ER on less than 600K ?

[FlowGirl]

Hmm.  Am I wrong to think that some people here are spoiled?  $2,000/mo is more than many people in this country live on.  Here in Oregon, one can rent a nice 2 bedroom apartment for $700/mo.  $300/mo for food, $150 for utilities, etc.

Good point, but I think it depends on the situation. If I were 55, tired and beaten down by work, I might choose the $24K lifestyle. In fact I wish my MIL would take this advice instead of continuing to search for her next big break at age 59. But since the spouse and I are in our early 30's, and pretty happy with our work life, I'm not quite willing to settle yet. We're not aiming for a luxury lifestyle... we're pretty happy right now living on about $50K after savings, but its been a long time since I've had to watch the pennys too closely and don't really care to go back. I'm also smart enough to realize that while $2K/month may be fine right now, my future self might have a different opinion.

 

[LOL!]

So if someone wanted to retire couldn't they retire (if they were debt free) by buying a 4 unit apartment building outright and living in one unit. 

No, because then they would have a job as a landlord.  And I thought having a job was anathema to being retired.

 

[obryanjf]

Since the median household income in the US is just under $45k, and that includes a mortgage.

I would presume that there are many other places other than Oregon that are low cost of living locations.  My next move closer to the kids cousins, aunts, uncles and grand parents has an average income of 32,000/yr. 32,000/.05 = 640,000.

job 

 

[unclemick]

Duh

I used to think this forum was a hoot - living in the Louisiana swamp with a paid up Fish camp, vehicles, 28 foot camper and no health insurance - having brought in one year at 12k(couple - she threatened murder if I ever tryed THAT again). Outside the city - we knew people who raised families on less than 20k.

Heh heh heh - now in MO with health insurance, a mortgage and er ah more expensive tastes(portfolio permitting) - I'm singing a different tune. Have yet to see how the first year budget works out.

Thinking outside the box - you have the most control over spending - limited only by your imagination.

600k at 4% is still a cake walk in many parts of the good old USA - not as easy as the 90's but doable.

No longer a cheap bastard - my nerves are shot spending all this money. Living on more than 24k/yr is emotionally traumatic.

heh heh heh

 

[shorttimer]

a lot depends on if you have kids and aging parents or not.

My kids are gone and financially independent. In fact they are almost adamant about not wanting any financial support including gifts, as they are thankful for a paid for education. They however do not live close. I have no doubt I could live on twenty thousand dollars a year with careful planning and exchanging my paid for house for one with cheaper taxes. We could go from two cars to one, and try to live within walking distance of most of what we need, which we would do if we needed to. But if I have grandchildren don't think for a minute I won't want to travel to see them.

I also have elderly in laws that we help out. Not a lot, but enough to put a dent in a 20,000/yr budget.

and the neverending health insurance drama.

If you can do it, fine, but like in all areas of our lives it is give and take, weighing all the options.

 

[youbet]

Has anyone been able to ER on 600k or less?

There have been a lot of interesting replies to your query ferco and a lot of insight given out.  But in the end, you'll have to decide for yourself if the frugal lifestyle of living on $24K/yr is for you.

Having listened to all the chatter generated by your question, whatdaya think?  And why?

 

[tryan]

20k/ year is living at the poverty level in the US for a family of 4

24k is poverty for a family of 5.

Frankly, I'ld rather keep w*orking.

http://www.census.gov/hhes/www/poverty/threshld/thresh04.html

 

[perinova]

yes it is doeable
a big chunk of the population is doing it
and as tryan mentioned in some areas of the country and depending how may people in household it might be poverty level.

if the definition of poverty line is having necessities covered, no fancies or discretionaries. I would make sure to be at least above the line.

-------

 Table H-3. Mean Income Received by Each Fifth and Top 5 Percent
of Households (All Races): 1967 to 2001

(Households as of March of the following year. Income in current
and 2001 CPI-U-RS adjusted dollars28/)
------------------------------------------------------------------------
Lowest Second Third Fourth Highest Top 5
Year fifth fifth fifth fifth fifth percent
------------------------------------------------------------------------
Current Dollars

2001 $10,136 $25,468 $42,629 $66,839 $145,970 $260,464

 

[jdw_fire]

No, because then they would have a job as a landlord.  And I thought having a job was anathema to being retired.

Well then how about buying 2 adjacent 4-plexes for the $200k each, live in 1 apt, use the rent from 2 apts for expenses (including a vacancy factor), pay for a property manager with the rent from 1 apt, leaving you the income from 4 apts to live on.  Would that qualify as retirement?

 

[haha]

Well then how about buying 2 adjacent 4-plexes for the $200k each, live in 1 apt, use the rent from 2 apts for expenses (including a vacancy factor), pay for a property manager with the rent from 1 apt, leaving you the income from 4 apts to live on. Would that qualify as retirement?

It would for me. Where do I find these 4-plexes @$200K each, in a neighborhood where I won't get my throat cut?

I would even be happy collecting my own rents.

