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Old 10-11-2007, 12:19 PM   #21
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First they scare everyone in to thinking you have to have a cool Mil to retire. Most will retire and live well on less, a lot less. I see my relatives doing that all the time. Most did not have high paying jobs, had modest lifestyles, raised their kids and are now retired, comfortable and by their own admission "living good." It is more about meeting expenses and having enough left over to do the things you like to do. I call that financial security. Not every one wants the "Lifestyles of the Rich and Famous". Most of us would be satisfied with maintaining our current standard of living in retirement. That standard is different for everyone.

Now some financial guru's are upping the ante. Now you need millions more. I think these articles assume that every one wants to live in a McMansion (sp) in a golf course community and travel three times per year. That is not everyones idea of retirement. Another thing I take issue with is the notion that your expenses increase as you age. That is flat wrong. Sure health care gets more expensive but if you have coverage, Medicare, you are covered for most things. Again I look at my late MIL. Her expenses over the thirty some years she was widowed stayed manageable. Inflation had to be considered sure, however when she got in her late 70's and 80's she was not as active as she was, less dinners out, less travel. She did not remodel the house, hardly drove her car so there was less wear and tear. When she needed to have services in the home, house keeper, caregivers etc. the money was there to pay for that stuff. It just shifted from entertainment and travel to support care. That is usually what happens. Most of her issues later in life were medical. She had good coverage and was able to pay the premiums. But then again if you are not paying for trips and the like then you can maintain your medical insurance premiums.
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Old 10-11-2007, 12:23 PM   #22
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Originally Posted by SecondCor521 View Post
Hmmm. My plan still calls for me to retire at 52 in a three bedroom house with a hair under $2M. I better call that wealth management firm and find out what is wrong with my spreadsheet.

Hey, unclemick, can I be a junior curmudgeon? I don't have a number 2 pencil, but I can do longhand multiplication...

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It sounds like you mis-read the article. It says folks with 2 mil bux find themselves retired with middle class amenities like three bedroom houses and minivans, and not with mansions and limo's like you might expect from millionaires. In fact, it sounds like you'll be retiring in a similar fashion to the folks referenced in the article. Perhaps you're drastically overestimating what you need to retire and should be considering RE sooner and with less? Otherwise, you'll be just like the folks in the article!
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Old 10-11-2007, 12:27 PM   #23
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Well, 4% SWR on a 2 mil portfolio produces 80K per year. That certainly isn't poverty but I wouldn't call it being rich, either.

For a person living in a low cost part of the U.S., with no debt or unusual expenses, it's pretty nice. For someone who lives in a high price area and has extra medical expenses, kids still in college, home mortgage, etc it can be just one step above dog food.
Well I'm single with no kids. So $80 per year is a very nice retirement. But you are correct. Someone living in NY with 2 kids in college probably would be challenged with a 2 mil portfolio. But I was taking the quote at face value. "A person", meaning one.
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Old 10-11-2007, 12:51 PM   #24
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It sounds like you mis-read the article. It says folks with 2 mil bux find themselves retired with middle class amenities like three bedroom houses and minivans, and not with mansions and limo's like you might expect from millionaires. In fact, it sounds like you'll be retiring in a similar fashion to the folks referenced in the article. Perhaps you're drastically overestimating what you need to retire and should be considering RE sooner and with less? Otherwise, you'll be just like the folks in the article!
Actually, before I posted above I just read about the first two lines of it and mentally filed it in the "puff piece" category, with a cross reference under "trying to scare me".

I know a few millionaires proper and at least a few folks clearly on their way. Most if not all of those people are very much "millionaire next door types". Heck, I'm one of those.

I'm fine with my house and a decent Honda or Toyota sedan. I'd rather live that lifestyle and retire at 52 than have a limo and McMansion and retire at 75 (and be dependent on an inadequate social security, as the article intimates).

My requirements for a $2M at age 52 are based on my actual spending over the last six months, as tracked religiously in Quicken, inflated by an historically average CPI index. The age 52 is determined by taking my current actual investment balances and inflated by an historically average rate of appreciation.

Actually, I may be overstating my needs somewhat, but I'll post a different thread on that.

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Old 10-11-2007, 01:15 PM   #25
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Didn't we see an article just a month or two ago on this forum that "you're nobody here if you are worth less than $10m", referring to New York City? Seemingly you cannot even get a date with a reasonable looking girl if you're not worth at least that much. Sheesh!

