What's the Magic Number to Retire?

What's the Magic Number to Retire?

Every retirement plan is unique and asks the age old question: How much do I need to retire?  It takes a lot of finesse to devise each individual’s “magic” retirement age and dollar amount.  The industry’s rule of thumb is to draw down 4% of one’s assets in a 60/40 portfolio, which often leads to the best probability of sustaining a 30yr retirement.  Personally, I hate using that “rule;” the answer is far from that simple.  When trying to ascertain your personalized retirement age, here are some items to consider.

Work Backwards

You can’t determine what you need if you don’t know how much you should anticipate retirement to cost.

Start by figuring out the type of retirement you want. If you are like most, you want to maintain your current lifestyle. With that assumption, do you really have a good sense of your expenses?  Most people’s estimates are off by 10–20%.

If you’re planning a long retirement and are under by 10%-20%, it will make a significant difference.  If you don’t keep good records, I suggest looking at your current after-tax paycheck. Then, add back health insurance costs and subtract any additional after-tax savings.  This should reveal your estimated monthly costs.

Additionally, you must account for large expenses and make a loose assumption on life expectancy. (I recommend spending 5 minutes on livingto100.com to get a rough sense of your life expectancy.)  With the constant increase in modern medicine, I always recommend adding a few extra years to the end of your assumption.  Below is a great visual:


Once you understand your expenses, you’ll need to get a sense of the inflation rate at retirement.  I tend to use 3% for inflation as it’s close to historical rates.  Today, however, we are in a low inflation environment of approx 2%, which happens to be the Federal Reserve target.  Another quick tip: grow your health care expenses by a higher rate of return, say 5%.


What is the amount of money or legacy you want to leave behind?  I’ve heard everything from “I want my last check to bounce” to “I’d like to leave each kid $1,000,000.”  Think through this carefully.  If you don’t, it will be determined for you.

Retirement Income

How will you fund retirement? It’s critical to get a sense of what will be funded from fixed income.  I assume you and your spouse will receive Social Security.  That said, estimate minimal to no growth on these figures.  Therefore, what other type of incomes will you have?  (Pensions? Annuities? Part time work?)  Whatever it might be, it’s important to get a clear sense of how much these fixed incomes will be and when you’ll receive those dollars.


Understanding how your current assets are held helps you understand the tax implications.  Broken down to four categories (IRA’s, Roth IRA’s, cash, and Non-Retirement investment accounts), presume   the tax treatment is as follows:

  • Traditional IRA/401(k)– taxed as if it is all ordinary income.
  • Roth IRA – no taxes owed when taking withdrawals.
  • Cash – no taxes owed when taking withdrawals.
  • Non-Retirement Investment Accounts – growth taxed at long term capital gain rate (15% if married and under $250,000 of AGI).

Stay away from guessing the future tax rates and just use the current ones.  Here is a link from the Diversified website to understand 2017 rates:  Tax Rates 2017.

Related: The DuPont/Dow Merger: The Risks & The Strategies

Investment Mix & Returns

The final piece is your risk tolerance and investment mix.  Think of these things as return over your inflation rate.  This is very important.  Cash earns 0% and inflation of 3% actually looses purchasing power value.  I like to reverse solve this as well.  Understand the amount you want in “safer” assets, along with the “riskier” assets. It’s important to find that specific comfort zone for you.

Emotions are the number one detractor from achieving your desired investment returns, so stick to the plan.  I’d assign a 6-8% growth rate to stocks, 3-5% growth rate to bonds, and 0% growth rate to cash.

My Magic Number!

Hopefully, you now have a sense for:  what it costs to be you; how long you (approx) expect to live; how your costs will grow; what legacy you want to leave behind; what income to be expected in your retirement; and what taxes are owed on redeeming your assets.

With this information, you can assign amounts to everything. It will help you solve for what your “magic” number truly will be. You only get one shot at retirement; make it a great one!

Andrew Rosen
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In March 2010, Andrew Rosen joined the Diversified team, bringing with him nine years of financial industry experience. In his role as Advisor, Partner, Andrew forge ... Click for full bio

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

Written by: Jeremie Capron

China is on a mission to change its reputation from a manufacturer of cheap, mass-produced goods to a world leader in high quality manufacturing. If that surprises you, you’re not the only one.

For decades, China has been synonymous with the word cheap. But times are changing, and much of that change is reliant on the adoption of robotics, automation, and artificial intelligence, or RAAI (pronounced “ray”). For investors, this shift is driving a major opportunity to capture growth and returns rooted in China’s rapidly increasing demand for RAAI technologies.

