>
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If you were not eligible for Social Security, using the 4% withdrawal approach, you'd need <i>~19 times</i> your salary in order to receive 75% of your pre-retirement income. If you earned $100k, you'd need about 12x your salary. However, at these salary levels, <i>given current Social Security guidelines</i>, <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">your Social Security benefit</a> reduces your need to "only" 7 times your salary. (Note: For more on the 4% withdrawal approach, see Assumptions below.)</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
The Glide Paths: How Much Should I Have Saved by Age 35, 40, 50 & 60? -- 5-30 Years Before Retirement</h3>
<div>
<br /></div>
<div style="font-size: medium; font-weight: normal;">
The blue line shows the idealized retirement portfolio growth for a person who started saving for retirement at age 30. We already know that this person should be saving about 8%/year based upon the results from <a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">What Percent Should You Save for Retirement?</a>. </div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
As you can see from the graph, if you start saving at age 30, the targets are:</div>
<ul style="font-size: medium; font-weight: normal;">
<li>a little over half a year's (then-current) salary by age 35</li>
<li>a little over 1x (times) salary by age 40 </li>
<li>about 3x salary by age 50, and</li>
<li>about 5.5x then-current salary by age 60.</li>
</ul>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
Regardless of When you Start, You'll Want 4.5-5.5x Salary by Age 60</h3>
<div>
<br /></div>
<div style="font-size: medium; font-weight: normal;">
If instead of starting to save at age 30 you start at age 35 (the red line), the target at age 40 is three quarters of a year's salary instead of more than a bit more than a year's salary (of course, if you start at 35 you'll have to contribute more each year). However, over time, the lines converge. <i>Regardless</i> of when you start saving, you'll need about 7 times salary at age 65; and, you'll need about 4.5-5.5 times salary at age 60.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
<i>If You Already Have Savings</i>, Hop on a Glide Path at Any Time</h3>
<div>
<br /></div>
<div style="font-size: medium; font-weight: normal;">
The previous series assumed you were starting from scratch. However, you can hop on these "glide paths" at any time. For example, suppose you are 40 years old, have been saving only sporadically, but have just received a nice chunk of extra cash. As a result, you now have over a year's salary in savings.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
To see where you stand, find your age on the horizontal axis and then check to see where your savings put you relative to the benchmarks. A year plus in salary puts you right on the blue, "starting at age 30," glide path, and you'll want to save about 8%/year from this point forward.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
If, at age 40, you have three quarters of your salary in retirement savings, you're on the red, "starting at 35," glide path and will need to save about 11%/year. If your assets are between three quarters and one times your salary, your annual contribution should be between 8% and 11%. (See below for a more precise estimate.)<br />
<br /></div>
<h3>
Starting Your Savings After Age 40</h3>
<div>
<br /></div>
<div style="font-size: medium; font-weight: normal;">
The earlier posts generally assumed that you would start your savings by about age 40 at the latest -- primarily because if you did not, your required savings rate would be excessive. This chart suggests that, given <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">current Social Security benefit levels</a>, it's actually <i>conceivable</i> that you could start saving as late as age 50 and still meet these targets! Challenging? Yes. But, feasible. (And, not recommended!)<br />
<br /></div>
<h3>
The Real World May, No WILL, be Different!</h3>
<div>
<br /></div>
<div style="font-size: medium; font-weight: normal;">
Remember, these are <i>benchmarks</i>! In the real world, your retirement portfolio will not consistently deliver 5% real returns year after year. The "glide paths" in this chart show what would result <i>if</i> it did in order to give you a benchmark.</div>
<br />
<br />
<h3>
Some Key Assumptions (short version)</h3>
<div style="font-size: medium; font-weight: normal;">
<span style="background-color: white;">I've assumed that you:</span></div>
<div class="MsoNormal" style="font-size: medium; font-weight: normal;">
</div>
<ul style="font-size: medium; font-weight: normal;">
<li><span style="text-indent: -0.25in;">Invest a constant percentage of your <i>then-current</i> salary each year until retirement</span></li>
<li><span style="text-indent: -0.25in;">Earn a pre-retirement <i><a href="http://observationsandnotes.blogspot.com/2009/04/about-nominal-real-rates-of-return.html" target="_blank">real</a> (i.e., after-inflation) </i>rate of return of 5% -- after <a href="http://observationsandnotes.blogspot.com/2011/10/expenses-impact-on-investment-returns.html" target="_blank">taxes & expenses</a><i>.</i></span></li>
<li><span style="text-indent: -0.25in;">Retire at age 65, spending 75% of your current annual income (inflation-adjusted) in retirement</span></li>
<li><span style="text-indent: -0.25in;">Start by withdrawing <i>5%</i> (rather than the more normal 4%) of your assets</span><span style="text-indent: -0.25in;"> your first year in retirement. </span></li>
</ul>
<div style="font-size: medium;">
<br />
The standard assumption these days is that you will withdraw 4%, not 5%; I assumed 4% in the "hi-income" version of this post. However, if Social Security is expected to cover over 50% of your yearly expenses in retirement, as in this case, you <i>may</i> be able to afford to be a little more aggressive. <i>Ideally</i>, I'd still try to target a 4% withdrawal rate.<br />
<br />
For a more detailed discussion of the "4% withdrawal" approach and my assumptions, see <a href="http://www.observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html">Assumptions for the 4% Withdrawal Retirement Graphs</a>.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
For an estimate more tailored to your specific circumstances, and to get a better feel for the impact of some of the variables, I encourage you to enter your own data into <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a>. Specifics of your situation, such as your pre-retirement investment returns and expected spending level in retirement, could make a significant difference. The graphs are best for getting a feel for the "big picture."</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
Related Posts</h3>
<div style="font-size: medium; font-weight: normal;">
<b>Other Easy-to-use graphs</b> based on these same concepts:</div>
<ul style="font-size: medium; font-weight: normal;">
<li><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need to Retire?</a> an overview that calculates targeted savings at retirement for <i>all</i> salary levels (based upon 4% withdrawal, not 5%)</li>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">What Percent of Your Salary Should You Save For Retirement?</a>: a companion post to this one</li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">How Much Should High Salaried Workers Have in Retirement Savings, by age</a></li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should You Have in Savings?</a> For those without Social Security </li>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should Higher Income Earners Save For Retirement?</a> </li>
<li><a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html" target="_blank">What Percent of Your Salary Should You Save For Retirement?, w/o Social Security</a></li>
</ul>
<div style="font-size: medium; font-weight: normal;">
<a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a> an interactive calculator tailored to your specific circumstances</div>
<div style="font-size: medium; font-weight: normal;">
<a href="http://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="http://en.wikipedia.org/wiki/Trinity_study" target="new">Wikipedia</a>.</div>
<div style="font-size: medium; font-weight: normal;">
<a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">How Long Will You Live?</a> A look at one of the most vexing issues in retirement planning.</div>
<div style="font-size: medium; font-weight: normal;">
<a href="http://observationsandnotes.blogspot.com/2009/01/do-you-need-personal-strategic-plan.html" target="_blank">Do You Need a Personal Strategic Plan?</a>: a process for establishing life priorities</div>
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b><br />
Copyright © 2012 Last modified: 12/1/2020<br />
<h3>
Share This Article</h3>
<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com3tag:blogger.com,1999:blog-7073066728112402191.post-31568485455453551992012-12-09T10:30:00.001-06:002020-12-02T16:46:24.245-06:00How Much Should You Have in Retirement Savings? - higher incomes<div style="font-size: medium;">
<div style="font-weight: normal;">
This post uses the "4% withdrawal" approach to retirement savings to estimate how much high-income earners should have in savings -- by age. And, <i>given how much you actually have, what percent you should save going forward</i>.</div>
<div style="font-weight: normal;">
<br /></div>
<h3>
Those With Higher-Salaries Need to Save More Than The Average</h3>
<div style="font-weight: normal;">
Have I saved enough for my retirement? Am I on track? Here's an easy-to-use graph to help those earning $100,000 or more plan for retirement; they need to save more than the average. An <a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">earlier post</a> calculated the percent of salary that high-income earners should save each year, depending upon when they start their retirement savings plan. This one provides some benchmarks to monitor your progress along the way.</div>
</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
Retirement Savings Targets for Those With Higher Salaries</h3>
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<br /></div>
<div style="font-size: medium; font-weight: normal;">
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi966qxWXKIQjKTxspH_1i_Q-3S47BoR5ELPVFHsU5HinL6o-_7ed8qrSEmviGGCvx31706_XPDOM8fYINkZIJJOvo0UfoHLPWyoK6yxTuWcBnm-ze9InlyyiA2V1rHErHE45ch8zK_jvkU/s1600/Retirement+Savings+Multiple+of+Salary+-+hi+inc.jpg" style="margin-left: auto; margin-right: auto;"><img alt="How much should I have in retirement savings at age 30, 35, 40, 45, 50, 55, 60 ..." border="0" height="270" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi966qxWXKIQjKTxspH_1i_Q-3S47BoR5ELPVFHsU5HinL6o-_7ed8qrSEmviGGCvx31706_XPDOM8fYINkZIJJOvo0UfoHLPWyoK6yxTuWcBnm-ze9InlyyiA2V1rHErHE45ch8zK_jvkU/s400/Retirement+Savings+Multiple+of+Salary+-+hi+inc.jpg" title="Retirement Savings Targets for Higher Salaries" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">Retirement Savings Targets for Higher Salaries</span></b></td></tr>
</tbody></table>
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<div style="font-size: medium; font-weight: normal;">
<div class="separator" style="clear: both; text-align: center;">
</div>
This post is designed for those earning $100k or more who are eligible for Social Security. Earn more? See <a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">targets for those not eligible for Social Security</a>. Earn less? See <a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">typical Social Security recipients</a>. Ending targets for <i>all</i> salary levels are covered in <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Will You Need to Retire?</a><br />
<a name='more'></a><br />
<br /></div>
<h3>
High-income Earners With Social Security Will Need 12-13 Times Salary to Retire Comfortably at Age 65</h3>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
As you can see from the chart above (click to expand), <i>no matter when you start saving</i>, by the time you're 65 you'll need about 12-13 times your "then-current" salary in retirement savings. That is, assuming you want to maintain the same standard of living in retirement that you could afford during your working years. Then-current just means it's times your salary <i>at that time</i>, not your current year's salary. </div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
If you were not eligible for Social Security, and wanted 100% of your salary, the 4% guideline would recommend that you accumulate (100%/4%=) <i>25 times</i> your salary; if you wanted 75% of your salary, you'd need (75%/4%=) <i>~19 times</i> your salary. <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">Your Social Security benefit</a> reduces that to "only" 12.5 times your salary. (Note: For more on the 4% withdrawal approach, see Assumptions below.)</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
The Glide Paths: How Much Should I Have Saved by Age 35, 40, 50 & 60? -- 5-30 Years Before Retirement</h3>
<div style="font-size: medium; font-weight: normal;">
The blue line shows the idealized retirement portfolio growth for a person who started saving for retirement at age 30. We already know that this person should be saving about 13.5%/year based upon the results from <a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent Should High-Income Earners Save for Retirement?</a>. </div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
As you can see from the graph, if you start saving at age 30, the targets are:</div>
<ul style="font-size: medium; font-weight: normal;">
<li>about 1x (times) then-current salary by age 35</li>
<li>2x salary by age 40 </li>
<li>5x salary by age 50, and</li>
<li>about 9.5x then-current salary by age 60.</li>
</ul>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
Regardless of When you Start, You'll Want About 8.5-9.5x Salary by Age 60</h3>
<div style="font-size: medium; font-weight: normal;">
If instead of starting to save at age 30 you start at age 35 (the red line), the target at age 40 is 1.25x salary instead of 2x salary (of course, if you start at 35 you'll have to contribute more each year). However, over time, the lines converge. <i>Regardless</i> of when you start saving, you'll need about 12.5 times salary at age 65; and, you'll need 8.5-9.5 times salary at age 60.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
<i>If You Already Have Savings</i>, Hop on a Glide Path at Any Time</h3>
<div style="font-size: medium; font-weight: normal;">
The previous series assumed you were starting from scratch. However, you can hop on these "glide paths" at any time. For example, suppose you are 35 years old, have been saving only sporadically, but have just received a nice chunk of extra cash. As a result, you now have a year's salary in savings.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
To see where you stand, find your age on the horizontal axis and then check to see where your savings put you relative to the benchmarks. One year's salary puts you right on the blue, "starting at age 30," glide path, and you'll want to save about 13.5%/year from this point forward.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
If, at age 35, you have 1.5x your salary in retirement savings, you're on the green, "starting at 25," glide path and will only need to save about 10%/year. If your assets are between one and 1.5 times your salary, your annual contribution should be between 10% and 13.5%. (See below for a more precise estimate.)</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
The Real World May, No WILL, be Different!</h3>
<div style="font-size: medium; font-weight: normal;">
Remember, these are <i>benchmarks</i>! In the real world, your retirement portfolio will not consistently deliver 5% real returns year after year. The "glide paths" in this chart show what would result <i>if</i> it did in order to give you a benchmark.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
<i>What If I Earn More, or Less, Than $100,000?</i></h3>
<div>
If you earn between $40,000 and $100,000, your targets will be between these numbers and those in the <a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">average salaries</a> post. Earn more and your targets will be between these numbers and the targets for those <a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">without Social Security</a>.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
