Originally Posted by medford
thanks for the update, never saw the original post, but happy to see the outcome some 3 years later.
If you don't mind me asking, w/ the house paid for (I assume the rental properites as well?) what are your monthly living expenses? What are the things you find yourself paying for in retirement that you didn't think about 20-30 years ago? I've often wondered myself just how much I'll need for retirement.
I've read alot about something I think is called the theory of 20 or something along those lines, where basically you take your yearly living expenses, multiple it by 20 and that is how much you need in retirement. You take out 5% each year, and even if you started your retirement in the worst time frame for the S&P (It was the early 70s at the time I believe where it took a sharp dive over 2 years) you still ended up growing your portfolio showing that traditional returns, even if you pick the wrong year to start should get you thru assuming you can start limit your self to a 5% withdrawl each year (the historical return would outpace inflation so each year you'd take out a little more money in theory than the year before to overcome the rise in cost)
I'm currently on "pace" to have a little over 1 mil in my 401(k) when I hit 60. I've got a small personal account outside of that that I hope to continue contributing to again some day, plus we'll have my wife's retirement from STRS (teacher's retirement plan). Throw on Social Security (if its still there) as well. The 5% would be 50k a year, plus 5% of whatever my personal accounts are at the time, plus the SS and my wife's pension plan (there are so many changes I haven't even bothered to begin worrying about what that will be yearly at this point). All told, $75 to $100k a year, I'd hope to have my house paid off at that point, perhaps even a retirement getaway somewhere. Inflation will eat into that number from today; I think that would all be enough, we live fairly simple, probably wouldn't start getting all extravagent in retirement.
I think you're on the right track. Check out FIRECalc: http://www.firecalc.com/
I've always believed that 20 times annual expenses is a bit low though, and a 5 percent withdrawal might be a bit high. A safer number to use, assuming a retirement around your late 50s, would be 30 times annual expenses. If you want to retire early around 50, you might want to aim for 35 or 40 times annual expenses. For safe withdrawal rates, maybe think about 3 percent.
That much said, adjust for Social Security, even if it's a conservative adjustment of receiving only 50-70 percent of your projected benefits. It'll be there in some manner, maybe not as much as we're promised now (I'm 31 years old, for example), but some of it will be around. If you project your Social Security to cover 30 percent of your living expenses, for example, then you'll only need retirement funds to cover the remaining 70 percent. Use that remaining annual number to multiply by 30 with.
I've also used a future inflation calculator to try to adjust today's money ahead 25 years or so. A ballpark calculation I simply use is doubling today's money - in other words, if I want $1 million in today's money then I need to actually save $2 million by 2038.
By the way, my fiance is in STRS Ohio too. Their recent changes were probably necessary to make sure the fund stays healthy, but for her age group (20 and 30-somethings) they took a haircut if they want to retire early before age 60. My response to that is I've now got her maxing out a Roth IRA in addition to STRS so 1) worst case is she has a safety valve if STRS implodes, and 2) best case is she has an early retirement option if STRS stays healthy.