You may have heard of ‘Made in China 2025,’ the strategy announced in 2015 by the central government aimed at remaking its industrial sector into a global leader in high-technology products and advanced manufacturing techniques. Unlike some public relations announcements, this one is much more than just a marketing tagline. Heavily subsidized by the Chinese government, the program is focused on generating major investments in automated manufacturing processes, also referred to as Industry 4.0 technologies, in an effort to drive a massive transformation across every sector of manufacturing. The program aims to overhaul the infrastructure of China’s manufacturing industry by not only driving down costs, but also—and perhaps most importantly—by improving the quality of everything it manufactures, from textiles to automobiles to electronic components.

Already, China has become what is arguably the most exciting robotics market in the world. The numbers speak for themselves. In 2016 alone, more than 87,000 robots were sold in the country, representing a year-over-year increase of 27%, according to the International Federation of Robotics. Last month’s World Robot Conference 2017 in Beijing brought together nearly 300 artificial intelligence (AI) specialists and representatives of over 150 robotics enterprises, making it one of the world’s largest robotics-focused conference in the world to date. That’s quite a transition for a country that wasn’t even on the map in the area of robotics only a decade ago.

As impressive as that may be, what’s even more exciting for anyone with an eye on the robotics industry is the fact that this growth represents only a tiny fraction of the potential for robotics penetration across China’s manufacturing facilities—and for investors in the companies that are delivering or are poised to deliver on the promise of RAAI-driven manufacturing advancements.

Despite its commitment to leverage the power of robotics, automation and AI to meet its aggressive ‘Made in China 2025’ goals, at the moment China has only 1 robot in place for every 250 manufacturing workers. Compare that to countries like Germany and Japan, where manufacturers utilize an average of one robot for every 30 human workers. Even if China were simply trying to catch up to other countries’ use of robotics, those numbers would signal immense near-term growth. But China is on a mission to do much more than achieve the status quo. The result? According to a recent report by the International Federation of Robotics (IFR), in 2019 as much as 40% of the worldwide market volume of industrial robots could be sold in China alone.

To understand how the country can support such grand growth, just take a look at where and why robotics is being applied today. While the automotive sector has historically been the largest buyer of robots, China’s strategy reaches far and wide to include a wide variety of future-oriented manufacturing processes and industries.

Related: Smooth Tomorrow's Market Volatility With a Smart Approach to Robotics & AI

Electronics is a key example. In fact, the electrical and electronics industry surpassed the automotive industry as the top buyer of robotics in 2016, with sales up 75% to almost 30,000 units. Assemblers such as Foxconn rely on thousands of workers to assemble today’s new iPhones. Until recently, the assembly of these highly delicate components required a level of human dexterity that robots simply could not match, as well as human vision to help ensure accuracy and quality. But recent advancements in robotics are changing all that. Industrial robots already have the ability to handle many of the miniature components in today’s smart phones. Very soon, these robots are expected to have the skills to bolster the human workforce, significantly increasing manufacturing capacity. Newer, more dexterous industrial robots are expected to significantly reduce human error during the assembly process of even the most fragile components, including the recently announced OLED (organic light-emitting diode) screens that Samsung and Apple introduced on their latest mobile devices including the iPhone X. Advancements in computer vision are transforming how critical quality checks are performed on these and many other electronic devices. All of these innovations are coming together at just the right time for a country that is striving to create the world’s most advanced manufacturing climate.

Clearly, China’s trajectory in the area of RAAI is in hyper drive. For investors who are seeking a tool to leverage this opportunity in an intelligent and perhaps unexpected way, the ROBO Global Robotics & Automation Index may help. The ROBO Index already offers a vast exposure to China’s potential growth due to the depth and breadth of the robotics and automation supply chain. As China continues to improve its manufacturing processes to meet its 2025 initiative, every supplier across China’s far-reaching supply chains will benefit. Wherever they are located, suppliers of RAAI-related components—reduction gears, sensors, linear motion systems, controllers, and so much more—are bracing for spikes in demand as China pushes to turn its dream into a reality.

Today, around 13% of the revenues generated by the ROBO Global Index members are driven by China’s investments in robotics and automation. Tomorrow? It’s hard to say. But one thing is for certain: China’s commitment to improving the quality and cost-efficiency of its manufacturing facilities is showing no signs of slowing down—and its reliance on robotics, automation, and artificial intelligence is vital to its success.

Want all the details? Download the ROBO Global Investment Report - Summer Brings Best ROBO Earnings in Six Years or visit us here.

ROBO Global
Robotics and AI
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ROBO Global LLC is the creator of the ROBO Global® Robotics and Automation Index series, which provides comprehensive, transparent and diversified benchmarks representing the ... Click for full bio