Here's an ignorant but honest question: how do people retire without rental property income? (I have blinders on.)

You'd need a lot more "cash" and investments to have the same income without rentals, wouldn't you? What's the number they say you can pull out today and not kill your accounts: 3% still? I haven't kept up with the instructions.

I understand some have pensions - let's exclude those people because most don't!

So honestly: what does a retiree live on these days?

IRA, 401k, and a healthy stock investment portfolio. I’ve been reading The Millionaire Next Door, based on recommendations from Bonanza and Lisa ( if I recall) and, hubby and I could feature prominently as examples in that book. Especially when we were first married. We were both enlisted in military, he had two stripes because of community college, so he made slightly more money. We lived off of my paycheck, and saved every penny of his for over one year. Each month I would go down to GEICO ( govt employee s credit union, before they opened up to everyone) and buy a $1000 CD. Five years, 17%. Wee-doggies!! And then I convinced hubby to start buying stocks with the rest of the money. He was the saver-minded one, I was the investing-minded one, but, he became enamored of stock market investing. I wanted to do real estate back then too, but he was adamantly against. What I know now is he thought just because he was the guy, he would have to be the one doing the labor. Housing prices way back then were doing like they did in 2008-2012. People were buying rentals with cash advances on credit cards. I missed that first opportunity, but sure was not going to miss the second.

IRA 401k and Stocks are all the same thing though and all are just cash, really, with hopefully better returns and tax advantages than your mattress. But still: all the same investment vehicle: cash.

So for someone who missed out on saving every dime since day one, and who doesn't have a pension, and who does not own rental property...

What do they live on when they no longer have a paycheck????

God's grace and loved ones' protection. Think property managers do a lousy job of managing properties? Imagine how fast the wrong professional could make certain assets disappear. Think Brooke Astor.

When you were 18 or 20 and in your first job, you managed or lived with family or friends. The same thing when you are old. Except you now probably have Medicare so don't have huge health insurance premiums.

WMH's question is excellent. If WMH doesn't know, you can bet that 80% of the retirement consultants don't have a clue either.

They live off others -

inheritance, life insurance, churches, senior centers,

Most of my retired friends are millionaires because of their IRA and 401k. (I read a couple years ago I read that baby boomers have $35 trillion in their IRAs. The coming wealth transfer as baby boomers die off will be the biggest wealth transfer in history).

My friends retirement income comes from:

Social security - remember my friends worked 45 years as a W2 employee. Their social security check is much higher than my social security check.

Pension - in the 70’s and early 80’s, most companies still had pension programs. Even though my friends only have 10-15 years in their company pension before it was shut down, the pension provides another source of income for my friends.

IRA and 401 - This makes up the third income stream for retirees.

Based on the latest analysis on IRA’s, you can pull 5% annually from your IRA and 401 and have the funds last your lifetime.

A retired couple across the street were both school teachers. Their social security and the state teachers retirement plan provide a comfortable retirement income for them. They do not have an IRA.

So, my friends have a comfortable retirement and, if they are lucky, will leave an inheritance for their kids.

NE, an IRA is just cash...and you can't just throw lots of money in at the end of a career, not allowed, so really you have to save the maximum each year, invest it properly and take it out carefully for it to last. How many people know how to really manage that process?

Ken only if you have enough in your IRA to do that sort of thing.

MMIT "Based on the latest analysis on IRA’s, you can pull 5% annually from your IRA and 401 and have the funds last your lifetime."

"IRA 401k and Stocks are all the same thing though and all are just cash"

Not on your life are they anywhere near the same. Cash in the bank drawing interest has averaged less than 1% over the last 30 years. The stock market has returned almost 11% each over 30 years when you average it. Savings accounts are used by the bank to make money for them. Stocks are a partial ownership of the company you own stock in. While the stock fluctuates, generally over the long haul, if the company does well then you will do well.

There's no one answer to retirement income, everyone is different.

Good planners that follow the guidelines of putting 15% of their income into the stock market for a 30 year career will have enough money drawing 3% plus SS to replace the 85% of income that is required to live the same lifestyle in retirement.

The non savers become a burden on someone else if they are ever able to retire. Most continue working until they physically aren't able. I have several tenants who's mom lives with them because there isn't enough money to make it on their own.

Definitely without rentals I would have needed more in the stock market to retire. i would have had more (since I wouldn't have bought rentals) but would I have had enough? I don't think so.

