$2.5 million to retire (Legg Mason PR story)

[Mulligan]

It certainly is doable if what you want/like to do is spend most of the time at home with inexpensive hobbies and you live in low COL area. And there is nothing wrong with that.

But what if you want to go for 4 months to Amsterdam or Granada Spain? Or what if most of the places you like are medium to high COL areas?

Retirement is enjoying life and not having great restrictions what one can or can not do. Hence personally I would not want less than 100k a year once retired.

BTW it seems to me more interesting/enjoyable to live for example in Mill Valley CA then suburb of Atlanta.

Ol Suzy busted a guy last night on this scenario... He wanted no loss of lifestyle on his 10k a month budget when he plans to retire at 62. He gave himself a "B" grade thinking Suzy would grade him easier as he was harder on himself. Well she gave him an F and said he had to work to 67 if he wanted no changes in his current lifestyle. The major reason was he wasn't figuring in taxes from his retirement account and she expects him to buy that LTC insurance for the two of them.


Sent from my iPad using Tapatalk

 

[eta2020]

Ol Suzy busted a guy last night on this scenario... He wanted no loss of lifestyle on his 10k a month budget when he plans to retire at 62. He gave himself a "B" grade thinking Suzy would grade him easier as he was harder on himself. Well she gave him an F and said he had to work to 67 if he wanted no changes in his current lifestyle. The major reason was he wasn't figuring in taxes from his retirement account and she expects him to buy that LTC insurance for the two of them.


Sent from my iPad using Tapatalk

Well we are actually living on 60k-70k a year for last 10 years. Which by the way is much less then our annual federal taxes.

When retired we will have more free time so we budget expenses will go up and not down to range of 90k-100k.

 

[W2R]

Ol Suzy busted a guy last night on this scenario... He wanted no loss of lifestyle on his 10k a month budget when he plans to retire at 62. He gave himself a "B" grade thinking Suzy would grade him easier as he was harder on himself. Well she gave him an F and said he had to work to 67 if he wanted no changes in his current lifestyle. The major reason was he wasn't figuring in taxes from his retirement account and she expects him to buy that LTC insurance for the two of them.

Yeah, but Suze Orman thinks everybody should work until 67 and buy LTC insurance. I really like her "Can I afford it?" segments, but her investing advice is awful IMO, and her retirement advice is nearly as bad. Great show, and oddly, I like her personality and assertiveness, but I do think she goes beyond her areas of expertise.

 

[Mulligan]

Well we are actually living on 60k-70k a year for last 10 years. Which by the way is much less then our annual federal taxes.

When retired we will have more free time so we budget expenses will go up and not down to range of 90k-100k.

I didn't mean to imply you were not doing the right thing, Eta. I didn't clearly write my intent was this man also clearly wanted to retire only at the lifestyle he was presently living at and didn't want to "downgrade" to be able to retire.
He was just caught off guard a bit on that he wasn't on pace at 44. Of course Suzy can be very conservative in her retirement budgets also. And it seems she values money safety over time. She said "working 5 more years isn't a big deal at all retiring at 67 instead of 62. I would beg to differ. I think that is a big difference.


Sent from my iPad using Tapatalk

 

[NW-Bound]

Not proud about this, but my expenses last year encroached the 6-figure mark. Mamma mia! How did that happen? I did not plan to spend that much, when I started my retirement in 2012.

Well, one of the homes needed exterior maintenance, and the other interior upgrade. I was still under serious healthcare, so there's the $10K deductible. I did not want my daughter and her fiancé to elope to LV, and told them that we wanted a nice wedding, as we have a large family we want to include. So, I paid for a large part of it in advance.

I thought we would be traveling like crazy in our retirement, but as I was recovering from a serious health problem, we only did the 2-month RV trip to the North East, so only spent $7K last year on travel. So, that helps.

Here hoping it's not so crazy in 2015, else I would have to use optimistic portfolio return numbers like many of the pension funds use.

 

[eta2020]

I didn't mean to imply you were not doing the right thing, Eta. I didn't clearly write my intent was this man also clearly wanted to retire only at the lifestyle he was presently living at and didn't want to "downgrade" to be able to retire.
He was just caught off guard a bit on that he wasn't on pace at 44. Of course Suzy can be very conservative in her retirement budgets also. And it seems she values money safety over time. She said "working 5 more years isn't a big deal at all retiring at 67 instead of 62. I would beg to differ. I think that is a big difference.


Sent from my iPad using Tapatalk

5 years is not a big deal if you are 40 but she should tell it to someone who is 70 . Especially if you are talking about 5 years when you have good health and can do variety of things.

 

[Mulligan]

Not proud about this, but my expenses last year encroached the 6-figure mark. Mama mia! How did that happen? I did not plan to spend that much, when I started my retirement in 2012.

Well, one of the homes needed exterior maintenance, and the other interior upgrade. I was still under serious healthcare, so there's the $10K deductible. I did not want my daughter and her fiancé to elope to LV, and told them that we wanted a nice wedding, as we have a large family we want to include. So, I paid for a large part of it in advance.

