How Much is Enough

[Malcolm2]

We are planning to start in Asia and then Europe, Italy and France especially, and then perhaps Season in different places, for 3-6 months at a time to help immerse ourselves into a community and a language and also keep costs down.

Unless you have dual citizenship you are limited to 90 days anywhere in the EU/Schengen Zone every 12 months. They are serious about that. France and Italy are both in the Zone as is most of Europe except Switzerland. Virtually impossible to get a long-term visa in Switzerland as an American without a work reason.

There are other issues with being without a base, but I'm sure you have researched them. Special issues with kids as well.

We lived and worked in Europe with a different type of visa for years before recently returning to the States. We will keep a house here but plan 1-2 month stays in different places each year.

 

[pb4uski]

Same here.
I live well on X dollars a year. When dividend income from our portfolio reaches X dollars after taxes I am ready to FIRE. BTW I am all my life 100% in stocks
and it looks like we will work few years past the FI date.

If you're only living on dividend income (and not considering principal at all) and not considering SS then you'll probably end up working much longer than you need to.

Also, remember that most dividends will not be taxable if your taxable income is in the 15% bracket or lower.

 

[enjoyinglife102]

Like most, I crunched the numbers every which way and will always be on top of my where I currently stand. Again like most, a lot of thought has been given to possible scenarios going forward and how they would be addressed. There's always lots of uncertainties, "unique" current events and at times some anxiety dealing with so many unknowns. The one certainty though is that time is not a renewable resource and I made the transition to be more worried about not maximizing that than the possibly never ending pursuit of accumulating a bigger safety cushion.

 

[Hiredgun]

Don't get sucked into the golden handcuffs! If you have enough to retire do it. We were going to retire Oct. 1, 2013. Instead we retired August around the 1st when my wife was diagnosed with aggressive breast cancer. Yes, we now have regrets of not doing it sooner. You have one life, don't wait!

 

[gcgang]

It sounds like you are in a great place financially. I was in a similar position 5 years or so before I actually retired. What my wife and I did at that point was to tilt the balance a little more towards experiences in the present rather than saving quite so much for the future. We started taking better vacations and created a lot of wonderful family memories in the process. Our overall spending went up a bit too, but by that time our investments were growing more by investment gains than they were by what I added so it didn't seem to matter.

+1

 

[lhamo]

It is so hard because right now we are in peak earnings years (45 & 42) and really socking away a lot of money. It just seems foolish to walk away from that, when every additional year can permanently add that much more to the monthly budget. Things would be a lot easier if one of us would get fired or something.

This is pretty much our situation, too, though ages are a little different (DH 55, me almost 45). I'm on the verge of some kind of promotion at work -- could be a very significant one -- and if that comes through I want to at least try it for a few years and see what happens. The work is stressful but meaningful, and I could potentially make a big difference. If it doesn't work out then I will likely start focusing my energies on convincing DH we should FIRE sooner rather than later.

 

[akck]

These links might be of interest to this discussion:

http://www.dfaus.com/pdf/How_Much_Should_I_Save.pdf

http://www.dfaus.com/pdf/RetirementIncome_Summer2012.pdf

According to the research, anywhere from 82% to 58%, depending on your income level. If I read the report correctly, that equates to an income stream from savings of 23% to 37%, with the remaining needs met by SS. They use 40% as the goal.

 

[butterfly]

Unless you have dual citizenship you are limited to 90 days anywhere in the EU/Schengen Zone every 12 months. They are serious about that. France and Italy are both in the Zone as is most of Europe except Switzerland. Virtually impossible to get a long-term visa in Switzerland as an American without a work reason.

There are other issues with being without a base, but I'm sure you have researched them. Special issues with kids as well.

We lived and worked in Europe with a different type of visa for years before recently returning to the States. We will keep a house here but plan 1-2 month stays in different places each year.

Hi, thankyou for your information.

I thought it was 90 days for every 180 days that you could be inside the EU zone.

We have planned on that advice to initially have 3 months in Italy, then 3 months in either the UK or Switzerland then 3 months in France to comply with the EU visa stuff.

But if we can prove that we earn enough money France Italy and Germany have long term 12 month + visas that we can apply for and apparantly they are not too difficult to obtain. The German one is a self employed web-style one, but as long as you have the income level they require you can apply with just a blog or basic webpage.

If anyone is interested I can post an interesting link on EU Visas.

We are Australian so in the UK we can stay for 6 months at any time and I can apply for an ancestral visa if we want to eventually.

But we will most likely move every three months at this stage, for the first 2 years anyway. Then we may find a base for 12months or so after that. Who knows where....?