Yep- That's exactly why they won't date me.
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Old 10-11-2007, 01:39 PM   #26
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... and are now retired, comfortable and by their own admission "living good." It is more about meeting expenses and having enough left over to do the things you like to do. I call that financial security. Not every one wants the "Lifestyles of the Rich and Famous". Most of us would be satisfied with maintaining our current standard of living in retirement. That standard is different for everyone.
I don't know about you guys, but I've had a hard time planting my butt in a first-class airplane cabin-- let alone spending $10K on a fantasy vacation.

Don't get me wrong, I'm quite happy to travel first class when I win the departure-lounge lottery get upgraded, but it's hard to put it on my credit card. It's not buyer's remorse or a lack of value as much as it is a sad commentary on what it takes to get treated with a bare minimum standard of personal space travel accomodation. I wonder if the inflation-adjusted cost of a first-class airline ticket has risen over the last 40 years... but I guess we'd have to factor in hedonic adjustments like better aircraft timeliness, reliability, and safety improved in-flight entertainment systems.

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Now some financial guru's are upping the ante. Now you need millions more.
How strange. Don't they know that millions of little retail investors will get discouraged and flock to the offices of financial gurus for assistance in meeting their retirement goals? Why would the gurus want to be pestered by all these crowds of desperately unhappy people??!

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The cost of being rich just keeps going up and up. Just check out the Forbes "Cost of Living Extremely Well" index. The index clearly shows that the cost of being rich is racing ahead of the normal cost of living as measured by the CPI....
BTW Forbes has an updated chart (Sep 2007):
Interactive Chart: Cost Of Living Extremely Well Index - Forbes.com

and an updated CLEWI basket:
The Price of Living Well - Forbes.com

Luckily the cost of a subscription to Forbes magazine has managed to hold the line (no doubt with a few hedonic improvements) at the bargain rate of just (*choke*) $60/year...
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Old 10-11-2007, 02:07 PM   #27
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If drawing $80k per year from $2M in assets makes you middle class what does my planned $30k per year from $750k make me?----working class? But I'm not working... oh yes I remember now I'm poor . Actually I think with $30k as a single person I'd be at 3x the official poverty level and if you don't have a mortgage you can live a very comfortable life on $30k per year anywhere in the US.
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Old 10-11-2007, 02:45 PM   #28
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If drawing $80k per year from $2M in assets makes you middle class what does my planned $30k per year from $750k make me?----working class? But I'm not working... oh yes I remember now I'm poor . Actually I think with $30k as a single person I'd be at 3x the official poverty level and if you don't have a mortgage you can live a very comfortable life on $30k per year anywhere in the US.
I'm not only living comfortably at just under $30k, I'm still saving.
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Old 10-11-2007, 02:54 PM   #29
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Really, I think it comes down to this: these people (the ones referred to in the article) simply haven't saved enough to support their lifestyle after retirement. They have been "rich" their whole lives, and expect to retire rich as well. But they just haven't done the math.

If you're used to making $300k per year and spending most (or all) of it, $4 million ain't gonna support that lifestyle after you stop working.
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Old 10-11-2007, 02:58 PM   #30
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Yahoo finance is a total joke--isn't that where Kiyosaki a-clown gets space to write his dribble, I mean drivel? Oh, and Suze, too. Great.
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Old 10-11-2007, 03:21 PM   #31
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as a salute to Flip Wilson - 'the devil makes me do it':

it wasn't too many years back we had some - I can live cheaper than you can threads - both in LBYM and in ER!

not to cross thread or get people angry at the search function or .

12k waaay back in the 90's - of course she threatened bloody murder if I ever ever tryed that again. Seems a lot grouped in the low twenties - paid up house and health care in the bag, kids grown and gone.

I know I know - some of us are just bad to the bone.

heh heh heh
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Old 10-11-2007, 04:47 PM   #32
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BTW Forbes has an updated chart (Sep 2007):
Interactive Chart: Cost Of Living Extremely Well Index - Forbes.com

and an updated CLEWI basket:
The Price of Living Well - Forbes.com
What is the "Good Life" worth ?

It's worth pointing out that since 2001 the Cost of Living Extremely Well index has gone from 550 to 772 for an increase of just under 38 %.

So if in 2001 you needed to spend $22,606,236 to live extremely well, in 2007 you would need to spend $31,162,932 just to keep up. So to provide this much spending power I might need 50 percent more just to pay the taxes on my income. Therefore I'll need an income of around $46,744,000 to support me in the style to which I would really like to become accustomed to.

