new - dirt cheap retirement?

[pb4uski]

So the consensus is $30k is doable this year.

And given experience with obamacare with my girlfriend we can buy a catistrophic medical coverage for $200 monthly that has a $5000 deductible.

Just need a van down by the river. Lol. Or a relative to move in with on the cheap. Or HUD elderly subsidized housing.


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One problem might be... what if that $5,000 deductible bites you every so often... how much does you budget provide for for deductibles?

 

[daylatedollarshort]

I do agree with the posters recommending not to cut it too close. I would hope for the best but plan for the worst which would at minimum be maxing out the medical deductible every year. That can happen in households where someone has a chronic illness that last for years. Plus stuff happens. Sometimes big stuff. It is good to have financial security.

 

[Totoro]

So the consensus is $30k is doable this year.

And given experience with obamacare with my girlfriend we can buy a catistrophic medical coverage for $200 monthly that has a $5000 deductible.

Just need a van down by the river. Lol. Or a relative to move in with on the cheap. Or HUD elderly subsidized housing.

Well, some people have 1.25 USD a day - it's all relative.

Regarding the $30k: Is that excluding housing?

As a benchmark, consider that the average GDP per capita in the US is $53k (before tax) - also roughly the median household income. So you will find yourself in the middle of the pack roughly.

 

[offroad]

Household is $53k and per capita (per person) is $28k median. So the average household has two people working. Or does it? Thought that single residence households have never been bigger. --- it just sounds hollow that household income is that high.

So the median person makes $30k and a lot make less. A whole lot less. $10 an hour at 40 hours gets you $20k per year minimum wage. So a best statement is half the population of any worker makes between $20k and $30k per year.

And with that they pay a $1500 rent-mortgage-insurance-utilities bill every month. Then they pay $300 car-insurance-gasoline-maintenance payment too per month.


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[kombat]

So a best statement is half the population of any worker makes between $20k and $30k per year.

And with that they pay a $1500 rent-mortgage-insurance-utilities bill every month. Then they pay $300 car-insurance-gasoline-maintenance payment too per month.

And they're miserable.

The numbers you just outlined don't leave any money for saving, emergencies, travel, life/disability insurance, clothing, gifts, charity, or even groceries. Just because lots of people live on such a small budget doesn't mean they're happy about it.

 

[David1961]

offroad:

Welcome to the forum!

I'm curious how much you have been able to save so far, and what the asset allocation is. I think it is going to be a long time before banks pay 5% interest.

 

[Fermion]

Are we talking about two people living off of $30k income?

Medical isn't going to be as much as you think.

I ran the numbers in Washington State for a couple, both age 52 (non smokers though) and a Premera Blue Cross plan was $242.66 total per month with a $750 individual $1500 couple deductible. OOP max was $1150/$2300.

There were cheaper silver plans...the bridgespan silver plan was $155.46 per month with a $500/$1000 per year deductible.

There are advantages to low income.

So it looks like you would have worst case about $3,000 to $5,000 per year in medical expenses, including the monthly premium, even if you have a serious illness. This leaves $25,000 to $27,000 for other expenses. Very doable, and you don't even need to live in a van down by the river like we plan on doing.

 

[daylatedollarshort]

Household is $53k and per capita (per person) is $28k median. So the average household has two people working. Or does it? Thought that single residence households have never been bigger. --- it just sounds hollow that household income is that high.

So the median person makes $30k and a lot make less. A whole lot less. $10 an hour at 40 hours gets you $20k per year minimum wage. So a best statement is half the population of any worker makes between $20k and $30k per year.

And with that they pay a $1500 rent-mortgage-insurance-utilities bill every month. Then they pay $300 car-insurance-gasoline-maintenance payment too per month.

Average annual expenditures are in the Consumer Expenditure Survey here:

http://www.bls.gov/cex/csxann13.pdf

Average spending for 2013 was $63K for a 2.5 person household.

I couldn't find detailed tables for 2013, but the 2011 are here. Average expenses for older, retired and young adult / college age households are on the lower ends of spending. And these tables include all kinds of spending (big houses, Starbucks habits, load fees on their investments, credit card interest, 300 cable channels, etc.) and not necessarily people with frugal habits or simple living lifestyles.

 

[athena53]

One problem might be... what if that $5,000 deductible bites you every so often... how much does you budget provide for for deductibles?

This is the issue I have with dirt-cheap retirement plans. Every year can bring a similar shock. The house is paid off but what about property taxes and insurance? Where will you find the money to replace the roof or the HVAC system when needed? Cars eventually get to the point that it's more cost-effective to replace than keep repairing multiple problems. Then there's dental care and hearing aids- not covered by Medicare. (Ask me about the cost of my dental implants- and I was grateful to be able to get them.) Also, it will cost you to age in place. DH and I will not get up on ladders to clean the gutters of our 2-story home, for example. It saddens me to see homes in our town that need a coat of paint, have moss on the roof and weeds in the flower beds, etc. because no one keeps them up.

Anyway, that's my doom-and-gloom scenario. I retired last year at 61 (DH is 76 and retired at 65) but there's plenty of cushion to absorb the shocks I listed above. We're experts at frugal living but it's nice not to have to go cheap on things like medical and dental care.

 

[Fermion]

Ok, now that you have been scared by everyone who thinks you need $6,000,000 to retire we can now get real.

$30,000 income for a married couple
$5,000 worst case medical, including premiums and OOP
$25,000 remaining
$2083 per month

$800 per month rent. Very reasonable. My parents pay $500 a month for a 2 bd condo on a golf course. If your rent is high in your area, move to a different region of the country. You are not working so why stay in a high COL area?

