100
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
this post was submitted on 08 Sep 2023
100 points (75.5% liked)
Showerthoughts
29196 readers
1094 users here now
A "Showerthought" is a simple term used to describe the thoughts that pop into your head while you're doing everyday things like taking a shower, driving, or just daydreaming. The best ones are thoughts that many people can relate to and they find something funny or interesting in regular stuff.
Rules
- All posts must be showerthoughts
- The entire showerthought must be in the title
- Posts must be original/unique
- Be good to others - no bigotry - including racism, sexism, ableism, homophobia, transphobia, or xenophobia
- Adhere to Lemmy's Code of Conduct
founded 1 year ago
MODERATORS
You people can't fucking math. 1M is more than enough to retire on if you want to live stingy.
This isn't how retirement works.
If you try to retire on $1M you're going to end up in a medicaid facility. Interest rates are high right now, so $1M in the bank may get you as much as $5,000/mo if you're lucky. This is $60,000/yr and can be supplemented with social security to allow a person to live well enough at today's cost of living.
However, inflation is a constant and is ideally restricted to 2-3% per year. This means that every year you live after you retire, your spending power is reduced by at least 2%. So even if interest rates stay high (they won't) then by the time you hit 85 your $60,000/yr will feel more like $24,000. This will still be supplemented by social security, but you will also find that your needs are increasing by this age and you will likely need to start using your savings to pay a lovely nurse or two to help with, well, everything. In-home care and even nursing facilities are quite costly and will eat away at your savings, so if you only have $1M you better start dying soon after needing them.
This all assumes best-case-scenario. It doesn't account for runaway inflation rates, pandemics, recessions, catastrophic events (it's not uncommon for the elderly to accidentally set things on fire), or other possibilities that can take a bite out of your retirement savings.
When your money runs out you won't be kicked out on the streets, thankfully. But a medicaid facility in the US can be nearly as dangerous for the elderly.
You're ignoring that your balance will increase over time through interest and stock gains. I believe this is historically around 8%, exceeding inflation.
No, you're spending that increase to live. You leave the 1 million to generate gains and take off the top. In ten years that 1 million will have less purchasing power than before.
No, you always take less than the increase. This is why most FIRE plans revolve around living on 3-4%. The gain percentage minus withdrawal percentage should ideally leave you with a number greater than the losses due to inflation.
To add to this, you are also expected to withdraw more year after year along with inflation. If your safe withdrawal rate allows you to withdraw $40,000 on year one, you can withdraw $40,800 the second year (assuming 2% inflation). Dispite this increase, your portfolio should still grow. If you are withdrawing all of your gains, you are setting yourself up for failure.