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Old 03-24-2011, 01:45 PM   #41
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Thanks very much for posting that link to Andy Baird's site. I've only just begun reading it but it looks like it's going to be very inspiring. It has already opened me up to the possibility of a Lazy Daze motorhome...
I myself learned of Andy Baird from this forum, from a mention by Martha. You can search the forum to get old threads related to RV. Some people like the Lazy Daze, which is a fine motor home, but one can get other brands which are less expensive but in the same class C (motor homes built on a Ford or Chevy commercial van chassis). For full-time RV'ing or even extended traveling, the RoadTreks are just too small for most people.

Get a class C, then tow behind a small car like Andy is doing, and have a ball touring North America!

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Running out of the 240k in 10 years is acceptable ... but not preffered. If I can get 15 years out of it, it's a homerun. She still has SS and pension ($2400/mo total) and a house for a reverse mortgage (assuming a nursing home doesn't get it).
$2.4K a month + an owned home. That's the situation of my mother. As I mentioned, she has been living fine, and does not even want to sell her rental property yet. By the way, the rental home is not even being rented out right now, so does not generate any revenue for her.

So, unless your mom is in an area with a higher cost of living, I do not see any problem. Or perhaps my mother is a lesser spender.
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Old 03-24-2011, 07:29 PM   #42
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Running out of the 240k in 10 years is acceptable ... but not preffered. If I can get 15 years out of it, it's a homerun (but 1/15 vice 1/20 isn't going to change her life much). She still has SS and pension ($2400/mo total) and a house for a reverse mortgage (assuming a nursing home doesn't get it).

At some point it becomes "use it or loose it" (to a nursing home). Just not sure if 72 is that point (in great health) ...
If you stated her income goal I missed it, but with a paid for home and $2400/month locked down, she can get a pretty good income just by setting aside a little cash for emergencies, then investing the rest in dividend growing high quality equities such as PG, JNJ, ABT, WMT, WM, PEP, MSFT, SYY...etc. Some of these are higher quality than others, and they also differ on other dimensions. I just tossed them out as reasonable candidates. There also may be ETFs that invest in this type of stock.

$200,000 invested in a selection of these will yield between $6 & $7 thousand the first year, and this very likely growing fairly rapidly. If it were me, I would like the positive psychological aspect of getting more every year, even with low inflation. Her SS and pension will fill the role of fixed assets.

I assume you have already considered and rejected your special skill area of income producing real estate? (With you as manager.)

Ha
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Old 03-24-2011, 07:46 PM   #43
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Excellent question. Put away $3,000 per year for 40 years, and have the money (on average) double during that time? Then recognize that your retirement income goal can be $3,000 less because you weren't spending that.

I wouldn't be surprised that a fair number of the people who said $250k would be enough aren't on track to have $250k.
If $3k a year can be saved form $30k salary (~$20k take home pay) $250k could be built up. But on such a low salary finding $300 a month would be difficult. At 66 the worker would get maybe $12k SS. If we use the 80% rule for income that would leave $12k to find, maybe less as no FICA would be required. 4%x$250k=%10k. Maybe just enough to keep the person at the same poverty level they lived at all their working life.
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Old 03-24-2011, 09:53 PM   #44
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Working from your monthly $313 number and 5% return. If you earn $30k a year you might take home $1800 a month. So that $313 is 17% of your take home pay before you've paid for housing, medical, car, food etc. Saving 17% of income for high earners is relatively easy....but on $30k a year it would be difficult.
Yep...

