55 alive in Minnesota

[teekaymn]

Thanks to all who contribute and maintain this site. I'm already learning a great deal.
My situation: Wife is 57, I'm 55, good health, annual gross income of $130k. We have $425k in 401k and IRA's, and we're each putting 15-16k into our 401k's annually now. Another $60k or so is in savings, stocks, and bonds. One kid already married, and one kid with 2 years of college to go. We have a 15 yr $180k mortgage on $280k house.
Question is: Are we resigned to working until we're 67 to be able to afford retirement? I read frequently of people getting along just fine on 2k-3k per month in places like rural Italy, Costa Rica, Mexico. Correct me if I'm wrong, but that would mean a nest egg of about 650k to throw off 4% every year -- it doesn't seem that far out of reach for us.
We are COMPLETELY open to making the adventurous move and retiring out of the U.S., but I need some realistic viewpoints.

 

[RetireBy90]

I'm in similar situation, about same age and $600k in retirement accounts. First thing I needed to do was figure a budget for retirement. We have about $27k in savings and then social security and my DW drives up to 50 miles a day for the job. Lots of expenses we won't have. Then look at what sources of income you will have. Any pensions, SS for both. I did a spreadsheet to make it easier to make changes.

Then I knew where we stood. We made some adjustments to spending and added some more savings. Now we hope to draw 1k from CD ladder, and 2k from retirement acct till SS kicks in in 10 and 14 yrs. With $650k, you could draw $26k supposed to be safe rate of 4%. With w couple yrs of part time Starbucks, keep you busy and buzzed, maybe another $10-12k? So, can you live on that?

 

[teekaymn]

Thanks, Retireby90. We've been much more diligent in the last year or so with budget, and we've got a pretty good spreadsheet cooking now to see at a glance where changes could be made with current income and expenses.
I'd love to think we could live on a 26k draw, plus a part-time gig (and Starbuck's would be fine, thanks!). The larger question for me is just what kind of standard of living does that draw get you in various locales? Mexico vs Costa Rica vs Italy vs blah blah blah....

 

[Midpack]

Welcome aboard. We may not be able to answer your question without knowing what your retirement spending will be, along with a few other variables. But you can get a rough probability by entering your info in FIRECalc: A different kind of retirement calculator.

There are several folks here who are very knowledgeable on the ex-pat route, though I'm not one of them. But there's a lot to consider and I don't think you want to contemplate moving to another country based on $ alone. Google "expat retirement" or the like, and you won't run out of reading material any time soon. Here's just one site at random http://internationalliving.com/2011/02/retire-in-costa-rica-why-20000-u-s-expats-have-got-it-right/.

Best of luck...

 

[teekaymn]

Thanks Midpack -- I intend to spend a great deal more time on this site and crunch some serious numbers to help make decisions. I have a lot of reading to do....

 

[Aiming_4_55]

Welcome to the forum Teekaymn! We're neighbors as I'm in the St Paul burbs.

While moving to an exotic location sounds great, I've been looking at the inexpensive condos and townhomes in the Twin Cities. It's very affordable for a basic 2 or 3 br place for $50 - 75k. The HOA under $200 a month appeals to me for future travel. I have a handful of years before I can pull the plug but I'm itching. When we do pull the plug I see various travels to the Far East... Manila, Shanghai, Thailand, etc. The travel bug will cost a fair penny tho.

Enjoy the forum, alot of great information here.

 

[jclarksnakes]

The answer to your question is as much about you as it is about the cost of living in other countries. There are RE people on this forum getting along just fine here in the USA and all over the world on 2 to 3 thousand a month. Just looking at your numbers with a gross of 130K and putting 30K to 32K a year into 401Ks it would seem to me that you are used to living on a gross income around 100K a year. The cost of living may be lower in many other places but 2 to 3 thousand a month may not buy anything like the kind of lifestyle you are accustomed to. My closest friend is RE here in Savannah GA on just his army retirement. His take home must be around 27 hundred a month. He seems to get along fine but the way he lives would absolutely not work for myself and my DW. I would suggest that you spend a year spending way less and saving more to learn if you can be happy on much less income.

