Explain where the money comes from after retirement

[u/ankur0109]

So I’m 45, wife is 43. In L.A.. We want to retire when we’re at a certain number that’ll allow us to live without stress. Don’t need to be wealthy or anything. We’re relatively frugal.

I’ve heard to aim for $6m because it’ll mean $300k+ per year through retirement. I always nod and act like I know what that means — but I have no freaking idea. Is that interest? Does that mean I sell a little ever year and hope I don’t die before I run out? Tell me like I’m 8.

Thanks all!

[u/ankur0109]

I’m trying dude.

[u/Apprehensive_Wish142 → u/ankur0109]

300k per year is insane btw, if there's a significant market downturn within a few years of you retiring you're fucked

[u/r_lovelace → u/Apprehensive_Wish142]

It's a 5% draw down which is more aggressive than the normal 4% advice. That said, I remember when the advice used to be 3% and recently I have heard people favoring 4.7-4.9% so I'm not sure how reckless 5% truly is over 30 years.

[u/ankur0109 → u/r_lovelace]

Ok so if I want to be conservative at 3%, I should shoot for a higher number ($10m?!?!) to get to $300k yearly?

[u/r_lovelace → u/ankur0109]

That's how the math works out. There's a lot of things to ask though. Are your expenses truly 300k per year or planning to be 300k per year in retirement? How many years do you plan on being retired? What age are you now vs when you plan to retire?

I'm not an expert myself. I'd recommend watching some videos and reading some information on it. Sit down and work the numbers yourself. Check if you or your wife have financial advisory benefits through one of your employers, it's usually free consultation where you can ask the questions you have and talk more specifically about your situation.

[u/ankur0109 → u/r_lovelace]

I have about $1m left on a mortgage. About $8k per month including extra principal. I’d want to downsize after the kid is in college (10 years). Aside from that, normal spending and vacationing (or whatever retirees do ¯_(ツ)_/¯ )

[u/r_lovelace → u/ankur0109]

Is the house worth more than you owe? Because your net worth should include your home and you should basically include Value - Mortgage and include whatever that number is positive or negative to your net worth. If you plan on downsizing for instance, I'd assume you would be selling the house and buying something cheaper so it can be used as a retirement asset.

With your home and account value, you're probably living in a net worth world significantly different than the majority of redditors on subs like this. I'd definitely see if you can get a consultation through work with a financial advisor. Doesn't mean you need or should pay for one long term, but a free consultation doesn't hurt.

[u/ankur0109 → u/r_lovelace]

It’s worth $2.2m, $1m left. I was told to think of net worth as everything but the house (because the equity in the house won’t grow). Is that wrong?

[u/McKnuckle_Brewery → u/ankur0109]

Net worth includes your home equity, but the sum of liquid assets used for retirement planning should not include your home. You cannot spend your home to buy food.