Some Key Assumptions (short version)</h3>
<div style="font-size: medium; font-weight: normal;">
<span style="background-color: white;">I've assumed that you:</span></div>
<div class="MsoNormal" style="font-size: medium; font-weight: normal;">
</div>
<ul style="font-size: medium; font-weight: normal;">
<li><span style="text-indent: -0.25in;">Invest a constant percentage of your <i>then-current</i> salary each year until retirement</span></li>
<li><span style="text-indent: -0.25in;">Earn a pre-retirement <i><a href="http://observationsandnotes.blogspot.com/2009/04/about-nominal-real-rates-of-return.html" target="_blank">real</a> (i.e., after-inflation) </i>rate of return of 5% -- after <a href="http://observationsandnotes.blogspot.com/2011/10/expenses-impact-on-investment-returns.html" target="_blank">taxes & expenses</a><i>.</i></span></li>
<li><span style="text-indent: -0.25in;">Retire at age 65, receiving 75% of your current annual income (inflation-adjusted) in retirement</span></li>
<li><span style="text-indent: -0.25in;">Follow the "4% Withdrawal" guidelines, starting by withdrawing 4% of your assets your first year in retirement.</span></li>
</ul>
<div style="font-size: medium; font-weight: normal;">
For a more detailed discussion of the 4% withdrawal approach and my assumptions, see <a href="http://www.observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html">Assumptions for the 4% Withdrawal Retirement Graphs</a>.</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
For an estimate more tailored to your specific circumstances, and to get a better feel for the impact of some of the variables, I encourage you to enter your own data into <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="">My SIMPLE Retirement Savings Calculator</a>. Specifics of your situation, such as your pre-retirement investment returns and expected spending level in retirement, could make a significant difference. The graphs are better for getting a feel for the "big picture."</div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<div style="font-size: medium; font-weight: normal;">
<br /></div>
<h3>
Related Posts</h3>
<div style="font-size: medium; font-weight: normal;">
<b>Other Easy-to-use graphs</b> based on these same concepts:</div>
<ul style="font-size: medium; font-weight: normal;">
<li><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need to Retire?</a> an overview that calculates targeted savings on retirement date for <i>all</i> salaries. An interesting overview.</li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should You Have in Savings?</a> For those without Social Security, by age </li>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should Higher Income Earners Save For Retirement?</a> a companion post to this one</li>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: for typical worker</li>
<li><a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: w/o social security</li>
</ul>
<div style="font-size: medium; font-weight: normal;">
<a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="">My SIMPLE Retirement Savings Calculator</a> an interactive calculator tailored to your specific circumstances.</div>
<div style="font-size: medium; font-weight: normal;">
<a href="http://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="http://en.wikipedia.org/wiki/Trinity_study" target="new">Wikipedia</a>.</div>
<div style="font-size: medium; font-weight: normal;">
<a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">How Long Will You Live?</a> A look at one of the most vexing issues in retirement planning.</div>
<div style="font-size: medium; font-weight: normal;">
<a href="http://observationsandnotes.blogspot.com/2009/01/do-you-need-personal-strategic-plan.html" target="_blank">Do You Need a Personal Strategic Plan?</a>: a process for establishing life priorities</div>
<div style="font-size: medium; font-weight: normal;">
<b>For lists of other popular posts and an index of posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b></div>
<div style="font-size: medium; font-weight: normal;">
Copyright © 2012 Last modified: 12/2/2020</div>
<h3>
Share This Article</h3>
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Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-2827547386957324562012-12-06T14:00:00.000-06:002012-12-28T21:11:04.478-06:00Personal Strategic Planning Development - Optional tasks<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhl99fKwmN-DAM33XTSslMH1XRx_41DginDHv_v0flaItCT8DDPF5oQFahixPnVwUK9_vF_-HAmCFr3NW9j5IjPsQ8BhYwOvaaY7-MEUsf6vuiPTVFVzdALmi3VC0UZXB3q8P4_BwXSyew2/s1600-h/Reaching+The+Top.jpg"><img alt="" border="0" id="BLOGGER_PHOTO_ID_5298797403584705826" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhl99fKwmN-DAM33XTSslMH1XRx_41DginDHv_v0flaItCT8DDPF5oQFahixPnVwUK9_vF_-HAmCFr3NW9j5IjPsQ8BhYwOvaaY7-MEUsf6vuiPTVFVzdALmi3VC0UZXB3q8P4_BwXSyew2/s320/Reaching+The+Top.jpg" style="float: left; height: 240px; margin: 0px 10px 10px 0px; width: 320px;" /></a><br />
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Following are some additional thoughts relevant to developing your personal strategic plan. For the most part, these address special situations, or are optional enhancements to <a href="http://observationsandnotes.blogspot.com/2009/05/creating-personal-strategic-plan.html" target="_blank">Creating Your Personal Strategic Plan</a>.<br />
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Create SMART Goals and Strategies</h3>
Make your goals and strategies SMART: <b>S</b>tretching (challenging), <b>M</b>easurable (so that you know whether or not they have been achieved), <b>A</b>chievable, <b>R</b>elevant, and <b>T</b>ime-bound (i.e., set target dates/deadlines). (Note: There are many variations of what SMART means, but all are similar. See, e.g., <a href="http://en.wikipedia.org/wiki/SMART_criteria" target="_blank">Wikipedia</a>).<br />
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Avoid Analysis Paralysis<a name='more'></a></h3>
Don't try to create a perfect plan -- especially if it's your first one. If you're comfortable that you have a plan that will help you, go with it.<br />
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Additional Thoughts re Creating Personal Goals and Strategies</h3>
<span style="font-family: inherit;">If you're having trouble organizing your SWOTs, here are some additional ways to organize SWOTs within a dream to arrive at goals, or within a "goal group" to arrive at strategies:</span><br />
<ul>
<li><span style="font-family: inherit;">By major outcome: For example, for your health dream, two big goals/ major outcomes might be 1) to lose 30 pounds, and 2) to lower cholesterol to 200 or less.</span></li>
<li><span style="font-family: inherit;">Chronologically: However, group the SWOTs by <i>major</i> milestone, not every single step. Some special cases of chronological sequence are:</span></li>
<ul>
<li><span style="font-family: inherit;">Study, plan, do. </span></li>
<li><span style="font-family: inherit;">Analyze, design, construct, test, implement, monitor/maintain.</span></li>
</ul>
</ul>
<span style="font-family: inherit;">You can also use the "define requirements" approach described below to organize your SWOTs. For example, for your career goal the job requirements might lead you to define goals for education, experience and knowledge/skills, and then organize your SWOTs around those goals. </span><br />
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Focus Your Plan</h3>
If it's your first one, keep it simple and <i>focused</i>. Don't spread yourself too thin. Initially, you may want to limit yourself to, say, 3 dreams -- picking one as your priority, until you've had some successes.<br />
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Create a summary version of your plan to help you focus; it should be no more than <i>one</i> page. Typically, my summary plan includes only my dreams and goals -- though on occasion I may include some critical strategies as well. For me, the "outline view" within Microsoft Word is ideal for this purpose since it allows me to hide the lower levels of my outline (in MSWord, click "View" - "Outline"). Click <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0sq8-7NIbXkU0U5wUW9N25xzwYHMsJRbwujVUrdQftgHlkPHtzAePoSekKfpigI8jsYUk9IqTfhiLsdhqBM03h7gx5vqUPe1A1E08iSA5LCP5wgWVYgy9B3UI4Ck9ri65qqKhYXc8sXP2/s1600-h/Sample+Personal+Strategic+Plan+-+p1.jpg" target="new">here</a> to see the first page of a sample plan created using the Outline view. If you prefer something less "dry," consider using "mind mapping" software such as <a href="http://www.mindjet.com/campaign/lp/mindjet/mm8/default.aspx?gclid=CL_ppN2KzJsCFRFWagodynrwKg#" target="new">Mindjet</a> or <a href="http://www.smartdraw.com/" target="new">SmartDraw</a>. Here's a view of that <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgE6oeeof5iEPweTByUDGZSwuac7rqtrB95SROVXToOLxH4a_tilMIOHiUX5yM-9DXOXVwqPxxIpCN7NEhW_sgAm5BunEp-AdOxwIeydFCTsxJlaqsLRcISYRctocNTs6ShBnZ7UTtpqNbm/s1600-h/Personal-Strategic-Plan-Example.jpg" target="new"> same plan</a> using SmartDraw.<br />
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Special Situations: Define "Requirements" for Realizing Your Dreams</h3>
After you have described your dreams, but before you start brainstorming your SWOTs, consider doing a little research on one or more of your <i>most critical</i> dreams. What education, experience, knowledge, skills, attitudes, behaviors, etc. will it take to realize that dream?<br />
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This approach is especially effective where objective requirements already exist, such as in career planning. In that case, job descriptions of your ideal job often effectively define the requirements you must meet in order to be a successful candidate. Knowing these requirements can not only help you define your goals, but also give you objective criteria to help you identify your strengths and weaknesses. <br />
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However, don't limit this approach to your career plan; consider it for any dream that you want to devote special attention to. Helpful expert advice is available from friends & family, on the web, and elsewhere, to help you realize virtually any dream. You can use that information to get a clear understanding of what it takes to be successful in that area so that you can set appropriate goals and address your deficiencies. (For a more detailed discussion of this approach, see <a href="http://observationsandnotes.blogspot.com/2009/12/career-planning-approach.html" target="new">An Approach to Career Planning</a>).<br />
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Special Situations: More on Creating Goals</h3>
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There are two basic ways to create goals -- 1) starting with your SWOTs, and 2) starting with your dreams. It is sometimes helpful to try both ways.<br />
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Creating Personal Goals From Your SWOTs ("Bottom-Up")</h3>
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This approach to creating goals is "bottom-up" since it starts with your SWOTs. SWOTs for a dream will sometimes fall naturally into smaller, related groups. For example, your financial dream might include a group consisting of SWOTs such as: I spend too much eating out; I have no savings; I don't know where my money goes; I make a good salary; I'm behind on my credit cards; I'm living paycheck to paycheck; etc.<br />
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The idea is to create a goal that, when reached, overcomes the obstacles (weaknesses and threats) and takes advantage of your strengths and opportunities. In this case, you might create a goal such as "Develop and implement an annual budget."<br />
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Creating Personal Goals From Your Dreams ("Top-Down")</h3>
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The "top-down" approach starts with your dream. What are the most critical goals you need to accomplish in order to realize this dream? This approach will be especially useful when you naturally envision a sequence of goals that you must reach in order to make the dream a reality. For example, if one of your dreams is to start a new business, one of your early goals might be "Develop business plan."<br />
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If you initially create your goals by starting with your dreams, try following up with a bottom-up approach using your SWOTs to flesh out your goals and clarify what reaching each goal will entail. If you initially create your goals starting with your SWOTs, try following up with a top-down, "big picture," approach to make sure that you've covered all the important goals.<br />
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Core Posts in This Series:</h3>
<a href="http://observationsandnotes.blogspot.com/2009/02/discovering-your-vision.html" target="new">Discovering Your Vision</a>: identifying the dreams you want to make come true!<br />
<a href="http://observationsandnotes.blogspot.com/2009/02/developing-personal-strategic-plan-1.html" target="new">Identifying Strengths, Weaknesses, Opportunities & Threats (SWOTs)</a>: the central step in the planning process.<br />
<a href="http://observationsandnotes.blogspot.com/2009/05/creating-personal-strategic-plan.html" target="_blank">Creating Your Personal Strategic Plan</a> -- developing & writing your goals and strategies.<br />
<b style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18px;"><i><br /></i></b>
<b style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18px;">For a schematic that illustrates the relationship between <i>all</i> of my personal strategic planning posts, see</b><span style="background-color: white; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18px;"> </span><a href="http://www.observationsandnotes.blogspot.com/2012/12/personal-strategic-planning-index.html" style="background-color: white; color: #7f7f7f; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18px; text-decoration: initial;" target="_blank">Personal Strategic Planning Schematic</a><br />
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The picture is from <a href="http://www.publicdomainpictures.net/" target="new">Public Domain Pictures</a>.<br />
Copyright © 2012 Last modified: 12/28/2012<br />
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Share This Article</h3>
<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-89288224533926351642012-12-03T19:48:00.001-06:002020-09-27T19:36:39.793-05:00Personal Strategic Planning Schematic<br />
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjc1S2pft1YUsoIs3g5xNXf81HaZDQaW4867rvg-UAoQd_fSy01xie2pSzPjo7LD3FU7UzvRpme0UAtd50ldObSQy5lnPysuh-PA8goHAUFq0iP2lx6Wa64LIZ02EcP22NJcAwwvakuaseX/s1600/Personal+Strategic+Planning+Schematic+2.jpg" style="margin-left: auto; margin-right: auto;"><img alt="index to personal strategic planning posts" border="0" height="357" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjc1S2pft1YUsoIs3g5xNXf81HaZDQaW4867rvg-UAoQd_fSy01xie2pSzPjo7LD3FU7UzvRpme0UAtd50ldObSQy5lnPysuh-PA8goHAUFq0iP2lx6Wa64LIZ02EcP22NJcAwwvakuaseX/s400/Personal+Strategic+Planning+Schematic+2.jpg" title="Personal Strategic Planning Schematic" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">Personal Strategic Planning Schematic</span></b></td></tr>
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<b>Intros/Overviews</b></h3>
<a href="http://observationsandnotes.blogspot.com/2009/01/do-you-need-personal-strategic-plan.html" target="new">Do You Need a Personal Strategic Plan?</a> A process for establishing life priorities<br />
<a href="http://observationsandnotes.blogspot.com/2009/05/sample-personal-strategic-plan.html" target="new">A Personal Strategic Plan Example</a>: An introduction to & overview of the planning process, including examples and sample formats.<br />
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<b>Fast Track/The Core Processes: A 3-step plan to <i>change your life</i>, in 2-4 hours!</b></h3>
1. <a href="http://observationsandnotes.blogspot.com/2009/02/discovering-your-vision.html" target="new">Discovering Your Vision</a>: The first step in the planning process.<br />