 

[militaryman]

I just did my parents taxes and they gross $23k and live a simple but contented life in a Washington D.C. suburb. They have a paid for house. Qualify for having their prop. tax reduced by about half to $1500/yr and get about $500 utility assistance a year. Other than that they make it on the $23k out of which they pay $5160 a year in Health premium and have about $2000 a year that goes to RX's and $2000 a year to HOA dues. (55+ and up community so lawn and cable is included in dues) They eat out about 4 days a week at subway, Arby's, CiCi's and Golden Corral (senior lunch special time) They have about 10k in money that is for emergencies that can be withdrawn from whole life ins. policies and other than that -- No savings

So for me, my parents are a gauge of what CAN be done on very little in a not so low cost of living area when you have a LBYM mentality and a steady income with health coverage --- They have sustained this for over 10 years at same residence and income level. Financially I help them by providing them with a couple cellphones on my family plan which probably saves them about 50-80 bucks a month and I also do their taxes for them each year. Other than that they are getting no outside assistance. I finally convinced them last year that they need to stop the birthday, Christmas, and anniversary gifts for their grown kids and grandkids as that $25 a pop means alot more to their budget than impacts the recipient and everyone understands their lean budget.

Whether this lifestyle would be doable for you or me is personal --- For my parents it is a necessity as my dad has been fully disabled (walker/wheelchair) for years and my mother is his fulltime caregiver (bless her heart -- she deserves a medal) If I were on their budget but not out of necessity I am pretty sure I would maintain a parttime job for social interaction and additional income. An extra $500 a month would go along way to improving their lot.

If you are really serious about trying to live on that low a number there is no reason not to try before you buy..... Do it for a year while still working and see if you could swing it.

 

[teekaymn]

Thanks Aiming -- There's a good chance we'd stay around the Twin Cities if our kids end up staying around here and having kids of their own. If they're scattered, though, all bets are off! Even with the mild winter we've had, there's something about mid-February that gets one thinking about traveling to a warm spot, that's for sure.

 

[teekaymn]

Thanks jclarksnakes -- We probably would have downsized and saved expenses a few years ago after kid #2 left the nest, but the housing market is still so lousy that we decided to refinance and stay put for awhile (we also love our neighbors and neighborhood). We'll be ready to look at a much simpler lifestyle when we do pull the trigger -- I'm just trying to guess as to whether that trigger can be pulled in 5 years or if we'll have to wait for 10!

 

[teekaymn]

Militaryman -- first of all, thank you for your service. I don't say it often enough.
And thanks for your parents' story -- that's the kind of story (and gauge, as you put it) I was looking for, to be able to start drawing comparisons. It's great to know your folks have been able to have a nice life on their funds. That they've been able to do it for that length of time is one of the most telling parts of their story.

 

[NYEXPAT]

2k-3k a month should provide a good standard of living for a retired couple in many locales overseas. For permanent moves you need to look at individual residency requirements. Costa Rica was a good choice for many, but they have since withdrawn many of the benefits that made it most attractive.

Currently Panama has the best program for retirees. Health insurance can be an issue as many big companies will not accept new policy holders older than 62. For minor issues private clinics will issue a policy for about $50-$60 a month and retires generally return to the USA and check into a hospital once a year under Medicare. $500-$600 a month is the general cost for an unfurnished 1 bedroom apartment in city centers and similar for a small house in the country. Car ownership is generally quite a bit higher than in the US and most opt for walk able cities,towns or those with good public transportation. Most countries will not tax retirement income from overseas if they have a retiree visa program.

Equatorial countries are the most popular as you can choose your weather based on altitude and closeness to the coast.

 

[Dawg52]

You could always go the RV route and travel in Mexico like this guy. He see's a lot and lives pretty cheap. He bought a used RV and has been living this way for the last 9 years. Lot's of ways to make retirement happen if your willing to be creative as you suggested.

Tioga George Home Page

 

[Katsmeow]

teekaymn

Are you and your wife not eligible for SS? You seem to be assuming that all of your retirement income has to come from your portfolio and I wondered about that.

 

[militaryman]

Was wondering the same thing.... I know my wife and I are projected to get 28K+ (in today's dollars) at 62 between the two of us and that would really help you guys out if your in the same boat

 

[teekaymn]

You could always go the RV route and travel in Mexico like this guy. He see's a lot and lives pretty cheap. He bought a used RV and has been living this way for the last 9 years. Lot's of ways to make retirement happen if your willing to be creative as you suggested.

