Ask HN: How much have you saved for retirement?

[whitefish]

This blog post says as a Software Engineer working in the US you should have $4 Million in savings to have the same income, in retirement, as a fresh software engineer.

http://chase-seibert.github.io/blog/2014/01/01/saving-for-retirement-as-a-software-engineer.html

How much have you saved for retirement, and at what age?

[super-serial]

Nothing... because methane in the arctic will end human civilization by then. http://arctic-news.blogspot.com/p/extinction.html?m=1

It makes more sense to take big risks with money and then use any big payoffs to help geoengineering efforts or prepare for living in a bunker. That may sound silly but some rich people are already doing that: http://www.newyorker.com/magazine/2017/01/30/doomsday-prep-f...

[JJJJJJSsss]

I don't dispute man-made climate change, it's obvious by now.

I also don't dispute man-made climate change bringing about more extreme weather and raising sea levels, which are catastrophic things by themselves.

However, it's when you wrote about the "end of human civilization" that I got skeptical. There is no scientific consensus for that, and no compeling reason to believe such exaggerated claims, even if "rich people" took precautions against it, or some lone climate researcher claims it in a blogspot post.

Do not plan your retirement thinking that human civilization will end before you retire, because much more likely than not, it won't. This is so absurd that you're setting yourself up to have your end-of-life tragedy be in the future a pretty good joke about taking conspiracy theories seriously.

[bsvalley]

If you live in a place like the Bay Area, the best retirement plan involves these 4 steps:

1. Owning a home in the Bay Area by the time you retire. No mortgage, no rent. Just bills.

2. Sell that place when you retire in order to move to a cheaper location. Use whatever's left from the sale of your home as an income for the rest of your life. Let's take a $800K home for example, if you make $150K per year, you may qualify after 2-3 years by saving as much cash as you can for a down payment. That house/condo might be worth 1.5 to 2 million dollars in 30 years from now, who knows? Despite the inflation, if you sale it for say $1.5, after tax and real estate fee you might end up with $1.2 net. This is not income money. You could then buy a $500K house somewhere cheap, then use the remaining $700K as part of your retirement money, which brings in $35K net per year for 20 years. This is roughly the equivalent of $50K gross income per year.

3. Make sure to add a little bit in your personal saving account every month, even if it's $100-$500 it's fair enough on a 30 year period.

4. Make sure you add up a little bit in your 401K.

The combination of all 4 will maximize your retirement while leaving in your own place. Real estate in a place like the Bay Area is the best investment because of the location. It doesn't matter if it's a tiny 1 bedroom in San Francisco or a crappy old house in South Bay, it will hold its value over the years and will most likely help you moving to a cheaper place with a lot of cash in hands.

[whack]

> "Real estate in a place like the Bay Area is the best investment because of the location"

How do you know this? What you're saying sounds just like all the bankers and mortgage salesmen in 2007 promising that real estate prices will never fall. If you want to bet on SV real estate being the best investment, go ahead. But call it what it is: a speculative bet.

For those who would prefer not to speculate on their retirement savings, professionals have already put together very sophisticated calculators that tell you whether it's better to buy-or-rent. Check it out and run the numbers yourself, before trusting uncited blanket recommendations given in a HN comment.

http://www.nytimes.com/interactive/business/buy-rent-calcula...

[tehlike]

It is speculative, but so far it has resisted nicely.

All housing went down in the bubble bursts, but bay area still enjoyed nice 7-8% yoy growth so far.

There are couple things that could make it pop badly - like detroit like situation where it goes bankrupt, or the other is tech companies decide to move elsewhere.

I think this is where you should eiversify either way. Buying properties where tech is currently strong is a nice way to diversify

Austin, bay area, ny might be good spots for this.

[hanoz]

It's a bit depressing, and a damning indictment of the system, that most people's only hope for a comfortable retirement is basically a massively leveraged bet on the housing market.

[bsvalley]

The question is, what's better than that today? Nothing but way more risky stuff.

[cylinder]

Stocks are leveraged too. Our entire economy runs on credit.

[toomuchtodo]

> Stocks are leveraged too.

Half-true. You only need 3-25% down to purchase a home. No one is going to extend you credit at that leverage for equities, bonds, etc (you could trade futures and options, or even 3x/4x ETFs, but that's pretty exotic for your typical investor).