2. <a href="http://observationsandnotes.blogspot.com/2009/02/developing-personal-strategic-plan-1.html" target="new">Identifying SWOTs (Strengths, Weaknesses, Opportunities & Threats)</a>: developing the primary inputs to your plan.<br />
3. <a href="http://observationsandnotes.blogspot.com/2009/05/creating-personal-strategic-plan.html" target="new">Creating a Personal Strategic Plan</a>: using your SWOTs to develop goals & strategies and write your plan.<br />
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<b>Optional Plan Development Processes</b></h3>
<a href="http://observationsandnotes.blogspot.com/2011/12/strategic-plan-mission-vision-values.html" target="new">Mission, Vision & Values</a>: For readers willing to spend more time in order to develop a more robust plan, and those developing <i>family</i> strategic plans.<br />
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<a href="http://www.observationsandnotes.blogspot.com/2012/12/personal-strategic-planning-optional.html" target="_blank">Strategic Plan Development - Optional</a>: Identifying requirements, setting SMART goals, etc.<br />
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<b>Implementation</b></h3>
<a href="http://observationsandnotes.blogspot.com/2009/06/implementing-personal-strategic-plan.html" target="new">Implementing Your Personal Strategic Plan</a>: Some suggestions -- dream boards, monitoring progress, ...<br />
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Special Plans</h3>
<a href="http://observationsandnotes.blogspot.com/2010/12/creating-mini-personal-strategic-plan.html" target="new">A More Effective Approach to New Year's Resolutions!</a>: taking about 1/2 hour to create a mini-plan for just one important area of your life.<br />
<a href="http://observationsandnotes.blogspot.com/2009/12/career-planning-approach.html" target="new">A Career Planning Approach</a>: A mini strategic plan limited to career.</div>
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Implementation Tools</h3>
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<b>RETIREMENT PLANNING:</b></div>
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<a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need to Retire?</a> establishing the target for retirement savings.</div>
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<b>What Percent of Your Salary Should You Save for Retirement? (by starting age)</b></div>
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<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">% to Save, with Social Security</a></li>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">% to Save: High-Income, with Social Security</a></li>
<li><a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html" target="_blank">% to Save, Without Social Security</a></li>
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<b>How Much Should You Have in Retirement Savings? (by age)</b></div>
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<li><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">How Much Should You Have in Retirement Savings?</a> with Social Security</li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">High-Income Earners with Social Security</a></li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should You Have in Retirement Savings?</a> w/o Social Security</li>
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<a href="http://observationsandnotes.blogspot.com/2011/12/simple-retirement-saving-calculator.html" target="_blank">My SIMPLE Retirement Saving Calculator/Spreadsheet</a>: The spreadsheet used to create the above graphs</div>
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<b>BUYING A HOUSE:</b><br />
<a href="https://observationsandnotes.blogspot.com/2009/07/planning-to-buy-house-spreadsheet.html" target="_blank">Planning to Buy a House Calculator</a>: An interactive home purchase planning tool<br />
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<i><b>Link to <a href="http://www.observationsandnotes.blogspot.com/p/subject-index-for-stock-market-posts.html">Full Subject Index</a>, or see links to individual categories below the blog header.</b></i></div>
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Copyright © 2012 Last modified: 12/28/2012<br />
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Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com2tag:blogger.com,1999:blog-7073066728112402191.post-89948678546405859572012-11-25T21:27:00.002-06:002020-12-02T20:51:29.641-06:00Assumptions for the "4% Withdrawal Rate" Retirement Savings Graphs<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUD-lHAEo62y6MJ7ZRJv8iJZfFroLnED1Q5iau7F9YnKcwOEkm7axWqk3x4W_u7XMOmfuwwkDaJyzBUIR8bmzXfgGPipIlyGNu_cm_KeRL0VqfeNk9ymho1IEyE6fYb7LWeZs2eIiRwZbv/s1600/Retirement+Picture.jpg" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="Retirement planning: retire safely & comfortably using 4% initial withdrawal rate" border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUD-lHAEo62y6MJ7ZRJv8iJZfFroLnED1Q5iau7F9YnKcwOEkm7axWqk3x4W_u7XMOmfuwwkDaJyzBUIR8bmzXfgGPipIlyGNu_cm_KeRL0VqfeNk9ymho1IEyE6fYb7LWeZs2eIiRwZbv/s1600/Retirement+Picture.jpg" title="Retirement" /></a></div>
The Observations posts based upon the Trinity Study / "4% Withdrawal Rate" guidelines for retirement savings include a short version of the assumptions made. This post discusses the assumptions underlying those graphs in more detail. (See Related Materials below for a list of the posts.)<br />
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The Trinity Study (The "4% Withdrawal Rate" Approach to Determining Retirement Savings Needs)</h3>
The <a href="http://en.wikipedia.org/wiki/Trinity_study" target="_blank">Trinity Study</a> was a retirement study conducted by three finance professors from Trinity University. They assumed that, <a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">given today's lifespans</a>, a safe retirement portfolio should be large enough to last for thirty years. Their methodology involved simulating the performance of a variety of stock/bond allocations using actual historical market performance data. Their research concluded that the most important factor in having retirement savings last that long was a realistic <i>initial withdrawal rate</i>. Further, they found that for a wide range of portfolios, a portfolio would have lasted 30 years more than 90% of the time if you started with a 4% initial withdrawal rate.<br />
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<a name='more'></a>The portfolios were tested by withdrawing 4% of the portfolio in the initial year of retirement. Thus, the portfolio initially held 25 years worth of expected expenses. Withdrawals were increased by inflation each year after that to fund the hypothetical retiree's yearly expenses. They defined success as not running out of money before 30 years had elapsed. <br />
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The hypothetical portfolios ranged from 100% stocks and 0% bonds to 0% stocks and 100% bonds. Results were calculated based on <i>actual market performance</i> in the forty 30-year periods from 1926 to 1995. The portfolios that were at least 50% stocks were successful more than 90% of the time; in addition, they supported a <i>5%</i> withdrawal rate more than 75% of the time.<br />
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While this period is broadly representative, there is no guarantee that future market returns will be as large, or that <i>your</i> post-retirement returns will match <i>market</i> returns. (Also, these were hypothetical portfolios; as far as I know, they did not include expenses.)<br />
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Their Study Assumes Retirees Receive Neither a Pension, nor Social Security!</h3>
Note that the Trinity study assumes the investment portfolio is the retiree's <i>only</i> source of income. However, where noted, <i>my graphs include the impact of Social Security</i>. On the other hand, because so few people are eligible for traditional pensions, my graphs do not account for their impact. If you have a pension that includes cost of living adjustments you can calculate the impact by using <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a>, and combining your Social Security income with your pension income.<br />
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Additional Assumptions for the Observations Retirement Savings Graphs</h3>
The graphs in the "what % should I save" and "how much should I have in savings" series assume that the <i>goal is to save enough money by your retirement date to follow the 4% withdrawal approach</i>. (See Related Materials below for links to the graphs.)<br />
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In order to calculate these benchmarks, I've assumed that you are starting your retirement savings plan "from scratch." That is, you currently have no significant retirement savings. (However, if you already have savings, see links below to the "How Much Should I Have In Retirement Savings?" series for a way to use these same benchmarks.) In addition, I assume that once you start, your salary will increase <i>at the same rate as inflation</i>, and you will contribute a constant percent of that salary each year until you retire (i.e., your contributions also increase with inflation).<br />
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My Social Security benefits were calculated based upon then current rules; these rules may changed since then, but typically the basic shape of the curve remains the same. Combining the salaries of more than one Social Security beneficiary will result in my underestimating the benefits that are due (under current rules); do each wage-earner separately. The "w/o Soc Sec" graphs don't have this issue. (See below re changing the assumptions.)<br />
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The graphs show results <b><i>if</i> </b>you earn pre-retirement returns of 3, 5 and/or 7% -- <i>after inflation, </i><i><a href="http://observationsandnotes.blogspot.com/2011/10/expenses-impact-on-investment-returns.html" target="_blank">taxes and investment expenses</a>.</i> If inflation averages 3%, "5% after inflation" is equivalent to the 8% nominal return often assumed by financial planners. Historically, this would typically have required that at least 50-60% of your assets be in stocks. However, even so, there is <i>no guarantee</i> that you will earn your <i>planned</i> pre-retirement returns. No matter what returns you plan, I suggest you monitor your <i>actual</i> progress along the way and make adjustments as appropriate! (See more on <a href="http://observationsandnotes.blogspot.com/2009/04/about-nominal-real-rates-of-return.html" target="_blank">"real" -- i.e., after-inflation -- vs nominal returns</a>.)<br />
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Finally, I've assumed you will retire at age 65, and want about 75% of your current annual salary, adjusted for inflation, each year in retirement. (Don't forget, you'll no longer be saving a big chunk of your salary for retirement.)<br />
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What If I Want to Change Some of the Assumptions?</h3>
For an estimate more tailored to your specific circumstances, and to get a better feel for the impact of some of the variables, I encourage you to enter your own data into <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a>. Specifics of your situation, such as your expected pre-retirement investment returns, expected Social Security benefits, and expected spending level in retirement, could make a significant difference.<br />
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Related Materials:</h3>
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<a href="http://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="http://en.wikipedia.org/wiki/Trinity_study" target="new">Wikipedia</a>.<br />
<a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">How Long Will You Live?</a> A look at one of the most vexing issues in retirement planning.</div>
<a href="http://observationsandnotes.blogspot.com/2011/10/expenses-impact-on-investment-returns.html" target="_blank">Real World Expenses Reduce Published Market Returns</a> : on real world vs hypothetical returns<div><br />
<div>
<b>Easy-to-use graphs based on the Trinity Study/"4% withdrawal" approach.</b></div>
<div>
<ul>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: for typical worker</li>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should Higher Income Earners Save For Retirement?</a></li>
<li><a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: w/o social security</li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should You Have in Retirement Savings? by age.</a> </li>
</ul>
<a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a> interactive calculator using these same calculations.</div><div><br /></div>
<div>
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b></div>
<div>
Copyright © 2012 Last modified: 11/30/2020<br />
<h3>
Share This Article</h3>
<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. </div>
</div>Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-79144302741559328462012-11-22T09:00:00.001-06:002020-12-01T10:50:47.479-06:00How Much Should You Have in Retirement Savings? (by age)In this post, we use the "4% withdrawal" approach to retirement planning to approximate how much you should have in savings at each age. And, <i>given how much you actually have, what percent you should save going forward</i>.<br />
<br />
<h3>
Have You Saved Enough for Your Retirement?</h3>
Have I saved enough for my retirement? Am I on track? These are critical questions for those hoping to retire in comfort. In the previous series, we calculated <a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html" target="_blank">the percent of your salary that you should save</a> each year. In this series, we provide some benchmarks to monitor your progress along the way.<br />
<br />
<h3>
Retirement Savings Targets as a Multiple of Salary: Benchmarks, by age</h3>
<div>
<br /></div>
<div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZqSsItFPe9v4qnBvY3ALEV9nF8fus7zYS_VxXS6ljA3e9bYkmWxWn5XeCOL3yQnZQjlJSGeaqrfwVRjoYNu13VlqecwlrYtJWNg4BARuFVSEN3Ir_PRPP2w9XhrXb9nnjFxS7fuoo_0x7/s1600/Retirement+Savings+Multiple+of+Salary+-+no+ss2.jpg" style="margin-left: auto; margin-right: auto;"><img alt="How much should I have in retirement savings" border="0" height="271" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZqSsItFPe9v4qnBvY3ALEV9nF8fus7zYS_VxXS6ljA3e9bYkmWxWn5XeCOL3yQnZQjlJSGeaqrfwVRjoYNu13VlqecwlrYtJWNg4BARuFVSEN3Ir_PRPP2w9XhrXb9nnjFxS7fuoo_0x7/s400/Retirement+Savings+Multiple+of+Salary+-+no+ss2.jpg" title="Retirement Savings Targets as Multiple of Salary" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">Retirement Savings Targets as Multiple of Salary</span></b></td></tr>
</tbody></table>
This post is designed for those who do not expect to receive a pension or Social Security -- regardless of salary level. Otherwise, see <a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">with Social Security</a>, or <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">higher income earners.</a><br />
<br /></div>
<h3>
Without Social Security or a Pension, You'll Need ~19 Times Your Salary to Retire Comfortably at Age 65!</h3>
<div>
<br /></div>
As you can see from the chart above (click to expand), <i>no matter when you start saving</i>, by the time you're 65 you'll need about 19 times your "then-current" salary in retirement savings! That is, assuming you want to maintain <br />
<a name='more'></a>the same standard of living in retirement that you could afford during your working years. Then-current just means it's times your salary <i>at that time</i>, not your current year's salary.<br />
<br />
If you wanted 100% of your salary, the 4% guideline would recommend that you accumulate (100%/4%=) <i>25 times</i> your salary. However, since we're assuming you only <i>spend</i> 75% of your salary, including what you spend on taxes, you'll need "only" (25 x 75%=) 18.8 times your salary. If that seems like a lot, remember that you could possibly <a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">spend 30 years <i>or more</i> in retirement</a>. So, if your money was not invested and not earning a return you could need even more! (Note: For more on the 4% withdrawal approach, see Assumptions below.)<br />