Tioga George Home Page

The RV route isn't out of the question, either. DW's dream would be a nice Airstream to park somewhere warm in the winter and spend summers back in Minnesota. Still lots of dreaming at this stage....

 

[teekaymn]

teekaymn

Are you and your wife not eligible for SS? You seem to be assuming that all of your retirement income has to come from your portfolio and I wondered about that.

DW and I will be eligible for SS, roughly the same amount as militaryman for age 62 (28K), and 54K per year if we wait until age 70. DW insists we ignore SS, though, just to keep us more focused on contributing to our self-directed accounts. I intend to do some more reading about the "bucket" approach to funding, but I'm not sure I can convince DW that the SS money will be there to throw in a bucket.

 

[RetireBy90]

teekaymn - While I am in no way a financial advisor or possess any information that the pundits or others don't, I would say that the most likely answer to "Will SS be there when I need it?" is that in one way or another it will be there. IMHO there will be changes, less COLA, more of it taxed, longer wait to start a draw, phase out of the limit to how much income is subject to SS taxes, and perhaps we cut off those in prision (that one always gets me

According to the latest numbers from SSA we would draw $29K and $16K, and we are about 8 and 10 years from the full retirement age of 66. so there will likely be changes, but I suspect we will get at least $3K. While I don't want to rely on that it does form a part of our plan if my DW has to carry on without me or my pension.
I have a good friend that says his plan is not to rely on SS at all. I say good for him but to generate a stream of around $29K in income per year (my SS) would take a big pile of $$ that I'm not gonna pile up before I want to retire. I'll be happy to either get some of that and live the life style I live today. If I don't then I'll need to tap other sources and reduce our expenses. There are any number of things that can happen while in retirement and you can plan for this, plan b, plan c, but at some point your going to have to adapt to something we don't expect and haven't planned for. Just my thoughts.

 

[teekaymn]

Thanks Retireby90 -- I am really learning a lot about what other people's perceptions and assumptions are, after only a few days of following the content. So far the only conclusion I've come to for my own situation is that I've still got a lot of research to do!

 

[Marita40]

Welcome! Another St. Paulite here, also 55, and still working. I don't have advice to give, being a novice at this myself, but I've learned so much from lurking. I'm a condo owner with the mortgage almost paid off, but the city property taxes are killers! Still, I intend to stay here through retirement as I love the Twin Cities. . .

 

[militaryman]

Teekaymn --- What I always do when I am being conservative and also realistic when thinking about SS's future is to count it as 60-70% of what they say it should be.

I do this based on the thinking that SS itself has said that when all funds from the "trust fund" are exhausted that the incoming receipts from existing workers will be what is used to exclusively fund SS checks and those receipts account for over 75%

So add in whatever "slop factor" you want but counting on some figure north of 50% should be a very safe bet. I think the "slop factor" should be based on how much of a retirement bankroll one has as the really well off folks may end up getting "means tested" out of more of their benefits than others.

"at the time of projected trust fund exhaustion in 2037, continuing tax revenue is expected to be sufficient to cover 76 percent of the currently scheduled benefits."

The Future Financial Status of the Social Security Program

 

[Katsmeow]

DW insists we ignore SS, though, just to keep us more focused on contributing to our self-directed accounts.

In theory that is a good idea but doing that is a choice which has very, very real consequences. That is, for many people if you assume that you will receive $0 SS then retirement is either impossible or you are assuming a level of spending that will be painful. Therefore, the person ends up working extra years or living at a very low standard of living.

I agree that one should consider the possibility SS benefits could be 100% taxable or reduced but I personally didn't feel it was reasonable to assume there would be no benefits.

 

[KeyserSoze]

Teekaymn - To address the points you made in the OP concerning quality of life in other countries, I believe I can provide some insight as going expat is my plan once I finally cut the string...

I have traveled to many countries searching for the ideal place to retire outside of the US... There are many issues to consider before considering such a decision...

Culture, language, quality health care, safety, political stability, exchange rates, family & friends, cash flows, emergency preparation, etc are just a few and are all issues that any person considering going expat needs to address. Hopefully before you make the leap... Most of these things are non-starters as long as you stay in the US...

