# Retirement -- How Much Is Enough? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [October 24, 2007, 11:04pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882 "2007-10-24T23:04:27Z")\ **Posts on this page:** 9\ **Page:** 2
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [October 25, 2007, 4:04pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/21 "2007-10-25T16:04:31Z")
[QUOTE=kurilla] ETA a second thought that I forgot the first time around: The 4-5% withdrawal assumes you’ll have an investment return of 8-10% before taxes, so you are withdrawing partly interest income and partly principal. [/QUOTE] If you are withdrawing 5% and earning 10% - aren’t you going to be increasing capital each year? So lets say you saved $1,000,000 and earn 10% (I think that’s a high return to plan for, but its easy numbers) You earn $100,000 in year one You withdraw $50,000 You have $1,050,000 in capital in year two You make $105,000 in year two, withdraw $52,500 (the $2.5k covers cost of living increases between year one and year two), and now have 1,102,500 in capital. ---
**Author:** ![Stitchglass\_Slide](https://avatars.discourse-cdn.com/v4/letter/s/9de053/32.png) [@Stitchglass\_Slide](https://boards.straightdope.com/u/Stitchglass_Slide)\ **Post date:** [October 25, 2007, 4:07pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/22 "2007-10-25T16:07:32Z")
[QUOTE=DrDeth] There is also things like: Reverse Mortages, Pensions and Soc Security. [/QUOTE] Okay, I’ve got to ask. What on earth is a Reverse Mortage? Your house somehow earns income for you? I can’t quite picture it. ---
**Author:** ![kurilla](https://avatars.discourse-cdn.com/v4/letter/k/ea5d25/32.png) [@kurilla](https://boards.straightdope.com/u/kurilla)\ **Post date:** [October 25, 2007, 4:40pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/23 "2007-10-25T16:40:06Z")
[QUOTE=Dangerosa] If you are withdrawing 5% and earning 10% - aren’t you going to be increasing capital each year? So lets say you saved $1,000,000 and earn 10% (I think that’s a high return to plan for, but its easy numbers) You earn $100,000 in year one You withdraw $50,000 You have $1,050,000 in capital in year two You make $105,000 in year two, withdraw $52,500 (the $2.5k covers cost of living increases between year one and year two), and now have 1,102,500 in capital. [/QUOTE] The difference between what’s withdrawn for expenses and what you earn accounts for (a) variable returns in any given year (it won’t be 8% every year – some years it’ll be 16%, some years it’ll be 0%); (b) taxes; and (c) the vagaries of chance. ---
**Author:** ![Trunk](https://avatars.discourse-cdn.com/v4/letter/t/87869e/32.png) [@Trunk](https://boards.straightdope.com/u/Trunk)\ **Post date:** [October 25, 2007, 5:18pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/24 "2007-10-25T17:18:37Z")
[QUOTE=Stitchglass Slide] Okay, I’ve got to ask. What on earth is a Reverse Mortage? Your house somehow earns income for you? I can’t quite picture it. [/QUOTE] It’s sort of like an annuity with the house as the payment. The bank will pay you, say, $1000 each month, and when you die, they get your home. If you live a long time, it stinks for the bank. if you die next year, they just got your house for $12000. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [October 25, 2007, 5:40pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/25 "2007-10-25T17:40:27Z")
[QUOTE=kurilla] The difference between what’s withdrawn for expenses and what you earn accounts for (a) variable returns in any given year (it won’t be 8% every year – some years it’ll be 16%, some years it’ll be 0%); (b) taxes; and (c) the vagaries of chance. [/QUOTE] Sure but if you get 8-10% and withdrawl 4-5% you aren’t withdrawing principal, just interest. Unless I missed something in your earilier post. ---
**Author:** ![Kalhoun](https://avatars.discourse-cdn.com/v4/letter/k/3bc359/32.png) [@Kalhoun](https://boards.straightdope.com/u/Kalhoun)\ **Post date:** [October 25, 2007, 5:50pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/26 "2007-10-25T17:50:36Z")
[QUOTE=Trunk] It’s sort of like an annuity with the house as the payment. The bank will pay you, say, $1000 each month, and when you die, they get your home. If you live a long time, it stinks for the bank. if you die next year, they just got your house for $12000. [/QUOTE] Both reverse mortgages I’ve been in the know about allow the surviving family members 6 months to pay the original loan and interest back. Then you get to keep the house. Easy to do if the person dies early on. Not so much when your loved one outlives his or her expectancy. ---
**Author:** ![kurilla](https://avatars.discourse-cdn.com/v4/letter/k/ea5d25/32.png) [@kurilla](https://boards.straightdope.com/u/kurilla)\ **Post date:** [October 25, 2007, 6:13pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/27 "2007-10-25T18:13:58Z")
[QUOTE=Dangerosa] Sure but if you get 8-10% and withdrawl 4-5% you aren’t withdrawing principal, just interest. Unless I missed something in your earilier post. [/QUOTE] I probably wasn’t as clear as I could’ve been, because there are so many variables. If you have a string of low-return years, you could end up dipping into the principal. If you have a string of high-return years, you’re absolutely right. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [October 25, 2007, 6:36pm UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/28 "2007-10-25T18:36:46Z")
[QUOTE=Dead Cat] . This also means your money can be passed on when you die, whereas with most annuities, if you die the day after purchasing them you get diddly squat for your £200k you put in.. [/QUOTE] Well, if I _die_, I’ll get squat for any investment. 😛 But you can purchase annuities with a survivor benefit or those with a guaranteed pay-out period. ---
**Author:** ![Dead\_Cat](https://avatars.discourse-cdn.com/v4/letter/d/9fc29f/32.png) [@Dead\_Cat](https://boards.straightdope.com/u/Dead_Cat)\ **Post date:** [October 26, 2007, 11:30am UTC](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882/29 "2007-10-26T11:30:22Z")
[QUOTE=DrDeth] Well, if I _die_, I’ll get squat for any investment. 😛 But you can purchase annuities with a survivor benefit or those with a guaranteed pay-out period. [/QUOTE] Sure, I’m aware of that. But if you build in these guarantees you’ll nearly always get an even lower annuity rate. [Previous page](https://boards.straightdope.com/t/retirement-how-much-is-enough/423882.md?page=1)