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Old 04-18-2008, 08:59 AM   #41 (permalink)
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Quote:
Originally Posted by Crompsin
Exactimundo. In my opinion, IRAs are what will save my generation (kids from the 80s) from Uncle Sam's broken system of limp-dick dollars. I think young people should invest in them (IRAs) starting as early as possible (college years or immediately after), even if their parents have to help get them the initial boost to max out the first 3 to 5 years. If you start an IRA at 18 you can essentially stop putting money in it at 35, or so I was told by a few financial gurus when setting up my own account.
Not everyone in that age group has the option. I'd love to max out my RRSP contributions, but as I do enjoy eating, I find the actual execution difficult.

Unfortunately I don't have the option of running to mummy, either.

It's not always bad planning. Sometimes it's just bad circumstances.
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Old 04-18-2008, 09:04 AM   #42 (permalink)
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Quote:
Originally Posted by Martian
Not everyone in that age group has the option. I'd love to max out my RRSP contributions, but as I do enjoy eating, I find the actual execution difficult.

Unfortunately I don't have the option of running to mummy, either.

It's not always bad planning. Sometimes it's just bad circumstances.
Oh, I'm with ya on that Martian... but I live outside D.C. and see all these rich college kids blowing their money on silly stuff with no idea of how to plan for the future. They'll be poor by the time they're 35. My point is that if you have the money... use it for something good instead of buying another Acura.

...

As a broke-ass middle class college student who spent two tours in the desert... I feel the pain of sending $5k to a place I won't see for another four decades, but I know that in the long run it'll keep me fat and happy when I lose bladder control and Viagra is chased every morning by a Centrum Silver.

Sadly, the poor will still be poor. Government programs should take care of them, instead of trying to take care of everybody, including the haves who had-it back in the day instead of saving it like they should have.
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Old 04-18-2008, 09:10 AM   #43 (permalink)
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I have just finished reading Wealthbuilding by Kurt Rosentreter. It's an excellent book on how to work with financial experts to create your financial plan.

An interesting distinction made in the books was defensive versus offensive debt. Debt is okay if it builds your net worth, such as maximizing your RRSP contribution.

I am definitely inspired to visit a financial planner soon. It's unfortunate that the importance of financial planner was not stressed earlier in my generation's life.
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Old 04-18-2008, 07:27 PM   #44 (permalink)
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Originally Posted by aberkok
I'm going to be that fun loving, scruffy, wise-cracking, care-free friend who sneaks into the exclusive country club where Baraka is a member. We'll muse on the strange coincidences existence brings us on this crazy ride called "life," then I'll ask to borrow money before security chases me across the the golf course to a jump blues soundtrack.
There's plenty of room on these coattails, my friend.

Quote:
I want to be making music for the rest of my life, so my answer to question one would be NO, but to question two would be NO.
You will be that kind of pianist they wheel up to the keys in your wheelchair to hear music "as it was played 'back then'." Kind of like a living relic.

* * * * *

CandleInTheDark, I work for the company that published that book (just before my time). The book isn't very useful to me at this point, as I would classify as the income increasing, debt reducing category it talks about. I haven't read it thoroughly for that reason.
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Old 04-18-2008, 08:24 PM   #45 (permalink)
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Is that going to be enough?
10% plus the matching 5% = 15. In addition, you're not taking into consideration the investment interest it builds during the whole time (compound at that).
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Old 04-18-2008, 08:48 PM   #46 (permalink)
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Quote:
Originally Posted by Seaver
10% plus the matching 5% = 15. In addition, you're not taking into consideration the investment interest it builds during the whole time (compound at that).
I'll be generous, then. Let's say you have $650-700k + $401k + SS. Is that enough? In order to maintain my lifestyle, I calculated that I'd need over $5m if I retired around 68-70 and lived 15 years (which is about my life expectancy). I'll be retiring a little after 2050, and assuming the dollar somehow stabilizes in the next few years 330k a year will be able to provide the equivalent to a $70-80k a year lifestyle now, if we're damned lucky.