I thought we would be traveling like crazy in our retirement, but as I was recovering from a serious health problem, we only did the 2-month RV trip to the North East, so only spent $7K last year on travel. So, that helps.

Here hoping it's not so crazy in 2015, else I would have to use optimistic portfolio return numbers like many of the pension funds use.

NW, just plug in 8% return and life expectancy of 70 and I guarantee you the calculator will grant you permission to spend all you want this year!


Sent from my iPad using Tapatalk

 

[Dwhit]

Is the 2.5 million post tax, or in a pre-tax account (IRA, 401k etc.)? That makes a significant difference, and is often not specified in these type of articles.

 

[NW-Bound]

No need to go that far. I can still stay with historical FIRECalc return, and with a 30-year duration. While I doubt that I will live that long, my wife may, but that's her problem, or the kiddos will have to pitch in.

So, what I have done was to enter in our SS, then turn on the Bernicke's spending model.

Result: Another big boost in spending power! Way more than the amount that I spent last year.

I did not tell my wife about this, so how did she know to push for the upcoming $12K home upgrade?

NW, just plug in 8% return and life expectancy of 70 and I guarantee you the calculator will grant you permission to spend all you want this year!

 

[Alan]

Well we are actually living on 60k-70k a year for last 10 years. Which by the way is much less then our annual federal taxes.

When retired we will have more free time so we budget expenses will go up and not down to range of 90k-100k.

This is almost exactly the same figures as us, 60-70k for the five years before ER, and 90-100k for the 5 years since we ER'ed.

So far, so good.

 

[W2R]

This is almost exactly the same figures as us, 60-70k for the five years before ER, and 90-100k for the 5 years since we ER'ed.

So far, so good.

I'm spending more in retirement than I did for the five years before ER, also. I have more leisure time now, and even though I don't care to travel it is nice to have sufficient resources to be able to fund all my non-travel leisure activities.

 

[Alan]

I'm spending more in retirement than I did for the five years before ER, also. I have more leisure time now, and even though I don't care to travel it is nice to have sufficient resources to be able to fund all my non-travel leisure activities.

Isn't it nice to be able to sit back and say, "This is what all those years saving and planning is all about".

 

[eta2020]

I'm spending more in retirement than I did for the five years before ER, also. I have more leisure time now, and even though I don't care to travel it is nice to have sufficient resources to be able to fund all my non-travel leisure activities.

That makes sense.

It is much cheaper to sit behind a desk and work then go for bike ride and eat in some restaurant along the way or take car to near national forest and go for 8 hour hike or visit Museum of Fine Arts.

If you are snow-birding add to this cost of moving between 2 locations and maintaining 2 residences.

 

[NW-Bound]

The less one has to spend to be happy, the better.

I was surprised that I ended up spending so much. I guess I would spend less if I did not see how much FIRECalc told me I could. And my happiness level would still be the same.

 

[eta2020]

The less one has to spend to be happy, the better.

I was surprised that I ended up spending so much. I guess I would spend less if I did not see how much FIRECalc told me I could. And my happiness level would still be the same.

If you have 24k for discretionary rent you can pretty much live anywhere you want. On 3 month base you will find place in Granada or Amsterdam or Prague for 2k a month.

Now once in destination you can frugally enjoy place. I would imagine one would need simple bike in Holland and you can have great time.

It is not extravagant travelling, but you can not do that with income of 45k a year. With 100k you can.

 

[papadad111]

It doesn't include income tax. Also I'm not sure if it includes miscellaneous expenses or fitness expenses, but these might be rolled into other categories. So if they are then that's fine.

Kids and spouses cost money, and we apparently live in different parts of the country. Still, your expenses blow me away. They came to substantially more than mine in almost every single category. Your total yearly budget is considerably more than twice what I spent last year. And I spent more last year than I have ever spent before in my life. I live alone in a slightly smaller house, but gosh, I have been spending freely and buying whatever I want, whenever I want it. I am definitely not living a Spartan lifestyle any more, that's for sure. Unlike me, you do not seem to be spending a lot on "fun stuff" at all, but all the rest seems to be frightfully expensive in your situation.

My advice would be to go through your budget line by line, and try to figure out how to lower each expense as much as possible. Start with your various utilities' costs, which add up to more than twice mine, and maybe your insurance costs. I'd think that by carefully examining your overall spending, it shouldn't be too hard to cut back at least $500-$1000/month. Then when you are done with that, for sure add some "fun money"! You aren't going to want to sit and stare at the walls all day in retirement.

Honestly I think the biggest problem with your spending might be those teenaged kids! They won't stay kids for long (drat, I miss my grownup kid!). So enjoy them when you can, and realize it won't last forever. Before you know it, they'll be grown and gone and paying for their own insurance and cell phones, so that hopefully your expenses will go down.

Yes. Correct. No income tax. I am using after tax expenses here just because I want a baseline of expenses.

As discussed earlier in this thread, a dollar is not just a dollar depending which account type it comes out of (and when).

I'll do the category by category sweep. See where we can shave. But I think there is maybe $300 at best we can cut from posted budget.