The value of my rentals have doubled in less than 10 years. I don't think my investments would have. I can't eat or spend the rentals (yes I could but they aren't as liquid as the investments) but they throw off the cash needed to live without touching (or touching very little) the investments.

Without rentals I bet most people are retiring when they can take social security. So probably 67 now a days for full benefits. They your SS and your investments make up your living expenses. I am betting for most it doesn't work long term once the health issues start. Many people live well and don't save. That's their choice.

What's it take for you to live in after tax dollars? 120,000? That's 10K a month. What's your investments? 2,000,000? You got 17 years of living in the bank. Depending on what you invested in you can probably extend that to 25 without trying too hard.

Live on less? Your funds last longer. Have more money? Your funds last longer.

Start taking SS and your needed draw from the investments is less. Get 40K in SS then you only need 80K in investments and you live on the investments longer.

Got rental income 40K and SS of 40K then you only need 40K of investments per year.

If this is your situation then needing only 40K a year from a 2 million portfolio gives you 50 years of fund to draw from. You'll have lots of left over money for heirs.

Do you want to leave money for heirs? If the answer is no then you can run those free monte carlo simulators to die with zero funds at 100. You might be surprised how little you need if the goal is to use all your money up. Most of use would be uncomfortable with the idea that you didn't have funds and back up savings and emergency funds and rainy day hidden in the kitchen cookie jar money.

I think the thing that will hurt most of us is required minimum distributions.

At 73 the government is going to force you to take a percentage of your portfolio and pay taxes on it. Take your portfolio and divide by 26.5. For a 2 million dollar portfolio that's $75,000 you have to take out of your IRA.

by 80 it's 20.2 as the divisor on 2 mill and that's $99,000. By 90 you are forced to take out $164,000.

Trying to figure out the best way to do ROTH conversions (which aren't subject to RMDs) and stay in lower tax brackets is an interesting math education. Lots of youtube videos on this subject.

retirement is way more complicated than just working. When you're working it's save and invest and buy houses. The thought process is very different upon retirement.

I specifically got into real estate to create retirement income. Nothing is without risks, but the attractive thing about real estate is that the risk of outliving your money isn't as great as with financial investments.

I was speaking with my personal physician a few months ago. He works for a large medical group but I sure he makes in excess of 350K. He was worried about retirement and how much he would need to accumulate. I told him it's pretty simple; assume a 4% withdrawal rate against what you accumulate and that's the number you have to have saved or invested. I used an example of $ 3.0 million at a 4% withdrawal rate and his response was that "I'm a long way away from that". Very few people have that level of income producing assets. The poor and lower middle class can't afford it and the upper middle class have consumed it. Few have actually invested and saved

I specifically got into real estate to create retirement income. Nothing is without risks, but the attractive thing about real estate is that the risk of outliving your money isn't as great as with financial investments.

I was speaking with my personal physician a few months ago. He works for a large medical group but I sure he makes in excess of 350K. He was worried about retirement and how much he would need to accumulate. I told him it's pretty simple; assume a 4% withdrawal rate against what you accumulate and that's the number you have to have saved or invested. I used an example of $ 3.0 million at a 4% withdrawal rate and his response was that "I'm a long way away from that". Very few people have that level of income producing assets. The poor and lower middle class can't afford it and the upper middle class have consumed it. Few have actually invested and saved

Cash and skills, talents are probably the basis for all income. Someone who doesn't have cash hopefully has a skill/ talent. Or, they live off of the generosity of others. A lot of older tenants collect social security and then work undocumented jobs. Lack of documentation makes them ineligible for houses/ apartments they might otherwise afford. Hairdressing, barbers, drug dealers. One of the most notorious drug dealers in Milwaukee was an 84 year old grandma. I guess she didn't have to worry about food, clothing, shelter after she was busted.

I have an uncle who is 80 years old and he never had rentals and wouldn't dream of it. He has SS and a pension. Bought his house with no down payment with a VA loan. Now he has done a reverse mortgage on it. He uses credit cards a lot. Gets a tax freeze on his property taxes and some other types of "discounts". He buys an expensive vehicle that he can't afford but he doesn't want to drive a gas saver. That said, he does not have cable TV and lifts weights.

"retirement is way more complicated than just working"

Does it have to be?

Jason - toilet words.

I hear ya. Most times its actually

and literally when they wanna really try to sound smart.

Not all money is equivalent. Net worth at retirement is only a measure of your starting point at retirement. It isn't a guaranteed predictor of what the entirety of your retirement will be like.

