How much would it take for you to retire/leave work

[Katy Lied]

I will never be able to retire early to write my bestseller, so I've already started it.

[byu71]

I don't know how I missed this thread originally. I have a different answer now than I would have then.

As long as I am 70% senile I don't see myself retiring. I don't go after new money to manage and that would occupy a half a day. I don't trade clients accounts so that means I don't have to be here all the time. My assistant is awesome and the clients love her, so that means I can go away for a week. I also have remote access when I am away.

I make a decent income being semi-retired, why give that up?

It does bug me that I pay into Social Security and medicare at the max. When you add up what the company throws in that is about $15,000 into Social Security and since I have insurance, I don't use medicare.

I get taxed on the Social Security I collect so I don't net from SS much above what I put in.

That's why I get upset with those who have such a naive, dumb, uneducated attitude when it comes to old people getting a so called entitlement called Social Security. I will never ever get my money back.

[cowboy]

I was curious and did some quick research/calculating. The present value of the average retired couple's social security benefits (around $2,300 per month that rises with the cost of living) is right at $800k. In other words, you would need $800,000 just to make up for not having social security, or another way to look at it is the government returns $800,000 to you when you retire in exchange for you and your spouse paying into the system. This is a return of approximately 9.2% plus inflation, or about 12%, on the 7.5% of workers' checks that they paid in, assuming a $30,000 average wage over 40 years. Not a bad deal. Since the government is making most retirees millionaires, maybe we should redefine "rich."

[imanihonjin]

I was curious and did some quick research/calculating. The present value of the average retired couple's social security benefits (around $2,300 per month that rises with the cost of living) is right at $800k. In other words, you would need $800,000 just to make up for not having social security, or another way to look at it is the government returns $800,000 to you when you retire in exchange for you and your spouse paying into the system. This is a return of approximately 9.2% plus inflation, or about 12%, on the 7.5% of workers' checks that they paid in, assuming a $30,000 average wage over 40 years. Not a bad deal. Since the government is making most retirees millionaires, maybe we should redefine "rich."

But if you factor in the 7.5% an employer is also paying on your behalf, the return doesn't look so pretty.

[cowboy]

But if you factor in the 7.5% an employer is also paying on your behalf, the return doesn't look so pretty.

It's still the return on your investment. You aren't paying the other half, your employer is. In 401k's we call it a match, with the SSA, we call it a tax. Either way, it's money out of somebody else's pocket.

[old_gregg]

You aren't paying the other half, your employer is.

are we assuming the employee bears none of that cost?

[Jeff Lebowski]

I was curious and did some quick research/calculating. The present value of the average retired couple's social security benefits (around $2,300 per month that rises with the cost of living) is right at $800k. In other words, you would need $800,000 just to make up for not having social security, or another way to look at it is the government returns $800,000 to you when you retire in exchange for you and your spouse paying into the system. This is a return of approximately 9.2% plus inflation, or about 12%, on the 7.5% of workers' checks that they paid in, assuming a $30,000 average wage over 40 years. Not a bad deal. Since the government is making most retirees millionaires, maybe we should redefine "rich."

Hmm... I would be curios to see those calculations.

[imanihonjin]

It's still the return on your investment. You aren't paying the other half, your employer is. In 401k's we call it a match, with the SSA, we call it a tax. Either way, it's money out of somebody else's pocket.

I don't know if I see it the same way. My employer pays it on my behalf but it likely reduces my compensation as a result.

[wuapinmon]

I don't think I could ever retire. I get restless during Summer, Christmas, and sabbatical not teaching. I love it. On sabbatical I started teaching free English classes in Costa Rica because I missed the excitement and purposefulness of teaching; the impact I can have on someone else's life justifies me and the efforts I made to get where I am. I've been teaching long enough now that I get people a few times a year sending me messages thanking me for changing the arc of their lives in a positive way. Here's one I got last week from someone who graduated in 2013:

Don Mac I cannot even express to you and your wife how appreciative I am that professors, people, like the both of you exist. Being a student to you both has changed the way I see the world and allowed me to view things from a different perspective. I never in my wildest dreams believed that coming to Coker would mean meeting as two influential people as the both of you. Your guidance and friendship is something that continues to motivate me to keep pushing through with school and seeing what else life has to offer.

Those kinds of compliments are gratifying and make me feel elated, but I'd keep teaching even I never got another one. Now, if I had money to teach where, when, and what I wanted to, that'd be different. But, I figure I'll never fully retire.

[PaloAltoCougar]

It's still the return on your investment. You aren't paying the other half, your employer is. In 401k's we call it a match, with the SSA, we call it a tax. Either way, it's money out of somebody else's pocket.

Not if it's your corporation... My partner and I have had our practice incorporated for the past 20+ years, so I guess I've been paying twice as much for my SS benefit than have the ordinary working stiffs. While SS is a windfall for a lot of people, and I'll likely come out ahead, I'm certain I'd be ahead of the game if I'd had my contributions for the past 30+ years invested in the market.