Ha

 

[ferco]

I would probably "bucketize" the 600k into 3 200k buckets into 6 yr buckets. Bucket 1 fixed income ; Bucket 2 in a balanced fund like Vanguard Wellington or STAR; and Bucket 3 into an "aggressive" fund like a Target 2035 or 2045....this ought to get me there smoothly and relatively safe.

 

[free4now]

Nords, that Dolly Freed Possum Living link was a hoot:

http://www.soilandhealth.org/03sov/0302hsted/030206possum/030206toc.html

Raising rabbits in the basement for sale, boarding horses for transportation, distilling your own spirits, terrorising your enemies, no insurance.  

Here's a fun quote:

We like the anecdote about the stranger in a small Vermont village. Walking down the street, he notices that the man walking ahead of him is provoking some peculiar behavior. The men glare at him or shake their fists. The women turn up their noses. The children are bustled across the street to avoid coming near him.

  "What's going on?" he asks one of the villagers. "Is he a wifebeater? A drugpusher? A childmolester?''

  "Nup. Dipped into his capital."

  My kind of people!

 

[jdw_fire]

It would for me. Where do I find these 4-plexes @$200K each, in a neighborhood where I won't get my throat cut?

I would even be happy collecting my own rents.

Ha

  And in NM you can easily get a 4-plex with 2 BR units for $200k so it should be very doable to retire on $600k.  All you need to do is find a 4-plex in an area and with the apartment size that you are willing to live in.

And with $600k you could go to >$250k apiece.

 

[perinova]

I would probably "bucketize" the 600k into 3 200k buckets into 6 yr buckets. Bucket 1 fixed income ; Bucket 2 in a balanced fund like Vanguard Wellington or STAR; and Bucket 3 into an "aggressive" fund like a Target 2035 or 2045....this ought to get me there smoothly and relatively safe.

If you use well diversified funds like Target/Asset Mgr/STAR etc? You could dump everything into one of those funds with your preferred allocation except for the short term MM funds. I did my initial allocation suing index funds from Vanguard Total Intl -Total stock and Total Bond thenI noticed that my allocation was pretty much copied by the Target 2035.

Now is there really any advantage in using the 2 buckets since those funds are constantly reallocated?

 

[d]

is there really any advantage in using the 2 buckets

the essense of the bucket approach is that you are in control of the rebalancing ... when it suits your needs.  with the target funds, the rebalancing is automatic and might not suit your needs. that said, i'm not sure one is better than the other.

 

[perinova]

the essense of the bucket approach is that you are in control of the rebalancing ... when it suits your needs. with the target funds, the rebalancing is automatic and might not suit your needs. that said, i'm not sure one is better than the other.

OK I understand that part (buckets of one category funds like bonds, value stocks etc)
ferco was proposing buckets of funds already rebalanced.
I was questioning whether this add more safety (or fun)
or just complicate things
and possibly make it slightly more expensive since those funds have a slightly higher expense ratios than the pure index funds. If you own Target 2035 or STAR, Vanguard is doing the work for you.
IMHO if you want several buckets it might be better to buy the components of those funds instead.

 

[d]

it might be better to buy the components

i'd place some emphasis on "might".  the added expense of the target and star funds might be worth it; as you note, they do the work for you (and might do it better)

 

[Martha]

Well, with insurance premiums at more than $12,000 a year, and about $150 a month in drug copays, I wouldn't retire with $600,000. Even if I was perfectly healthy I wouldn't retire young with only $600,000. Too many things can happen in the next 30-40 years.

I know plenty of people who live on $20-$25000 a year. But that is not the same thing as having a portfolio generate the income. Those making $20,000 a year might have employer subsidized insurance. If things go bad, they have little to lose. File bankruptcy and keep working.

 

[MJ]

Well, right now, I could easily live on under $13k.
Of course, the fact I'm staying with my elderly father and not paying any rent, phone, electric, gas, or cable, kinda helps. But I don't think I could do this for more than a few months or I might have to add another $20k in medical expenses for 2 to 3 psychiatric sessions a week.

 

[Martha]

Well, right now, I could easily live on under $13k.
Of course, the fact I'm staying with my elderly father and not paying any rent, phone, electric, gas, or cable, kinda helps. But I don't think I could do this for more than a few months or I might have to add another $20k in medical expenses for 2 to 3 psychiatric sessions a week.

In the summer we hire high school students to scan files and do other assorted clean up duties. We joke about how they are the richest of us all. All their money seems to go to cars, clothes, and dates. Everything else is covered by mommy and daddy.

 

[PortlandDiehard]

I do agree that $600K might be lean, but it's within the realm of being able to begin to wind down one's career, maybe go part time, start working those consulting contacts, etc. You've already done the heavy lifting.

Regarding health coverage, I think the younger among us have an advantage. I'm 32 and expect that there's a good chance that at least the uncertainty of health coverage will be "solved" in the next 20 years. We'll be flying to India or Thailand for surgeries, seeing foreign doctors via webcam, etc.

I also predict that we'll see a government mandated, universal risk pool. 20 years is a long time - and health care is a problem that "everyone" wants fixed. Small companies, large corporations, individuals, etc.