We all are conditioned to believe that what is heavily marketed to us is the only way. More so if we have heard the marketing from our youth. More so if there is something new and sophisticated that is replacing something old that employers don't want ot deal with.

One old way is the younger generation took care of the older generation, either directly in their family or through their contributions to social security. This is why several billionaires have expressed concern about declining birthrates and a weaker workforce not contributing to social security. Although that doesn't stop them from massive layoffs.

Another centuries old way that has virtually disappeared is pensions, because they cost burden companies. The burden has shifted to the worker to maintain an IRA. People are conditioned to believe that they are stupid if they have doubts about their capability of managing an IRA. But think about it, most people don't really have the understanding or confidence level or time to handle making decisions about money and investments on an ongoing way. This is especially true as you get older. That's why direct deposit money like social security and pensions can be so much more valuable than a sophisticated and large investment portfolio. When you're old, sick, and possibly demented, you don't have to worry about whether your designate (child, grandchild, investment advisor, helpful neighbor) is making a right decision that would keep you out of the poor house. Bonanza was right. Retirement is more complicated than working and accumulating. You have think differently. Someone (GKARL?) created a thread a few weeks back that listed some of the complex decisions you have to make with various types of investments when retiring.

Almost everyone on this very smart, sophisticated and knowledgeable board of advisors has bought into the historically recent IRA group think of the last 40-50 years that the smart worker controls their IRA investment and draws it down at a rate of 4% or so each year. Then 20 years goes by and the retired person outlived actuarial tables, has run out of retirement funds, and only has social security to live on. Sure, they may have had a nice healthy net worth to brag about once upon a time, but do they need the stress of making additional lifestyle and budgeting decisions just as health issues may be hitting that may impact their capacity to make those decisions.

No one has mentioned the very old money philosophy of "live on the interest, not the principal". The goal is to routinely invest in stock that pay dividends regularly, and be less concerned about stock that make your net worth look spectacular but are usually liquidated to access money. Think income stock such as utilities instead of growth stock such as Tesla. Be boring. You can open a DRIP investing (Dividend Reinvestment Plan) at any brokerage at any age. Even old age. You get compounded growth. At some point, you redirect some of the dividends from being reinvestment to being income for you. You can open a DRIP account at almost any brokerage.

No one method is perfect for all situations. Have a variety of options that is works for you, from very simple and hands-off (social security, pensions) to very complex and hands on. Figure out what is right for you, and allow yourself sufficient options that make you both be smart and feel smart and that you can brag about regardless of the economic season. You can get by well with the social security and pensions if they are provide sufficient monthly payments. If you don't have an inflation-adjusted pension payment, then your next challenge is to get your investments to act like a pension (i.e. DRIP income) or be very judiciously cautious about selecting a product which would emulate it (an annuity product, or some of the other investment options that people like to mention here, but may not know of the downsides).

I often wonder if my diversified path is the correct one.

There is 17 TRILLION dollars sitting on the side lines earning less than 2%. These folks are losing spending power as they have money tied up in savings, checking and C/D accounts. The poor fools think they are doing it right by saving.

Sir Walter--I think it was Bonanza who authored that post about retirement investments.

This is somewhat related to the subject of this post. I read today that home builder DR Horton is getting sued for deceptive practices because of escrow shortages for property taxes. There were a bunch of people who bought new homes from them and used their mortgage affiliate. The basis for the suit is that they weren't told about the property taxes. The houses were new and the tax assessment wasn't completed at the time of purchase.

Why is this related to retirement? These people focused on "payments" rather than cost and were completely clueless about the components of a mortgage payment. They should have known enough to estimate the property tax escrow but now they're shocked and ready to sue because the payment rose $ 1000 a month due to the escrow shortage.

This is the reason why folks don't have it for retirement. It's ignorance of basic personal finance. Folks are struggling now even with social security but those pulling up the rear probably face the loss of even that in the future. Being wedded to consumerism while being financially ignorant is going to be absolutely fatal.

6, how did they lose it all? You don't just immediately pull all your money out of the stock market when you retire, you pull a small percentage like 3-4%. Yes, your balance will take a hit for a while, but it will recover. If for example, you took the huge decline of 2008 you would see that 4 years later you have fully recovered and 8 years after that you have almost tripled your balance in your retirement account.

Those who are capable but do not plan ahead to take care of themselves (in the future retirement or after the next paycheck) will do what they always do - blame others & expect a hand-out.