01/24/2020    Michael M. Rosenblatt, DPM

How much in assets must you have to comfortably retire?

I usually agree completely with Dr. Herbert in
his advice on retiring and other issues
peripherally related to podiatry. I disagree
however on his assessment of the securities
industry and stock markets. My argument is
statistical. If you invested and stayed in the
S and P 500 index from 1973 to 2016, your rate
of return would be about 11.69%.
https://www.thebalance.com/stock-market-
returns-by-year-2388543

10,000 initial starting balance+1,000
dollars/month (forced saving) over 30 years at
11.69% interest= 3,146,317 dollars. If you
survive life; you will get older. Time will go
by. What you do with it counts.

There are caveats. You need to stay in, which
means that during downturns, you leave your
investments alone and ignore the downturns.
This appears to be the key. Being an old man, I
have lived through so many downturns that I
completely ignore them, including the Great
recession of 2008. The exception to this is my
moving to a no-income tax state in 2016, and
leaving California permanently in my rearview
mirror. The other impact element is healthcare
insurance and its availability and cost, but
this issue only occurs if you retire earlier
than Medicare age. Many podiatrists do; so it
is a vital part of this equation.

No actual dollar amount for retirement
calculation can be made until or unless you
deal with healthcare insurance issues. If you
and/or your spouse have a so-called
"preexisting condition" you need to find out if
you are insurable. This welcomes in a political
discussion which I would rather not start here.
I will disclose how my wife and I dealt with
this issue when we were under the age of 65 and
one of us was not "insurable." In our state
then, if you held a family business and you and
your spouse were employees, you could purchase
a "small business major medical plan" which did
NOT allow the insurance company to ask you
about pre-existing conditions. In short, they
HAD to accept us. Some will argue that this is
no longer necessary with Obamacare. My point is
that either way, it is manageable.

Our family businesses were not sham. They were
real. One was a company we established to
manage our investment Real Estate. The other
was my consulting business in helping doctors
accredit their practices as a Medicare
Certified Surgical Center. We actually worked
those, even though I no longer practiced
podiatry. We had two employees: My wife and
myself. I also occasionally hired outside help
as necessary. Onetime, Blue Cross wanted to see
our tax returns. No problem. Our accountant had
set up our business tax returns. We never heard
anything from them after. We had income and
outgo from our businesses. There is no
requirement in the law that states your
business must be profitable, even though ours
were.

The major medical insurance was expensive. But
it was real. Our family businesses also served
us well in the ability to take myriad tax
deductions. Those were also completely
legitimate. The beauty of the family business
is that "cheating" is unnecessary. All that is
necessary is good records. (We were never
audited).

Before you retire, I recommend that you make a
study of your health insurance issues, since
this is the major cost item. Others include
where to live. I strongly recommend LEAVING
high cost-of-living states and metro areas,
even if you have grandchildren there. I can get
into the politics on that, but not here. You
need a paid-up place to live where costs are
moderate. If you have a high value home that
you can sell for a large profit, SELL AND MOVE.
You may have an issue with capital gains when
you sell certain high-value Real Estate.

I don't have enough room to get into forming a
Charitable Remainder Trust to help shield
capital gains from taxes. But you need to get
into that, unless you are moving just once into
your next home in another state. Consult your
accountant before you sell. You may not have to
pay any income taxes from the sale of your
existing home. You may however have an excise
tax, especially in "some" high-taxed states.

I retired at a very early age, after being
extraordinarily blessed by choosing to be a
podiatrist. I might have tried to make a living
as a classical concert pianist instead. I was
very good, but not THAT good. It is
astonishing, even now on how many people who
can play the 5 Beethoven Piano Concertos.
In summary: You need to do thorough analysis
before you retire. Most of the information is
readily available. Don't be so concerned about
the actual post-retirement income, but rather
other issues that pull and play with that
number.

Michael M. Rosenblatt, DPM, Henderson, NV

Other messages in this thread:

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01/24/2020    Bob Hochron, DPM

How much in assets must you have to comfortably retire?

The survey question is an interesting one,
because it really refers to only one side of
the important equation. Having retired almost
five years ago, I have been asked this question
by many friends and colleagues. The quickest
way to answer this is to pose the rest of the
question: How much do you need to live on?

My suggestion is to start with a clear and
comprehensive idea of what it actually costs
you to live for 3 years. I recommend every
dollar spent be tracked with a simple program
like Quicken, which I’ve used for decades. All
personal expenditures get paid out of one
account, including cash and all credit card
bills, and categorized by type so you can look
back and see what life is costing you. Actually
pretty easy to do, and a total revelation to
many.

Only when you know what you need can you begin
to determine the kind of income that your
available assets will have to generate, and
then determine the size of that asset mix
needed to produce what will be required. A good
financial planner is essential (as in
mandatory) in evaluating assets, projecting
cost of living increases, and customizing a
responsible portfolio in whatever mix of
investments is age and time appropriate.
Historical experience has long estimated that
you can generally count on withdrawing 4% of
your total asset pool each year and maintain
enough to last the average lifetime. That’s a
very rough estimate, but a fair place to start.

Not counting other income (such as Social
Security), one million in your investment
portfolio should provide about $40,000 in
yearly retirement income. You can do the math.
What you need in assets equals the ability to
generate the yearly income you need to live on.
It really depends on your individual lifestyle,
and what’s comfortable is relative.

Bob Hochron, DPM, Skillman, NJ