<br />
<h3>
The Glide Paths: How Much Should I Have Saved for Retirement by Age 35, 40, 50 & 60?</h3>
The blue line shows the idealized retirement portfolio growth for a person who started saving for retirement at age 30. We already know that this person should be saving almost 21%/year based upon the results from <a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html" target="_blank">What Percent of Your Salary Should You Save for Retirement?</a>. (see assumptions below)<br />
<br />
As you can see from the graph, if you start saving at age 30, the targets are:<br />
<ul>
<li>about 1.5x (times) then-current salary by age 35</li>
<li>3x salary by age 40 </li>
<li>7.5x salary by age 50, and</li>
<li>about 15x then-current salary by age 60.</li>
</ul>
<br />
<h3>
Regardless of When you Start, You'll Want About 15x Salary at Age 60</h3>
If instead of starting to save at age 30 you start at age 35 (the red line), the target at age 40 is 2x salary instead of 3x salary. However, over time, the lines converge. <i>Regardless</i> of when you start saving, you'll need about 19 times salary at age 65; and, you'll need 14-15 times salary at age 60.<br />
<br />
<h3>
<i>
If You Already Have Savings</i>, Hop on a Glide Path at Any Time</h3>
The previous series assumed you were starting from scratch. However, you can hop on these "glide paths" at any time. For example, suppose you are 35 years old, have been saving only sporadically, but have just received an inheritance. As a result, you now have 1.5 times your salary in savings.<br />
<br />
To see where you stand, find your age on the horizontal axis and then check to see where your savings put you relative to the benchmarks. One and a half times salary puts you right on the blue, "starting at age 30," glide path, and you'll want to save 21%/year from this point forward.<br />
<br />
If, at age 35, you have 2x your salary in retirement savings, you're almost up to the green, "starting at 25," glide path and will only need to save 16%/year. If your assets are between 1.5 & 2 times your salary, your annual contribution should be between 16% and 21%. (See below for a more precise estimate.)<br />
<br />
<h3>
The Real World May, No WILL, be Different!</h3>
Remember, these are <i>benchmarks</i>! In the real world, your retirement portfolio will not consistently deliver 5% real returns year after year. The "glide paths" in this chart show what would result <i>if</i> it did in order to give you a benchmark. <br />
<br />
<h3>
<i>
What If I'm Eligible for Social Security?</i></h3>
See <a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">with Social Security</a>, or <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">higher income earners.</a> If you are eligible for Social Security but want to include it at a <i>reduced</i> amount, <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a> will not calculate what you should have now, but <i>will</i> calculate how much you should save going forward.<br />
<br />
<h3>
Some Key Assumptions (short version)</h3>
<span style="background-color: white;">I've assumed that you:</span><br />
<div class="MsoNormal">
</div>
<ul>
<li><span style="text-indent: -0.25in;">Invest a constant percentage of your <i>then-current</i> salary each
year until retirement</span></li>
<li><span style="text-indent: -0.25in;">Earn a pre-retirement <i><a href="http://observationsandnotes.blogspot.com/2009/04/about-nominal-real-rates-of-return.html" target="_blank">real</a> (i.e., after-inflation) </i>rate of return of 5% -- after <a href="http://observationsandnotes.blogspot.com/2011/10/expenses-impact-on-investment-returns.html" target="_blank">taxes & expenses</a><i>.</i></span></li>
<li><span style="text-indent: -0.25in;">Retire at age 65, receiving 75% of your current annual income
(inflation-adjusted) in retirement</span></li>
<li><span style="text-indent: -0.25in;">Follow the "4% Withdrawal" guidelines,
starting by withdrawing 4% of your assets your first year in retirement.</span></li>
</ul>
For a more detailed discussion of the 4% withdrawal approach and my assumptions, see <a href="http://www.observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html">Assumptions
for the 4% Withdrawal Retirement Graphs</a>.<br />
<br />
For an estimate more tailored to your specific circumstances, and to get a better feel for the impact of some of the variables, I encourage you to enter your own data into <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a>. Specifics of your situation, such as your pre-retirement investment returns and expected spending level in retirement, could make a significant difference. However, the graphs give you a better feel for the "big picture."<br />
<br />
<br />
<h3>
Related Posts</h3>
<b>Other Easy-to-use graphs</b> based on these same concepts:<br />
<ul>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Will You Need to Retire?</a> An interesting overview showing the impact Social Security has on how much money you will need on your retirement date.</li>
<li><a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: w/o social security; a companion post to this one.</li>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">What Percent of Your Salary Should You Save For Retirement?, by starting age</a>: for typical worker</li>
<li><a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should Higher Income Earners Save For Retirement?</a></li>
<li><a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">How Much Should You Have in Retirement Savings? - ave income</a> with Soc Sec, by age</li>
<li><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">How Much Should You Have in Retirement Savings? - higher incomes</a> with Soc Sec, by age</li>
</ul>
<a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My SIMPLE Retirement Savings Calculator</a> an interactive calculator version of the spreadsheet used to generate the graphs<br />
<a href="http://observationsandnotes.blogspot.com/2009/05/sample-personal-strategic-plan.html" target="_blank">A Personal Strategic Planning Example</a>: a process for establishing life priorities.<br />
<br />
<a href="http://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="http://en.wikipedia.org/wiki/Trinity_study" target="new">Wikipedia</a>.<br />
<div>
<b>For lists of other popular posts and an index of posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b></div>
<br />
Copyright © 2012 Last modified: 12/1/2020<br />
<h3>
Share This Article</h3>
<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com1tag:blogger.com,1999:blog-7073066728112402191.post-59386234588761555752012-11-15T08:00:00.001-06:002020-12-01T18:44:22.116-06:00What Percent of Income Should High-Income Earners Save For Retirement?Here's another easy-to-use graph that suggests the percent of your income to save for retirement depending upon the age you start saving. It's based upon the commonly used 4% withdrawal approach to retirement savings, and is designed for a high income wage earner planning to receive Social Security in retirement. Earlier posts targeted a <a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">typical social security recipient</a>, and those <a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html" target="_blank">without Social Security</a>.<br />
<br />
<h3>
Some Benchmark Percents of Income to Save for Higher Income Earners with Social Security, by Starting Age</h3>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWaSRWWwPgRhIQzrSmZLxRLIGaJaFAunV2WAxwG63OeIPrUy2Zdvuhgsv0g78mjCX6r06Oc9FUOGqQ9sW_T2CE2gU33uNajjwxd4Wg-zLddoBJxj9C1dU-TsxVOIM4VufoNuVkUIxbtWO3/s1600/Annual+Retirement+Savings+-+high+income+w+Soc+Sec.jpg" style="margin-left: auto; margin-right: auto;"><img alt="Retirement planning: what percent of salary should I save yearly (higher income w social security)" border="0" height="270" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWaSRWWwPgRhIQzrSmZLxRLIGaJaFAunV2WAxwG63OeIPrUy2Zdvuhgsv0g78mjCX6r06Oc9FUOGqQ9sW_T2CE2gU33uNajjwxd4Wg-zLddoBJxj9C1dU-TsxVOIM4VufoNuVkUIxbtWO3/s400/Annual+Retirement+Savings+-+high+income+w+Soc+Sec.jpg" title="Annual Retirement Savings Percentage Needed (higher income)" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">Annual Retirement Savings Percentage Needed (higher income)</span></b></td></tr>
</tbody></table>
<br />
Most people are not saving enough for retirement! Because of the way Social Security is designed, those with higher salaries need to save <i>an even higher percentage</i> of their salaries than the average person. Waiting too late to start planning & saving for retirement, or not saving enough, can be the difference between having a secure, comfortable retirement and a drastically reduced standard of living.<br />
<br />
<h3>
High Income Earners Should Plan to Start Early, and Save A Larger Percent of Their Annual Salary -- Even With Social Security</h3>
<div>
The <a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">previous post</a> in this series benchmarked savings percentages needed for a typical worker with Social Security (and no pension). Unfortunately, the <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">percentage of your salary that Social Security will replace</a> <i>decreases</i> as your salary <i>increases</i>. As a result, higher income earners <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">need to accumulate more years of salary in savings</a> by their retirement date. Therefore, they should plan to save a larger percentage of their income than those with average salaries in order to reach the higher targets.<br />
<a name='more'></a></div>
<br />
For this post, I've assumed a salary of $100,000/year; using 2011 data, that would put you in <a href="http://blogs.wsj.com/economics/2011/10/19/what-percent-are-you/" target="_blank">the top 20th percentile</a> in the United States. Based on current rules, Social Security will replace about 26% of your yearly salary instead of the more typical 40% replacement rate (for those earning about $40,000). Partly as a result, in order to retire in the style you are accustomed to:<br />
<ul>
<li>You will likely need to save more than 13% of your salary each year, unless you start before you are 30 and/or earn a higher than average return on your investments. </li>
<li>If you wait until age 30-35 to start saving for retirement, you'll probably need to save around 13-26% of your salary each year.</li>
<li>Wait until age 40-45 and you may need to change some of my assumptions.... (see below)</li>
</ul>
<br />
<h3>
How Much Should You Save for Retirement Yearly, in Dollars</h3>
<div>
Assuming you earn $100,000/year, start your retirement savings at age 30, and earn the 8% nominal (5% real) return often assumed by retirement planners (the middle line on the graph), you'll need to save at least 13% of your salary each year. (See <a href="http://observationsandnotes.blogspot.com/2009/04/about-nominal-real-rates-of-return.html">nominal vs. real returns</a> for an explanation of the difference between the two.) That's $13,000/year or about $1100/month. To keep up with inflation, you'll need to increase your contribution each year to 13% of <i>that</i> year's salary.</div>
<br />
Start after age 30, and you will need to save more. Earn a lower return? You'll need to save more. And, remember, this is just <i>retirement savings</i>. Saving to buy a house? for your kids' education? That's extra!<br />
<br />
<div>
Note that, even at these low salary replacement levels, qualifying for Social Security is still very beneficial. At these salary levels, a few percentage points reduction in your needed contribution <i>each year</i> adds up to big bucks over your working career.</div>
<div>
<br /></div>
<h3>
Your Results May Vary: Some Key Assumptions</h3>
<div>
<span style="font-family: inherit;"><br />
</span></div>
<span style="background-color: white; font-family: inherit; line-height: 18px;">I've assumed that you:</span><br />
<div class="MsoNormal" style="background-color: white; line-height: 18px;">
</div>
<div class="MsoNormal" style="background-color: white; line-height: 18px;">
</div>
<ul style="background-color: white; line-height: 18px; margin: 0.5em 0px; padding: 0px 2.5em;">
<li style="margin: 0px 0px 0.25em; padding: 0px;"><span style="text-indent: -0.25in;"><span style="font-family: inherit;">Start with no retirement assets. (Already started? see <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">How Much Should I Have in Savings?</a>)</span></span></li>
<li style="margin: 0px 0px 0.25em; padding: 0px;"><span style="text-indent: -0.25in;"><span style="font-family: inherit;">Have only one income earner in the family</span></span></li>
<li style="margin: 0px 0px 0.25em; padding: 0px;"><span style="text-indent: -0.25in;"><span style="font-family: inherit;">Invest a constant percentage of your <i>then-current</i> salary each year until retirement</span></span></li>
<li style="margin: 0px 0px 0.25em; padding: 0px;"><span style="text-indent: -0.25in;"><span style="font-family: inherit;">Earn the assumed pre-retirement rates of return (3, 5, or 7% after <a href="http://observationsandnotes.blogspot.com/2011/10/expenses-impact-on-investment-returns.html" style="color: #7f7f7f; text-decoration: initial;" target="_blank">taxes, expenses,</a> <i>and inflation</i>)</span></span></li>
<li style="margin: 0px 0px 0.25em; padding: 0px;"><span style="text-indent: -0.25in;"><span style="font-family: inherit;">Retire at age 65, receiving 75% of your current annual income (inflation-adjusted) in retirement</span></span></li>
<li style="margin: 0px 0px 0.25em; padding: 0px;"><span style="text-indent: -0.25in;"><span style="font-family: inherit;">Start by withdrawing 4% of your assets your first year in retirement, and increase that amount by inflation each year thereafter.</span></span></li>
</ul>
<span style="font-family: inherit;"><span style="background-color: white; line-height: 18px;">For a more detailed discussion of the 4% withdrawal approach and my assumptions, see </span><a href="http://www.observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html" style="background-color: white; color: #7f7f7f; line-height: 18px; text-decoration: initial;">Assumptions for the 4% Withdrawal Retirement Graphs</a><span style="background-color: white; line-height: 18px;">.</span></span><br />
<br />
For an estimate more tailored to your specific circumstances, and to get a better feel for the impact of some of the variables, I encourage you to enter your own data into<a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html"> my simple retirement savings calculator</a>. The "big picture" will probably remain the same; specifics of your situation, such as your expected spending level in retirement, can make a significant difference.<br />
<br />
<h3>
<i> What If My Yearly Salary is More ( or Less) Than $100,000?</i></h3>
<div>
<br /></div>
<div>
If you earn more than $100,000, you will need to save even more! For example, earn $250,000 and <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">your Social Security income replacement rate</a> drops from 25% to 11%. As a result, here are some sample starting age-savings percentages, assuming a 5% real return: age 25-13%; 30-18%; 35-24%; 40-34%. If you earn more than $250,000 your suggested savings rates will be between those rates and the <a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html" target="_blank">suggested savings for those without Social Security</a>.<br />
<br />
Earn $40,000 to $100,000 and your suggested savings rates will be lower; they'll be between these rates and the <a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">suggested savings rates for a typical Social Security recipient</a>.<br />
<br />
For a more precise estimate, calculate your expected Social Security income (see related materials below), and enter your data into<a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html"> my simple retirement savings calculator</a>.<br />
<br /></div>
<h3>
What's My Target? How Much Will I Need to Accumulate By The Time I Retire?</h3>
<div>
For targeted savings levels for <i>all</i> salary levels, see <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need To Retire?</a> These are the amounts that the 4% withdrawal approach would recommend you have in order to retire at age 65 -- and the amounts the above savings rates are designed to achieve.<br />
