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Old 08-10-2010, 09:50 PM   #41
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I don't see how we could ER in the US given the cost of health care.
It isn't just the cost but also even qualifying, at least for now. Supposedly that will change in 2014.
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Old 08-10-2010, 11:36 PM   #42
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I have not, but hopefully will have in the next 5-10 years. I plan on doing this through real estate. Rental income at perhaps $3,000/mo + existing residuals combined with low bills.
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Old 08-11-2010, 12:02 AM   #43
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I don't know if I will RE -- probably won't -- but my spreadsheet right now is set up for me to declare "FI" at about 45 1/3 with ~$600K in FIRE stash and annual expenses of ~$16K. No DB plan from the employer. Health insurance would be a high deductible catastrophic policy from Blue Cross at ~$59 / month.

Some of the above is probably stretching things a bit, but it is "possible" and it helps survive the workplace to have some hope.

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Old 08-11-2010, 02:21 AM   #44
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It isn't just the cost but also even qualifying, at least for now. Supposedly that will change in 2014.
It will be very interesting to see if a possible change of majorities in 2010, or even of President in 2012, will result is a reversal of this, now that quite a lot of voters who may have been against Obamacare will have started to plan their retirement on the basis of its going ahead.
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Old 08-11-2010, 09:24 AM   #45
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It will be very interesting to see if a possible change of majorities in 2010, or even of President in 2012, will result is a reversal of this, now that quite a lot of voters who may have been against Obamacare will have started to plan their retirement on the basis of its going ahead.
The thing is, many insurers and corporations are already making changes -- mostly watering down their own plans or canceling some of them -- in preparation for the event, and don't expect them to restore everything even if many of the provisions were repealed. In that sense, we may be on the road to no return.
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Old 08-11-2010, 09:29 AM   #46
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Talking about health care subsidies, it looks like you would have to make less than 400% of the poverty level to qualify. For a couple, that would be roughly $50K / per year. Our planned retirement income would be just above that although, in bad market years, we may qualify. That could help soften the blow.

I found this nifty simulator yesterday that shows what impact Obamacare could have based on income:

Health Reform Subsidy Calculator
Healthcare is the big variable in my planning. If premiums continue to increase by double digit %ages each year I'm screwed, but I have options. I live in MA and the state is starting to get a handle on things. If my income is under 3x poverty (~$32k/year) my monthly premiums are $150. Over that income I can get a plan with a $2000 deductible and $5000 annual max out of pocket cost for $300 a month. If I stay in my job until I'm 55 I can get MA state healthcare for the regular premium (currently $100/month). If things get really bad I can always go back to the UK (I'm a US/UK dual citizen) and get health care from the NHS. All residents of the UK get health care "free at the point of service".
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Old 08-11-2010, 10:02 AM   #47
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According to that health reform subsidy calculator, I would receive a subsidy of about 80% of my health insurance premiums, a pretty hefty amount even for a single adult.

As Nun wrote above, if my HI premiums rise at double-digit rates (although a mere 10% would be most welcome after 2010's 20% increase), then I'm screwed. Well, not really screwed, just put in a tough spot until I qualify for Medicare in 18 years.

HI in 2010 overtook my monthly co-op maintenance costs (i.e. property taxes, general upkeep, co-op's underlying mortgage P&I) as my #1 expense. A few more 20% annual increases in HI and this FIRE thing is going to be tougher than I expected. I had budgeted for annual HI increases in the 7%-10% range, not 20%.
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Old 08-11-2010, 11:04 AM   #48
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If you had a portfolio of less than a million, say $900,000, then at a 3%-4% SWR your annual withdrawal would be between $27,000-$36,000.

According to the U.S. Census Report, "Income, Poverty, and Health Insurance in the United States: 2008" this would have put your household income in the next to lowest quintile in 2008. So, between 20%-40% of American households would have lower incomes than you and are still surviving.

If, by any chance SS would ever figure into the situation, and you got, say, $12K/year from SS, then your income would be $39K-$48K. This would put your household income in the third quintile in 2008. So, between 40%-60% of American households would have lower incomes than you.

Health insurance subsidies are on the horizon. Still, many Americans in lower income brackets are not getting employer paid health insurance so even before the subsidies, your situation would be far from unique.

