San Diego Housing Market News and Analysis

You're probably not doing too badly--but so much depends on your dependents, the lifestyle you want in retirement, whether or not Social Security and (especially) Medicare will exist in 20 years, etc.

One thing I would suggest is to pull up one of the many retirement savings calculators that are online and run your numbers.

Agree with cvmom. There are some good retirement calculators out there... some are pretty in depth about *all* sources of income (including possible rental income, pensions, etc.) Others are very superficial.

I obsess about retirement. Seriously obsess. Constantly running "what if" calculations. My favorite tool is one built into quicken. But you have to buy quicken to get it.

Here are some calculators and sites I like:

decent overview article:
http://money.cnn.com/2002/12/16/pf/exper...

SS estimator:
http://www.socialsecurity.gov/OACT/anypi...

retirement calculators:
http://cgi.money.cnn.com/tools/retiremen...

https://www3.troweprice.com/ric/ricweb/p...

http://www.schwab.com/public/schwab/plan...

https://personal.vanguard.com/us/insight...

https://personal.vanguard.com/us/insight...
(calculator is pretty lame. no variables)

Also to consider... you talk about your net worth, all in. I assume that includes equity in your home. Do you plan to sell the home at retirement, or still live there? Some people plan on downsizing, or selling and renting. Others plan on retiring in place. You need to adjust accordingly. Personally, I plan on retiring where I am, so I do *not* include my home equity in my retirement calculations. I need the shelter more than the equity.

What about retiring in Italy? That's a nice retirement location.

What is this "retirement" you speak of? That word sounds very 20th century.

I agree with UCGal. I wouldn't count home equity at all. Even if you don't plan to live in your current house, you still have to use the equity to buy another place.

Yes, my calculation is including equity of my house. I should NOT include that then...

I'm on living in a smaller house/condo closer to Del Mar area eventually.

Thanks for the advice. I will definitely use the calculator to see if I'm on track or not...

It also depend on when you plan to retire as well. That makes a big difference. I'm planning to retire in Del Mar/Solana Beach area as well. I think that when I get to $2M cash, I would have enough to retire. With $2M, if I get 5% return on my money, that would mean yearly income of $100k. That would be more than enough for me to live on. Without car or house payment, $100k is way more than enough to retire on for me. You can look at your current expenses and remove housing & car and see how much you're really spending. That will give you a good idea of how much you need to retire.

AN...
Do you plan to drive when you retire?

I assume you'd use your current equity to pay for a place in Del Mar or Solana Beach.

Cars wear out...even when lightly used. You still need to budget for gas, insurance, tires, etc... if you own a car.

Brian...
We're looking at Italy as an option... but the less likely one. Might do 6 months here, 6 months there... but we'd have to factor travel and rentals into our budget. Wouldn't want to buy there since we'd want to try different places...

Hahaha... that's what I was thinking. I think folks should plan on working at least until 70, and until 75, if possible. The best retirement plan is to find something that (a) you actually like doing, and (b) you can do well into old age. The longer you can stave off having to live off of your nest egg, whatever the size, the better.

Yes, I plan to drive. I said remove car payments, not car maintenance or gas, etc. Right now, even with today's gas price, we're paying ~$150/month in gas for 2 cars. When we're retired, we can reduce to 1 car and we no longer need to drive everyday to work. So, I suspect it'll be much less than that. I suspect insurance will go down to for lightly used vehicles vs vehicles used for commute. Tires will last much longer too. Right now, we're driving ~10-15k miles/years, so tires should last 4-5 years. When we're retired, I suspect 1 set of tires will last 8-10 years. Bottom line is, if you project the current expense for transportation (not including car payment) will be more than enough to cover the transportation cost during retirement.

Yes, you assume correctly, I don't plan to retire until I can pay off my retirement house.

The method I use for myself is very simple. To calculate my target retirement asset amount, I multiply the total annual amount I need to spend in order to preserve my standard of living by the number of years I plan to be retired for.