But I'd still support an increase in the retirement age and a small adjustment for higher net worth individuals, if it'll ease somewhat the burden our kids and grandkids are being left with.

[Topper]

Not if it's your corporation... My partner and I have had our practice incorporated for the past 20+ years, so I guess I've been paying twice as much for my SS benefit than have the ordinary working stiffs. While SS is a windfall for a lot of people, and I'll likely come out ahead, I'm certain I'd be ahead of the game if I'd had my contributions for the past 30+ years invested in the market.

But I'd still support an increase in the retirement age and a small adjustment for higher net worth individuals, if it'll ease somewhat the burden our kids and grandkids are being left with.

Bingo! Owners of their own corporation pay the entire freight.

[imanihonjin]

Not if it's your corporation... My partner and I have had our practice incorporated for the past 20+ years, so I guess I've been paying twice as much for my SS benefit than have the ordinary working stiffs. While SS is a windfall for a lot of people, and I'll likely come out ahead, I'm certain I'd be ahead of the game if I'd had my contributions for the past 30+ years invested in the market.

But I'd still support an increase in the retirement age and a small adjustment for higher net worth individuals, if it'll ease somewhat the burden our kids and grandkids are being left with.

I would too. In fact I would be happy to pay higher taxes across the board if it would be stipulated that the increase would be used to drive down the country's debt rather than increase the size of the government. Unfortunately though, we all know that the increase would be squandered away.

[imanihonjin]

Bingo! Owners of their own corporation pay the entire freight.

Self-employed individuals do as well.

[Jeff Lebowski]

I was curious and did some quick research/calculating. The present value of the average retired couple's social security benefits (around $2,300 per month that rises with the cost of living) is right at $800k. In other words, you would need $800,000 just to make up for not having social security, or another way to look at it is the government returns $800,000 to you when you retire in exchange for you and your spouse paying into the system. This is a return of approximately 9.2% plus inflation, or about 12%, on the 7.5% of workers' checks that they paid in, assuming a $30,000 average wage over 40 years. Not a bad deal. Since the government is making most retirees millionaires, maybe we should redefine "rich."

Just ran the numbers. I got $412K, not $800K.

I assumed 3.22% inflation (current long-term average), 6% ROI, and 19.3 years in retirement. This is based on average US life expectancy of 84.3 yrs for someone who is currently 65. Sure you would want more than that in case you live longer, but for a straight-up comparison it seems like you would want to base it on averages.

Changing from 6% to 4% ROI bumps it up to $494K.

For the record, I fully support the Social Security program. Anyone who thinks the average American has the self-discipline or the means to adequately plan and save for retirement doesn't get out much.

[cowboy]

Hmm... I would be curios to see those calculations.

Like I said, they were quick, so I'm not saying I'd take them to court:
Assumptions-
Starting Benefit: $2,176/month (average SS benefit for a retired couple)
Term: 20 Years (Average retiree can expect to live to 84.3 years of age)
Annual Cost of Living Adjustment: 3.88% (Average over the last 30 years)

From there, the present value inputs are simple:
PMT: 2,176*12
Rate: -.0388
N: 20
PV = $812,033

The return was more quick and dirty:
N: 40
PMT: 30,000*.075
FV: 812,033
Rate = 9.25%

As I look at it, this is a nominal return, so the real return would be less, not more than 9.25%, but that's still a pretty decent return.

I don't know if I see it the same way. My employer pays it on my behalf but it likely reduces my compensation as a result.

Your opinion is debatable, but most economists would agree that your compensation is not reduced by the full amount the employer pays. As an employee, you've already negotiated the net salary you are willing to work for, so there is no reason for an employer to pay more because his cost is reduced. Further, the widely accepted economic principle that price seeks the cost of production would lead to the conclusion that, rather than the savings being passed on to you, the price of goods and services would decline as the cost of producing them declines. Hence, one would expect the consumer to be the winner, so no, I don't think you are bearing the burden of the employer's share.

Not if it's your corporation... My partner and I have had our practice incorporated for the past 20+ years, so I guess I've been paying twice as much for my SS benefit than have the ordinary working stiffs. While SS is a windfall for a lot of people, and I'll likely come out ahead, I'm certain I'd be ahead of the game if I'd had my contributions for the past 30+ years invested in the market.

You need a new accountant. If you are organized as an S-Corp and pay yourself a reasonable wage, the rest of the profits should pass through to you without being subject to FICA. Of course, in the kind of dough you probably roll in, a 'reasonable wage' might exceed the FICA limit.

Also, while I agree you may have done better with your money had you controlled it, you would have put it at greater risk. For essentially a riskless investment, Social Security can't be beat. Don't get me wrong, I am pro SS, but I think the only way to keep it solvent is to gradually raise eligibility age to 70, especially for workers under 30. For the rest of us, I'd propose that eligibility should be raised two months for every year our current age is under 60, with no change for those over 60.