$2.5 million to retire (Legg Mason PR story)

[Birdie Num Nums]

2.5M seems pretty ample; but as everyone pointed out, there are a lot more factors to consider

And is that $2.5M per person or per couple? Because some of the earlier posts above refer to "us" while others concern the poster alone.

 

[Big_Hitter]

I think 2.5M would be ample for "us" - not counting DB/SS income.


I will acknowledge that blanket statements like these are pretty silly, as everyone has a different story/situation.

 

[GTFan]

Of course it depends on spending and duration among other things but as a general target for the general public I don't think it's a bad number. At least it's a conversation starter.

Our target number is a little over that. First few years will be at 4% SWR for a few years and then down to a right around 2. We feel pretty good and will adjust spending as needed.

I think it's an insanely high number that is obviously targeted to high cost of living areas and/or people already used to living high on the hog. And it completely ignores the impact of SS, any available pensions etc.

Way too high.

 

[GTFan]

+1

While I admire the folks able to have a joyful retirement on less than $20k (for a couple), that's not us. $75k is more like it and if you don't have a pension or substantial SS, it takes 2.5 mil to count on that amount, inflation adjusted, over the long haul.

The article is just stating the obvious.

The mind boggles at needing to spend $75k a year, but obviously I'm not used to such largesse.

For those saying they have to have that amount because of where they live, the answer is obvious.

 

[Big_Hitter]

I think it's an insanely high number that is obviously targeted to high cost of living areas and/or people already used to living high on the hog. And it completely ignores the impact of SS, any available pensions etc.

Way too high.

completely depends on one's standard of living, even in low cost of living areas like BFE Texas, for example

if you FIRED at 55, had a mortgage, travelled and hung out at your country club every day (when not travelling) I don't think it's an insanely high number

 

[nuke_diver]

As mentioned there are too many variables...just like (I suspect at least) when someone says they don't need millions to retire (because they have a pension or they have a stream of income that is pretty stable like real estate). If you don't have a pension and don't count on SS as a venue sources (either because you are concerned over long term viability or because you didn't work as much and therefore won't get as much) the number for 100% safe (or as close as possible) ER needs to be a lot larger than others for a long retirement.

But the one size fits all implied in that article is also not correct. IIRC Mr MoneyMoustache is retired on $600K with a family (though I suspect that there is some income from the blog/website). He also does a lot of things that not everyone could (or would want to) do

 

[jerome len]

So much depends on your lifestyle prior to retirement. If you've been successful and have an expensive home, you need more in retirement. If you've been used to flying 1st class because you're business allowed that, travel will be more expensive. That's why we should look at around 80% of our pre-retirement income instead of a dollar amount that would satisfy all. I suspect someone living a middle class lifestyle in Montana would need less than 1/2 the retirement money than someone living a middle class lifestyle in New York City.

I've always LBYM.......yet, I'll need more than most......why? I've made more than most and my church, kids, grandkids and favorite restaurants would hate to see me cut back since they've depended on my support all these years. I'm lucky, shared my luck and don't want to change my conservative but comfortable life style.

 

[Andre1969]

As others have said, there are too many variables for a one-size-fits-all approach. Your age, location, number of dependents, lifestyle, SS/pensions, etc, all factor in here.

Now in my case, if I had amassed $2.5M, I'd be putting in my 2 week notice right now! FireCalc says that, at the 95% success level, I could live off of about $92K per year, assuming no SS. When I factor in SS (~$13K per year starting at age 62 in 2032), I can bump it up a bit to $97K.

$92-97K, even taking taxes into account, would be a nice lifestyle bump for me. To put it in perspective I'm almost 45, single, live in Maryland just east of DC, and don't really live an extravagant life. So for me it would be like hitting the lottery. But to others, having to live off of $92-97K per year could represent a severe hardship.

 

[Independent]

Let's remember two things:

On another thread, we learned that only 10% of households ages 65-74 have $1.0 million.
Presumably, most of these people are retired, so the other 90% have found some way to live in retirement without 7 figure net worth.