Part of challenge is retiring early. Early enough that kids are still at home and not launched. My sister reminds me that my Kids and spouses and raising a family and a dog is more expensive that her living alone with a cat. Certainly different spending. Then the conversation goes toward reminding each other than we can buy just about everything except time.

 

[NW-Bound]

Yes, Alan spent around that much and he and his wife played perpetual travelers. I spent the same or more last year without much travel, but had other kind of expenses. It's OK though, as we cannot be perpetual travelers. We need the comfort of home in between trips.

Anyway, one's budget can expand indefinitely to what one has available. The additional happiness is marginal though. For example, instead of having an expensive 2nd home in the high country to escape the summer heat at the main home, I could just drive my motorhome up to camp out there in the national forest.

In the end, one may spend on a lot of superfluous stuff, just because one can or thinks he can.

If you have 24k for discretionary rent you can pretty much live anywhere you want. On 3 month base you will find place in Granada or Amsterdam or Prague for 2k a month.

Now once in destination you can frugally enjoy place. I would imagine one would need simple bike in Holland and you can have great time.

It is not extravagant travelling, but you can not do that with income of 45k a year. With 100k you can.

 

[W2R]

Then the conversation goes toward reminding each other than we can buy just about everything except time.

So true, so true.

It sounds like you are on the right track, anyway. I'm sorry I couldn't think of any other suggestions!

 

[NW-Bound]

Oh, money can buy time too, but it can be very expensive.

A recent poster said his wife had been on treatment for stage 4 cancer, and the cost was $200K/yr.

 

[W2R]

Isn't it nice to be able to sit back and say, "This is what all those years saving and planning is all about".

It sure is. I love it when a plan comes together, not to mention the booming market which makes us all feel like financial geniuses.

 

[W2R]

Oh, money can buy time too, but it can be very expensive.

If the Immortality Pill is ever invented, I'll be the first in line and I'll expect to pay every cent for it.

 

[NW-Bound]

Sorry, but you do not have enough cents. There are so many people to outbid you, the like of Gates and Buffett.

Besides, immortality or infinite life would have a cost of infinity. Else, to pay for infinity even with Buffett's fortune still means zero $ / unit time of life. Such a bargain cannot exist.

So, even with the current cost of $200K/year, how many years can each of us afford?

And also remember that these $200K/year drugs do not work for every patient, and in fact work for very few. Most patients got very little out of it, something like a month or two.

 

[scrabbler1]

Part of my ER plan I was developing from 2007-08 included a requirement that my general day-to-day lifestyle would not change once I ERed. Not living extravagantly to any degree, if I decided to blow some money once in a while that would be fine because my budget would include a hefty surplus.


I based my ER budget on my still-working budget with a few substitutions such as the removal of SS taxes and commutation expenses in exchange for paying more for my health insurance, pretty much a wash. This left my annual expenses for me, single with no kids, at about $21k a year. And I live in a high COL area (Long Island, NY).


Another key part of my ER plan was to split the income side into 2 parts. The first part was between age 45, when I ERed, to age ~59.5 when I would have main access to only my taxable account. After that, my "reinforcements" would arrive in the form of unfettered access to my IRA, my frozen company pension, and SS. So, my SWR using only the taxable account (about 2/3 of my overall portfolio) would be about 3.5% (about 2.1% if the IRA were included). This mean that I could actually withdraw from the taxable account's principal in my late 50s if I needed to. Otherwise, I could generate enough reliable investment income to cover those expenses. The taxable account had only $600k in late 2008 when I first ERed in the depth of the market crash. So, when I read something like, "You need $2.5M to retire," I laugh and laugh and laugh.......


I have been averaging about $44k in investment income in my 6 years of ER, double what I need to cover my expenses ($21k). That's a pretty nice surplus to easily adhere to my aforementioned rule of "no day-to-day lifestyle change" and wall off the IRA. The ACA has also stabilized my erratic HI premiums, a good thing.


Meanwhile, thanks to the markets bouncing back, that $600k I had in my taxable accounts back in late 2008 has risen to more than $800k while the IRA's value has doubled to nearly $500k, despite fairly conservative AAs.

 

[Walt34]

Besides, immortality or infinite life would have a cost of infinity. Else, to pay for infinity even with Buffett's fortune still means zero $ / unit time of life. Such a bargain cannot exist.

Unless one has a COLA'd DB pension plan? Not trying to belabor the point since this is so speculative anyway but I read a science fiction story a very long time ago that touched on that. Sorry I am clueless about title, author, etc. but the gist of it was that such a pill had been invented and pension managers all over the country were in an uproar. I read the story in the late '60's or early '70's so DB pensions were common then.

The story focused more on the societal effects (food, housing, employment, etc.) than the financial so it didn't take the financial issues very far but now I wish the author had.

I suspect that what would happen is that eventually a court would rule that if one has a COLA'd DB pension and are not going to die more-or-less on schedule then you've violated an incoherent presumption of the contract and that would make it void.

In other words, I'd have to go back to w*rk.

 

[papadad111]

So true, so true.

It sounds like you are on the right track, anyway. I'm sorry I couldn't think of any other suggestions!

The suggestions you made were good ones ! Thank you !