Does anyone else NOT include the princpial in their SWR? We are only including the income from the principal in our calculations as we will be 42 and 38. Obviously that is a safer option, but just curious as to what the "proper" calculation would be.

 

[dtbach]

Enough is when you can live your life as well as when you were working. I got laid off when I was 56 but realized we were not deprived of anything we had done before. I did a couple of odd end jobs but then realized that they were not really adding to what we already had. Once my military pension came in at 60 I knew we were set.

 

[FIGuy]

I recall reading recently that the median saturation point was 75K/yr, so assuming a 3% SWR, this works out to 2.5M USD minus 33x your annual income from pensions and social security.

These studies make a lot of assumptions when stating that "happiness is maximized at 75k / yr". For one, they pretty much assume one would just spend blindly what they make and that 75k is enough to come near the peak happiness (however that's defined!). With or without kids? With a big, fancy house or plopping around the Bahamas on a 30' sailboat like the Pardeys? For my wife, dog, and myself, we've reached our happiness at around 25k-30k / year (not necessarily related to what we make). I expect to stick around that number my whole life if health allows and semi-retire in my 30s instead. Work will just be financial gravy and enjoyable projects.

It just takes a bit of creativity to cut that 75k in half. I've read of plenty of folks that add about 5k/yr for each kid (transfer payments definitely help as earned income drops) so I might be at 35k-40k if I had some little ones. Some add less, some WAY more with all the 3 year old resume building insanity.

I say find your own number, add 25% for safety buffer if you want or just work part time in something you love, and find a way to fund it. Then you have "enough".

Earlyretirementextreme.com : Low income path to FI
Mrmoneymustache.com: middle income path to FI
FinancialSamurai.com: high income path to FI

All three paths have happy folks at the other end...

 

[RetiredAndFree]

Our pre-retirement spend was pretty close to what we thought we'd need post-retirement, other than a doubling of our travel spend, and that is what we used as our FIRE threshold. I.e., the point that 3% of our assets matched our current spend rate.

The big surprise for us in retirement was that we are actually leaving very comfortably at a withdrawal rate of 2.75% because we've discovered much less expensive ways to go about enjoying our lives. We've literally cut many thousands of dollars from our annual run rate simply by dropping things we really didn't value, or making lower priced substitutions.

Our goal in retirement was to travel half of the year, which we've accomplished. We have an RV, which goes a long way in stretching our travel dollars, though we take plane trips and rent vacation properties as well. Otherwise, we live pretty simply, focusing most of our non-travel time and energy on being outdoors and active (hiking and biking primarily), and attending a Lifelong Learning program at a nearby college.

All of these, as others have wisely pointed out, are things we enjoyed prior to retirement. We just get to spend a lot more time on them now.

 

[scrinch]

Does anyone else NOT include the principal in their SWR? We are only including the income from the principal in our calculations as we will be 42 and 38. Obviously that is a safer option, but just curious as to what the "proper" calculation would be.

The calculation is usually taken as x% (say 3%) of your invested balance (3% of your principal, if you prefer). But whether that 3% annual withdrawal happens to have recently been principal, dividends, interest, or other is immaterial (except for its tax treatment). If you have a balance of $1M at the time of year you take your withdrawal, and if you withdraw 3% of it to live on for the year, it doesn't matter what account or type of security that $30k came from. You have full control of your money and can invest any amount in any way, any time you want. That $30k might have been dividend, equity, and cash during the past 12 months, depending on how often you shuffle your investments. If you reinvest $1000 in dividends today into stocks, tomorrow is it principal or dividends? Other than for tax treatment, it doesn't matter what you call it.

I think what you are trying to do is maintain at least a certain balance in your portfolio. Is that right? If you are invested in mostly dividend-paying stocks or mutual funds, then in order to maintain a minimum balance you would withdraw less than the dividend amount. If you are invested in growth stocks, then you would likely sell shares for your withdrawal.

 

[jerome len]

I guess I'm a bit spoiled. Since I've been fairly successful my retirement income is substantially more than 75k a year that most on this blog thinks is a lot. I don't know if I could live on less unless I sold a car, bought a smaller house and asked my kids to quit their private colleges and enroll in community colleges instead.

So, how many on this blog make more than a couple hundred grand a year and expect to come close to that income in retirement. And, how many of the high income bloggers intend to substantially reduce their income and accept less in life.

I really don't consider myself rich.....I believe I'm middle class but on the upper income end of what would be considered middle class. My challege is this year we needed a new roof, DW and I got new glasses, DW spend 4 days in the hospital and I'm about to get a dental implant. I wonder how some say they live on 30k a year and do everything we had to do in the past 12 months.