[whack]

I believe the guideline is that in order to enjoy a $X/year retirement income (adjusted annually for inflation), you need a nest egg of $25X. So if you'd like to retire with $100k/year, $2.5M would do it. And even less if you are willing to factor in social security income.

If you adopt a buy-and-hold investment strategy over the course of 20-30 years, with a good mix of index funds, the above should be easily within reach.

[1ba9115454]

Not sure it's safe to assume the stock market will go up and up. Perhaps it will, but where does that money come from?

[whack]

The S&P 500 has a PE ratio of ~20. Which means that for every $20 of stocks that you earn, your portfolio of companies are generating $1 in yearly profit. These profits alone represent a ~5% ROI. That's where the money comes from.

[cko]

Sounds good, though 100k in 25 years would be like 30k in purchasing power.

[throwaway8800]

Wouldn't it be more like $60K?

[cko]

If you believe in the 2% inflation figure put forth by the government, yes. So let's say it's $60k, before taxes. Seems like a bummer, do you think?

[throwaway8800]

Yes, it would be a bummer if you think you are getting $100K. But I'm hoping that people who are competent with their savings have some understanding of inflation's effects on their savings.

[kolijila]

I'm 24 and have 10k in Wealthsimple because I can't be bothered to learn more about how to manage my investments myself right now (and I've been a dumbass with money for the past 6 years).

WS tells me I'll have ~$5,222,649 when I'm 65 if I continually add $5k/mo to my invesments.

They say "We include your scheduled contributions into this projection and assume a return of 5.1-5.45% on stocks and 0.74-1.05% on bonds after 0.5% fees. The impact of taxes is not included. Actual returns may differ."

My ideal plan is to have ~$600k+ in investments and withdraw 1-2%/yr to cover food costs. I'm looking at some 200-300 acre stretches of land for around $150k~ in Canada where I plan to build a house myself. Looking to hookup solar and for a freshwater lake to be running through the land. The goal is to self sustain for however long I need to so I can think and work on my hobbies without the overhead of rent/career.

I feel like trying to scrape together an hour or two here and there for a hobby doesn't do anything for me because I'm working on things that require large stretches of uninterrupted time over the span of weeks/months.

[toomuchtodo]

Why waste your money at Wealthsimple when you could open a Vanguard account and put the money in a target date fund?

https://investor.vanguard.com/home/

https://investor.vanguard.com/mutual-funds/target-retirement...

EDIT: Sweet jesus, wealthsimple charges 0.5% of your first 100k, Vanguard is like 0.16%. You might as well be stuck in a crap 401k at wealthsimple expense ratios.

https://www.wealthsimple.com/en-us/details#pricing

[kolijila]

>Why waste your money at Wealthsimple when you could open a Vanguard account and put the money in a target date fund?

Because I would have to know what any of that stuff is, hence: "can't be bothered to learn more about how to manage my investments myself right now"

Thanks for the links. Also I'm a Canadian and their MER is lower than everyone elses all things considering, even tangerine.

What can I do as a Canadian?

[kingbirdy]

How much are you earning if you can afford to drop $60k/year in investments?

[kolijila]

Roughly $85k net.

[pm90]

So you're living on $15k per year? That's just slightly over $1k a month. My rent alone is $1k a month :).

[kolijila]

2-3k/mo, sometimes I hit 3, most of the time it's the lower 2000. That's why I said roughly 85. So yeah, 2-3k on living, and anything I didn't use that month goes to investments which is usually 4-5k.

[milkytron]

It pays to live humbly I suppose haha

[cylinder]

New account - suspicious. I don't doubt that startups like Wealthfront are gaslighting HN and Reddit.

[pm90]

Or it might simply be that people don't like to discuss specific numbers related to their income/investment on a public forum under their real name.

[kolijila]

Don't want financial data tied permanently to a popular username of mine. I realize it looks like an Ad yes. I provided the third paragraph for people unfamiliar with WS returns as background to the $5m number I posted.

[seattle_spring]

Anyone else sick of the unbelievable amount of lazy and unsubstantiated "shill" accusations being thrown around lately?

[DamonHD]

In the UK the (usual) limit you can have in your pension fund is now £1m.

I would expect to have about 20 times whatever I wanted to live on per year, and that yearly amount would high enough above what I know is enough to be comfortable. The state pension should kick in something too.