In equations, my target amount is S x (DA-RA), where S = annual spending requirement, RA = my retirement age, and DA = the age at which I want my savings to run out. Choosing DA is tricky. If you decide to have enough until you are 85, you are taking on real risk that you'll be digging for food in a dumpster at age 86, should you live that long. If you decide to have enough until you are 100, you are taking on a lot less risk of outliving your assets, but you are going to have to retire later.

Which assets do I include? I need to be able to liquidate them over time without affecting my standard of living. So I don't include any home I live in.

I don't count future investment returns. Any investment return needs to be reduced for expenses, taxes, and inflation. Staying ahead of all those by a healthy margin would require taking on a healthy dose of risk, with a much higher probability of premature dumpster-diving should the risks not pan out.

You're doing a lot better than most Americans. Fewer than 10% (possibly as few as 2-3%) of people your age have 600k in assets. In 2004, median net worth of a 40-year-old was around $60,000, and that's including home equity.

I've heard similar stats too. But average Americans will depend on SS to retire.

there is never enough. save what you can, and enjoy the moment.

You are certainly doing very well, but, at your age, many variables, as have been previously mentioned, must be considered.

In my age group (50's), generally speaking, I agree with $2MM--excluding real estate--especially if you plan to retire in CA. For those in their 30's, I would think $3MM+ might be more realistic, especially since I've heard from younger friends, that many financial planners today are telling their clients in their 30's and 40's to plan on $0 Social Security and Medicare.

The trick to all of this, is, of course, to actually get to retirement--the next phase of life, or whatever each of us might choose to call it with these reserves still intact, and the health to enjoy life at that particular point it time.

I wish you the best on your journey!

Obviously, SS will be insufficient to afford a retirement in Del Mar. If you want to retire in the 98th percentile, you have to have a nest egg in the 98th percentile.

But it is somewhat bizarre to see people mentioning Del Mar and dumpster-diving in the same thread.

Why is it bizarre? It's from two different points and they're not related/responded to each other. Think about it, if you have enough money to pay off a house and still have $2M in cash to spend during your retirement, why does it matter if it's a house in Del Mar or a house in Escondido? It probably end up being cheaper to live in a 1000 sq-ft house in Del Mar than a 4000 sq-ft house in Escondido.

It represents the lack of perspective. Just like people show the lack of perspective when they show concern over federal debt and demand spending cuts now lest we become Italy/Greece. When the real danger is for us to become Japan. But I digress.

Most Americans won't retire in a condo in Del Mar or in a 4000 sq ft house, or go dumpster diving. The question as originally posed was "how much is okay for retirement?". The answer to that question is zero. There is a senior apartment complex not far from where I live. I'm fairly sure that, if I were 65 right now, I'd be able to afford to live there on my SS benefits with no savings whatsoever. And I wouldn't even have to move to a lower cost-of-living state. I don't think that SS or Medicare will get rolled back substantially by 2040, because the majority of Americans don't have enough savings to last more than a year or two without SS and Medicare. And seniors vote. They will saddle their grandchildren with whatever taxes necessary to ensure retirement that does not involve dumpster-diving or eating cat food.

Then at some point "how much is okay for retirement" somehow got twisted into "how much is okay for retirement in Del Mar", which is the spectral opposite of the original question.

And the bizarre part, I guess, is that people continue the discussion without blinking an eye.

Does it really matter?

I think we can definitely say now that by the time you retire, you're going to be paying much higher taxes when you take out your mandatory 401k/retirement plan distributions than you are paying now during your income years and who knows if the government is going to keep it's promise by not taxing the roth 401k's...Not to mention, the dollar is going to be clearly trashed by the time you are ready to retire....

In other words, as a responsible "saver", you're going to be paying for the entitlement benefits of everyone else who's been reckless and hasn't saved....That essentially your diligence in being financially responsible will benefit not you, but everyone else around you who hasn't been been responsible. Just to name a few:

*When you're ready to send your kids to college, you/your kid ain't going to qualify for financial aid because you will be perceived as being "wealthy" (especially when they start counting how much equity you have in your house and start expecting you to take out a mortgage to finance your kid's education), but your higher income tax bills year over year will gracious go towards others that can't afford to pay for the increased tuition hikes....Like Joe six-pack that maxxed out his/her credit card on bling and who now have no savings, but who's kids now qualify for financial aid.... And people who aren't even here legally, never paid income taxes, that somehow still get to get in-state tuition reductions at the U.C. schools....