I guess "how much is enough" is vastly different for many of us. What makes all of us lucky is when we don't have to worry about having enough.....what we believe is enough for us. I think I've got enough, basically because I've earned, saved and now invest in index funds living off of my dividends....But I do hope next year is a better spending year than this year......I'd rather take a longer vacation than spend my fun money on another dental implant.

 

[daylatedollarshort]

I guess I'm a bit spoiled. Since I've been fairly successful my retirement income is substantially more than 75k a year that most on this blog thinks is a lot. I don't know if I could live on less unless I sold a car, bought a smaller house and asked my kids to quit their private colleges and enroll in community colleges instead.

In California kids can go to community college for two years and then transfer to schools like Berkeley, UCLA or Cal Poly with majors in STEM career fields.

Between community college, California middle class college scholarhships effective next year, college income tax credits, internships, financial aid and/or merit aid, an in state student could get an engineering or computer sciences degree from Berkeley or any other UC or state college for quite a modest investment in relation to the graduation starting salary.

I think the point of the popular ER bloggers is that it is possible to live quite well for not a lot of money, and that can even include college for the kids, too.

Georgia Tech is partnering with AT&T to develop a $7K online masters degree in computer science.

 

[gcgang]

I'm 59, wife 56, 12 year old daughter. Our health insurance premiums alone will total over $16,000 this year. How one could live on $20-$30 k per year is out if my comprehension.

 

[Ozstache]

I'm 59, wife 56, 12 year old daughter. Our health insurance premiums alone will total over $16,000 this year. How one could live on $20-$30 k per year is out if my comprehension.

I'm not an American, but MMM at this link Our New $237/month Health Insurance Plan | Mr. Money Mustache leads me to believe that you can get high deductible health insurance and self insure the rest much cheaper than that.

 

[2B]

I'm 59, wife 56, 12 year old daughter. Our health insurance premiums alone will total over $16,000 this year. How one could live on $20-$30 k per year is out if my comprehension.

You won't have to pay the $16,000 for the insurance premiums next year with that income. I think you are above the medicaid income level so you fall into the subsidy zone. I'm not familiar with all the income limits but in other threads people have made comments about arranging income to make them eligible for the subsidy.

Health insurance aside, it's always hard to imagine people living on less than you do but it's likely many people do. Many things we spend our money on today didn't exist a century ago - like health insurance.

 

[2B]

So, how many on this blog make more than a couple hundred grand a year and expect to come close to that income in retirement. And, how many of the high income bloggers intend to substantially reduce their income and accept less in life.

I resemble that remark. FireCalc says that I could take out an inflation adjusted income that is greater than my current income (after deducting SS, FICA and the taxes paid for them). This would give me an after tax income greater than I now have.

My "basic" living expenses are about half of that. I could economize easily although DW may not be happy. What's left is available for travel and decadence.

So, why am I still drawing a paycheck? First, my work is easy and comfortable. I get more PTO than DW will spend traveling with me although life has settled down enough for her that I will begin pushing the envelope on that issue again. I also haven't really figured out "what I'd do all day." In many ways it's nice knowing I could just walk out the door if I so choose.

 

[scrinch]

So, how many on this blog make more than a couple hundred grand a year and expect to come close to that income in retirement. And, how many of the high income bloggers intend to substantially reduce their income and accept less in life.

We plan on living on about $100k/yr which includes a hefty travel budget. Actually we live on less than that now and just save the rest.

 

[imoldernu]

How Much is Enough?

After 24 years of retirement...
1. When you are happy with your life.
2. When money is not a worry, but a hobby.

Cheers!

 

[butterfly]

The calculation is usually taken as x% (say 3%) of your invested balance (3% of your principal, if you prefer). But whether that 3% annual withdrawal happens to have recently been principal, dividends, interest, or other is immaterial (except for its tax treatment). If you have a balance of $1M at the time of year you take your withdrawal, and if you withdraw 3% of it to live on for the year, it doesn't matter what account or type of security that $30k came from. You have full control of your money and can invest any amount in any way, any time you want. That $30k might have been dividend, equity, and cash during the past 12 months, depending on how often you shuffle your investments. If you reinvest $1000 in dividends today into stocks, tomorrow is it principal or dividends? Other than for tax treatment, it doesn't matter what you call it.

I think what you are trying to do is maintain at least a certain balance in your portfolio. Is that right? If you are invested in mostly dividend-paying stocks or mutual funds, then in order to maintain a minimum balance you would withdraw less than the dividend amount. If you are invested in growth stocks, then you would likely sell shares for your withdrawal.