Car. None. Why pay ins., taxes, gas. when you are not having to commute? Ride a bike and take public transportation when available. Hire a taxi or rent a car for longer trips. Save $300 or more a month here.

Utilities: $200 per month (water, elec, garbage, basic cable)

Phone: $100 per month

Food and toiletries: $500 per month

You now have $483 per month remaining after health, housing, food, basic entertainment (cable and phone).

Even if you have $2000 of dental a year on average, that still leaves nearly $4,000 a year that could be used for vacations or whatever.

 

[2B]

I would be hesitant to base a long term retirement plan on the assumption the ACA subsidy has somehow become a "sacred cow." Just like erosion of most "entitlements" is an accepted topic, the ACA subsidy is just one more entitlement that is in the pot for future "adjustment" no matter what the current political alignment.

As for low cost, I'm targeting with my sinking fund to end up at age 70 with an inflation adjusted livable dollar amount using my SS and DW on 42% of my age 66 SS. A collection of small pensions just sweeten the pot a little. With the rest of our portfolio, I can't see actually ending up there but I believe it would be doable with a few adjustments to our basic living expenses. I would want to downsize our house and we'd certainly cut out most travel.

 

[daylatedollarshort]

Elon Musk figured out how to live cheap so he could focus on his ventures early on and not have to worry about money -

When Elon Musk lived on $1 a day - The Washington Post -

“In America it’s pretty easy to keep yourself alive,” Musk explained. “So my threshold for existing is pretty low. I figure I could be in some dingy apartment with my computer and be okay and not starve.”

So he bought food in bulk at a supermarket to scrape by.

“You get really tired of hot dogs and oranges after awhile,” he said. “And of course pasta and a green pepper and a big thing of sauce. And that can go pretty far, too.
“So it’s like, ‘Oh, okay, if I can live for a dollar a day then at least from a food cost standpoint, well it’s pretty easy to earn like $30 in a month anyway, so I’ll probably be okay.’ "

I guess we all have different thresholds to be happy.

 

[Fermion]

I would be hesitant to base a long term retirement plan on the assumption the ACA subsidy has somehow become a "sacred cow." Just like erosion of most "entitlements" is an accepted topic, the ACA subsidy is just one more entitlement that is in the pot for future "adjustment" no matter what the current political alignment.

There will always be some way to game the system for low income folk.

One thing that likely IS a sacred cow is the elimination of pre-existing condition exclusion for insurance. If for some reason subsidies were eliminated, a strategy could be formed to go without insurance at all, and then obtain insurance within a short time frame if you encounter a major long term medical problem. If you are not in an open enrollment window, you could simply move the required distance (you are renting, this would not be that hard) to open up enrollment. It is very unlikely a person making $30,000 a year would owe any penalty for not having health insurance, especially if there is no affordable option due to lack of subsidy.

 

[2B]

There will always be some way to game the system for low income folk.

One thing that likely IS a sacred cow is the elimination of pre-existing condition exclusion for insurance. If for some reason subsidies were eliminated, a strategy could be formed to go without insurance at all, and then obtain insurance within a short time frame if you encounter a major long term medical problem. If you are not in an open enrollment window, you could simply move the required distance (you are renting, this would not be that hard) to open up enrollment. It is very unlikely a person making $30,000 a year would owe any penalty for not having health insurance, especially if there is no affordable option due to lack of subsidy.

Eventually, I expect these obvious gaming tactics for pre-existing conditions will be closed along with the "subsidies for millionaires" discussed on the forum. Medicaid already has barriers for those with assets. I suspect that these will eventually creep into the on-going ACA focus.

My original comment is probably best read as "What Uncle Sugar gives, Uncle Sugar can take away."

 

[offroad]

Fermion - thanks. Good summary in my view.


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[timo2]

There will always be some way to game the system for low income folk.

Actually, There will always be some way to game the system. period. at all income levels. But is that really how you want to plan for your ER?

 

[Fermion]

There will always be some way to game the system for low income folk.

Actually, There will always be some way to game the system. period. at all income levels. But is that really how you want to plan for your ER?

If it means doing what you want to do before you die, then yes, yes, I do.

In my opinion the system has been gaming me for years, so turning the tables just feels good.

 

[offroad]

Gaming -- Nothing illegal of course. Just doing what every red blooded politician with strong religious ethics has done for decades in the good old USA.


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[jim584672]

I feel porky pig will make an appearance soon.

 

[MichaelB]

Hopefully the thread can continue - but it would sure help if it gets back on topic, which is a discussion about our new member offroad and his retirement plan.

 

[Fermion]

I think offroad appreciates the discussion of how he can get cheaper healthcare since it is 20% or so of his current $30,000 budget.

 

[offroad]

Well dirt cheap retirement does factor in longevity. See many are thinking they will live long years past 70. Lol. Not happening folks no matter how healthy you are. Half are passed on by 70 for men.


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[REWahoo]

See many are thinking they will live long years past 70. Lol. Not happening folks no matter how healthy you are. Half are passed on by 70 for men.

If that's the case why does the SS longevity table say 73% of males in the US are still above ground at age 70? Odds of survival don't drop below 50% until age 80.

Actuarial Life Table

 

[Fermion]

Pretty horrible though that you have a 27% chance of not making it to age 70 and plenty of people don't retire until 65.

I am not sure I would take on an investment that has a 27% chance of a 100% loss.

 

[offroad]

http://www.usatoday.com/story/news/nation/2014/10/08/us-life-expectancy-hits-record-high/16874039/

Maybe my interpretation of average. 76.4 doesn't mean half are dead by then? Or that most will live this long and that's it? Many not as long.


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