<br /></div>
<h3>
</h3>
<h3>
What If I Can't Save This Much of My Income?</h3>
<div>
<br /></div>
We'll discuss some options in future posts in this series. For example, delaying retirement can significantly reduce the amount that you need to save.<br />
<br />
<h3>
</h3>
<h3>
Related Materials:</h3>
<div><a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html">My SIMPLE Retirement Savings Calculator</a> an interactive calculator tailored to your individual circumstances using these same concepts.</div><a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need To Retire?</a> Target savings when you retire for all salary levels.<br />
<a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-hi.html" target="_blank">How Much Should You Have in Retirement Savings? -higher incomes</a>. Companion post to this one.<br />
<a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html">What Percent of Your Yearly Salary Should You Save For Retirement, by starting age</a>: similar to this post, but for those without Social Security<br /><a href="http://www.observationsandnotes.blogspot.com/2009/05/sample-personal-strategic-plan.html" target="_blank">A Personal Strategic Planning Example</a>: A process for establishing your life priorities<br />
<a href="http://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="http://en.wikipedia.org/wiki/Trinity_study" target="new">Wikipedia</a>.<br />
<a href="http://www.ssa.gov/estimator/" target="new">Social Security Income Estimator</a> : the official site. For an approximation, <a href="http://www.calcxml.com/do/ret04" target="new">see this site</a>, or <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">my graph</a>.<br />
<div>
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b></div>
<br />
Copyright © 2012 Last modified: 2/23/2013<br />
<h3>
Share This Article</h3>
<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;">Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below.Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-36639346863436665872012-11-08T09:00:00.001-06:002020-12-02T16:53:48.017-06:00What Percent of Your Income Should You Save For Retirement? (by starting age, with Social Security)Here's an easy to use graph that suggests the percent of your income to save for retirement depending upon the age you start saving. It's based upon the commonly used 4% withdrawal approach to retirement savings, and designed for a typical wage earner who is planning to receive Social Security. Other posts address <a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">saving percentages for higher income earners</a>, and those <a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html">without Social Security</a>. For other situations, see the end of this post.<br />
<br />
Most people do not save enough for retirement. <a href="http://www.huffingtonpost.com/2012/03/29/older-women-basic-expenses_n_1389179.html?ref=business" target="_blank">Sixty percent of older women have trouble covering their basic monthly expenses</a>. <a href="http://www.huffingtonpost.com/2012/08/06/americans-die-without-money_n_1746862.html" target="_blank">Nearly half of Americans die with virtually no financial assets</a>. Waiting too late to start planning & saving for retirement, or not saving enough, can be the difference between having a secure, comfortable retirement and spending your golden years in poverty.<br />
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<h3>
Some Benchmark Retirement Saving Rates for Typical Employees with Social Security, by Starting Age</h3>
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheJxrP9IC0olxuSYnRAHELg98l2vwHTzjwuzAZi0O4iMuxZ6-RUiNecSnmZoMwObifHKbczGUHbiYAl7QEeXBZ-9WjKzZI7bnLkn6TrapDPXJPIETHU1hAvk33KPonwBOUSZSEMc6BXU_v/s1600/Annual+Retirement+Savings+w+Soc+Sec.jpg" style="margin-left: auto; margin-right: auto;"><img alt="Retirement Planning: what percent of salary should save -- by starting age" border="0" height="270" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEheJxrP9IC0olxuSYnRAHELg98l2vwHTzjwuzAZi0O4iMuxZ6-RUiNecSnmZoMwObifHKbczGUHbiYAl7QEeXBZ-9WjKzZI7bnLkn6TrapDPXJPIETHU1hAvk33KPonwBOUSZSEMc6BXU_v/s400/Annual+Retirement+Savings+w+Soc+Sec.jpg" title="Annual Retirement Savings Percentage Needed (w Soc Sec)" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">Annual Retirement Savings Percentage Needed (w Soc Sec)</span></b></td></tr>
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<h3>
Even <i>With</i> Social Security, You Will Need to Start Early, and Save A Significant Percent of Your Yearly Salary</h3>
The <a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html">previous post</a> in this series showed results for workers without a pension or Social Security. However, about 90% of American workers <i>do</i> have Social Security; it<a href="http://www.socialsecurity.gov/pressoffice/basicfact.htm" target="_blank"> typically replaces roughly 40% of their pre-retirement income</a> (<i>not </i>the at least 70% of pre-retirement income normally assumed to be needed). Even so,<br />
<a name='more'></a>this is a <i>huge</i> advantage, a) because it reduces the amount of income their savings need to replace, b) because it is a more reliable, less volatile, source of retirement income than investment income, and c) because it is <i>lifetime inflation-adjusted</i> income (many pensions do not include cost of living adjustments). <br />
<br />
Still, the graph above (click to expand) suggests that <i>even if you expect Social Security to replace 40% of your salary</i>, in order to retire in the style that you are accustomed to:<br />
<ul>
<li>You will likely need to save more than 7.5% of your salary each year unless you start before you are 30, and/or earn a higher than average return on your investments. <br />
</li>
<li>If you wait until age 30-35 to start saving for retirement, you'll probably need to save around 8-15% of your salary each year.<br />
</li>
<li>Wait until age 40-45 and you're looking at saving 15-25% <i>of your gross income</i> each year.</li>
</ul>
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<h3>
How Much Should You Save Yearly for Retirement, in Dollars</h3>
For this post, I've assumed that you earn about $40,000/year, and have Social Security but no pension. (See <a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">this post</a> if you earn more) In that case, start your retirement savings at age 30, and earn the <a href="http://observationsandnotes.blogspot.com/2009/04/about-nominal-real-rates-of-return.html">8% nominal (5% real) return</a> typically assumed by retirement planners (the middle line on the graph) and you'll need to save about 8% of your salary. That's $3,200/year or $265/month. Plan to increase that contribution each year to keep up with inflation.<br />
<br />
Start later, and you will need to save more. Earn a lower return? You'll need to save more. The point is, even the typical Social Security recipient faces a significant savings challenge since Social Security will only replace about 40% of his income. And, remember, this is just <i>retirement savings</i>. Saving to buy a house? for your kids' education? That's extra!<br />
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<h3>
If You Earn More Than $40,000 Plan To Save Even More!</h3>
The graph in the previous post was independent of salary. Unfortunately, <i>this one is not. </i><br />
<br />
Under current rules, an employee earning $40,000/year will receive about $15,725/year in Social Security benefits (in current dollars) if he retires at age 65; Social Security will replace about 40% of his pre-retirement income. This is right in line with the average Social Security recipient -- which is why I chose that salary level for this post.<br />
<br />
However, the <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">percentage of pre-retirement income that Social Security replaces</a> <i>decreases</i> as your salary increases. Earn $50,000 and your income replacement rate drops to 37%; at $100,000, it's 25-26%; at $250,000, it's down to 11%. And, of course, as Social Security's contribution to your retirement income decreases, <i>your</i> contribution has to increase. To see the impact, see <a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should High Income Earners Save for Retirement?</a><br />
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<h3>
What's My Target? How Much Will I Need to Accumulate By The Time I Retire?</h3>
<div>
For targeted savings levels for <i>all</i> salary levels, see <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need To Retire?</a> These are the amounts that the <i>4%</i> withdrawal approach would recommend you have in order for your savings to last for 30 years -- and the amounts the above savings rates are designed to achieve.</div>
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<h3>
Your Results May Vary: Some Key Assumptions</h3>
<span style="background-color: white;">I've assumed that you:</span><br />
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<ul>
<li><span style="text-indent: -0.25in;">Start with no retirement assets</span></li>
<li><span style="text-indent: -0.25in;">Have only one income earner in the family</span></li>
<li><span style="text-indent: -0.25in;">Invest a constant percentage of your <i>then-current</i> salary each year until retirement</span></li>
<li><span style="text-indent: -0.25in;">Earn the assumed pre-retirement rates of return (3, 5, or 7% after <a href="http://observationsandnotes.blogspot.com/2011/10/expenses-impact-on-investment-returns.html" target="_blank">taxes, expenses,</a> <i>and inflation</i>)</span></li>
<li><span style="text-indent: -0.25in;">Retire at age 65, receiving 75% of your current annual income (inflation-adjusted) in retirement</span></li>
<li><span style="text-indent: -0.25in;">Start by withdrawing <b>5%</b> of your assets your first year in retirement, and increase that amount by inflation each year thereafter.</span></li>
</ul>
<br />
The standard assumption these days is 4%, not 5%; I assumed 4% in the previous post. However, if Social Security is expected to cover over 50% of your yearly expenses in retirement, as in this case, you <i>may</i> be able to afford to be a little more aggressive. <i>Ideally</i>, I'd still try to target a 4% withdrawal rate.<br />
<br />
For a more detailed discussion of the 4% withdrawal approach and my assumptions, see <a href="http://www.observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html">Assumptions for the 4% Withdrawal Retirement Graphs</a>.<br />
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<h3>
What If I Can't Save This Much?</h3>
We'll discuss some options in future posts. For example, delaying retirement will reduce the amount that you need to save.<br />
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<h3>
The Retirement Planning Interactive Calculator: </h3>
For an estimate more tailored to your specific circumstances, and to get a better feel for the impact of some of the variables, I encourage you to enter your own data into <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="">My SIMPLE Retirement Savings Calculator</a>. For example, suppose you are eligible for Social Security, but expect reduced payments in the future. Other specifics of your situation, such as your pre-retirement investment returns and expected spending level in retirement, could also make a significant difference. The graphs are better for seeing the "big picture."<br />
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<h3>
Related Materials:</h3>
<a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need to Retire?</a> The bigger picture. An overview that calculates the "ending" targets for <i>all</i> salary levels (using 4%, not 5%, withdrawal rates).<br />
<a href="http://observationsandnotes.blogspot.com/2012/12/how-much-should-i-have-in-savings-ave.html" target="_blank">How Much Should You Have in Retirement Savings?</a> : to monitor your progress along the way.<br />
<a href="http://observationsandnotes.blogspot.com/2012/10/what-percent-of-salary-should-i-save.html">What Percent of Your Salary Should You Plan to Save For Retirement, by starting age</a>: similar to this post, but for those without Social Security<br />
<a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should <i>Higher Income Earners</i> Save For Retirement?</a><br />
<a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html">My SIMPLE Retirement Savings Calculator</a>: interactive calculator tailored to your specific circumstances<br />
<div>
<a href="http://observationsandnotes.blogspot.com/2009/01/do-you-need-personal-strategic-plan.html" target="_blank">Do You Need a Personal Strategic Plan?</a> a process for establishing your life priorities.</div>
<a href="http://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="http://en.wikipedia.org/wiki/Trinity_study" target="new">Wikipedia</a>.<br />
<a href="http://www.ssa.gov/estimator/" target="new">Social Security Income Estimator</a> : the official site. For an approximation, <a href="http://www.calcxml.com/do/ret04" target="new">see this site</a>, or <a href="http://observationsandnotes.blogspot.com/2013/02/how-much-will-receive-in-social-security.html" target="_blank">my graph</a>.<br />
<div>
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b></div>
Copyright © 2012 Last modified: 12/2/2020<br />
<h3>
Share This Article</h3>
<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com1tag:blogger.com,1999:blog-7073066728112402191.post-55077379631093939072012-10-22T08:30:00.001-05:002020-12-01T11:19:49.750-06:00What Percent of Your Salary Should You Save for Retirement? (by Starting Age)Here's an easy-to-use graph that suggests the percent of your salary you should save for retirement depending upon the age you start saving. It's based upon the commonly used 4% withdrawal approach to retirement savings, and is independent of your salary. Waiting too late to start your retirement planning & saving, or saving too little, can make the difference between having a secure, comfortable retirement and spending your golden years in poverty.<br />
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<h3>
What Percent of My Salary Should I Save for Retirement? Some Benchmarks by Starting Age</h3>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj9RUOxKTJ2N9KUgxL2LBH_7fA64PJMPp1DByb9R639hJFiekaRsEVoqEIEVnzklm_IIEk-PT_03RZhTqOAMc5OqR8Z4XnI7AznqVPOCMVvJzxTUqZf-8Yjai3V-QxC2DwhsBY2-Fb5Jy_0/s1600/Annual+Savings+Percentage+Needed+w-o+soc+sec.jpg" style="margin-left: auto; margin-right: auto;"><img alt="Retirement Planning: percent of salary to save each year -- by age you start saving" border="0" height="214" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj9RUOxKTJ2N9KUgxL2LBH_7fA64PJMPp1DByb9R639hJFiekaRsEVoqEIEVnzklm_IIEk-PT_03RZhTqOAMc5OqR8Z4XnI7AznqVPOCMVvJzxTUqZf-8Yjai3V-QxC2DwhsBY2-Fb5Jy_0/s320/Annual+Savings+Percentage+Needed+w-o+soc+sec.jpg" title="Annual Retirement Savings Percentage Needed" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b><span style="font-size: small;">Annual Retirement Savings Percentage Needed</span></b></td></tr>
</tbody></table>
<b>Note</b>:<b> This chart is for those who do not <i>expect</i> to receive Social Security.</b> See also <a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">Percent to Save With Social Security</a>, <a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">saving percents for higher income earners</a>, and the final section of this post.<br />
<br />
<h3>
Start Saving & Investing When You Are Young, And Don't Invest Overly Conservatively</h3>
This graph (click to enlarge) proposes some benchmarks for those planning to retire without a pension or Social Security. While your specific circumstances may differ from what I have assumed (see "Key Assumptions" below), they won't change the basic messages that I think this chart sends, namely:<br />
<ul>
<li>The earlier you start planning & saving for retirement, the better off you are (i.e., the less you will need to save each year)<a name='more'></a><br />
</li>
<li>The lower your return on investment, the more you will have to save each year<br />
</li>
<li>If you will not have a pension or Social Security, you very likely need to save <i>at least</i> 10% of your salary each year, regardless of when you start, or how much money you make.<br />
