01-24-2014, 09:40 PM
"Assuming a 4 percent yield, if you are unwilling to touch the principle, you’ll need a nest egg of $1,250,000 to fund 40 years of retirement at $50,000 per year. If you are willing to burn up the principle, you’ll only need $1,000,00"
Clearly the first question sometime in your 50's is "What do we believe our living expenses will be when we retire?"
This is followed closely by "what income can we count on?"
The difference between these numbers is the cash flow that must be generated by our retirement investments or by the selling of the investments themselves." The latter eventually being a losing proposition from the perspective of lower dividend income.
Unfortunately this problem really needs to be worked backwards: income needed less known income equaling income stream required. The gross portfolio number required to provide that stream IS the number.
If we cannot attain THAT number (late start to savings, too many children, expensive life style, whatever) something will have to give....available income, retirement spending, life style, etc.
So, yes we can retire on less by touching the principle. That MAY become the only survivable option depending on the curve balls life throws at you. I would prefer to accept what numbers I have achieved, what those numbers provide, then adjust my life style and expenses accordingly.
Why I wasn't "briefed" on the time value of money as a high school student is beyond me....you can bet my kids hear about it like a broken record.
If you have an iPad, here are some helpful Apps to "play with the numbers":
Retire Plan App
Retire!
Good luck to us all....and Ms. Yellen.
Have a good weekend!
Clearly the first question sometime in your 50's is "What do we believe our living expenses will be when we retire?"
This is followed closely by "what income can we count on?"
The difference between these numbers is the cash flow that must be generated by our retirement investments or by the selling of the investments themselves." The latter eventually being a losing proposition from the perspective of lower dividend income.
Unfortunately this problem really needs to be worked backwards: income needed less known income equaling income stream required. The gross portfolio number required to provide that stream IS the number.
If we cannot attain THAT number (late start to savings, too many children, expensive life style, whatever) something will have to give....available income, retirement spending, life style, etc.
So, yes we can retire on less by touching the principle. That MAY become the only survivable option depending on the curve balls life throws at you. I would prefer to accept what numbers I have achieved, what those numbers provide, then adjust my life style and expenses accordingly.
Why I wasn't "briefed" on the time value of money as a high school student is beyond me....you can bet my kids hear about it like a broken record.
If you have an iPad, here are some helpful Apps to "play with the numbers":
Retire Plan App
Retire!
Good luck to us all....and Ms. Yellen.
Have a good weekend!
There are people who use up their entire lives making money so they can enjoy the lives they have entirely used up
Frederick Buechner
Frederick Buechner