The irony is that, in this example, the person earning $30k is used to living on it. If you're used to living on, say, $75k, then you'll have a rather rude awakening when you start trying to live on what $250k will throw off.
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Old 03-25-2011, 05:30 AM   #45
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Working from your monthly $313 number and 5% return. If you earn $30k a year you might take home $1800 a month. So that $313 is 17% of your take home pay before you've paid for housing, medical, car, food etc. Saving 17% of income for high earners is relatively easy....but on $30k a year it would be difficult.
That's the fly in the ointment of LBYM that goes unspoken on these forums. And I think the threshold of pain is a bit higher than $30K.
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Old 03-25-2011, 06:08 AM   #46
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If $3k a year can be saved form $30k salary (~$20k take home pay) $250k could be built up. But on such a low salary finding $300 a month would be difficult. At 66 the worker would get maybe $12k SS. If we use the 80% rule for income that would leave $12k to find, maybe less as no FICA would be required. 4%x$250k=%10k. Maybe just enough to keep the person at the same poverty level they lived at all their working life.
I wouldn't call $30K poverty level. At least in the U S, it's defined as $10,890 for a single person. The median income is only around $40K.

If we're talking household income with several dependents, then I agree.

Many workers at this wage level, just keep working until they reach SS eligibility age, and their take-home pay and potential SS benefit are equal. Some will work part time if they need to make up a shortfall between their prior full-time income, and what they now get from SS.

Retirement planning is an afterthought with this demographic. Contrary to some opinions, the sky doesn't fall down upon them when they reach retirement age.
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Old 03-25-2011, 07:13 AM   #47
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I wouldn't call $30K poverty level. At least in the U S, it's defined as $10,890 for a single person. The median income is only around $40K.

If we're talking household income with several dependents, then I agree.

Many workers at this wage level, just keep working until they reach SS eligibility age, and their take-home pay and potential SS benefit are equal. Some will work part time if they need to make up a shortfall between their prior full-time income, and what they now get from SS.

Retirement planning is an afterthought with this demographic. Contrary to some opinions, the sky doesn't fall down upon them when they reach retirement age.
On $30k for a single person retirement planning won't be a priority as there will be more immediate things to worry about, like food and a roof. I think that it's a bit of a fantasy to think that with such a low salary there'd be anything left over for meaningful retirement saving. Given the low median salary of $40k is it a wonder that retirement savings in the US are so low.

In any reform of SS I hope that the benefit of the poorest in our society is protected or increased as without SS someone who earned $30k a year would have the sky falling on them later in life.
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Old 03-25-2011, 07:19 AM   #48
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Yep...

The irony is that, in this example, the person earning $30k is used to living on it. If you're used to living on, say, $75k, then you'll have a rather rude awakening when you start trying to live on what $250k will throw off.
The only way the maths works out is if you have a $30k lifestyle on a $75k salary and save the surplus.

The $30k earner won't have enough of a surplus to save
Most $75k earners don't have the discipline to live on $30k and save
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Old 03-25-2011, 07:42 AM   #49
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This topic reminds me of a cruise I took over 20 years ago. The waiter was hoping to retire early by 30 by saving $100,000. Obviously, 100K was worth more 20 years ago than it is now, but still not enough for 50+ years of retirement, especially in his country (Israel, with high cost of living). But probably fun for him to dream....
Well, $100K really does seem like a whole different number when you're on the bottom looking up. The first mutual fund I had ever bought into was American Century Growth (back then it was 20th Century Growth). This was in the fall of 1991. I think it had been recommended in some money magazine that my Granddad subscribed to, and in the past year, it had jumped about 20%.

Well, I was young and naive at 21, and figured that it could return 20% consistently. I was still in college, working part time at a department store, and making $6.50 per hour. So to me, the thought of having $100K seemed really rich. And IF it could return a consistent 20%, well, that would be $20K in the first year! And if it kept it up, $24K in the next!

Naturally, it didn't play out that way.

Fast forward to four years later, late 1995, and I was in a marriage that was falling apart fast. I was out of college, but was only making $10.83 per hour (I had to look it up in my records; my memory isn't THAT good!). I still had the part time job, which might have been up to around $8.00 per hour. Combined, I was making around $27,000 per year. I also had a condo that would be lucky to break even on. And debt was pushing $15-20,000. So yeah, even at that point, $100K seemed like a lot of money. And while I didn't think I could retire on it by this point, I sure thought it would make life a lot easier!