</li>
<li>If you wait until age 30-35 to start saving, you could easily need to save 20-40% of your salary each year in order to fund a comfortable retirement<br />
</li>
<li>Waiting until age 35 can mean that you will need to save approaching twice as much per month as would have been required if you had started at age 25<br />
</li>
<li>If you wait until age 40-45 you'll probably need to change some of the assumptions.... </li>
</ul>
<br />
While you're probably not surprised that you're better off starting early and earning a high return, you may be surprised at how quickly the savings burden can become unmanageable if you do not.<br />
<br />
<h3>
The Impact of Starting Age on Annual Retirement Savings Needed, in Dollars</h3>
The chart suggests that, without a pension or Social Security, if you start your retirement savings at age 25 and earn the 8% <a href="http://observationsandnotes.blogspot.com/2009/04/about-nominal-real-rates-of-return.html">nominal return</a> typically assumed by many retirement planners, you'll need to save about 16% of your annual salary each year.<br />
<br />
This means that if you earn $50,000 a year, you will need to save about $667/month or $8,000 <i>your first year</i> -- $16,000 if you're earning $100,000. Wait 10 years, and the yearly numbers jump to $14,000 and $28,000 (in <i>today's</i> dollars). Future years' contributions will need to be the appropriate percentage of <i>that year's</i> salary.<br />
<br />
Note: If long-term inflation is about 3%, then 8% nominal return roughly corresponds to the 5% "real" - after inflation - return line on the chart. (If you're not familiar with real returns, see <a href="http://observationsandnotes.blogspot.com/2009/04/about-nominal-real-rates-of-return.html">About Nominal & Real Rates of Return</a>.)<br />
<br />
<h3>
The Impact of Rate of Return on Yearly Retirement Savings Needed, in Dollars</h3>
Similarly, if you earn $50,000/year, start saving at age 25, and earn 6% nominal (3% real) return instead of the 8% assumed in the previous section, your contribution will need to increase from $667/month to about $1042/month or $12,500/year in the first year. With a $100,000 salary, that translates to $2084/month or $25,000/year.<br />
<br />
The 7% real (10% nominal) return line is included as an upper limit. Over very long periods of time, 50 years or more, a theoretical 100% stock portfolio has returned about 10%. However, few planners would recommend a 100% stock allocation.<br />
<br />
These results are based upon your <i>actual</i> returns, not on what you <i>planned</i> to earn. So, be realistic; choose expected returns that are consistent with historical returns for asset allocations similar to yours.<br />
<br />
<br />
<h3>
What's My Target? How Much Will I Need to Accumulate By The Time I Retire?</h3>
<div>
To determine how much you need to save by your retirement date, see the appendix at the end of <a href="http://www.observationsandnotes.blogspot.com/2012/12/how-much-savings-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need To Retire?</a> These are the amounts that the 4% withdrawal approach would recommend you have in order to retire at age 65 -- and the amounts the above savings rates are designed to achieve.<br />
<br /></div>
<br />
<h3>
The Key Assumptions</h3>
This post illustrates the impact of <i>two important factors in retirement planning</i>: when you begin saving for retirement, and how much you earn on your investments -- assuming you won't have a pension or Social Security.<br />
<br />
To provide a quick overview of the impact, I've assumed some typical values for some of the other critical factors. I've assumed you will retire at age 65, and spend about 75% of your current annual income (adjusted for inflation) each year in retirement. In addition, I've assumed that you plan to withdraw 4% of your retirement portfolio to fund your first year of retirement expenses, and increase that amount by inflation each year thereafter (For a more detailed discussion of the 4% withdrawal approach and my assumptions, see <a href="http://www.observationsandnotes.blogspot.com/2012/11/assumptions-for-4-withdrawal-graphs.html" target="_blank">Assumptions for the 4% Withdrawal Retirement Graphs</a>).<br />
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<h3>
What If My Situation is Different? e.g., <i>What If I Already Have Savings?</i></h3>
<div>
I've assumed that you currently have no retirement savings. <i>If you already have significant retirement savings</i>, see <a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should I Have in Retirement Savings?</a></div>
<div>
<br /></div>
Even if my other assumptions are a little off in your case, they'll likely at least put you in the right ballpark (unless you will have a pension or Social Security). However, for a more accurate estimate, and to get a better feel for the impact of some of the variables, I encourage you to enter your own data into <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html">my simple retirement savings calculator</a>. The "big picture" will probably remain the same; specifics of your situation, such as your expected spending level in retirement, can make a significant difference.<br />
<br />
<h3>
<i>
What If I Am Eligible to Receive Social Security?</i></h3>
Having a pension or Social Security makes a big difference. See <a href="http://observationsandnotes.blogspot.com/2012/11/percent-salary-2-save-w-social-security.html" target="_blank">What Percent of Your Yearly Salary Should You Save For Retirement? (with Social Security)</a>, or <a href="http://observationsandnotes.blogspot.com/2012/11/percent-save-retirement-higher-salary.html" target="_blank">What Percent of Income Should High Income Earners Save for Retirement?</a>. If you are eligible for Social Security but want to assume a reduced amount, see <a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html">My SIMPLE Retirement Savings Calculator</a>.<br />
<div>
<br />
<br /></div>
<h3>
Other Related Materials:</h3>
<a href="http://www.observationsandnotes.blogspot.com/2012/11/how-much-should-i-have-in-savings.html" target="_blank">How Much Should I Have in Retirement Savings? (by age)</a> companion post to this one.<br />
<a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html">My SIMPLE Retirement Savings Calculator</a> An interactive calculator tailored to your individual circumstances using these same concepts. <br />
<a href="http://observationsandnotes.blogspot.com/2009/01/do-you-need-personal-strategic-plan.html" target="_blank">Do You Need a Personal Strategic Plan?</a> a process for establishing your life priorities<br />
<br />
<a href="http://www.time.com/time/specials/packages/article/0,28804,1951190_1951442_1951468,00.html">Start Retirement With a 4% Withdrawal Rate</a> A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see <a href="http://en.wikipedia.org/wiki/Trinity_study" target="new">Wikipedia</a>.<br />
<div>
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b></div>
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Copyright © 2012 Last modified: 12/1/2020<br />
<h3>
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmRCNrrpQWKylRxP6bxqZRhfayrNsZO-P3X53Yo-AQbucNZfyH05waCZttS1ZfUDSZRZ7Ehbmvo6wD5QAvRLFXkoLylRN9LQKf9m7z_cs4Bjw5oxYQEoTPD8QaMn9G-WT_gOssv_ccRJU6/s1600/Big+crowd.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="215" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmRCNrrpQWKylRxP6bxqZRhfayrNsZO-P3X53Yo-AQbucNZfyH05waCZttS1ZfUDSZRZ7Ehbmvo6wD5QAvRLFXkoLylRN9LQKf9m7z_cs4Bjw5oxYQEoTPD8QaMn9G-WT_gOssv_ccRJU6/s400/Big+crowd.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-size: small; text-align: start;">How do you find your friends in a crowd of 75,000 people?</span></td></tr>
</tbody></table>
<br />
<div style="text-align: center;">
<b>DRAFT</b></div>
<div style="text-align: center;">
<br /></div>
<h3>
Tailgating at the Texans - Packers Monday Night Football Game</h3>
The Houston Texans have sold out every game in their 10-year history. Thus, the Texans-Packers Monday Night Football game will have over 70,000 football fans in attendance. Thousands of additional fans bought "tailgating" tickets, which admit them to the parking lot, but not the stadium itself. How do you find someone in that mass of humanity?<br />
<br />
<h3>
</h3>
<h3>
Don't Rely on Your Cell Phone</h3>
If you do not arrive at the parking lots with the rest of your tailgating party, finding them somewhere amidst 75,000 fans can be a problem. Under normal circumstances, you'd just whip out your handy cell phone and have them give you directions and describe key nearby landmarks. Unfortunately, this method may be problematical in this situation.<br />
<br />
A crowd of 75,000 people in such a constricted area may well overwhelm the local cell phone tower capacity -- even with the additional capacity that the league trucks in for the occasion. It's very difficult to <br />
<a name='more'></a>complete calls in that environment (texting is much more likely to be successful). So, what do you do? Here are two options I'll be trying out tonight.<br />
<br />
<h3>
</h3>
<h3>
Using Google Maps</h3>
If you and someone in the party you are trying to find both have Droids, you can use Google Maps to help you locate your friends. Go to Google Maps - Settings - Location Settings, and check "Enable location sharing." Then, click on "Manage your friends." At the bottom of the screen, click on the add friend icon (the icon is a human profile, followed by a +). You can enter the email addresses manually, or select friends from your contacts. Your friend will then be sent an email asking him to authorize you to have access to his location.<br />
<br />
Once you're authorized to see his location, both your location and his will show when you open Google Maps. You can then navigate accordingly. When you're through, you can disable location sharing if you like.<br />
<br />
This basic process should work for Blackberrys as well -- though, of course, the key sequence is different.<br />
<br />
<h3>
</h3>
<h3>
Using Find My Car</h3>
Since the Find My Car (FMC) app determines your longitude and latitude, it's useful for more than just remembering where your car or hotel is located. If you and your friends have FMC, you can use that to find each other (note: <a href="https://play.google.com/store/apps/details?id=com.elibera.android.findmycar&feature=search_result#?t=W251bGwsMSwxLDEsImNvbS5lbGliZXJhLmFuZHJvaWQuZmluZG15Y2FyIl0.">it's available free</a> on Google Play).<br />
<br />
From the FMC main screen, your friend should scroll to the right to bring up the list of additional functions, then choose "Send current GPS-pos." He can then choose to send his current position via Gmail, and enter your email address. Other options are to send via text, Facebook, Twitter, etc. Obviously, you want him to send it via a method that you can receive on your phone. <br />
<br />
When you receive the message, his current position will arrive formatted as a URL. Click on the URL, and then choose to complete the action using Find My Car. FMC will then store those GPS coordinates in your list of positions as "My position."<br />
<br />
Next, from the main FMC menu, chose Find - My position. You can then choose to either "show on map," or "navigate" to have FMC navigate you to your friends' coordinates.<br />
<br />
<h3>
</h3>
<h3>
Just in Case</h3>
My experience with GPS is that it is not always precise, so I would ask your friend to also send a supplemental text with additional info -- e.g., section numbers and nearby landmarks.<br />
<br />
Good luck. And, let me know if you have any corrections.<br />
<br />
<br />
<h3>
Related Posts</h3>
<div>
<a href="http://observationsandnotes.blogspot.com/2012/06/syncing-android-smartphone-calendars-pc.html">Syncing Android Calendars with PCs (MS Outlook)</a></div>
<div>
<a href="http://observationsandnotes.blogspot.com/2012/09/syncing-android-addresses-contacts-pc.html">Syncing Android Contacts / Addresses with Your PC</a></div>
<div>
<a href="http://observationsandnotes.blogspot.com/2012/10/nfl-all-ex-houston-texans-football-team.html">My All Ex- Houston Texans Team</a></div>
<div>
<a href="http://observationsandnotes.blogspot.com/2012/01/nfl-football-houston-texans-strategy.html">The Houston Texans' Strategy is Paying Off</a></div>
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b><br />
Copyright © 2012 Last modified: 10/16/2012<br />
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<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-44836701119817206672012-10-06T09:00:00.000-05:002012-10-14T15:24:56.785-05:00My All Ex-Houston Texans Team<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDOs-wuEIdZrfcuuLY7BD8ViNsMvaeGbwjO2sKCvEgSodxU7fsFH89qjNNCG6hp-T8ogym9vdm8dWrWz2PftpU3VXhpzSCW7rF4A4K_40WzYMXn60ddKpVcLk5_SoMyBO7PFpLqnE4r1xW/s1600/IMG_0140+-+Copy.JPG" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img alt="All Ex-Houston Texans Football Team" border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDOs-wuEIdZrfcuuLY7BD8ViNsMvaeGbwjO2sKCvEgSodxU7fsFH89qjNNCG6hp-T8ogym9vdm8dWrWz2PftpU3VXhpzSCW7rF4A4K_40WzYMXn60ddKpVcLk5_SoMyBO7PFpLqnE4r1xW/s320/IMG_0140+-+Copy.JPG" title="" width="320" /></a></div>
Not many years ago, if a player couldn't make the Houston Texans, his chances of making some other NFL team were... well, let's say "slim."<br />
<br />
How far the Texans have come! Now, the Texans see ex-Texans on the opposing side virtually every week -- often as starters. In fact, it occurred to me that you could put a pretty good football team together consisting only of current NFL players that the Texans had released. Here's my team (and where they are now). <br />
<br />
<h3>
My All-Ex-Houston Texans Team: Offense</h3>
<ul>
<li>QB: Rex Grossman (Redskins)</li>
<li>RB: Chris Ogbonnaya (Browns)<a name='more'></a></li>
<li>FB: Vonta Leach (Ravens)</li>
<li>WR: Jacoby Jones (Ravens), Jabar Gaffney (Dolphins)</li>
<li>TE: Joel Dreessen (Broncos)</li>
<li>OT: Eric Winston (Chiefs), Nick Mondek (Raiders-ps)</li>
<li>C/G: Cody Wallace (Buccaneers), Mike Brisiel (Raiders), Shelley Smith (Rams)</li>
</ul>
<div>
<br /></div>
<h3>
My All-Ex-Houston Texans Team: Defense</h3>
<ul>
<li>DE: Mario Williams (Bills), Jason Babin (Eagles)</li>
<li>DT: Amobi Okoye (Bears), Mitch Unrein (Broncos)</li>
<li>LB: DeMeco Ryans (Eagles), Zack Diles (Titans), D.J. Bryant (Buccaneers-ps)</li>
<li>CB: Dunta Robinson (Falcons), Tramon Williams (Packers)</li>
<li>S: Bernard Pollard (Ravens), Jason Allen (Bengals)</li>
</ul>
<div>
<br /></div>
<h3>
Some Positions Were Easy: Others Were a Stretch</h3>
What's really incredible is that there were positions where I actually had <i>options</i>. For example, I went with "the sex cannon" at QB; I could have chosen Matt Leinart, Dan Orlovsky, or ... David Carr -- all currently active.<br />
<br />
Still, there were a few places where I had to stretch. My ideal was a roster of players who were currently on some NFL team's 53, but in a couple of cases I dipped into the practice squads (ps). The biggest stretch was putting Jason Allen at safety. There has to be another ex-Texans safety under contract besides Bernard Pollard, but I couldn't find one.<br />
<br />
<h3>
Where Did I Screw Up?</h3>
Maybe with a little more research I could have come up with an even better team. So, let me know if you have any upgrades. Which players on my roster would you replace, and with whom? Remember, the player had to be under contract with an NFL team as of October 5 -- either on the 53 or the practice squad. As a result, as much as I wanted him to be, Steve Slaton is not my All-ex-Houston Texan running back. It appears the Dolphins dropped him and no one has picked him up. <br />
<br />
<h3>
Who Would You Like to Have Back?</h3>
This year's Texans roster is clearly the best ever. However, imagine if we could have a couple of "do-overs!" What two players would you like to have back? I'd go with DeMeco and Tramon (ignoring salary cap).<br />
<br />
<br />
<h3>
Related Materials</h3>
<div>
<a href="http://observationsandnotes.blogspot.com/2012/10/use-phone-gps-to-locate-your-friends.html">Using Your Android Phone GPS to Find Friends in a Crowd</a> (e.g., tailgating at Reliant)</div>
<div>
