Most of the time, in the back of my mind, is worry that we got such a late start on retirement savings (aged 41) and we won't have near enough. Then about every year or two I actually do a projection of where my 401k should be by the time I retire, as well as get online and see what our estimated social security will be. Then I kind of breathe easier. It's not really that bad.
I plan (ya ya - I know how plans go) to retire somewhere between 67 and 70. I'm healthy, don't feel my age, I should be able to work until I'm 70. I've always pretty much figured I'm going to have to work that long since we started so late saving.
Monday I did a little spreadsheet for yearly contributions and estimated earnings. They say over time the stock market has averaged 7% a year. I also have my 401k in an aggressive portfolio, since I still have quite a few years to ride it out (about 17 years). I put in my current starting balance, added my yearly contributions, my employer matching and my employer profit sharing contribution. I just left it the same every year and didn't even increase it (though it will most likely increase). I was a bit more conservative on the earnings and put in 6% per year.
By age 70 I would have about $400,000. While at first that sure doesn't seem like enough..who could live another 20 or more years or so on that? But, I'm going to assume social security or some form of it will still be there. I really don't think the voters and politicians in this country are going to cheat us out of putting into it for over 50 years and never get anything out of it. So, I'm going to assume I'm going to get what they are telling me I'll get when I retire. At age 67 I would get $28,000 a year. My DH will be eligible for his or 1/2 of mine, which ever is larger, so 1/2 of mine. Bringing our annual income up another $14,000 to $42,000 a year. Each year, waiting past age 67 to collect adds 8% to the amount. By waiting until age 70 to collect our social security benefits our annual benefit total would be $52,000 a year.
Assuming a (recommended) 4% draw from my retirement funds per year, I just put the first year at a flat $16,000 draw in my spreadsheet along with a much lower earnings estimate at 2.5%. That would give us $68,000 a year total to live on. I increased the draw 2% per year for inflation needs. With the principal balance (while declining) earning a rate of return every year, by age 95 (Gosh, I hope I don't have to live that long LOL) I would still have about $50,000 left. Money that can go towards living in assisted or a nursing home, which I'm sure we'll end up in before we'd reach 95 years of age. Plus by that time we'll have a paid for house we can sell and that money can be used, as well, for our remaining years, if we have to live in assisted living or nursing home. If that runs out then, I guess it's medicaid, like my grandma had to use after her money ran out (she lived to 95).
I really don't think we'd need to draw down 4% a year if we are making $52k a year in social security. Changing it to 3% gives us $64,000 a year to live on and assuming the same other variables (2.5% earnings and 2% draw increase each year) - we then still have over $200,000 left by age 95.
At some point, I'll also have some amount of inheritance from my mom. She's very frugal and her annual draw is usually less than her annual earnings on her principal. (plus she gets social security), so she's not even touched her principal yet (at age 76). I don't anticipate it being until past when I actually retire, but then of course I'll still most likely have another 20 years or so to live. My mom isn't likely to run out of money, that's for sure and even if it
ended up only being $50,000-$100,000 she had left, that's still
something to add to our retirement money. Plus that's not even counting her house she owns.
So, I don't think we are going to end up poor and destitute. Obviously we will have to manage our money closely and wisely. As long as our house and cars are paid for I do not see any reason whatsoever we could not live on $58k a year - or less! My mom lives very comfortably on $50k a year. We don't plan on living some extravagant lifestyle in retirement, that's for sure. In another year or two I'll start panicking again and have to do this exercise all over again.