Once I finally got out of debt and started focusing on saving and investing, $100K simply became one point in a long list of milestones. It did seem like a big deal the first time I reached that point, but once I got past it, and then $200K came up, it just didn't seem like a big deal anymore.
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Old 03-25-2011, 08:01 AM   #50
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My Mom is 95 and has been widowed for thirty one years . She lives on SS and a small pension from my Dad . She also has some CD's not more than $100,000 and she lives very nicely .She travelled a lot on this money including trips to Hawaii, Panama Canal , New Orleans . She has seen almost every Broadway play and she does not skimp on clothes or eating out . She rents and has not owned a home since my Dad died and she just sold her car three years ago . So it is possible to live nicely on small amounts .
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Old 03-25-2011, 08:02 AM   #51
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I wouldn't call $30K poverty level. At least in the U S, it's defined as $10,890 for a single person. The median income is only around $40K.
One thing I've always wondered...when they try to calculate those poverty levels, do they take assets into account, or only income? For instance, let's say I have a $3M saved up, but it's in something lame like a checking or savings account earning almost nothing, to the point that even that $3M isn't paying $10,890 per year.

And, suppose I don't work at all, but just draw money out whenever I need some. On one hand, my income would be in the poverty level, but on the other, I'd still be set for life (or at least a good long time before inflation ate up too much of it).

And, while $30K might not be considered poverty, a lot of it depends on where you live. I'm in Maryland, near DC, and most of the people I know who make $30K per year fall into three categories:
1) still living with relatives, or at least getting some major help from them.
2) renting a room or sharing a house
3) retirees who have a paid-off home and no major expenses.
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Old 03-25-2011, 08:44 AM   #52
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These surveys that cover "all Americans" are not helpful to me. I wish they would segregate into different pre-retirement income groups - that way could can get a feel for "people like me".

My mother owns her house, lives in low cost midwest, gets $10k in SS, and spends about $12k of her savings each year. Kids indirectly pitch in a little.

She sticks with "cheap hobbies", has no catastrophic long term care plan, and cannot buy a vineyard - but she lives great.

A person who has $250k could do this for 20 years.
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Old 03-25-2011, 11:00 AM   #53
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Retirees DO have a median net worth around 161K, so of course its likely the 31% who said yes CAN retire on $250K.

The question posed did say "comfortably". Thats what makes the 31% interesting and too subjective to know whether they have poor math skills or low expectations.
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Old 03-25-2011, 11:38 AM   #54
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If you stated her income goal I missed it, but with a paid for home and $2400/month locked down, she can get a pretty good income just by setting aside a little cash for emergencies, then investing the rest in dividend growing high quality equities such as PG, JNJ, ABT, WMT, WM, PEP, MSFT, SYY...etc. Some of these are higher quality than others, and they also differ on other dimensions. I just tossed them out as reasonable candidates. There also may be ETFs that invest in this type of stock.

$200,000 invested in a selection of these will yield between $6 & $7 thousand the first year, and this very likely growing fairly rapidly. If it were me, I would like the positive psychological aspect of getting more every year, even with low inflation. Her SS and pension will fill the role of fixed assets.

I assume you have already considered and rejected your special skill area of income producing real estate? (With you as manager.)
Thanx for the tips! 1/2 of the wad is in GE Elfun fund ... it's been doing well of late (but got hammered in 2007). The other half is cash.

She did mention letting me invest the cash. I'ld give a fixed return of 6% and pick up another REO. We had a similar arrangement in the mid 90's (but the rate was 10%!) ... it worked well for both of us.

Need to think about the income goal. Been working it from the back (what can she take). Knowing what she "needs" will help (thanx for that).
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Old 03-25-2011, 11:51 AM   #55
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If $3k a year can be saved form $30k salary (~$20k take home pay) $250k could be built up. But on such a low salary finding $300 a month would be difficult. At 66 the worker would get maybe $12k SS. If we use the 80% rule for income that would leave $12k to find, maybe less as no FICA would be required. 4%x$250k=%10k. Maybe just enough to keep the person at the same poverty level they lived at all their working life.
Your numbers are correct. The only thing I'd question is the "poverty" word.