So knowing that I want to have a stable retirement, I'll use the SWR of 4 % to predict how much stash I'll need to live extremely well.

If I do that I see that I'll need a nest egg of just under $1.170 billion (with a "B") to provide for my needs.

Actually though that isn't quite enough. I'll need to pad my nest egg ... just in case. So I'll add in another 20 percent for my personal comfort bringing the total to $1.4 Billion.

But now since the CLEWI basket is going up at 3 times that of the CPI, then I'd better use a smaller safe withdrawal rate...say 2%. In that case with the tax hit and the 20 percent cushion I'll need just over $2.8 Billion.

So just between us friends lets make that a nice $3 billion for us to live extremely well

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Old 10-11-2007, 04:52 PM   #33
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I guess the poor $4M guy has to go back to work since $160k/year is not enough. What a shame. Maybe he will be prepared at 65. Oh well, look at the upside... I suppose he can continue funding SS for the rest of us.
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Old 10-11-2007, 05:42 PM   #34
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This must be the "cost of keeping up with the Jones'" chart...
No. It is the "cost of keeping up with the Rockefellers" chart...
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Old 10-11-2007, 06:27 PM   #35
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The 4m man is probably bringing home $200k salary and $800k in profits in a good year pre-retirement. He probably saves around 100-200k per year and lives on about 500k after taxes. He probably has several cars, houses and other toys and activities that he doesnt want to give up in retirement. The article doesnt say how much he saved in addition to the sale of his business, or how much of a tax bite he had when he sold. But its a safe bet that he cant support his lifestyle on the 160k that he would withdraw per year based on 4% of the 4m.
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Old 10-11-2007, 06:37 PM   #36
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The 4m man is probably bringing home $200k salary and $800k in profits in a good year pre-retirement. He probably saves around 100-200k per year and lives on about 500k after taxes. He probably has several cars, houses and other toys and activities that he doesnt want to give up in retirement. The article doesnt say how much he saved in addition to the sale of his business, or how much of a tax bite he had when he sold. But its a safe bet that he cant support his lifestyle on the 160k that he would withdraw per year based on 4% of the 4m.
Actually after reading the article, I am under the impression that he can only count on the $4M he received from the sale of his business to finance his retirement. Therefore, it looks like he might have never saved a cent until now and was living paycheck to paycheck. If his income was as high as you seem to think it was, no wonder he feels he can't retire with "only" $4M!

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got a call from a newly "rich" executive. Having worked 60-hour weeks for years and now ready to retire at 55, he sold his business for $4 million. He was ready to live out his dream life and live off that tidy nest egg. The problem is, to do so--on $4 million--he must cut his standard of living.
Sounds like there is nothing else in the kitty besides the $4M...
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Old 10-11-2007, 06:55 PM   #37
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You're right - it does sound like he is living paycheck to paycheck. He must have an extreme lifestyle not to have saved anything
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Old 10-11-2007, 07:35 PM   #38
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You're right - it does sound like he is living paycheck to paycheck. He must have an extreme lifestyle not to have saved anything
Not necesarily true at all. He may have been maximizing growth of his business at the expense of a large salary. A $4million cash-out is not bad, and he likely lived at least as well as most of us baggie washer/savers.

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Old 10-11-2007, 08:05 PM   #39
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Not necesarily true at all. He may have been maximizing growth of his business at the expense of a large salary. A $4million cash-out is not bad, and he likely lived at least as well as most of us baggie washer/savers.

Ha
If this were the case, then he would likely have no problem retiring with a nest egg of $4 million. Hard to believe there are people who cannot live well on $160k per year.
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Old 10-11-2007, 08:20 PM   #40
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Not necesarily true at all. He may have been maximizing growth of his business at the expense of a large salary. A $4million cash-out is not bad, and he likely lived at least as well as most of us baggie washer/savers.

Ha
Define large salary! OK maybe he didn't pay himself $500K per year. Perhaps he tried to, as you said, maximize the growth of his business at the expense of a large salary. Perhaps he did not save any portion of his income during the past 20 years because he knew he would be able to cash out of his business one day. But he is obviously used to spend more than $160K per year or we would not have this conversation. And 160K can give anyone a fairly nice lifestyle! For him to postpone retirement with $4M in the bank tells me that his annual expenses are in fact so much higher than 160K that he can't even start to picture himself live on such "measly" sum of money...
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