Wait, how old are you?
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Old 04-18-2008, 09:53 PM   #47 (permalink)
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There's a question I should ask you, willravel:

Why would you have $4m sitting in cash and only $1.5m in investments?
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Old 04-19-2008, 03:19 AM   #48 (permalink)
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Wait, how old are you?
I'm 25. I'm also pretty damn sure I can live comfortably well below the 70k mark by that point.
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Old 04-19-2008, 03:24 AM   #49 (permalink)
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Quote:
Originally Posted by Baraka_Guru
There's a question I should ask you, willravel:

Why would you have $4m sitting in cash and only $1.5m in investments?
great question. you can't have $4M in cash just laying about in your house or even simple bank accounts. There just isn't enough banks for you to make sure you're FDIC covered, and then after that why lose value of those dollars every day, every month, every year????? that makes absolutely no sense... unless you got that cash via illegal handling and can't launder it in any way...

Quote:
Originally Posted by Seaver
I'm 25. I'm also pretty damn sure I can live comfortably well below the 70k mark by that point.
and yes, that's the trend as well... your current lifestyle will only be a shadow of the retirment lifestyle as it declines in the twilight years. the only increase in monies is healthcare related like assisted living or old aged home.
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Last edited by Cynthetiq; 04-19-2008 at 03:26 AM.. Reason: Automerged Doublepost
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Old 04-19-2008, 07:02 AM   #50 (permalink)
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Quote:
Originally Posted by Baraka_Guru
There's a question I should ask you, willravel:

Why would you have $4m sitting in cash and only $1.5m in investments?
The $4m would be in a savings account with a reasonable interest rate (not cash). I'd have more invested, but I've found in the past that having too much of my worth tied up in investments can make for trouble if there's an emergency and I need it. I had to take a rather alarming loss on some of my investments a year and a half ago. It left an impression.
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Old 04-19-2008, 07:13 AM   #51 (permalink)
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Quote:
Originally Posted by willravel
The $4m would be in a savings account with a reasonable interest rate (not cash).
Is that not considered cash?
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Old 04-19-2008, 07:15 AM   #52 (permalink)
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Quote:
Originally Posted by samcol
Is that not considered cash?
I wanted to clarify in case anyone thought I'd have $4m in $100 bills in a safe.
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Old 04-19-2008, 07:16 AM   #53 (permalink)
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Quote:
Originally Posted by willravel
I wanted to clarify in case anyone thought I'd have $4m in $100 bills in a safe.
Oh, lol.
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Old 04-19-2008, 09:36 AM   #54 (permalink)
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Quote:
Originally Posted by willravel
The $4m would be in a savings account with a reasonable interest rate (not cash). I'd have more invested, but I've found in the past that having too much of my worth tied up in investments can make for trouble if there's an emergency and I need it. I had to take a rather alarming loss on some of my investments a year and a half ago. It left an impression.
This shouldn't prevent you from having much of that in fixed-income investments such as long-term and short-term bonds. $4m out of $5.5m in assets is rather high. That's nearly three quarters (75%) of your "portfolio" sitting in cash. What will you do if inflation runs amok? Your $4m could be decimated in one or two years. As a retired senior, it makes sense to have a low proportion of stocks, since there are few short-term benefits to holding them, but one benefit is that they protect your money from inflation.

Having that much cash sitting in a savings account will only earn you around $100,000/year (assuming 2.5%, though even a more generous 3.5+% would only earn around $150,000). Your portfolio of $1.5m would reasonably earn you around $90,000 to $100,000/year (assuming around 6%). This is quite a bit shy of your desired $330,000/year. How did you do your math?

If I were your advisor, I'd tell you to do this with your assets:

10% cash, 25% stocks, 65% bonds

This is rather conservative. And depending on the bond market, you might want to shift some of that into stocks. An alternative shift in a poorly performing bond market (due to inflation) could be:

10% cash, 35% stocks, 55% bonds

Still rather conservative. The bonds would be guaranteed income, and the stocks would protect you from inflation. I would suggest some foreign ownership too if you haven't considered that.

I would divy up your cash holdings with a savings account, CDs, and treasury bills. This 10% would still be $550,000, which would be far more than one year's income if you consider your $330,000/year. Isn't that more than enough for emergencies? When you have bonds that are continually becoming due, you will always have cash to move around. EDIT: There are those who would argue that 10% in cash is too high, that 6% to 8% would be more ideal.

