Poll: How much are you planning to spend yearly in retirement?

[Lordosis]

I have been pounding a double mega backdoor roth situation, so I'll be bummed if it ends.

I feel like there is a joke someone should be making here.

[FIREshrink]

Agreed- Poll reflects overall spend in this forum is significantly lower than average physician spend. My guess minority of physician colleagues will have <200K budgets while 55%+ here in forum are have it. That makes the equation of saving and RMD and conversion challenges from dividends much less frequent outside this forum (sadly).

The very small segment of society which overpopulates forums such as WCI and Bogleheads is massively oversaving for their needs and going to have substantial RMD, income, and taxation "problems" in late life.

I have an additional complication in that I inherited a substantial amount and am the beneficiary of a trust, so I'm already dealing with the problem of way more income than we need and have a window into the future most here will live. Inherited IRA RMDs are taxed at our high marginal rate and get reinvested in taxable. Taxable income gets reinvested but taxed at 23.8%. This all affects our "usual" income through NIIT and phased out charitable deductions and so on. We still save 40-50% of our gross income and don't spend any of what we inherited for many reasons so numbers keep going up.
But this is not a sympathetic position, we (all of us) are rich by any definition and we will pay the tax man.

[Larry Ragman]

I feel like there is a joke someone should be making here.

I would certainly hope so, light me up…

[JBME]

You think most physicians spend more than $200k/year?

I remember WCI writing once that he upped family spending to $160k/year and considered that to be a very generous amount. Is there data on median or average physician household spending?

If you consider all physicians of all specialties in the United States, isn't their average gross over $200k? And we know that tons of doctors are broke and/or I know I've seen the pie charts of the NW of doctors by age bands and I believe I've seen from that plenty of physicians in their 50s have a NW of $1m or less, which suggests to me that plenty (in fact "most") of physicians spend at least $200k/yr. You get the doctor house with paying off student loans and sending your kids to private school and taking expensive vacations and having pricey hobbies, it's not hard at all for it to get out of control and beyond $200k. It's hard for most of the regulars here to fathom this since we're all so frugal

[GasFIRE]

You think most physicians spend more than $200k/year?

I remember WCI writing once that he upped family spending to $160k/year and considered that to be a very generous amount. Is there data on median or average physician household spending?

No data but just looking at the cars, estates and the number of ski or lake homes owned by the partners of my former group (not to mention the surgeons and consultants) I can't see how it would be under $200K.

[JBME]

--RMD: This is why the concentration on so much discussion in this forum (especially on my part). We oversave significantly for the poll reflecting most intend a <250k budget.

I'm with you on this. With over $1m in pre-tax and still under 40 and also with the ability to continue working while socking another $100k/yr in pre-tax, RMDs in my mind are going to be a huge issue. If I knew for certain when I'll retire, this might be easier to solve. But I have no idea when I'll retire. "Fortunately" we regularly end up in the upper end of the 24% bracket. At that level I'm comfortable with roth conversions and/or doing Roth 401k rather than pre-tax. The hiccup is living in a high income tax state and I have no idea where I'll retire too and how much state income tax arbitrage I'll end up taking advantage of. So that does make doing Roth 401k more painful rather than pre-tax.

All of this to say that I'm doing our tax and savings planning for next year and increasingly thinking we'll be doing more Roth 401k contributions rather than pre-tax 401k contributions, as long as we stay under the top dollar for the 24% bracket. All because I fear this RMD issue.

[StarTrekDoc]

I'm with you on this. With over $1m in pre-tax and still under 40 and also with the ability to continue working while socking another $100k/yr in pre-tax, RMDs in my mind are going to be a huge issue. If I knew for certain when I'll retire, this might be easier to solve. But I have no idea when I'll retire. "Fortunately" we regularly end up in the upper end of the 24% bracket. At that level I'm comfortable with roth conversions and/or doing Roth 401k rather than pre-tax. The hiccup is living in a high income tax state and I have no idea where I'll retire too and how much state income tax arbitrage I'll end up taking advantage of. So that does make doing Roth 401k more painful rather than pre-tax.

All of this to say that I'm doing our tax and savings planning for next year and increasingly thinking we'll be doing more Roth 401k contributions rather than pre-tax 401k contributions, as long as we stay under the top dollar for the 24% bracket. All because I fear this RMD issue.

I would have done the same in this tax situation. It hurts living in Cali for Roth; but it's better than RMD 32% vs now 24% + state tax - and compound earnings That equation may change with tax bracket changes in the future of course. --- We won't be relocating out of CA realistically. Perhaps part-year to HI, but certainly not NV/AZ/OR since not our style for income tax avoidance in retirement is not in the cards.

[CM]

No data but just looking at the cars, estates and the number of ski or lake homes owned by the partners of my former group (not to mention the surgeons and consultants) I can't see how it would be under $200K.