If your "need to spend" is average, then you may not have a problem retiring on this size of portfolio. I am not in that situation, but had I been I would have pulled the trigger because I don't spend much and was very motivated to retire. But still these decisions should be based on your individual desires. Knowing yourself is so important when deciding when to retire. If your needs and wants do not match this income, then wait.
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Old 08-11-2010, 11:12 AM   #49
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I think the bottom line is, if you have NO debt when you retire, and live in a state that is somewhat tax friendly, and are not jet-setting all over the globe, you can get by with less than $1million.

For folks that are 62 or older, you could take early SS and definitely do it, IMHO...........
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Old 08-11-2010, 11:13 AM   #50
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If you had a portfolio of less than a million, say $900,000, then at a 3%-4% SWR your annual withdrawal would be between $27,000-$36,000.

According to the U.S. Census Report, "Income, Poverty, and Health Insurance in the United States: 2008" this would have put your household income in the next to lowest quintile in 2008. So, between 20%-40% of American households would have lower incomes than you and are still surviving.

If, by any chance SS would ever figure into the situation, and you got, say, $12K/year from SS, then your income would be $39K-$48K. This would put your household income in the third quintile in 2008. So, between 40%-60% of American households would have lower incomes than you.

Health insurance subsidies are on the horizon. Still, many Americans in lower income brackets are not getting employer paid health insurance so even before the subsidies, your situation would be far from unique.

If your "need to spend" is average, then you may not have a problem retiring on this size of portfolio. I am not in that situation, but had I been I would have pulled the trigger because I don't spend much and was very motivated to retire. But still these decisions should be based on your individual desires. Knowing yourself is so important when deciding when to retire. If your needs and wants do not match this income, then wait.
Great way to put things in perspective.

My $600k will give me $24k income and I get another $24k from rent....I'm pretty much set except for the mortgage, once that is gone I'm golden.
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Old 08-11-2010, 03:39 PM   #51
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Retired in 2007. Less than $1m? Yes. No debt. Own house free and clear.

2010 Much less. But still retired and anticipate that I will remain so.

We will see.

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Old 08-11-2010, 04:21 PM   #52
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Retired in 2007. Less than $1m? Yes. No debt. Own house free and clear.

2010 Much less. But still retired and anticipate that I will remain so.

We will see.

(still) Free to canoe
Canoe, I am glad you are still free to do whatever you want. Also I have a question about the house free and clear issue. Roughly it seems to me that even a modest house with no mortgages will cost at least half of what a one bedroom apartment in the same or similar area might cost. Often with the apartment one will get some free or much cheaper utilities, and of course zero maintneance costs. Also, there would be no need for tools, painting equipment, ladders, etc., and the apt may be closer to town to save on auto costs. And this analysis values the owner's time at 0, and the owner's or an heir's frustration at selling time at 0 too.

Isn't it likely that the opportunity costs sunk in the house would easily pay the other one half of rent, unless we get into a very heavy-duty inflation?

I am ignoring the option value of the house, assuming that it will be occupied until death.

Ha
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Old 08-11-2010, 04:22 PM   #53
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Originally Posted by W2R View Post
If you had a portfolio of less than a million, say $900,000, then at a 3%-4% SWR your annual withdrawal would be between $27,000-$36,000.

According to the U.S. Census Report, "Income, Poverty, and Health Insurance in the United States: 2008" this would have put your household income in the next to lowest quintile in 2008. So, between 20%-40% of American households would have lower incomes than you and are still surviving.
But how many of those are 65 or older, so are on medicare, or 30 or under and choose not to have HI or can get it super cheap?

If choosing to retire up to now, you have to assume that HI will be expensive and has an inflation rate of 15%. With HI costs for a couple older than 50, easily can spend $10K on health insurance alone, cuts a big hole out of that retirement income.
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Old 08-11-2010, 09:38 PM   #54
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Canoe, I am glad you are still free to do whatever you want. Also I have a question about the house free and clear issue. Roughly it seems to me that even a modest house with no mortgages will cost at least half of what a one bedroom apartment in the same or similar area might cost. Often with the apartment one will get some free or much cheaper utilities, and of course zero maintneance costs. Also, there would be no need for tools, painting equipment, ladders, etc., and the apt may be closer to town to save on auto costs. And this analysis values the owner's time at 0, and the owner's or an heir's frustration at selling time at 0 too.