The median income for full-time year-round workers in the US is something like $36k for females and $47k for males. So the author's guess that 30% of workers might be living on $30k doesn't seem so remarkable. $30k is an income range that I don't want to revisit, but I guess it's a judgement call to say that someone with that income would be "poverty stricken".
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Old 03-25-2011, 12:52 PM   #56
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I was curious, so I tried to to run an estimate of my 87 year old grandmother's cost of living.

I pay most of her utility bills (oil, electricity, phone, directv), plus her medicine co-pays, with my credit card, and then once a month I get a check from her for that amount plus $500, which is for groceries, incidentals, and other cash-type stuff.

Well, over the past year, I've come up with $6,303 for utilities/medical copays. Another $6,000 for the $500/mo.

So, we're at $12,303 per year.

House is paid off, but property taxes are around $3200 per year. I think homeowner's insurance is around $700. And the water bill, which my Mom or uncle take care of, might be $200 per year tops.

So, now we're up to $16,403 per year.

I'm sure there's some details I might be missing here, though. For instance, I know she pays estimates taxes every month, but I can't remember what that total is. Maybe another $4,000 for the year? She might give $1000 a year to the church.

So, now we're pushing $21,403 per year.

Granted, she lives a very meager existence these days. Hasn't driven since 1999, so there's no car expense anymore. House is long since paid for, but if something needs replacing, that's an added expense. My uncle and I take turns cutting the grass and doing what upkeep we can. And I'm not sure how much her other medical expenses are...doctor's visit co-pays and such. Maybe her insurance plan covers all that? And, somehow, I think her insurance is all paid for as well, probably because she worked for the federal gov't?
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Old 03-25-2011, 07:03 PM   #57
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My mom retired a few years ago in her seventies, with far less than $250K and a paid off house. She lives on a near-maximum SS payment (thanks dad), and says she cannot possibly spend it all, in spite of buying a new car recently and upgrading the house several times. Her savings total has been slowly trending up since retirement.
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Old 03-25-2011, 07:43 PM   #58
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Your numbers are correct. The only thing I'd question is the "poverty" word.

The median income for full-time year-round workers in the US is something like $36k for females and $47k for males. So the author's guess that 30% of workers might be living on $30k doesn't seem so remarkable. $30k is an income range that I don't want to revisit, but I guess it's a judgement call to say that someone with that income would be "poverty stricken".
With the cost of living being so variable across the country the real poverty level salary will also vary. $30k salary is poor in New England as the median salary is ~$60k. Someone from Mississippi would be doing ok on $30k, but I still think it would be tough to find $300 a month to save towards retirement at such a low base salary. Also the level of savings would never allow for movement in retirement, they wouldn't be able to move to a less expensive state. I'd be interested to see retirement account balances by state.
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Old 03-25-2011, 08:08 PM   #59
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...
The median income for full-time year-round workers in the US is something like $36k for females and $47k for males...
The median income level indeed does not leave one with much to save, but I would think it is possible to have $250k at the end of one's long working life. For most people, much of it would be tied up in their house. For a couple, both working, it is indeed easier to be ahead. The housing cost does not double for a couple, vs. single persons, for example.

Then again, most people would not dream of early retirement at all. They would be glad to be able to stop working at 65, assisted by SS.
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Old 03-26-2011, 04:14 PM   #60
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When my parents retired, they had less than $250K of liquid investment assets, counting both before and after tax categories. But they were no "Uncle Mick"!

They owned their home and a rental property, which were worth more than $500K combined. They were no early retirees, so were drawing SS and a small state pension. My father deceased, and my mother now lived alone comfortably on a total annual income of less than $30K. Again, her housing cost is minimal.

To retire early on just $250K? Well, there are always people who can or could like Uncle Mick and Jacob, but for me, it's too tough! I'd rather go to work!

PS. Actually, if I were single, had no dependents, and did not care about health insurance, a $250K portfolio may provide enough for me to park my little motorhome in the NM mountains like I often fancy myself doing to play a recluse. Heck, I am sure there are some people doing that already.
I'm sure there are, and I'm sure very, very few have as much as $250,000 in a portfolio.
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