*Your healthcare bills are going to skyrocket because you're going to find that this healthcare reform really wasn't a reform. It was a sneaky way for insurance companies to extract more dollars from middle class americans such as yourself who could afford to pay for others who don't have health insurance...and for employers that once provided better healthcare to pass more cost on to you, the employee, while simultaneously providing you with less healthcare benefits.

*You're going to be paying up the noses in income taxes when you take out your 401k distributions, because obviously when the 401k/IRA benefits administrators told you to max out your contributions, what they didn't tell you is that if you really did this, and you really are a good saver, then by the time you retire, there will be a period of which you will be required to take mandatory distributions each year, and pay income taxes that year, which most likely is going to be more than what you pay right now....And don't forget that if you saved too well, and the amount that is determined to be "mandatory" ends up exceeding certain limits, you'll end up paying a penalty for that on top the high income taxes you already are paying...

*With a much larger baby boomer population retiring than generation x, savers are going to be pretty much screwed because you're tax dollars will be feeding at least 2 baby boomers who more than likely hasn't saved...Meanwhile, you're really screwed because you only produced 1 millenium baby/generation y baby, and while we probably will see more immigration into the U.S., they probably won't be mostly legal, and hence we won't be collecting taxes from folks.

*Meanwhile, the general public (especially here in CA) will continue to demand free social services that they have been accustomed to...So I'm sure the government will come up with even more ways to extract as much as they can from savers. Simultaneously, our government will continue to spent on maintaining the prestige of having the largest military in the world and proping up the image of being the world police...That's right, you're tax dollars will continue to feed this bloated world police, while simultaneously just about every public service you really need is cut that you end up having to pay for in some other format to subsidize whatever deficiencies.

*Meanwhile corporations, will still have the lowest tax rates, the exrepatriation tax laws still wouldn't have changed, and the ubber-wealthy will still enjoy the benefits of the various tax-loopholes that exist (in new form).

So....time in and time out again, it's been proven savers are the losers. Don't count on "retiring" if you remain in this taxpaying, upper-middle class groupworking class.
....Have you folks not learned anything over the past few years during this economic meltdown?????
Savers get screwed.

I'm not holding my breath on the advantages of "tax deferred" savings plan....The once financial advise that "your tax bill is going to be lower when you retire" is a cock-amina shit that won't be true. The goal still should be pay as little taxes as possible when you retire, but the rules have changed....And I don't think conventional thinking, run of the mill "put your money into a 401k/IRA" is going to be the ticket to minimize your taxes during your retirement.

So I'm thinking...You have $600k in assets...How about contributing the bare minimum to your 401k (enough to get any company match)...Then take $300k (maybe consider a cash-out refinance on your primary as much as you can) and try to buy a rental paid off as much as you can. You'll maximize your mortgage interest deduction for you primary on your taxes (assuming that Big 6 negotiations don't end up screwing around with that) and reduce your tax bill. Meanwhile, your renter will pay for those other homes so 30 years they'll still be producing income when you aren't. Then when you are ready to retire, you can sell your primary and get the tax break (asssuming you've seen some appreciation and assuming that tax excemption on cap gains for a primary still exist) and move into one of your rentals, or roll your rentals into bigger rentals without incurring big tax bills that you would incur if you moved a comparable amount from your 401k during those years. And if things blow up and for some reason, you lose all your investment on the house, it's really not a big deal...Because you'll end up just being one of the other folks who still be able to collect on the entitlement programs that our governments will continue to promise, that will still continue to be paid by others savers that are like what you were before....