What say you?
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Last edited by Baraka_Guru; 04-19-2008 at 09:43 AM..
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Old 04-19-2008, 09:46 AM   #55 (permalink)
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Quote:
Originally Posted by Baraka_Guru
This shouldn't prevent you from having much of that in fixed-income investments such as long-term and short-term bonds. $4m out of $5.5m in assets is rather high. That's nearly three quarters (75%) of your "portfolio" sitting in cash. What will you do if inflation runs amok? Your $4m could be decimated in one or two years. As a retired senior, it makes sense to have a low proportion of stocks, since there are few short-term benefits to holding them, but one benefit is that they protect your money from inflation.
Then I shift. It'd be pretty easy to move money out of a savings account and into investments. I'm taking a pragmatic approach to the whole thing. Liquidity is important when you're only income is based on interest from savings and various investments. Should something happen to disappear that $1.5m, I need to be able to quickly move things around. Moving around investments is difficult. Moving around money in the bank is quick and easy. In other words, I wouldn't have to wait 1-2 years over the course of the inflation. I could move things around in a matter of days and not take a loss at all.
Quote:
Originally Posted by Baraka_Guru
Having that much cash sitting in a savings account will only earn you around $100,000/year. Your portfolio of $1.5m would reasonably earn you around $90,000 to $100,000/year. This is quite a bit shy of your desired $330,000/year. How did you do your math?
I'm counting on the $5.5 total dwindling. It'd be nice to have enough to live on interest and earnings, but it may not be possible.
Quote:
Originally Posted by Baraka_Guru
10% cash, 25% stocks, 65% bonds
I don't do debt security. When I say investments, I mean investing in something real, never stocks and never bonds. I'm much more likely to be investing in currency and goods. They're easier and I don't feel hypocritical for damning the stock and bond system while simultaneously using them. I only have Apple stocks now because I find it amusing.
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Old 04-19-2008, 09:54 AM   #56 (permalink)
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Quote:
Originally Posted by willravel
I don't do debt security. When I say investments, I mean investing in something real, never stocks and never bonds. I'm much more likely to be investing in currency and goods. They're easier and I don't feel hypocritical for damning the stock and bond system while simultaneously using them. I only have Apple stocks now because I find it amusing.
Wow, that sounds risky. Where do you draw the line between investing and speculation? I guess it's a good thing you have less than 30% of your assets there. Would this be your retirement hobby? Tracking pork belly futures?

Anyway, where you'd be sitting in your scenario would work, in theory. But how will you climb into that position by retirement without a less cash-oriented strategy? What is your plan?
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Old 04-19-2008, 10:09 AM   #57 (permalink)
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Quote:
Originally Posted by Baraka_Guru
Wow, that sounds risky. Where do you draw the line between investing and speculation? I guess it's a good thing you have less than 30% of your assets there. Would this be your retirement hobby? Tracking pork belly futures?
I've found that I'm pretty damn good at it, so it'd be part hobby and part income.
Quote:
Originally Posted by Baraka_Guru
Anyway, where you'd be sitting in your scenario would work, in theory. But how will you climb into that position by retirement without a less cash-oriented strategy? What is your plan?
The whole thing? It's a bit complicated. I'll give you the summarization:
I know that either by chance or by ability I've been able to find myself in relatively lucrative positions since I graduated. Considering that I'm going to be pursuing a career in the law in the next few years, I believe I can make a decent living between maybe 32 and 70. I already know a lot of people in the business now, and they've suggested that while I'll probably made as much after I graduate as I make now (about $80k a year), it's likely to increase a great deal if I follow a few bits of advice I've been given. A good friend of mine who has his own private practice earns around $500k a year. I'm hoping to make about $250k (or it's equivalent based on inflation) by 45-50. If I can maintain that income for a solid 15 years or so, I should be fine.
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Old 04-19-2008, 10:25 AM   #58 (permalink)
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Quote:
Originally Posted by willravel
The whole thing? It's a bit complicated. I'll give you the summarization:

*willravel goes into a brief summarization of getting into the practice of law and making buckets of money over several years*


If I can maintain that income for a solid 15 years or so, I should be fine.
Yes, you should be fine, indeed. Good on you.

*Baraka_Guru kneels down and begins bashing his head on the floor for having chosen a career based on his interest in the arts, thus ignoring his seemingly natural ability for business mathematics.*
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Old 04-19-2008, 10:32 AM   #59 (permalink)
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Originally Posted by willravel
I wanted to clarify in case anyone thought I'd have $4m in $100 bills in a safe.
And with this, my retirement plan of breaking into the safe in will's basement has been scuppered.
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Old 04-19-2008, 10:36 AM   #60 (permalink)
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Originally Posted by Martian
And with this, my retirement plan of breaking into the safe in will's basement has been scuppered.
Dude, he still keeps his gold bullion in there.
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Old 04-19-2008, 10:43 AM   #61 (permalink)
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I'm working to develop a lifestyle that allows me to live far below my means.

