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Old 03-10-2015, 05:31 PM   #41
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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.
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Old 03-10-2015, 05:34 PM   #42
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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.


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$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.
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Old 03-10-2015, 06:20 PM   #43
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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.
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Old 03-10-2015, 08:00 PM   #44
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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).
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Old 03-10-2015, 08:07 PM   #45
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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.
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Old 03-10-2015, 08:38 PM   #46
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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.
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Old 03-12-2015, 09:12 AM   #47
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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.
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Old 03-12-2015, 02:24 PM   #48
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Good grief, where do they find these people?
On ER.org?
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Old 03-12-2015, 02:59 PM   #49
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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?
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Old 03-12-2015, 03:36 PM   #50
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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.
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Old 03-12-2015, 03:42 PM   #51
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Since this is a conservative forum, most members are more comfortable with an SWR of 3% or even 2.5%, even though history has proven 4% to be quite safe. At 4%, $2.5M yields $100K per year, which would be enough for the two of us to live comfortably in Southern California. But when the SWR drops to 3% or below, it just doesn't leave much room for cushion.

We no longer have a mortgage or any debt, but our house is now 15 years old, and we've spent over $50K in renovations, repairs and upgrades over the past 12 months. If we had to live on $75K per year, it would have been challenging to spend that much on the house.

And while most articles think of a retirement age being about 65, with social security right around the corner, this is the early retirement forum, where SS might be 20 or 30 years away.
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Old 03-12-2015, 03:49 PM   #52
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$2.5M may seem like a big number to some but one should take into account (sans db income) that we are assuming all of the longevity risk, all of the investment risk and will have to shift to more conservative investments as we get older.


Yes, it's conservative but it's my number.
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Old 03-12-2015, 03:58 PM   #53
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Other than housing and gasoline, the cost of living in So. Cal. is quite low. Occasionally you might run the AC. OTOH, you could just hang out at the beach where it is 20 degrees cooler during the heat waves, or just go to a museum or the library when it is hot to save your electric bill. You rarely need heat. Housing is the biggest issue. If you have a paid off home, you should be set. Property taxes are fixed at 1% of assessed value and does not change from the time you bought the home, or 1976, whichever was earlier. No snow removal, no major insect problems, and produce is often much cheaper than here in the east.
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Old 03-12-2015, 04:10 PM   #54
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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.

How old are you?
What are your current expenses?
How long to you hope to be retired ?
How much is comfortable to you?
Do you have pensions ?
How old was mom when she retired? Bet she got full SS too...


I'd like to see your math. I'm in fly over states and think more than 2.5m would be necessary to sustain us from mid 40's through end of life. Now If you're 63 and "retiring early" with SS now or within the next few years, I get what you're saying.

But this is an early retirement board and that implies retiring in 40's or early 50s. I think that's where things are different.

Social security likely to be reduced or not around at a in another 25-30 years. No pensions .. It's all on our own.

Again i would like to see your math. What do you think you'll spend and how will you source that money in retirement ( thud....the sound of reality check).
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Old 03-12-2015, 04:14 PM   #55
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Lets call it 2.5 million per couple.

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 ....

+1
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Old 03-12-2015, 04:48 PM   #56
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Back in the 1970s - pre-DW and children - I decided that $200,000 was more than enough to retire in my 20s. Blue chip stocks paid 8% dividends. Health insurance was not in my mindset. I was a well paid engineer making about $12k/yr and spending less than half of that.

Times change. I think that's the biggest risk for a young couple retiring with (only ?) $2.5 MM. For those of us much closer to death, $2.5 MM seems a safe amount to retire with.
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Old 03-12-2015, 04:49 PM   #57
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A lot can skew people's perceptions.

If you have a solid health care benefit and are early retired, it can really color your thoughts about "what's enough."

If you are paying yourself, even with ACA (see above about unexpected out of pocket expenses on some plans), then you really feel the need to have more, just to pay for the health care alone.

Same can be said about early pensions, COLA'd pensions, etc.
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Old 03-12-2015, 05:04 PM   #58
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Other than housing and gasoline, the cost of living in So. Cal. is quite low. Occasionally you might run the AC. OTOH, you could just hang out at the beach where it is 20 degrees cooler during the heat waves, or just go to a museum or the library when it is hot to save your electric bill. You rarely need heat. Housing is the biggest issue. If you have a paid off home, you should be set. Property taxes are fixed at 1% of assessed value and does not change from the time you bought the home, or 1976, whichever was earlier. No snow removal, no major insect problems, and produce is often much cheaper than here in the east.
This isn't true. The base property tax increases 2% per year. In addition, there are several other taxes (voter approved bonds) and fees that also may increase each year. My property taxes have increased by almost 3% per year over the last 27 years.
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Old 03-12-2015, 05:23 PM   #59
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This isn't true. The base property tax increases 2% per year. In addition, there are several other taxes (voter approved bonds) and fees that also may increase each year. My property taxes have increased by almost 3% per year over the last 27 years.

Rats. It's been 15 years since I lived in CA. I own property there (purchased in 1908 by my great grandparents, so I haven't seen a tax increase. I guess they do it based on assessed value. Did you see a drop in taxes in 2008-9? I suspect not. But the bit about the weather and lack of heating bills is true.


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Old 03-12-2015, 06:03 PM   #60
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Looks like Legg Mason is trying to make folks that do not have $2.5M put aside think that they need to get on the Legg Mason band wagon (horse, train) and invest in one of their many actively managed mutual funds.

I'm probably just going to stay with my boring Vanguard passive portfolio.
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