The average age of respondents to this survey was 58. They averaged $400,000 in retirement accounts (maybe just 401k?). Somehow, I expect that most of them are not going to get to $2.5 million by 65.

 

[eta2020]

No You do not need 2.5 Million if you plan to retire at age 65, collect SS and have Medicare.

But retiring at 50 when you do not collect SS and you have to buy medical insurance is different story.

2.5 million is not enough IMO unless you have some nice pension like O-5 from US Army .

 

[jim584672]

A 2.5 million immediate annuity pays $10,425 per month for a 50 yo male.
I don't see how this would not be enough, then again I am a "frugal" type.

I am not recommending annuities, just using it as an example.

 

[Focus]

And is that $2.5M per person or per couple? Because some of the earlier posts above refer to "us" while others concern the poster alone.

Ding ding ding! Articles on this topic are usually vague about this very crucial point. Makes a world of difference.

 

[Retch The Grate]

That's my target number for a 4% withdrawal rate, assuming Social Security is still there as a backup longevity insurance when I retire and my folks end up passing along some money (which I don't want, I'd prefer they live indefinitely but...), otherwise I go with a 3% withdrawal rate and need $3.333 million to feel like I will be at my retirement number...

 

[Car-Guy]

The 2.5 mil caught my eye since that was my magic target number before I retired. That along with being debt free were two of my three main financial goals for retirement. Of course like many here on this board, once I hit my targets, the OMY syndrome set in. (at least twice )

While I was working, I worried a lot more about financials and investing than I do now in retirement. As I have gotten older, and then retired 3 years ago, my investment strategies have become much more conservative and "for me" that has taken away most of my financial worries.

 

[rodi]

ready:
I live in So. Cal. I retired on a LOT less than 2.5M in net worth not including real estate.
But I have a paid for house and rental that generates income. I live in an older neighborhood that doesn't have mello roos or HOAs. That cuts my spend. I do spend more than 75K - but I have 2 kids at home still.

jerome len:
While working my gross pay was reduced by
- max 401k contributions - that was a big percentage of my income.
- mortgage payments with extra principal - again, a big percentage of my income.
- extra investment/savings

Those added up to a LOT more than 20%... so the 80% of your previous income doesn't fly for me (and many other LBYM's types.) I was living on a less than 50% of my gross pay prior to retirement after accounting for the above adjustments.

 

[Spanky]

Clearly $72.3 billion is not enough as Mr Buffett keeps on working!.

Money is not reason why he's still working or having fun.

 

[Spanky]

I would not feel comfortable retiring early on $2.5M. I want to delay SS until 70 to maximize the benefit, so for me the $2.5M would need to last more than 20 years before any relief from SS kicks in. Even at 3% SWR that is only $75K per year, which is far too low to live on in Southern California.


Sent from my iPad using Early Retirement Forum

$75K is not enough to live in Southern Cal!? If you are debt free and the house paid off, the cost of living in California is not that different from anywhere else in the States.

 

[truenorth418]

2.5 million is not enough IMO unless you have some nice pension like O-5 from US Army .

Really? Wow it's beginning to feel like the Bogleheads site around here. "What, you only have $2.5 million? That's nothing!! You better keep working!!" (just kidding)

Seriously, I know there will always be exceptions - but even at a more than reasonably safe 2% withdrawal rate, one would have $50k to spend each year - which is about the current median U.S. household income. And in retirement, presumably one would not have commuting costs, would have lower clothing and food expenses. And for a couple filing jointly probably a very robust ACA subsidy to help with health insurance. Factor in some modest future SS benefits as "reinforcements", and $2.5 million should be plenty for the majority of people IMO.

 

[ulrichw]

A 2.5 million immediate annuity pays $10,425 per month for a 50 yo male.
I don't see how this would not be enough, then again I am a "frugal" type.

I am not recommending annuities, just using it as an example.

At 3% inflation:
In 10 years (age 60), that $10,425 becomes $7,780
At 20 years (age 70), that $10,425 becomes $5,760
At 30 years (age 80), that $10,425 becomes $4,290
At 40 years (age 90), that $10,425 becomes $3,198

The immediate annuity's payment can give you a false sense of security. Unfortunately owning an annuity for long time means that inflation will likely have a significant diminishing effect on the real value of that payment.