The goal is to invest more than half of my income for the next twenty-five years, to no longer depend upon a steady income age 50.
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Old 04-19-2008, 10:54 AM   #62 (permalink)
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Quote:
Originally Posted by Baraka_Guru
Yes, you should be fine, indeed. Good on you.

*Baraka_Guru kneels down and begins bashing his head on the floor for having chosen a career based on his interest in the arts, thus ignoring his seemingly natural ability for business mathematics.*
Can't you do both? My interest in music isn't damaged by my being involved in business.

Besides, I'll be playing piano long after I stop practicing law, assuming all goes to plan.
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Old 04-19-2008, 10:55 AM   #63 (permalink)
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Originally Posted by genuinegirly
The goal is to invest more than half of my income for the next twenty-five years, to no longer depend upon a steady income age 50.
That's very aggressive. I would contend that this will be difficult with an annual income of less than $90 000 per year and impossible with an annual income of less than $60 000 per year, unless you plan on living very poorly or being single for your entire life and never having a family.

I already do live simply and am comfortable on an income of $20 000 per year. I plan on getting an education and advancing into a proper career path in the near future, at which time I will hopefully be able to bring that up; should I ever pass from the noble bachelor ranks I expect to require a family income of at least $50 000 and preferably closer to $100 000 per year, and will need to accommodate that.

I honestly haven't even considered retirement planning at this point. Thinking that far into the future is one of the many luxuries my simple lifestyle does not afford me.
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Old 04-19-2008, 11:06 AM   #64 (permalink)
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Originally Posted by willravel
Can't you do both? My interest in music isn't damaged by my being involved in business.

Besides, I'll be playing piano long after I stop practicing law, assuming all goes to plan.
I'm an editor by trade because of my love of books. I would consider writing if my editor's mind hasn't ruined that as an option. Either way, these aren't the same as a career that employs a heavy dose of decimals, percentages, and statistics, especially when you consider income potential.

Mind you, as an editor, I can reasonably make between $80,000 and $100,000 in my latter years if I play my cards right (i.e. get some long-term corporate clients). But that will take a while. I'd be lucky to make between $30,000 and $40,000 in the low end for now, especially if much of my income is dependent on freelancing. It's difficult to get a cushy, full-time, in-house gig, especially in Canada.

I'd be more financially sound if I followed my head instead of my heart and became a managerial accountant or market forecaster or something.

But maybe you're right. Maybe I can do both. It just seems that now I've essentially chosen this path, that other path seems to have barriers to entry.
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Old 04-19-2008, 11:54 AM   #65 (permalink)
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Look at it this way. I already have a degree from a decent school and a career, and I'm shifting by direction drastically in the next few years. It's never too late to forge a new path. It just takes a lot of planning and a lot of drive, both of which I'm sure you're capable of.

"At the end of the day, just do what makes you happy so long as it's not rape or something." - Willravel, 2008
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Old 04-19-2008, 01:05 PM   #66 (permalink)
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Quote:
Originally Posted by genuinegirly
I'm working to develop a lifestyle that allows me to live far below my means.

The goal is to invest more than half of my income for the next twenty-five years, to no longer depend upon a steady income age 50.

Quote:
Originally Posted by Martian
That's very aggressive. I would contend that this will be difficult with an annual income of less than $90 000 per year and impossible with an annual income of less than $60 000 per year, unless you plan on living very poorly or being single for your entire life and never having a family.

I already do live simply and am comfortable on an income of $20 000 per year. I plan on getting an education and advancing into a proper career path in the near future, at which time I will hopefully be able to bring that up; should I ever pass from the noble bachelor ranks I expect to require a family income of at least $50 000 and preferably closer to $100 000 per year, and will need to accommodate that.
Another thing that is perfect about genuinegirly.

As a single guy, I have done this on $55,000 year before taxes. $12,000 goes to mortgage, $3,000 prop taxes & HOA (no income tax here), $2500 food, $500 utilities, $300 cell phone, $20 Linux DVR, $0 OTA antenna, $0 internet. Ok, I don't have MS Money right now to tell me the exact figures and everything else I spend money on. But most things I have bought before and don't need to buy again.