<a href="http://observationsandnotes.blogspot.com/2012/09/houston-texans-2012-nfl-football-season.html">Houston Texans 2012: A Few Words of Caution</a><br />
<a href="http://observationsandnotes.blogspot.com/2012/01/nfl-football-houston-texans-strategy.html">The Houston Texans Strategy Is Paying Off</a><br />
<a href="http://observationsandnotes.blogspot.com/2011/11/houston-texans-football-fire-kubiak.html">Fire Kubiak!</a><br />
<a href="http://observationsandnotes.blogspot.com/2011/09/nfl-football-houston-texans-draft.html">A Look at the Houston Texans' Draft Record</a><br />
While much of my approach is strategy based, readers shouldn't be surprised to hear that I'm also a huge proponent of sports analytics. For more on the analytical approach to sports, visit, e.g.,<br />
<a href="http://www.advancednflstats.com/">Advanced NFL Stats</a><br />
<a href="http://www.footballoutsiders.com/">Football Outsiders</a>: covers college football as well<br />
<a href="http://www.sloansportsconference.com/">MIT Sloan Sports Analytics Conference</a>: Covers all major sports: baseball, basketball, football, ....<br />
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b></div>
Copyright © 2012 Last modified: 10/14/2012<br />
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<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-11526894738893257112012-09-19T15:38:00.000-05:002013-03-17T18:54:17.222-05:00Syncing Android Contacts / Addresses With Your PC (MS Outlook)This post describes a method for keeping Android contacts and MS Outlook/ PC contacts in sync that works for most Android smartphones.<br />
<br />
In a previous post, I described the method I use for <a href="http://observationsandnotes.blogspot.com/2012/06/syncing-android-smartphone-calendars-pc.html" target="_blank">keeping my Android phone calendar in sync</a> with my PC (Microsoft Office - Outlook). In this post, I'll describe how I keep the two address books in synch using a similar approach. (I cover both Jelly Bean and ICS)<br />
<br />
<h3>
Synchronizing PC (MS Outlook) and Android Smartphone Contacts (Address Books)</h3>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAKI8TBTWlx2vqEVwJjzuDf8OL4XRocbuzLNRodeOLunUPIBAIMKQJLnlKDM1bQKinnRWOcW9pRTLjT5UDkxelj0X9yvcQzFKL4lVJgS0X1c-Payb_AYH_ml7REzNSAuluJXMuiPhqq7Tp/s1600/Smartphone+%2526+PC.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Synchronizing Android smartphone & PC (MS Office) contacts & addresses" border="0" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAKI8TBTWlx2vqEVwJjzuDf8OL4XRocbuzLNRodeOLunUPIBAIMKQJLnlKDM1bQKinnRWOcW9pRTLjT5UDkxelj0X9yvcQzFKL4lVJgS0X1c-Payb_AYH_ml7REzNSAuluJXMuiPhqq7Tp/s400/Smartphone+%2526+PC.jpg" title="Synchronizing Android Smartphone & PC Contacts" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Syncing Android & PC Contacts</td></tr>
</tbody></table>
<br />
As before, the key to this approach is to use my Google account as an intermediary. First I'll describe how I sync my Google Gmail contacts with my PC, then how I sync my Google Gmail contacts with my Motorola Droid RAZR smartphone.<br />
<a name='more'></a><br />
<h3>
Set Up Your Google Contacts (in your Gmail account)</h3>
First, I clicked on the down arrow in the upper left hand corner of my Gmail screen and switched from "Gmail" to "Contacts." This displayed an empty contact file that I would subsequently use to coordinate my phone and PC contacts. (Note: If you do not already have one, you will first need to <a href="https://accounts.google.com/ServiceLogin?service=mail&passive=true&rm=false&continue=https://mail.google.com/mail/?tab%3Dwm&scc=1&ltmpl=default&ltmplcache=2" style="background-color: white; color: #7f7f7f; font-family: Arial, Tahoma, Helvetica, FreeSans, sans-serif; font-size: 13px; line-height: 18px; text-decoration: none;" target="_blank">open a Gmail account</a>; they're free.)<br />
<br />
<h3>
Sync Microsoft Office (Outlook) and Google Gmail Contacts</h3>
Before going ahead, I backed up my Microsoft Outlook file by copying it do a flash drive (always a good idea when making major changes). To be extra safe, I also exported a separate file of only the Outlook <i>contacts</i> (File-Import and Export-Export to a file-Comma separated values-Contacts-specify destination file name).<br />
<br />
Next, I downloaded <a href="http://www.webgear.co.nz/Products/GOContactSync.aspx" target="_blank">GO Contact Sync Mod</a>. This <i>software is free</i> and is compatible with Microsoft Office 2003 and later, and Windows XP and later. Similar to the calendar sync, you can choose a one-way sync from Outlook to Gmail, one-way from Gmail to Outlook, or a full two-way sync. Users who want to "auto sync" can specify how frequently they want the files synchronized; the two files will be synchronized every n minutes per your specifications. Or, you can sync the files manually on demand by right clicking on the GO Contact Sync icon in the system tray, and choosing "sync."<br />
<br />
Since all of my contacts were initially in Outlook, I first did a one-way sync from Outlook to Gmail; I changed to the two-way sync once I had completed the initial sync/load. If you have multiple Outlook contact files, as I do, you can choose which of the contact files you want to sync with Gmail.<br />
<br />
<h3>
Synch Android Smartphone and Gmail Contacts</h3>
Setting up the sync between Gmail and my phone is straightforward. The sequence below was executed on a Motorola Droid RAZR running Jelly Bean. It's slightly different from the ICS sequence (see the appendix). I went to the "Sync" page via <b>Home-menu-System settings-Accounts/Google-choose the appropriate gmail account</b>. That takes you to the sync page for that gmail account; make sure to put a check in the box after contacts.<br />
<br />
As with the calendars, there is no place to specify how often you would like this sync to happen. It happens immediately if you make a change to the phone contacts; in addition, I assume updates are downloaded from Gmail every 15-20 minutes along with the calendar entries. There is no "sync now" button; you can accomplish that by unchecking the box and then rechecking it.<br />
<br />
Remember, to get a contact from Outlook to your phone will require a sync between Outlook and Gmail, followed by another sync between Gmail and your phone. To get a contact from your phone to your PC will require a sync between your phone and Gmail, followed by another sync between Gmail and Outlook. Keep this in mind when you are deciding how frequently you want to sync.<br />
<br />
<h3>
Syncing Your Android Address Book with Social Media: Facebook, LinkedIn, Twitter, Skype...</h3>
You can choose which of your social media contacts, if any, are shown in your phone's address book (via People-Contacts in custom view-contacts to display-Customize). For example, you could show LinkedIn and Facebook contacts, but not Twitter and Skype contacts. Information from the multiple address books will be combined <i>for display purposes only</i> to form a consolidated entry for each contact.<br />
<br />
Contacts listed under different names in different sources can be joined for display purposes (but later separated if appropriate). This is especially useful for handling situations where the same person has different names in different sources because of nicknames, maiden vs married names, etc.<br />
<br />
In Jelly Bean, the process for setting up the sync for each account is similar to the process for setting up the gmail sync -- i.e.menu-system settings-accounts/facebook, etc.<br />
<br />
<h3>
Observations & Caveats</h3>
While the most critical fields are compatible across platforms, the last time I checked there were still minor differences in the fields supported as you go from platform to platform. For that reason, if a contact's info goes much beyond basic name, address, phone number, email, I prefer to enter it in Outlook -- which seems to have the most robust set of fields. <br />
<br />
Initially, I noticed some problems with groups/categories carrying over from one platform to another; these problems seem to be remedied, or at least dramatically reduced.<br />
<br />
The basic processes described in this post should work not only for Motorola phones, but for most Android phones -- at least those running ICS or later. Give it a try.<br />
<br />
<br />
<h3>
Related Materials:</h3>
<a href="http://observationsandnotes.blogspot.com/2012/06/syncing-android-smartphone-calendars-pc.html" target="_blank">Syncing Android Calendars With PCs (MS Office) </a>: Same idea as this post, but for calendars.<br />
<a href="http://www.webgear.co.nz/Products/GOContactSync.aspx" target="_blank">GO Contact Sync Mod</a> :To download the software to sync Microsoft Office with Gmail.<br />
<a href="http://observationsandnotes.blogspot.com/2012/10/use-phone-gps-to-locate-your-friends.html">Using Android Phone GPS to Find Friends in a Crowd</a><br />
<a href="http://www.observationsandnotes.blogspot.com/2013/01/windows-8-how-to-get-started-screen.html" target="_blank">Getting Started With Windows 8: The Start Screen</a><br />
<a href="http://observationsandnotes.blogspot.com/2013/02/windows-8-intro-charms-search-share.html" target="_blank">Intro to Windows 8 Charms: Search, Share, Start, ...</a><br />
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b><br />
Copyright © 2012 Last modified: 3/17/2013<br />
<b><br /></b>
<b>Appendix: Syncing Android & Gmail/Google Contacts using ICS (Ice Cream Sandwich)</b><br />
Setting up the sync under ICS was slightly different from the Jelly Bean process above.<br />
<br />
<div>
(The sequences below were executed on a Motorola Droid RAZR running Ice Cream Sandwich. The sequence on your phone may be slightly different.) I went to the "Sync settings/ Data & Synchronization" page via <b>MyAccounts-Contacts-Google Contacts- your account</b>, and made sure "Synch Contacts" was checked. (An alternate way to get there is via <b>Home-menu-System settings-Accounts & Sync-your account</b>.)<br />
<br />
As with the calendars, there is no place to specify how often you would like this sync to happen. It appears to happen immediately if you make a change to the phone contacts; in addition, I assume updates are downloaded from Gmail every 15-20 minutes along with the calendar entries. Also, as before, if you click on the menu icon you can "sync now." In my case, a "sync now" took the contacts I had moved earlier from Outlook to Gmail and moved them from the Google account to my smartphone.</div>
<div>
<br /></div>
<h3>
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<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-50060174350397649622012-09-08T15:42:00.000-05:002013-09-08T12:34:17.223-05:00Houston Texans 2012: A Few Words of Caution<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDOs-wuEIdZrfcuuLY7BD8ViNsMvaeGbwjO2sKCvEgSodxU7fsFH89qjNNCG6hp-T8ogym9vdm8dWrWz2PftpU3VXhpzSCW7rF4A4K_40WzYMXn60ddKpVcLk5_SoMyBO7PFpLqnE4r1xW/s1600/IMG_0140+-+Copy.JPG" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDOs-wuEIdZrfcuuLY7BD8ViNsMvaeGbwjO2sKCvEgSodxU7fsFH89qjNNCG6hp-T8ogym9vdm8dWrWz2PftpU3VXhpzSCW7rF4A4K_40WzYMXn60ddKpVcLk5_SoMyBO7PFpLqnE4r1xW/s320/IMG_0140+-+Copy.JPG" width="320" /></a></div>
Less than two years ago, fans were calling for coach Kubiak's head; now the fans all seem convinced this is the year the Texans win the Super Bowl. I argued <i>then</i> that the fans were overreacting; they may be overreacting now as well.<br />
<br />
Don't get me wrong, I've never been more excited about the Texans. For the first time, it's not ridiculous to put Texans and Super Bowl in the same sentence. However, I view us as <i>contenders</i>, not odds on favorites. It's far from a sure thing that the Texans will even <i>get</i> to the Super Bowl, let alone win it.<br />
<br />
<h3>
Two Concerns</h3>
One obvious concern is the right side of the offensive line. Both the guard, Antoine Caldwell, and the tackle, Derek Newton, are new. Derek Newton is a second year player who<br />
<a name='more'></a>has never started an NFL regular season game. That's a concern. Equally important, is the impact of this change on chemistry. <br />
<br />
Last year, the Texans' offensive line was arguably the best in the NFL. One significant reason for that excellence was the fact that the line had been together for years; it takes time to build chemistry. Even if the new linemen are as talented as the players they replaced, I think it will take more time than most fans expect for the line to get back to its previous level of excellence. <br />
<br />
Don't forget that while for my money Arian Foster is the best back in the league, a key reason he led the league in rushing in 2010 was because he was running behind the best offensive line in the league. Thus, the running game is likely to suffer somewhat.<br />
<br />
Concern number two is rushing defense -- especially between the tackles. It was one of my concerns last year, but few teams were really able to exploit it. If anything, with the departure of Demeco Ryans, and Daryl Sharpton's injury, we're weaker inside this year than last. The success that the 49ers and Saints had running the ball during the preseason reinforced this concern.<br />
<br />
<h3>
The Wild Card: Injuries</h3>
Injuries are always a concern. To a large extent, winning the Super Bowl is a crapshoot. So much depends on avoiding key injuries, and peaking at the right time. And, while the Texans' depth is infinitely better than it was just a few years ago, there are still some scary spots.<br />
<br />
We saw last year what happened when we had to replace Andre Johnson with Jacoby Jones, and Matt Schaub with T.J. Yates. Losing either of those players this year would still be difficult to overcome -- though not as difficult as last year. In addition, even with our better depth there is still a <i>huge</i> drop-off if, for example, Jonathan Joseph goes out, or Brian Cushing. Losing J.J. Watt, or Duane Brown, or Chris Myers would hurt less, but would not be pretty. Multiple injuries in the same area -- e.g., on the offensive line -- would also be problematical.<br />
<br />
<h3>
Tough Schedule</h3>
My final concern is the schedule. The Broncos, Packers, Ravens, Bears, Lions and Patriots are all considered Super Bowl contenders. While I certainly expect the Texans to win the division, I expect they'll end up 10-6, 11-5 at best -- probably not good enough to win home field advantage throughout the playoffs. If the Texans are healthy, I think we can beat anybody when playing at Reliant Stadium. However, I'm not sure this team is ready to beat, e.g., the Patriots <i>in New England</i> in an AFC championship game. <br />
<br />
<h3>
What The Texans Have That The Others Don't Have</h3>
Still, the Texans do have one thing that virtually no other major contender seems to have -- balance. If we go all the way to the Super Bowl, and especially if we win, it will be because of that balance. As Coach Kubiak says, he wants to be able to win three ways, with offense, with defense, or with special teams. This team can do that. Not only that, on offense, it can win running and it can win passing.<br />
<br />
In short, I'm expecting an exciting year, with the Texans falling just short in the AFC Championship game. I hope I'm wrong.<br />
<br />
<h3>
Related Posts</h3>
<div>
<a href="http://observationsandnotes.blogspot.com/2013/09/houston-texans-2013-super-bowl-or.html" target="_blank">Houston Texans 2013: Super Bowl or ...</a></div>
<a href="http://www.observationsandnotes.blogspot.com/2013/01/houston-texans-patriots-playoff-game.html" target="_blank">Thoughts on the Upcoming Texans - Patriots Playoff Game</a><br />
<a href="http://observationsandnotes.blogspot.com/2012/10/nfl-all-ex-houston-texans-football-team.html">My All Ex-Houston Texans Team</a> A not-too-shabby team consisting solely of ex-Texans.<br />
<a href="http://observationsandnotes.blogspot.com/2012/01/nfl-football-houston-texans-strategy.html" target="_blank">The Houston Texans Strategy is Paying Off</a><br />
<a href="http://observationsandnotes.blogspot.com/2011/11/houston-texans-football-fire-kubiak.html" target="_blank">Fire Kubiak!</a><br />
<a href="http://observationsandnotes.blogspot.com/2012/10/use-phone-gps-to-locate-your-friends.html">Using Your Android Phone GPS to Locate Friends in a Crowd</a><br />
<a href="http://observationsandnotes.blogspot.com/2011/09/nfl-football-houston-texans-draft.html" target="_blank">A Look at the Houston Texans' Draft Record</a><br />