For those who can and do accumulate $600k in net worth by their mid 30s, most probably don't want to live in a senior apartment complex in Escondido. IIRC, masayako, the OP, plan is to retire in a small house or condo in Del Mar. He's also the one with $600k net worth and he's in his mid 30s. He wants to know if that's enough to get him to where he wants to be. So, maybe you should read OP whole situation before calling it bizarre when the discussion is about retiring in Del Mar.

I think there are some excellent posts on this thread. Retirement is something that I've thought about quite a bit from a younger age ever since I graduated college.

Some people above posted about being almost obsessive about it. I'm not sure I'd say obsessed but it's always been a goal of mine to be able to retire if I wanted by the time I hit 40.

Like some mentioned above, it all depends on the quality of life you will have in retirement. I know some friends that retired that don't do anything. They don't go out to eat to fancy restaurants, they don't travel on vacations, and they live really low cost living lifestyles. Then we have other friends that travel all around the world very often, dine out quite a bit, etc.

So it all depends on the lifestyle you plan to live. Judging by what many of the mainstream newspapers and magazines write, not many people think about their retirement picture and the end game which surprises me. I always get scared thinking about being older and not having enough to live on or get by.

I always say I will take early retirement but not sure I could do it. I do enjoy working and can't see myself stop working at this stage in my life. My wife thinks I'll never be able to stop working as she thinks I'd get bored of not working on "deals".

I agree with the others that say to discount and not factor in the equity you have in your house. I have my house paid off but I'm still not factoring that in my retirement picture as I'll always have to have a place to stay after I stop working. Even though we will most likely sell our 5 bedroom house and move into something smaller when the kids get out of the house, we will still buy something else.

I would however count in the retirement picture any additional properties you might own and can liquidate being careful to accurately budget what it's actually worth and also the time frame it might take to sell it. I have some friends that are dreaming when they value in their heads what they can get for their properties.

I'm in my late 30's and I don't factor in Social Security at all, even though I've contributed a TON. Frankly I don't think there will be anything left when I hit eligibility (or they end up extending where you can't take it until you are 75 or 80!) and factoring in the worst case scenario.

Unfortunately these days, $1 million isn't much money or at least not what it used to be. But I think the important thing is to really be honest with yourself and think about what kind of lifestyle you will live in retirement.

I agree with the advice to work as long as you can to avoid starting to tap into your nest egg. I'm not sure about 70 but definitely if you enjoy what you do (and even if you don't) it's good to keep working and adding to the nest egg.

ER, I totally agree with you that lifestyle makes a HUGE difference when coming up with the $ amount needed for retirement. Some people would say $500k would be more than enough for them to retire on and others will need $10M+. I know people who DON't ENJOY going out to eat or go traveling. So, their retirement would be them staying home and working on their house/yard. Those people don't need much to retire, as long as they have their house paid for. Others who travel all over the place and go out to eat constantly will probably need many millions to retire.

I also agree that rental property(ies) should be counted toward the net worth for retirement, since they can be liquidated if need be. I was only referring to primary resident, since we all need to live somewhere.

For me, when I can accumulate enough where I can live off the interest alone is when I think I'm ready to retire. That will compensate for different spending habits and have enough money to last you through your entire retirement. When I'm talking about interest, I'm talking about something very stable, like CD.

Hi AN,

Yeah, I actually think "lifestyle" is the single most important factor in considering if $X is going to be enough. I constantly see people asking if $X million will be enough but there isn't a one-size fits all answer.

I know people that took early retirement about 10 years ago with almost $4 million and they have little of that left due to poor choices, poor investments (and being in too volatile stocks for supposedly being "retired"). Also, they were living too high off the hog and spending more money than pre-retirement!

Before when they had to work they never had time to do anything. But they were finding themselves with tons of free time so they were going on all kinds of trips, bought expensive boats, visited their kids more that lived across the country, etc.

Yeah, they were stupid and foolish but unfortunately people do stupid things in retirement.

For us, we really enjoy traveling around the world and seeing new cities and going back to the cities that we enjoy. Fortunately we own a few properties in cities that we really enjoy outside of the USA. We rent them out when we don't use them so they are income generating which is ideal for us.