Isn't it likely that the opportunity costs sunk in the house would easily pay the other one half of rent, unless we get into a very heavy-duty inflation?

I am ignoring the option value of the house, assuming that it will be occupied until death.

Ha
Good point you make about the costs of home ownership. It has got me thinking about the many ways DW and I could still cut costs.
We own a house with some acres out in the sticks. I have always wanted to live in the country but could never find a way to get this and work at a career, too. I put great value on this at this time in my life. As long as my health holds out, working on the property will be a labor of love.

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Old 08-12-2010, 12:32 AM   #55
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Good point you make about the costs of home ownership.
The great thing about owning a 2 family is that it's an income producer. Of course it soaks up capital, but after the mortgage is paid I'll have $650 in tax and home insurance a month plus a few other minor expenses offset by $2000/month in rent.
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Old 08-12-2010, 01:55 AM   #56
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Roughly it seems to me that even a modest house with no mortgages will cost at least half of what a one bedroom apartment in the same or similar area might cost. Often with the apartment one will get some free or much cheaper utilities, and of course zero maintenance costs.
Those are all great points. I'm self employed and currently we own an older home that needs some major renovations. The renovations are expensive enough on their own plus the opportunity costs for me of not working while I'm picking out flooring, getting bids, checking licenses and references, etc.

When we were young and living in an apartment it seems like we had so much more free time.
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Old 08-12-2010, 08:13 AM   #57
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Roughly it seems to me that even a modest house with no mortgages will cost at least half of what a one bedroom apartment in the same or similar area might cost.
Ha

There are personal and subjective reasons why one would want to rent versus buy. But has any thread here done a reasonable job of measuring the long term financial differences (assigning zero value to the subjective ones)? I'd be curious.

My Dad always used to make snide comments about some of our relatives who rented - " 30 years and all they have to show for it is a box of rent receipts.". But renting has advantages, too. Just different ones.

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When we were young and living in an apartment it seems like we had so much more free time.
Sure did. And the flip side is we probably complained that we can't change out these cabinets, or do this or that upgrade.

After holding the flashlight and running for tools for me and watching me sweat my way through many remodels and maintenance jobs, I doubt any of my kids will be in any rush to buy a home. And as long as they can find nice rentals at a nice price, that sounds pretty good to me. They should enjoy their time.

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Old 08-12-2010, 08:16 AM   #58
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I would dispute that the expenses of living in an apartment are zero. I live in a co-op apartment and even after I exclude the portion of my monthly maintenance charges which go to property taxes, interest and principal on the co-op's underlying mortgage, and optional parking fee, I still pay about $260 a month which goes to general repairs and upkeep, heat, gas, electric (not inside my apartment), water, insurance (not my own HO policy), and the pool.

I don't write a check directly to the painter, the landscaper, or the elevator repairman, but that work still needs to be done and the money to pay for it still comes from from our managing agent via me and the other ~225 apartment owners.
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Old 08-12-2010, 08:21 AM   #59
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I would dispute that the expenses of living in an apartment are zero.

I don't write a check directly to the painter, the landscaper, or the elevator repairman, but that work still needs to be done and the money to pay for it still comes from from our managing agent via me and the other ~225 apartment owners.
I don't think anyone disputes that. But often times, a home owner just compares their mortgage payment to a rent check - one needs to include all the costs for a reasonable comparison. Maint, prop taxes, utilities, insurance deltas - anything that is above and beyond what a renter would pay.

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Old 08-12-2010, 09:15 AM   #60
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I don't think anyone disputes that. But often times, a home owner just compares their mortgage payment to a rent check - one needs to include all the costs for a reasonable comparison. Maint, prop taxes, utilities, insurance deltas - anything that is above and beyond what a renter would pay.
True. And to a degree one *could* pay cash for a home you may consider current interest rates. That NOW would favor buying in this sense: If you had a decision whether to buy a $200,000 home or rent a similar property, if you saved the money and rented, you'd only make about $4,000 a year on the money (assuming you were able to get 2%), and it would cost a lot more than that to rent it. But as mentioned earlier, you'd have to add taxes, insurance and maintenance to get a true comparison. But in an era where the Fed is extending the middle finger to savers, putting the money aside and renting isn't so compelling.
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