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b><br />
Copyright © 2012 Last modified: 9/8/2013<br />
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<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com0tag:blogger.com,1999:blog-7073066728112402191.post-27697748623944238552012-08-25T21:48:00.000-05:002012-11-13T16:10:34.064-06:00Build Your Own Pension Using Immediate Annuities<br />
<div class="MsoNormal">
If you don't have a pension, or your pension is too small,
consider creating your own pension using an immediate annuity (aka <i>single premium income annuity</i>).</div>
<br />
<br />
<h3>
Life Expectancies: Mortality Rates for 65 Year Old Males</h3>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjX16rf9w-SF9Hb7qOVfEoUuBUJxzZ4XnXqJPDw3til-Y7y_teGT4SE_xSn-_jRPTlQ_6rzHmgHctUI3cowCrJAYGlM4TCzm57js1lSkGSIDpnSbY5uGfCb1bMzIGAnU5yjNmTSc2mEKRde/s1600/Mortality+Rates.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="mortality rates reason for immediate income annuities" border="0" height="243" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjX16rf9w-SF9Hb7qOVfEoUuBUJxzZ4XnXqJPDw3til-Y7y_teGT4SE_xSn-_jRPTlQ_6rzHmgHctUI3cowCrJAYGlM4TCzm57js1lSkGSIDpnSbY5uGfCb1bMzIGAnU5yjNmTSc2mEKRde/s400/Mortality+Rates.jpg" title="Mortality Rates for 65 Year-Old Males" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Mortality Rates for 65 Year-Old Males</td></tr>
</tbody></table>
<br />
<br />
Here's another way to look at <a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">the life expectancy problem</a>. The graph above shows the mortality rates for a hypothetical population of males who are exactly 65 years old. The bar at age 65 indicates that 1.7% of this group would be expected to die while still 65 -- i.e., before reaching age 66. The remaining bars show what percent of the original group is expected to die each succeeding year until age 100.<br />
<br />
It's worth noting that<br />
<a name='more'></a>about 0.5% live even past 100 -- past the end of this chart. And, the chances of a person alive at age 100 being still alive at age 101 are greater than 50%. It's not until age 107 that you're not expected to finish a year that you start. (Think about the implications of that!)<br />
<br />
<h3>
Implications for Retirement Income</h3>
The point is, life is unpredictably long. If you want to cover you retirement <i>expenses</i> for the rest of your life, you need <i>income</i> for the rest of your life -- no matter how long that is. That is the challenge facing retirees.<br />
<br />
As we have seen, <a href="http://observationsandnotes.blogspot.com/2010/10/20-year-stock-market-returns.html" target="_blank">stock market results are incredibly variable</a>. The market is not well suited to being the primary source of dependable long-term income. By "dependable," I mean income that is as regular and consistent as your expenses are! That's the beauty of Social Security and pensions, especially pensions with cost of living adjustments. However, for many people annual Social Security and pension income falls far short of their annual expenses.<br />
<br />
<h3>
Immediate Annuities: Building Your Own Pension</h3>
The case for immediate annuities -- either alone or in conjunction with Social Security and/or a tradition pension -- is simple. It's a case of matching expenses with income that is similar in nature. That is, many planners recommend that you try to cover your permanent, recurring expenses with permanent, recurring income.<br />
<br />
If Social Security and pension income is insufficient, then a case can be made for adding enough in annuities to at least cover your permanent, non-discretionary expenses (e.g., basic food & shelter). More volatile sources of income that cannot be guaranteed for life, such as stock market assets, can then be used to cover discretionary expenses such as vacations. That way, if the stock market assets are depleted you can forgo some or all of the discretionary expenses until your finances improve. <br />
<br />
<h3>
Introduction to Immediate Annuities (aka Single Premium Income Annuities)</h3>
An immediate (lifetime) annuity is a series of payments guaranteed for the rest of your life. It is an insurance product that you buy for cash. In essence, you trade a lump sum (single premium) now for a stream of payments in the future. <br />
<br />
<h3>
Advantages & Disadvantages of Immediate Annuities</h3>
The primary advantage is that it is income that you cannot outlive, and is thus well-suited as a supplement to other guaranteed income (e.g., Social Security), though generally not past the point where your guaranteed income more or less matches your guaranteed expenses.<br />
<br />
In addition, this approach will generate more income than a like amount invested in bonds (because you can safely consume your "principal" as income).<br />
<br />
The primary disadvantage is that, at least for the basic product, the income is guaranteed <i>only</i> for life -- even if you only live another month or two. (With some companies, for an extra fee you can add riders to guarantee payout for a minimum length of time.)<br />
<br />
The price that you pay for a given annuity is primarily determined by your age and current interest rates. Since interest rates are currently near all-time lows, annuity prices are currently near all-time highs (i.e., annuities are currently expensive). <br />
<br />
<h3>
Some Implementation Hints</h3>
<br />
<ul>
<li>Policies are insured at the state level. Try to keep amounts within maximum insured limit for your state.</li>
<li>Choose highly rated insurance carriers, and consider diversifying across multiple carriers as an additional safety measure</li>
<li>Consider staggering purchases (similar to laddering bonds) to take advantage of changes in interest rates, and to assure that you do not make all your purchases at the current high prices.</li>
<li>Since your basic expenses will increase with inflation, consider paying the extra premium to have your annuity income payments adjusted for inflation as well -- especially if you are still a young retiree.</li>
</ul>
<h3>
Conclusion</h3>
Single payment income annuities have been somewhat overlooked as a source of guaranteed, stable income. They are now starting to get the attention they deserve.<br />
<br />
<br />
Note: All calculations based upon 2007 life expectancies for U.S. males.<br />
<br />
<br />
<h3>
Related Materials</h3>
<div>
<a href="http://online.wsj.com/article/SB10001424052748704681904576317351118089000.html" target="_blank">Is It Time to Buy an Annuity?</a> from the Wall Street Journal</div>
<div>
<a href="http://www.juliejason.com/images/0911_annuities_AAII_JOURNAL.pdf" target="_blank">How to Create Your Own Pension: A Closer Look at Immediate Annuities</a>: Reprint of article from The AAII (American Association of Individual Investors) Journal</div>
<div>
<a href="http://observationsandnotes.blogspot.com/2012/08/longevity-lifespan-how-long-will-live.html" target="_blank">How Long Will You Live?</a> Intro to one of the most vexing issues in retirement planning.<br />
<a href="http://news.morningstar.com/articles/article/555051/seeking-pension-replacement-in-retirement.aspx?CustId=&CLogin=&CType=&CName=&_LPAGE=/FORBIDDEN/CONTENTARCHIVED.HTML&_BPA=N" target="_blank">Seeking Pension Replacement in Retirement</a>, from Morningstar<br />
<a href="http://www.cbsnews.com/8301-505146_162-51277255/immediate-annuities/">Immediate Annuities</a>: A quick overview from CBS MoneyWatch with some more useful links.<br />
<a href="http://www.immediateannuities.com/" target="_blank">ImmediateAnnuities.Com</a> for sample annuity prices/quotes<br />
<a href="http://observationsandnotes.blogspot.com/2011/12/simple-retirement-saving-calculator.html" target="_blank">My SIMPLE Retirement Saving Calculator/Spreadsheet</a> A simple retirement planning tool.<br />
<a href="http://observationsandnotes.blogspot.com/2009/10/retirement-planning-calculator.html" target="_blank">A Retirement Planning Calculator/Spreadsheet</a> My traditional retirement planner.</div>
<div>
<b>For lists of other popular posts and an index of stock market posts, by subject area, see the sidebar to the left or the blog header at the top of the page.</b><br />
Copyright © 2012 Last modified: 11/13/2012</div>
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<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com3tag:blogger.com,1999:blog-7073066728112402191.post-12915369657010707532012-08-15T11:00:00.001-05:002020-12-14T20:44:58.068-06:00The Life Expectancy Problem: How Long Will You Live?Being realistic about how long you will live, your life expectancy, can increase your chances of a successful retirement.<br />
<br />
<h3>
Life-expectancy: People are Living Longer</h3>
<div class="separator" style="clear: both; text-align: center;">
</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgU_kBPmMtsQJa_k_BJyeHpLw3fIRQLEDefW-GY_wIQgEnsOE7NQ7kpenF3spXd7kHTdyEsB_PneLzSFenAiUJXY4XJLeCFmMAayVpLsN8CVxFYRBJCTwYYiOsQGHhVbWfIF6Mn96UeiqOZ/s1600/U.S.+life+expectancy+since+1920.gif" style="margin-left: auto; margin-right: auto;"><img alt="U.S. Life expectancy at birth (lifespan) since 1920" border="0" height="212" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgU_kBPmMtsQJa_k_BJyeHpLw3fIRQLEDefW-GY_wIQgEnsOE7NQ7kpenF3spXd7kHTdyEsB_PneLzSFenAiUJXY4XJLeCFmMAayVpLsN8CVxFYRBJCTwYYiOsQGHhVbWfIF6Mn96UeiqOZ/s320/U.S.+life+expectancy+since+1920.gif" title="Life Expectancy In The United States" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Life Expectancy In The United States</td></tr>
</tbody></table>
<br />
There is both good news and bad news about life expectancy. The good news is life spans are getting longer; life expectancy at birth has increased more than 15 years just since 1930. (see graph above. Click to expand.)<br />
<br />
<h3>
Increasing Life Expectancy is a Double-Edged Sword</h3>
The bad news is ... life spans are getting longer. One result of the dramatic decrease in mortality rates over the last century or so, is that retirees are spending more and more years in retirement. And, that means they are spending more and more years living off their retirement savings. While living longer is generally a good thing,<br />
<a name='more'></a>living longer than your money is not. <br />
<br />
One of the goals of retirement planning is to have enough money to live comfortably for the rest of your life. This planning is complicated by the inconvenient fact that you don't know how long "the rest of your life" will be. Furthermore, you are dealing with a moving target.<br />
<br />
<h3>
Life Expectancy is a Moving Target</h3>
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPvXInKcu0XxZ7OOpbegLOQapM__eTh9Zec3xwEAe1M_L5Y1N2dCRF2JKlTbZdORnh56o8lDqIcAa0itRkLUGxqeYd6HHE_wkaD_B4b7uNnslvxWrgIuFvSnE6SAYpBAwEcILbdBnmAxSw/s1600/Average+Life+Expectancy.jpg" style="margin-left: auto; margin-right: auto;"><img alt="U.S. males mortality rates, lifespans & life expectancy in 2007" border="0" height="292" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPvXInKcu0XxZ7OOpbegLOQapM__eTh9Zec3xwEAe1M_L5Y1N2dCRF2JKlTbZdORnh56o8lDqIcAa0itRkLUGxqeYd6HHE_wkaD_B4b7uNnslvxWrgIuFvSnE6SAYpBAwEcILbdBnmAxSw/s400/Average+Life+Expectancy.jpg" title="Average Life Expectancy" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Average Life Expectancy</td></tr>
</tbody></table>
<br />
As you can see from the chart above (click to expand), the remaining lifespan (green) line slopes downward. Every year we live results in having fewer years left to live. No surprise there. However, notice that the <i>total</i> expected lifespan (blue) line slopes <i>upward </i>-- especially later in life. That is, every year we live actually <i>increases</i> our total expected lifespan.<br />
<br />
<h3>
Retirement Planning Example</h3>
Suppose some conscientious 30 year-old decides to do a retirement plan. He looks at the chart and determines that he is expected to live another 47 years -- to age 77. Suppose further that he develops a detailed plan of how he will retire at age 65 and live comfortably until age 77. Finally, assume that everything goes exactly as planned until age 65. He retires at age 65 having accumulated exactly the retirement savings he needs to live comfortably for another 12 years. <br />
<br />
This retiree is in trouble. Why? Partly because now that he is 65, he is expected to live until he's 82 -- five years longer than the original projection. And, if he makes it to 82 he'll find that the target has been upped to 89!<br />
<br />
<h3>
What's Going On?</h3>
If you take 100,000 30-year-olds, on average we expect they will live for an additional 47.13 years. That is, we expect that half of the 30 year olds will die before age 77.13, and half will not.<br />
<br />
By age 65, many of the original group have expired. If the average for the whole group is 77.13, and we remove a sub-group with lifespans less than 77.13, then we would expect that the average for the remaining group would be more than 77.13. The surviving group has a life expectancy that is greater than the original group since it does not include the members who have already passed away.<br />
<br />
The point to remember is this: no matter when you calculate your expected termination date, if you actually reach that date, it will have moved.<br />
<br />
<h3>
Impact of Increased Longevity On Retirement Savings Needs</h3>
Obviously, the longer you live, the more money you will need. Less obvious is the fact that the longer you live the less your pension and annuity income will buy (unless they are full indexed for inflation). In fact, with average inflation, over a 25 year retirement a pension will lose about half of its value. (See <a href="http://observationsandnotes.blogspot.com/2013/01/what-will-100-be-worth-in-20xx-future.html" target="_blank">What Will $100 be Worth in 1-50 Years?</a>)<br />
<br />
<br />
<br />
Note: I don't mean to suggest that you do your retirement planning based upon <i>average</i> lifespans; fully half of the population is expected to live longer than the average. To be safe, you need to plan on longer than the average. This post is just trying to give you a feel for how mortality tables work. Note also that in order to simplify the calculations and discussion, 2007 mortality rates for U.S. males have been used for all calculations. Women live even longer.<br />
<br />
<h3>
Related Materials</h3>
<div><a href="https://observationsandnotes.blogspot.com/2020/12/how-much-money-will-i-need-to-retire.html" target="_blank">How Much Money Will You Need To Retire?</a> Using the "4% withdrawal" approach to retirement.</div><a href="https://observationsandnotes.blogspot.com/2012/08/lifetime-immediate-income-annuity.html" target="_blank">Build Your Own Pension Using Immediate Annuities</a> One approach to dealing with life expectancy uncertainty.<br />
<a href="http://observationsandnotes.blogspot.com/2013/01/what-will-100-be-worth-in-20xx-future.html" target="_blank">What Will $100 be Worth in 1-50 Years?</a> What long life can do to the value of your pension.<br /><a href="https://observationsandnotes.blogspot.com/2020/11/back-of-envelope-retirement-savings.html" target="_blank">My Back-of-the-Envelope Retirement Calculator</a> My interactive retirement planning calculator<br />The historical life expectancy graph is from <a href="http://www.obesitymyths.com/myth3.1.htm" target="_blank">Obesity Myths</a><br />
The source mortality rate data for the 2007 life expectancy graph is from the <a href="http://www.ssa.gov/oact/STATS/table4c6.html" target="_blank">Social Security web-site</a>.<br />
<b>For lists of other popular posts see the sidebar to the left or the blog header at the top of the page.</b><br />
Copyright © 2012 Last modified: 12/14/2020<br />
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<img alt="Delicious" height="10" src="http://static.delicious.com/img/delicious.small.gif" width="10" /> <a href="http://delicious.com/save" onclick="window.open('http://delicious.com/save?v=5&noui&jump=close&url='+encodeURIComponent(location.href)+'&title='+encodeURIComponent(document.title), 'delicious','toolbar=no,width=550,height=550'); return false;"> Bookmark this on Delicious</a> To share via Facebook, Twitter, etc., see below. Alhttp://www.blogger.com/profile/03349009181054767705noreply@blogger.com2