Also, for those that don't know about Home Exchanges or "home swapping" it's GREAT if you are retired and want to see the world. It's a GREAT and cost effective way to travel around the world. We currently travel about 100+ days a year around the world and we used to stay in hotels but the past 3 years we've done home exchanges via www.homeexchange.com and it's amazing. Most of the properties we have stayed in have been really high end properties. You can do simultaneous or non-simultaneous exchanges.

I thought it sounded strange before I started doing them but I can't think about any other way to travel or going back to small hotel rooms now that we discovered home exchanges. It allows us to "live like locals" when we travel and have always swapped for high end places. It's simply the best way to travel in retirement or otherwise.

Definitely an ideal situation is if you can live off of interest income. But then again, you can have multiple year stretches like the past few years where interest rates plunged due to government interaction. Lots of retired folks never planned on getting close to 0% to 1% on money markets/CD's so you also have to factor that into the mix.

Someone above talked about $2 million being enough as he planned on getting 5% interest income. That's all fine and dandy unless interest rates are super low for extended periods of time. Forget what statistically they are. You could have a really bad stretch where you aren't getting 5%. Plus once you are "retired" you will want to be in SUPER conservative investments and not the stock market. So factor all of that in too.

But I do agree with you AN that $100,000 in after tax net income per year will be enough for most people to retire comfortably. Even with a fair amount of travel, if you have your primary residence paid off, car paid off, no debt whatsoever...then a six figure per year retirement should allow for a really comfortable retirement.

Some retired people panic and just make horrible decisions. Like when the stock market was plunging they panic sold at the bottom. And now that CD's are paying next to nothing...they feel forced into investing in more speculative investments and higher risk like the stock market, even though retired people shouldn't be in high risk stocks.

Interest income used to be GREAT pre-recession but these days I'm really happy to be a landlord and having rental properties that are generating great cash-flow. Definitely being a landlord can be a pain in the butt ....however it's been really great and I believe high end rental properties in desirable areas/neighborhoods/cities will continue to do well heading into the future.

Flu touched upon this a bit above in his post about the benefits of having rental properties. I totally agree and that has been a big part of my retirement strategy and focus. I'd much rather depend on stable rental income vs. trying to guess what CD's are paying in the future. I also like having a tangible asset with no debt on it that spins off cash flow each year.

Also, I read some people talking about retiring in Italy or other countries. Definitely I think you should live where you really enjoy. But also you have to factor in exchange rates, what currency you hold your currency in, etc. Heading into the future, the value of the dollar can really depreciate against other currencies. Even with as many problems going on in Europe as there are.... the Euro has done well with the endless printing of Dollars by the government.

I've also lived abroad many years and it's been great but you have to really look into everything including healthcare costs and availability as well as residency status and how easy it is to become permanent residents. Also, you have to be careful as some countries once you become permanent residents, you get taxed on worldwide assets. So you just have to investigate all of those types of things.

Something else ESSENTIAL is to know how much you actually spend each year on EVERY category including (but not limited to) dining out, entertainment, clothing, automobile expenses including gas/insurance/maintenance/etc, travel, groceries, charity, housing expenses, utilities, medical/heathcare costs, prescription drugs, and especially any bad habit activities.

I'm always amazed by just how many people have no clue how much they spend each year on every category. Something essential is using a program like Quicken where you can track every category for an extended period of time. I have tracked every dollar I've spent since graduating college 15 years ago. It's been really helpful in helping me plan my retirement to know just how much I'm spending in every category.

Also, something VERY important is to make sure you are adequately insured for medical/health insurance as well as possibly long term care insurance. Also, if you have multi millions saved up, it's always a good idea to have a comprehensive Umbrella insurance policy that will cover you against liability, lawsuits, etc. I have known people that have gotten totally wiped out in a bad lawsuit or accident where their insurance coverage wasn't so great. So do yourself a favor and get an Umbrella policy. They are easy to get and not so expensive. (Heck, it's always a good idea to get it before you retired. I think anyone with significant assets should definitely have an Umbrella policy in place).