I'm also not sure that working another 5 years so you can afford better care is necessarily the "healthier" choice. 5 years to a 55 year old represents perhaps 25% of their remaining mobile, vital life. You might be better off spending 40 hours a week for those 5 years at the gym and yoga center.

Jon

 

[PortlandDiehard]

It's interesting that so many on this board are paranoid of outliving their money when they're in their 80s or 90s. That's the "upside" of the actuarial table.

The downside is that many of us will die in our 60s or heaven forbid, our late 50s. Read the obits sometime. To me, eating ramen at 90 is less scary than a life unlived.

One can bump life expectancy up somewhat not smoking or stuffing the face. But, as they say, they bury joggers too.

The older I get, the more I realize that memories made young are worth more than memories made when old. You have longer to savor them and they're made when the mind is plyable and willing to cement them in a non-cynical light.

If you've got $600K and you're 55, you have to look at those obituaries and ask yourself, "if that 64 year old was me, was my decision to work until I was 60 worth it"? You've got a better chance of dying at 64 than living to 90.

Morbid stuff, but crucial for those of us who are realistically able to ask ourselves if we want to spend our prime years under the sun or under flourescant lights.

Jon

 

[lazygood4nothinbum]

I'm also not sure that working another 5 years so you can afford better care is necessarily the "healthier" choice. 5 years to a 55 year old represents perhaps 25% of their remaining mobile, vital life. You might be better off spending 40 hours a week for those 5 years at the gym and yoga center.

the flaw in that line of thinking is that spending such time getting in optimal shape likely blows your 25% time frame. so when planning to spend all the money early, the congruous path leads to a pub, not a spa.

 

[rs0460a]

It's interesting that so many on this board are paranoid of outliving their money when they're in their 80s or 90s.  That's the "upside" of the actuarial table.

Interesting thought....

Last week, my DW /I spent 2+ hours at the Philadelphia branch of Fidelity to go over our retirement plan (we have about 66% with Fidelity, 33% with Vanguard, and 1% with Chase under a 403B).

Anyway, going in, I did the retirement projections against several "tools" (including FireCalc, Quicken, Fidelity Net Benefits, and Financial Engines <offered through Vanguard>)

I knew that Fidelity was very "conservative" in their approach (based upon several other folks at work who, like me, are approaching retirement). That being the case, I "plugged in" a date of 100yrs to both me and DW into our plan (I've been using Fidelity's "planning tool" for the last 2+ years).

When we started our review of the plan, Fidelity said that I was "overly consertative" in our plan, both from an expense and also a longetivey (I'll keep the response to the expense item for another thread).

Anyway, he reduced our 100yr "hope" to a 92/94 year "possible", resulting in a plan that among other things, says that DW/me can retire - today if we wish (at 100% of current income).

Yes - this opens up a lot of questions for DW/me at this time, but my intent is not to start a "discussion" - rather than just answer the original "thought" related to "longevity".

Sometimes, we need not plan for “forever”?

- Ron

 

[Billy]

Jon:

Regarding health coverage, I think the younger among us have an advantage. I'm 32 and expect that there's a good chance that at least the uncertainty of health coverage will be "solved" in the next 20 years. We'll be flying to India or Thailand for surgeries, seeing foreign doctors via webcam, etc.

I think you have a valid point, Jon. I know of someone who is putting together a website now -- interactive with doctors and patients. He lives in NYC. We have only just started with possible answers on this fascinating pathway. The difference is some are filled with negativity and fear, and others offer creative solutions and hope filled possibilities. I'm happy to hear that you, at 32, are filled with the latter.

Thank God for fresh minds willing to look at 'old' problems.

Jon:

I'm also not sure that working another 5 years so you can afford better care is necessarily the "healthier" choice. ..You might be better off spending 40 hours a week for those 5 years at the gym and yoga center.

I agree here as well. Stress is a big factor in tearing down the immune system, forcing us to utilize medical services. Staying in a job we dislike, or 'having' to work, - with little time for our own personal pursuits that support us --  can eat away at our optimism, flexibility, willingness to take a chance or ability to change our perceptions. This is a high cost indeed.

Jon:

It's interesting that so many on this board are paranoid of outliving their money when they're in their 80s or 90s. That's the "upside" of the actuarial table.

The downside is that many of us will die in our 60s or heaven forbid, our late 50s. Read the obits sometime. To me, eating ramen at 90 is less scary than a life unlived.

Once again, we are on the same page.

Everyone must choose what is the working balance for themselves - Didn't Jimmy Buffet say "I'd rather die while I'm living than live while I'm dead?"

Jon:

You have longer to savor them and they're made when the mind is plyable and willing to cement them in a non-cynical light...You've got a better chance of dying at 64 than living to 90...Morbid stuff, but crucial for those of us who are realistically able to ask ourselves if we want to spend our prime years under the sun or under flourescant lights.

I don't think this is morbid. I think it shows awareness of things as they really are, and it makes common sense. (At least to me.) I also see that it shows personal courage - again in my opinion, for what that's worth.

Everyone must choose for themselves. That is what life is all about.

Best,
Akaisha
Author, The Adventurer's Guide to Early Retirement