It is definitely possible and I live a pretty good lifestyle right now. I don't need to change anything. But part of this planning is becoming self-sufficient and not relying on the government or corporations.

But, I was able to buy a really nice house for $142,000. And I will have enough saved up in 2-3 years to pay it off just out of my savings. I already own 25% of it, and have a possible 40% in savings/stocks/401k right now. But it makes a big difference where you live and how much you can make there as to the possibility of retiring.

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Old 04-19-2008, 08:08 PM   #67 (permalink)
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Another thing that is perfect about genuinegirly.
Awww, thanks ASU.

I currently use about $5,000/year and I live in yuppie Berkeley. The school hands me $6,000- $10,000/semester (grants are random).

People tell me it's not humanly possible to live off so little here. I laugh.
I do plan on having a child. I also plan on living the next 5 years in Ohio, where I will be earning $25,000/year (teaching fellowship, grad school). Looking at cost of living... and the fact that Tt will be contributing to the household...

Quote:
Originally Posted by Martian
...impossible with an annual income of less than $60 000 per year, unless you plan on living very poorly or being single for your entire life and never having a family.
Honestly, I don't see my goal as unrealistic in the slightest. Where do you live, Martian, and what kind of lifestyle do you lead? I can't imagine spending $10,000/year on myself, much less $60,000.
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Old 04-19-2008, 08:53 PM   #68 (permalink)
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Originally Posted by genuinegirly
Honestly, I don't see my goal as unrealistic in the slightest. Where do you live, Martian, and what kind of lifestyle do you lead? I can't imagine spending $10,000/year on myself, much less $60,000.
You will most assuredly not be able to live off of $10 000 per year once you're finished college. Please don't make plans based on that assumption. My rent alone is half of that.

As I said, I live fairly simply myself. I have a small bachelor apartment, which is cheap to rent and also cheap to heat. I don't drive anywhere that's less than two miles from home. I don't eat out very often, and my only luxuries are my musical instruments (which I don't include in regular budgeting, since they're a special type of expenditure). At this level of income, I don't have enough money to save any significant amount for retirement funds. I can and do save, but my savings exist to cover more immediate concerns. As I said, I don't have the luxury of thinking forty years or more into the future right now.

Therefore, if I wanted to put away 50% of my income and maintain my admittedly simplistic lifestyle, I would need to make at least $40 000 per year. All of this assumes just myself to support.

When you're single and in your twenties it's easy to get by on a relatively low income. Once you hit your thirties and start a family things get more complicated. Children are a major expense, plus there's mortgage payments and car payments and little league and education funds and all the other sundries that go along with having a family. My estimate of $60 000 - $90 000 per year being the minimum income level necessary for your strategy assumes that supporting a family will require a minimum household income of $30 000 per year, and at least $45 000 for a comfortable 'average' lifestyle.

Consider ASU2003's numbers; those are for a single (I'm assuming relatively young) man with no dependants. He's accounted for $20 000, and doesn't have any numbers posted for a car, heating, electricity, water or any of the other 'real world' expenses that seem to get discounted so often. Add those in, plus the cost of dependants, then double it so that you can invest 'more than half' of your income and suddenly you've got a pretty big number.

I am dealing strictly in household income, here and anywhere else in this thread. In regards to spouses, boyfriends or any other sources of income, I will simply point out that proper strategic planning dictates relying on those other people as little as possible. That revenue stream may not always be there, and it would be best if you treated it that way.
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Old 04-19-2008, 09:04 PM   #69 (permalink)
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$10k US a year might work in Zimbabwe.
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Old 04-19-2008, 09:05 PM   #70 (permalink)
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but you know martin.. .there are people who do raise families on less than $40,000 a year. I don't know how they do it, I don't get it myself, but it is possible and it can and does happen.
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Old 04-19-2008, 09:11 PM   #71 (permalink)
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Martian, I appreciate your concern. Rest assured, I plan to have a million in an account before I retire. Please don't preach about what you think I will spend. As I said, people assume it's not humanly possible to live with expenses as low as we keep them. It's a mix of bargain hunting, coupon clipping, community living, hand-me-downs, freecycle, lentils, beans, rice, potatoes, and low personal needs.

Quote:
Originally Posted by Cynthetiq
but you know martin.. .there are people who do raise families on less than $40,000 a year. I don't know how they do it, I don't get it myself, but it is possible and it can and does happen.
I was raised in a family where this was the case.