Definitely I'm always interested and curious to hear about people's retirement and how it is going and the planning that is involved. I've always been fascinated with that topic. So thanks all for sharing your stories.

All very good advice, ER. I'm going to check into an umbrella policy.

After reading some of the more recent comments on this thread, I realized I should have mentioned that retirement lifestyle is a huge determining factor in assessing retirement income needs, and that the OP should definitely take this factor into consideration. Generally speaking, for us, the $2MM number is the one we chose for our comfort zone, and realize that is different for everyone.

We've had rentals for years, and completely agree with FLU's thoughts on investment properties. That might be a great option for you to consider--if, as he also said, drastic changes are not made to the current laws.

As many of you, we travel all of the time, and always will--so that will always be a major component of our lives. Since we have friends to stay with just about everywhere we go, and because we have airline benefits, and will through retirement, we incur very little expense in that regard, and it's something we enjoy tremendously.

As you can see, there are as many ways to think about retirement as there are people, so you just have to determine what works for you and your family. Hopefully, our thoughts have been helpful.

Thanks Bearishgurl. Yeah, DEFINITELY check into the Umbrella coverage. I really think everyone should have one unless they aren't worth anything. One bad accident or incident can totally bankrupt someone.

People don't realize that Umbrella insurance coverage paid for O.J. Simpson's legal defense as well as Bill Clinton's legal defense. Millions and millions of dollars worth of legal bills. They aren't expensive at all.

The truth of the matter is that really bad things can happen to normal people and you don't want to get wiped or put into bankruptcy by a liability judgement or frivolous lawsuit.

ER, all very good points and I agree to them all. I was actually the one who mentioned $2M and $100k/year. I actually mean $100k before tax, not after tax. $100k after tax would definitely make my retire that much more lavish.

Sure, the last 3 years, CDs might be paying ~3%, couple years before that, there were around 6%. If you have $2M and retiring today, you should be laddering your CD. I'm sure if you average CD rate over the last 10 years, it would be >5%.

I also totally agree about rental properties. I like to have my retirement fund more diverse. Which would also include rental properties. I don't want to put all of my eggs in one basket.

I personally don't care too much about all the expenses in individual categories. I'm more concentrated in total expenses. I keep track of all the big expenses, but all the smaller categories, like groceries, insurance, gas, etc, I just keep track of total monthly expense. I can always look up the details with Quicken or Mint, but they're not something I look at every month.

I agree with scaredy. Planning an unpredictable future like it is predictable only helps to enhance illusion. There is enough worry today, why worry about tomorrow?

Hey AN,

Ah..yeah well $100k before tax should still be good for most people with no debt and having all cars and home totally paid off.

Definitely I agree about CD's. I really wish I poured more money into them when they were paying 6% but then again hindsight is 20/20. Still, yeah, your probably right about average yields over 10 years but still....I know many retired people that have been nervous the past few years with such puny rates.

The thing about being retired is it causes you to worry more about pre-retirement. So you are really more sensitive to things like that. You don't really stop and say..."oh well the average 10 year yield is X% so I don't have to worry". That isn't the case at all. People are VERY worried and stressed about the low rates.

Definitely I think it's really good to have great diversification in assets for retirement. For me that includes having a good chunk of assets outside of the USA. I know most Americans will never think like that but I could see the writing on the wall many years ago and started shifting part of my portfolio outside of the USA and it's the best thing I could have done.

Another important strategy for me was getting residency status in other countries. You never know if the sh*t hits the fan in the USA in the future... I always thought it would be a wise idea to have permanent residency in another county as well as having a 2nd home in another country. I also feel really comfortable with that decision.

Yeah, I'm sure most people don't detail each and every expense. I'm probably a bit anal about that. But once I got accustomed to doing that and entering them into Quicken at the end of every day or every few days it just became 2nd nature. I admit I don't look at the charts too often but I do take a look at least twice a year to compare how my spending differs in each category throughout the year. Sometimes it's really interesting.

Here's an example of what nit to do; siccessiflwyer worked like dog had several million in the bank got early alzheimers forced into icky retirement in 50s expensive and icky. Don't do that.