However, I don't expect to completely retire at any point though legally I currently could in only 5 years' time (then another 10 years or so to state pension age). So if I'm not doing a reasonable amount of work and keeping my brain active at 70 I would be disappointed.

[pm90]

This is my thinking as well. I like to think I would be working in some capacity much beyond the current retirement age. One of the reasons I like to keep a healthy lifestyle is that I want to be physically and mentally capable of continuing to make useful contributions until the very end... and that last part really scares me, but that's another conversation.

[DamonHD]

What scares you? Mortality, or being able to keep being useful, or something else? (I'm not being flippant: I live next to a graveyard which reminds me that I'm not getting out of the first of those!)

[pm90]

I guess its a combination of Mortality and lack of independence/increasing dependence, while bodily functions slowly get less and less effective. I am very afraid of the idea of fading away. Perhaps I would be more comfortable if, e.g. I knew that my end would come at a very specific day and that I would remain healthy until then and the poof!

[DamonHD]

Then you should know the joke about the difference between an English actuary and a Russian actuary. The former tells you your life expectancy ie an age you might expect to die, whereas the latter gives you a date, time and place.

I suspect I'm somewhat older than you, and faults are already accumulating and have been significantly so for 20 years or more. I can see how it may eventually become too tiresome to carry on if some of the breakage can't be fixed. But there are often compensations...

[cbanek]

I'm 35, and have been saving for retirement and maxing out my 401(k) ever since I started working. I don't think I'll ever have 4 million dollars in my retirement account, but I think (hope?) I'll be fine.

I think it's the numbers that are suspect in this analysis.

1. The calculator asks for your salary, then uses your current salary to determine your need for money in retirement. If you're saving 20% of your salary, then really you are only living on 80%, and that 80% should be used as your 'living expenses money'.

(fine print of calculator: We then assume you can live comfortably off of 85% of your pre-retirement income. So if you earn $100,000 the year you retire, we estimate you will need $85,000 during the first year of retirement.

I think it should be at least 85% of what you're not saving. For example, if you're making 100k, saving 20k, then really you should take 85% of 80k, which is 68 - not 85.

Also costs change as you get older. While you may spend more for health care, you hopefully won't have to pay rent, for raising children, etc.

Finally, they seem to say they want to take all the money and purchase an annuity. It seems like as soon as you retire, your money stops growing (other than for inflation) because of the annuity, but if you kept that money growing while you were retired, it would probably be even less.

Really the big trouble is you can't rely on ever increasing markets with some 7% yearly rate of return. It could be higher, it could be lower. If it's lower for a long time, basically the US retirement systems (both 401k and pension) are in huge trouble.

[mindingdata]

They take the 85% of 100k because it's assumed when you retire, you won't be saving any of your income, just drawing down.

This calculator is often uses to demonstrate different savings rates : https://networthify.com/calculator/earlyretirement

The reason why saving more quite rapidly lowers your retirement age is because it's a twofold saving. Firstly you are saving more money which is good, and secondly you are learning to live on less.

To take a super simple example. Let's say you can live on 50k a year. And you can get 3.5% on term deposit rates (You can in NZ). Then you should need 50,000 * (100/3.5) = 1.4 million approx to retire and be able to earn 50k a year off interest alone.

[cbanek]

Totally agree with all that, and that's what I rely on, that I can live frugally.

But in the article, they link to the calculator that gave them the 4 mil figure, and that asks how much you make, and how much you are saving. But it doesn't take the savings out first. So it's saying you can live on 85% of what you need now, if you save 0% or 50%. Since they have the number you are saving, it doesn't make sense to me to bake that into the 85% number, when they can calculate it based on the info you provide. I really think it's that on average, you only need 85% of your income, likely due to some smaller cost of living changes, but also tax implications, etc.

Your calculator is much better, and assumes you have enough money to draw down only the gains, and not the principal, but that's not what the calculator in the article does (as they mentioned in the fine print), they buy a fixed income inflation adjusted annuity at 6%.

[mikestew]

This blog post says as a Software Engineer working in the US you should have $4 Million in savings to have the same income, in retirement, as a fresh software engineer

Fidelity is always telling me I need some ungodly amount of money saved in order to continue the lifestyle to which I've become accustomed. I don't need that much. Here's what my current income pays for that won't be an issue in retirement:

1. Maxed out 401K at $18K/year. The wife's doing the same.

2. $3K a month paid to mortgage principal, in addition to the house payment. (It is financially unwise to pay down a 2.5% loan quickly, but I'm not retiring with a house payment.)