My sister is raising her family (4 kids) on about $30,000/year, in Southern California. They want for nothing, except maybe a little more space in their home.
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Old 04-19-2008, 10:21 PM   #72 (permalink)
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I will be starting a Roth IRA and 401k when I get a real job after graduation and we don't have to make monthly decisions of who to borrow money from and whether power, water, or phone will be shut off for a few days until another paycheck comes. I consider it an investment in the overly optimistic hope that my generation will get old rather than annihilating the human race. Either way I'll be set.
Quote:
Originally Posted by samcol
Can IRAs and the like even keep up with the rate of inflation and cost of living increases? I mean it used to take .$90 to buy a euro a few years ago now it's like $1.45.

That's a pretty massive loss of dollar value.
I'm pretty hopeful about the potential for currency deflation revaluation since the report last week that there's a minimum of 200 billion barrels of recoverable oil under North Dakota, maybe as many as 500 billion.
Quote:
Originally Posted by genuinegirly
My sister is raising her family (4 kids) on about $30,000/year, in Southern California. They want for nothing, except maybe a little more space in their home.
I don't know how anyone can manage that. 30k would barely cover health insurance if there were 4 kids in my family.
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Old 04-20-2008, 05:51 AM   #73 (permalink)
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Quote:
Originally Posted by Martian
Consider ASU2003's numbers; those are for a single (I'm assuming relatively young) man with no dependants. He's accounted for $20 000, and doesn't have any numbers posted for a car, heating, electricity, water or any of the other 'real world' expenses that seem to get discounted so often. Add those in, plus the cost of dependants, then double it so that you can invest 'more than half' of your income and suddenly you've got a pretty big number.
$500/year utilities is the electricity and heating bill. Most people would use $1000 if they wanted a 'normal' temperature all the time. Water used to be covered in rent, now it is $360/year.

My car is 13 years old, I paid it off a long time ago, and I don't need a new car until I get a reliable basic electric car. I need to add that my car insurance is $260/year.

I will say that I pay $80/month ($960/year tax free) for healthcare/dental insurance (HSA). So, if I don't use it, I still get to carry over money from year to year.

For three years, I tracked every penny, but I've been slacking in the past year because a lot of stuff was happening in my life. But, I know I am still made more than I spent.
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Old 04-20-2008, 06:31 AM   #74 (permalink)
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Quote:
Originally Posted by willravel
$10k US a year might work in Zimbabwe.
My rent alone is over $14,000/year. And that's reasonable for the area. It's a modest apartment, comfortable for two people.

It really does matter where one lives. I could cut my rent in half by living in a small town, but I'd likely need to find another career path.
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Old 04-20-2008, 08:01 AM   #75 (permalink)
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Quote:
Originally Posted by MSD
I don't know how anyone can manage that. 30k would barely cover health insurance if there were 4 kids in my family.
What in the world is the problem with the American economic system if someone, anyone, is sinking $30k/year into health insurance for their family!!?!?!?! What a nightmare. I feel for anyone who pays that.

Health insurance, through some employers, is free to workers and their family. 30 hours/week working for the local school district will throw free health insurance your way. You just need to be tuned into these kinds of opportunities.

I feel this is becoming a threadjack. PM me if you feel like continuing the conversation.
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Old 04-20-2008, 09:03 AM   #76 (permalink)
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Quote:
Originally Posted by genuinegirly
What in the world is the problem with the American economic system if someone, anyone, is sinking $30k/year into health insurance for their family!!?!?!?! What a nightmare. I feel for anyone who pays that.

Health insurance, through some employers, is free to workers and their family. 30 hours/week working for the local school district will throw free health insurance your way. You just need to be tuned into these kinds of opportunities.

I feel this is becoming a threadjack. PM me if you feel like continuing the conversation.
Start a thread, please! I spent the first 15 years of my adult life living as a typical American, processed food, eating fast food for lunch every day, air conditioning, striving for a new work truck all the time, etc, etc, etc.

We're currently working on it and have been seriously cutting back for a couple years.

I'd love to hear a detailed explanation of how you are so frugal.
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Old 04-20-2008, 09:48 AM   #77 (permalink)
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Quote:
Originally Posted by smoore
Start a thread, please! [...]