After years of travel and much research, it boils down to this... If you want to maintain the same lifestyle you have today in the US while living in another country, you will wind up paying the same price for it no matter where you are... If you live comfortably in the US on $3K per month, then that is what it is going to cost you in Costa Rica, Panama, Colombia, Thailand, Philippines, Malaysia, etc... Yes, some things are less expensive, such as housing in Thailand, but other items are much more expensive, such as imported goods like wines and cheese... So it all balances out in the end... Yes, you can cut some corners, but then you have to sacrifice some aspect of the above list... If you want to reduce housing cost, you can, but at the risk to your safety...

If you want to go native in a foreign country you can live very cheaply, but this is not the mindset of most westerners looking for a quiet, enjoyable retirement...

 

[kevink]

I find it refreshing seeing someone ask about ER'ing on 2-3K per month, since most of the posts I've read on this board have been by folks with huge portfolios who are often spending 2-3K per month on health care and home maintenance alone.

We've been forced to find ways to live on that kind of draw due to premature exits from the corporate world, the '08 market crash, etc. I'm 55, DW is 48, so a long, long way to go for SS. In our experience ER is do-able on those amounts in many low-overhead parts of the U.S., but your lifestyle will bear little resemblance to what you're probably used to while earning 130K per year.

We've lived in Mexico (Lake Chapala area) for two years and are currently based in small-town New Mexico. I'm writing this from San Miguel de Allende, Mexico, where we've been spending a few weeks visiting friends and escaping winter. I can tell you that comparative cost of living for us here vs. a very low-cost (and beautiful and sunny) part of the U.S. runs about $500-600 a month more in the U.S. for a roughly equivalent lifestyle. I say "roughly" because overall quality of life in this part of Mexico is higher in key ways, at least for us. Here one can walk everywhere or use excellent, inexpensive public transport so no car needed or wanted (and the hills are steep, so no treadmill workout needed either!). That saves ~$150+ per month in gas, maintenance and insurance (and our car at home is a 40mpg used Toyota). Food is half the cost of the U.S., for incomparably fresher and more flavorful fruits and vegetables (due in part to year-round growing season) albeit one has to forego U.S. prepared foods (which we don't eat anyway). Then there is the 1000 lb. gorilla: health insurance and health care. We have an ultra-high deductible bare bones plan now and are paying under $300 a month for catastrophic-only coverage, but if we lived down here again we'd drop that coverage, join that national health care system here for less than $600 total per year for the two of us, and pay out-of-pocket for routine care. We just had our teeth cleaned using state-of-the-art equipment for 150 pesos (about $12 each) and I needed a large filling as well ($32). While at the beach a month ago I came down with an ear infection and wanted to see a specialist (ENT) since I'd had other issues. I called one up, got in the next day, and $45 later had diagnosis, treatment and antibiotics in hand plus the Doctor's home phone number for follow ups.

I would say for most trying to make it on 2-3K per month in the U.S. the decisive issue is going to be what happens with health care and insurance costs. Are you prepared, like militaryman's parents, to allocate 25% or more of a tight budget to insurance premiums and meds? Are you eligible for coverage between your ER date and age 65? Further down the road, will you have enough socked away for assisted living or nursing home care?

Frequent ER board posters the Kaderlis have been living well and traveling the world on about 24K a year for over two decades, and have several excellent downloadable books and a ton of info on lifestyle choices on their web site. I suggest checking it out for inspiration, and hopefully you'll have the chance to try living as an expat for a few months at least before you "pull the plug" on full-time work. Here's the link:

Retire Early Lifestyle

 

[teekaymn]

@KeyserSoze -- First of all -- nice pick on the handle you've chosen -- one of my favorite movies.
My DW would love it if we were able to find, in retirement, something similar to our first house -- 780 sf, 1 bath, no garage. We don't intend to continue to spend anywhere near our current lifestyle. The larger question is how to determine what we WILL spend, and what location will best support that level.

@KevinK -- I was really happy to see your description of costs encountered in San Miguel de Allende and Lake Chapala. DW has mentioned frequently that SMA should be on our list of possible retirement destinations, and I'm very open to that idea. Much reading and research is on tap for me as I continue to dream. Cold and snowy here in Minnesota today -- I think a scouting trip to Mexico is a swell idea......