3. Commuting expenses.

4. A hell of a lot more eating out than I plan to do in retirement.

5. My current tax rate. A lower tax rate in retirement is the whole basis of the appeal of tax-deferred accounts.

And let me give you some anecdata to work with as you ponder your starvation in retirement: my parents. Mom just bought a brand new Corvette last year. Dad is talking about a new $65K truck to replace the one they bought just a few years ago. The just bought a new $35K fifth wheel camper this year. A large, long-paid-off house on six acres in Florida. Lots of camping trips, which means feeding that hungry diesel truck that's pulling that fifth wheel, and camp spots with hook-ups ain't cheap. Maybe it's not how kings live, but I'd have no problem with the lifestyle. They're in their 70s now, I don't see the money running out any time soon.

And they retired in their 50s with about a million dollars.

You'll need $4 million if you still hold a mortgage in the Bay Area and you're stilling hitting the $EXPENSIVE_NIGHT_SPOT thrice a week, while having Uber Eats delivery your dinner every night. Which you won't be doing when you're 55 or 65 if you have any sense. Which means you don't need anywhere near $4 million.

To get to answering your question, I plan a minimum of $1 million, and a max of $2 million, when we retire. We're not going to continue to live in Redmond, WA, I don't think. Taxes are pretty good, IMO, but we'll sell the Redmond house and buy something in, say, Bellingham and pocket the difference. I have absolutely no reason to believe we'll be anything other than just fine and dandy. Especially considering that the median person of our mid-50s age has less than a tenth of our current savings, and you don't see masses of retired people starving in the streets, do you?

[throwaway8800]

I agree with you completely. I view my current income as almost irrelevant when it comes to determining how much of a retirement nest egg I need to have.

My approach is to actually contemplate what retirement looks like and develop a budget based on that to determine what our expenses will be, and subsequently how much income will be required to support that lifestyle.

[closeparen]

$0. I'm focused on building a six-month emergency fund first.

I don't need anything approaching 100% income replacement, as it would make no sense to pay exorbitant rent for proximity to jobs as a retiree.

I doubt I'll save enough over my lifetime (outside of 401k) to scratch a down payment on a Bay Area 1-bedroom condo, but it'll be more than sufficient to buy a palace for cash anywhere else the moment I don't need to live here anymore.

(I have worked in Midwestern IT cost centers, never again).

[eb0la]

Make it one year fund. Even better, have make one-year fund using peak expense month as a reference. The probability of not needing to use it fully is high, but not 1.

[closeparen]

I think it would be silly to prepare for long-term unemployment in the Bay Area. I can move to within a few blocks of my parents' house and live almost the same lifestyle for ~50% of the cost, or a lifestyle befitting a long-term unemployed person for ~25% of the cost.

Moving costs something, but would pay for itself very quickly. If I leave my furniture to the Craigslist scavengers, just the lease-break fee of 1 month's rent and a plane ticket with a couple of checked bags.

At some point it becomes important to start the ball rolling on that sweet compound interest, pick up the preferential tax treatment (saving the max of $18k to a 401k would only cost me about $10k), pay down student debt early for a guaranteed 4.5% return, and (yes) travel and enjoy being young.

Effectively, the fund I'm working on will be worth even more than a year, as long as I relocate.

[cm2012]

Less than 2% of the US will ever see anything near $4 million in their bank account.

Most people would consider it a LOT to save $20k a year, which would be well under a million by retirement.

[TheAdamAndChe]

It would only be below a million if you stuck your money in a savings account. If it's in an investment account, after 30 years at 7% growth per year and $20k deposited per year, you should have $1.87 million dollars saved. Which isn't tons when you consider inflation, but it's definitely better than what you're suggesting.

[toomuchtodo]

7% returns are unrealistic moving forward; I would target ~5-6%.

CalPERS came to this conclusion a few months ago, and they're a bit behind the rest of Wall Street when it comes to returns estimation.

http://www.cnbc.com/2017/02/08/calperss-sees-58-percent-retu...

Some Wall Street veterans are predicting returns even lower.

https://www.bogleheads.org/wiki/Historical_and_expected_retu...