I'd love to hear a detailed explanation of how you are so frugal.
Oooh. We could call it Tilted Frugality. Is there no such thread yet? If not, yeah, one should be started.
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Old 04-20-2008, 05:02 PM   #78 (permalink)
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Quote:
Originally Posted by willravel
SS isn't dead yet, and both Obama and Clinton are interested in keeping it alive. That'll probably last you at least to 57. If we get a few liberals in office in a row, it might just last you. Still, in the interest of pragmatism it'd certainly be best to have a nest egg.

Me being 24 (the tail end of genx or the beginning of gen y?), though, means the retirement time is slightly farther off, and it's even less certain.
My attempts to understand your statement have utterly failed. You seem to imply that the president, and no presidential candidates other than the Democratic ones are interested in maintaining the viability of SS. Only liberals can save it, apparently.

The SS "trust fund" (a gallows-humor name if there ever was one) has been raided annually for decades--that will be hard to blame on the Bush administration.

dc_dux got it right--by the time the piper comes calling, those of us who have contributed will be told that we don't "need" our money back. Of course, it won't matter, because there won't be any money to give back, since it is presently being given to many people who haven't contributed any of their earnings to it. That is an unsustainable business plan if there ever was one.

The biggest question for older Americans will be: Should they begin collecting SS as early as possible, in order to get SOME of their money back, or wait utnil such time as their payments would be maximized, and "trust the government."

I'm not expecting a dime back, and yes, I'm angry about it.
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Old 04-22-2008, 08:09 AM   #79 (permalink)
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My idea of retirement depends on who I am with. If I'm happily with someone my retirement will be a mesh of what she likes and I like. I imagine I would become more of a consultant, and still work, but more and more would travel for pleasure and have longer periods of time off between working. If I'm single. A bike, a journal, and a sense of adventure will take me wherever I want to go.
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Old 04-22-2008, 08:38 AM   #80 (permalink)
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X$ per year, at Y% real interest, both growing at inflation as well...

Define K = 100%+Y%

X * (K^0 + K^1 + K^2 + ... + K^n)
if you do this for K years, =
X * [K^(n+1) - 1] / (K-1)

Say 3% real return, 10,000$ per year, 30 years:
10,000 * [1.5] / [.03] = 1/2 a million dollars in today's money.

Increase K to 1.04%: 600,000$ in today's money.
K to 1.05%: 700,000$ in today's money.
K to 1.06%: 850,000$ in today's money.

Every 1,000$ put in today -> 2500$/3300$/4500$/6000$ in 31 years. (3%/4%/5%/6% real return)

Increase savings from 10,000$ to 20,000$ per year: double the result.

Boost savings period to 40 years: (10000$ per year)
780,000$ @ 3%
1,000,000$ @ 4%
1,250,000$ @ 5%
1,650,000$ @ 6%

At 1,000,000$ (todays dollars -- in 30 years @ 3% inflation, that's 2.5 million then)... At 3% return with a 40 year "run to zero" target, you can manage 42,000$ per year (inflation adjusted). (roughly the same equations)

So aiming for 1 million dollars in liquid savings for a 40 year retirement-before-death doesn't leave you destitute.

Half half a million? ~21,000$ per year over 40 years.
1/4 a million? ~10,500$ per year over 40 years.

Want to hit that 1 million dollar savings target?

Let's be cautious and assume 4% real return (after inflation).

Aiming for a 1 million dollar nest egg:
Over 40 years: 10,000$ per year, -1000$/year every ~20k in savings you have invested
Over 30 years: 16,500$ per year, -1100$/year every ~20k in savings you have invested.
Over 20 years: 31,000$ per year, -1400$/year every ~20k in savings you have invested.
Over 10 years: 74,000$ per year, -2300$/year every ~20k in savings you have invested.

Note that there is the additional, hard problem of managing a consistent return of 4% over inflation when you need it.

As an example, investing all of your money in one country is a bad idea, both due to local economic problems and currency effects.

A simple version of some of the above math:
Let C(x,y) be the compound equation:
(x^(y+1) - 1) / (x-1)

Then we have:
R * C(1.04, 30) * 1.03^40 = I * C(1.03,40)
for a 30 year savings period @ 4% and a 40 year retirement period.

R * 193.5 = I * 78.66
R * 2.46 = I

If you already have savings "S", it becomes:
[R * C(1.04, 30) + S*1.04^30] * 1.03^40 = I * C(1.03,40)

You can change the real returns pre and post-retirement, the periods of each, etc with relative ease.
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