I probably spent over $100K back in 2000 when I bought my girlfriend a BMW Z3, but I don't think I've topped that mark since. Maybe I'll cut loose one of these years just to see how it feels.

[JBME]

I would have done the same in this tax situation. It hurts living in Cali for Roth; but it's better than RMD 32% vs now 24% + state tax - and compound earnings That equation may change with tax bracket changes in the future of course. --- We won't be relocating out of CA realistically. Perhaps part-year to HI, but certainly not NV/AZ/OR since not our style for income tax avoidance in retirement is not in the cards.

The one thing I know for certain is I will not retire in Minnesota I don't know why old people would want to live here. The healthcare is very good, as are the schools, but with the taxes (they tax SS as well) and the cold, I just don't know why one would stay here. I secretly hope all of my kids end up out of state after college so I have an excuse to move somewhere else. If they end up here, then I'm part time in Minnesota and part time in another state, establishing official home residence in that other state.

[Lordosis]

If I get to the point where I am worried about a RMD problem that is a signal to retire. Or at least cut back. An RMD problem is that you have so much money that you are being forced to pay a higher tax bracket at withdrawal compared to contribution. If I am "burdened" by having so much money why am I still working?

[Tim]

I feel like there is a joke someone should be making here.

"Why You Need the Last Doubling
Interestingly, it is the last doubling that usually makes you “rich.”
That is, think about the rule of 72. If you get, on average, 10% returns each year, it will take your money 7.2 years to double.
The first doubling, if you have 100k invested, you get to 200k. The last doubling in a 30-year cycle, your money goes from 800k to $1.6M.
Thus, the last doubling is the one that really adds to your portfolio. You get 8 times more from the last doubling than the first!

The joke is a self fulfilling outcome. FI and RE are two separate objectives. ANYONE that actually focuses on saving, allocations, distributions and taxes and reaches ANY FI
has two controllable choices after 65.

• The house - this drives your cost of living in RE. Everything else is discretionary. Richest or poorest guy in the neighborhood, easy to change the neighborhood.
• The last doubling will in all probability occur.

Self preservation will lead to a behavioral finance choice that double is the human behavior. Twice as much for income or assets.
My crystal ball is not that hazy for almost anyone here with a plan. You will have way too much money by 2 times.

If your biggest problem is taxes, that is not really a problem. You will be rich regardless of the neighborhood you live in. All this fretting and planning is what caused you to overshoot your plan by double. Not bad and pretty funny.

[Turf Doc]

The one thing I know for certain is I will not retire in Minnesota I don't know why old people would want to live here. The healthcare is very good, as are the schools, but with the taxes (they tax SS as well) and the cold, I just don't know why one would stay here. I secretly hope all of my kids end up out of state after college so I have an excuse to move somewhere else. If they end up here, then I'm part time in Minnesota and part time in another state, establishing official home residence in that other state.

im sure the COL other than taxes has to be lower in minnesota which is why you dont hear about it, but i was shocked when i saw that in minnesota taxes for high earners are basically the same as in california! And i dont think the websites even show the 2% provider tax? which btw is such a kick in the teeth

[FIREshrink]

If I get to the point where I am worried about a RMD problem that is a signal to retire. Or at least cut back. An RMD problem is that you have so much money that you are being forced to pay a higher tax bracket at withdrawal compared to contribution. If I am "burdened" by having so much money why am I still working?

Such relies entirely on unknowable facts, such as your future rate of return and future tax policy, the age at which you'll die, and so on. It is that uncertainty paired with natural anxiety which creates these super savers in the first place.

[JBME]

im sure the COL other than taxes has to be lower in minnesota which is why you dont hear about it, but i was shocked when i saw that in minnesota taxes for high earners are basically the same as in california! And i dont think the websites even show the 2% provider tax? which btw is such a kick in the teeth

A "high earner" in MN is $276k. At least this goes pretty far in this state due to lower COL. When we were deciding on where we'd move to have a family and live for the next 20-30 years it came down to the DC area and Minnesota (family being here). The COL argument spoke to me and how I eventually came on board. It helped that I already knew the public school system was good and the state government, while it taxed its citizens at a very high rate, was at least well-run. This house in MN, which isn't all that cheap, would easily be $2-3m+ in DC or California. I also think docs get higher pay here on average compared to docs in CA and DC

[uksho]

Using Schwab calculator: today's 2.7M with 22 year horizon (age 50 ->72) puts RMD at 402k on a 6% ROI presumption for 25 years Life expectancy.

My guess is that since many folk earn more than my primary care academic job, 2.7M at age 50 is a relatively common situation here.
Coupled with the poll showing vast majority <200k -- most folk here will have a RMD issue if not addressed.

Trying to understand

when you retire , you will also start taking money out of nest egg , does your RMD calculation take that into account ? ( the money spent between retirement and 72)
for how much money at 72, RMD will be 200k ? Thx

Also, most folks here are talking about today’s dollars or future dollars ? Thx