[TheAdamAndChe]

This honestly doesn't surprise me. The fact that tons of men aren't working anymore is an indicator that the old methods of maximizing productivity by lowering wages and increasing hours isn't going to work as well in the future.

[Eridrus]

That's a bit of an odd analysis.

The biggest chunk of my income is eaten up by taxes and rent. Once you've retired and your only income is from long term capital gains, taxes are much less of an issue and hopefully you've purchased a home so you don't need to rent. It also ignores social security, which based on the quick calculator at ssa.gov seems to be not an insubstantial amount, though I get that people don't want to count on that.

On the flip side, it completely ignores inflation which may mean that while your savings may be very large compared to how much you need to live today, they may not be adequate 30-40 years from now.

Without a good estimate for what your expenses will actually be, the number you "need" turns out to be complete nonsense IMO.

[mikestew]

Once you've retired and your only income is from long term capital gains

You'll also likely be drawing down a 401K, and the government wants their deferred taxes back. So capital gains taxes aren't the only tax consideration. Granted, you most likely will in a lower tax bracket come retirement time.

[Artlav]

> Ballpark, you make about $100k a year in your 20s

I'm green with envy... With that much money i could have probably retire right now at 30, and i'm half way there.

Then again, i live in a country with free medicine, free education, no lawyers, a recently-ended oversupply of housing leaving me with 1.5 apartments and a house from grand-grand parents who "moved on", and all bills and necessities coverable by about $2k a year, so i'm not sure if i have a right to be envious.

More to the point, i keep the money scattered around - foreign currencies, gold, crypto, etc, to avoid losing all at once and staying ahead of the inflation. I don't expect to ever become a millionaire, barring a lucky investment or something.

[warsharks]

absolutely zero, i have very little chance of surviving to retirement age and even if i do i cant imagine id have any desire to not carry on working, its not like im a bricklayer, chances are ill still be able to type and as long as i can do that ill be working

[bko]

I'm too young to consider my savings as retirement, but I created a handy spreadsheet that allows you to estimate how much you'll have by the time you retire.

https://docs.google.com/spreadsheets/d/1nV8N16sBFiqDtZqkORlh...

Feel free to point out bugs or copy and add features.

[seattle_spring]

> I'm too young to consider my savings as retirement

Why do you say that? I started saving for retirement at 16, and have never considered it anything but.

[bko]

What I meant was that although I have savings, I am undoubtedly going to have unforseen expenses in the near future that I cannot say that my savings are earmarked for retirement

[TheAdamAndChe]

I'm 23. I have a goal of $2.4 million dollars by age 60. I currently have $4.3k saved. I'm having trouble meeting my goals because I am having trouble finding work. I live in the third largest city in my state, but it's not a city positively affected by globalization, so unemployment is high and wages are low. I can't move because my wife has a career started here. Such is life.

[tehlike]

where are you based, and what do you do?

[TheAdamAndChe]

Southern Missouri. I'm trying to get a career started in IT with an end goal of becoming a penetration tester. I've got a year and a half of tech support experience, several certifications, and am currently working on a degree. All tech jobs at my level in my area have been outsourced, unemployment is high here, and economic growth is slow. This has made it very tough to get started.

[tehlike]

could you move out of state?

[TheAdamAndChe]

Nope. Like I said in my post, my wife has a career started here, and I am not leaving her just to chase a career that is likely to be outsourced in the next decade.

[tehlike]

Outsourced is probably not going to happen at a full capacity.

I would consider places where you two could have reasonable careers.

For example, sf is good for tech, but ny might be good for both finance and tech. Now might not be the right time, but after her promo might be a better time.

[cko]

> When you do pay taxes on the money in retirement, your tax rate will likely be lower.

The only reason it will be lower is if income is lower.

Some people say to not contribute more than the match, because you end up paying more taxes in retirement (taxed as income) than if you just ate the taxes first and paid capital gains on it later.

[ksherlock]

Something to consider: assume you make $100,000 and you max out (~$18,000) your 401K. Are you going to be saving $18,000 a year for retirement when you're retired?

[sotojuan]

Not much, paying loans first. Should be finished with that in two years (age 25).

[tehlike]

depends on the interest rate on that loan.

if you are working for a large co, consider putting money in 401k first, and get (up to?) 50% match.