I think that a methodology that uses an SWR for a 40 year period (probably around 3% as others in this thread have suggested) gives you a better idea of what you can actually spend. That would be around $6,250 a month.

This SWR is designed to keep your payments increasing with inflation - so there will be no decline in the real value of your payments (your nominal payments will be increasing, so they'll end up at $20,375 in 40 years, assuming 3% inflation).

 

[papadad111]

The $2.5M number in isolation seems reasonable. Too many other variables as we all know - pre or post tax? , Other future pensions and social security, age of retirement, cost of living location, family size, as so forth.


Worthless "feel bad" article for most. But it is interesting that so many have commented it is "close" to their number.

Me and DW trying to do a pro-forma post FIRE budget. The stuff that's expensive is 1) health insurance - which is easily as much as a mortgage payment as we won't get ACA subsidies for a few years post FIRE and 2) other forms of insurance eg Umbrella liability policy. Disability insurance and with teen drivers, car insurance. 3). Cellphone service seems ridiculously expensive by historic "utilities" cost.

With just basics we are well over 5k per month - in middle America and we have no mortgage. Also that is basic as in No special travel and no sinking fund to set aside the annual deductible and max OOP for healthcare each year.

Looking again at the article, $2.5M or equivalent in annuitized income is reasonable to retire with low risk of running out of money over a long ( 35+ year retirement). With that sort of duration and need for inflation protection, @ $2.5m, I would be scared to spend more than 2.5% or about $62k SWR annually.

 

[ArkTinkerer]

Some of the comments here have me worrying. I don't have $2M+ but plan to retire this year. Now, I do live in fly-over country. House will be paid for. One son on full ride at college and the other likely to do the same. I do have rental property so, as every landlord knows, I will only be cutting down from two jobs to one! Still, I don't have the pension (and certainly not the pension with the COLA) many here are lucky enough to have.

My mother had one rental and a smaller nest egg than this and manages quite well. Occasions cruises, road trips, flies to visit friends when she wants to travel, covers family members flights on occasion. New used car every 5-7 years and yearly dealer maintenance. Eats well. Eats out when she wants. Yet her nest egg is increasing even though she pays an FA 1% to manage her accounts. Complains about her taxes.

It just doesn't cost that much to live well.

 

[GTFan]

No You do not need 2.5 Million if you plan to retire at age 65, collect SS and have Medicare.

But retiring at 50 when you do not collect SS and you have to buy medical insurance is different story.

2.5 million is not enough IMO unless you have some nice pension like O-5 from US Army .

Completely, absolutely false (as a blanket opinion). You really have no idea what it takes to live comfortably on way less. My guess is that you live in a very high COL area.

 

[haha]

Good grief, where do they find these people?

On ER.org?

 

[eta2020]

Completely, absolutely false (as a blanket opinion). You really have no idea what it takes to live comfortably on way less. My guess is that you live in a very high COL area.

Lets call it 2.5 million per couple.
Is it enough to retire at 30?

BTW I think 5 million per couple is enough to retire at any age.

That is 75k a year, at best. Will you recommend me to buy Silver plan or Platinum for Health Insurance? If silver what if I get really sick? How much will it cost me out of packet? What if at 50 both of us have major health problems?

Will I get any SS or Medicare if I retired at 30?

Is this retirement where as a young 30 year old couple we will sit at home and have inexpensive hobbies to save money?

 

[timemoveson]

I'm finding this thread fascinating, as I get to know more about what makes the members here tick.

I fully expected the crew, at large, to generally denounce the findings in the OP with arguments about how it doesn't take nearly that much, etc.

But clearly, many of you really do not believe that, let us say at a high-level, $2.5M in investible assets, not including what you live in or future government supplements, could sustain you in retirement.

I'm truly surprised at the diversity of responses and I really do find it interesting to understand the viewpoints which support them. As for me personally, I cannot imagine how it would not be a sufficient amount in the vast majority of cases but I stand to be further educated, and it's obviously just my personal opinion.

Keep bringing it on, please.