Thankyou. Yes you are right. We are calculating on having a 3% SWR but only calculating the dividends/rental income/interest on our principal to draw that from.

We do not want to touch our invested principal and keep reinvesting into it between 25-50k pa. We are doing this because we will have a long retirement and two children to include in our expenses. (aged 4 and 6 currently).

I suppose I was wondering if others calculated this way or just did an automatic drawdown until the entire amount runs out?

How Much is Enough?

After 24 years of retirement...
1. When you are happy with your life.
2. When money is not a worry, but a hobby.

Cheers!

That is cool.

We plan on living on about $100k/yr which includes a hefty travel budget. Actually we live on less than that now and just save the rest.

Yes, we plan that too. Our ER includes long term travel and we hope not to spend that amount but will be happy to have that budget.

 

[Katsmeow]

So, how many on this blog make more than a couple hundred grand a year and expect to come close to that income in retirement. And, how many of the high income bloggers intend to substantially reduce their income and accept less in life.

Toward the last few years before DH retired 3 years ago and I semi-retired our combined income was a bit over $300k a year. We don't expect to come close to that in our long-term retirement. However, after 3 years of DH being retired and me being semi-retired it is clear that we don't have to come close to that to have a great life.

Right now, we are spending a little over $100k a year because we have kids at home, one in full-time college and the other just starting college. My projections for what we will spend once kids are gone is between $65k and $70k a year and, frankly, that could be cut.

Our son did go to community college. He transferred his credits just fine to the state university. I looked at the cost of private colleges and the level of education of each and just saw no benefit to paying that extra cost. FWIW, DS's classes in CC were smaller than many of the first two years classes at a 4 year school and he had great instructors. And, yes, it did cut costs a lot.

We do spend less than we spent when we were both working. Part of it is that we don't have a lot of work related expenses we had before. Part of it is that we live in a less expensive to maintain house that is smaller (this was totally our choice and was not something we felt forced into). Part of this is that we don't have a lot of expensive hobbies and kid related expenses are a lot less now.

We did look at the budget and really decide what we felt added value to our enjoyment of life and what didn't. Having someone clean our house for us? We cut that. We also cut our grocery bill by a couple hundred dollars a month just by paying more attention to what we were doing.

On the other hand, having a nice gaming computer? I made that purchase.

 

[RetiredAndFree]

I'm not an American, but MMM at this link Our New $237/month Health Insurance Plan | Mr. Money Mustache leads me to believe that you can get high deductible health insurance and self insure the rest much cheaper than that.

It WAS $237 - my guess is it will at least double under ACA in 2014.

Our health insurance rates, after several years of modest 3% increases, are renewing for 2014 under ACA at an increase of 125%. This is solely due to ACA provisions, not due to mismanagement by our insurer - we received a rebate at the end of summer 2013 because our insurer had achieved their profit objectives.

 

[RetiredAndFree]

Toward the last few years before DH retired 3 years ago and I semi-retired our combined income was a bit over $300k a year. We don't expect to come close to that in our long-term retirement. However, after 3 years of DH being retired and me being semi-retired it is clear that we don't have to come close to that to have a great life.

Right now, we are spending a little over $100k a year because we have kids at home, one in full-time college and the other just starting college. My projections for what we will spend once kids are gone is between $65k and $70k a year and, frankly, that could be cut.

Our son did go to community college. He transferred his credits just fine to the state university. I looked at the cost of private colleges and the level of education of each and just saw no benefit to paying that extra cost. FWIW, DS's classes in CC were smaller than many of the first two years classes at a 4 year school and he had great instructors. And, yes, it did cut costs a lot.

We do spend less than we spent when we were both working. Part of it is that we don't have a lot of work related expenses we had before. Part of it is that we live in a less expensive to maintain house that is smaller (this was totally our choice and was not something we felt forced into). Part of this is that we don't have a lot of expensive hobbies and kid related expenses are a lot less now.

We did look at the budget and really decide what we felt added value to our enjoyment of life and what didn't. Having someone clean our house for us? We cut that. We also cut our grocery bill by a couple hundred dollars a month just by paying more attention to what we were doing.

On the other hand, having a nice gaming computer? I made that purchase.

+1

We were grossing over 500K our last few years of work, but we lived on about 125K. We've whittled that down to about 90K, exclusive of taxes, without any impact on our standard of living. We were too busy and stressed during our working years to pay attention to the minutia of our spend, and once we retired we drilled down and found lots of stupid spending that we eliminated.

We were actually able to find and cut enough waste to both lower our projected annual spend and double our travel budget.

We could technically increase our spend rate, but as you've suggested, we're already living a terrific life and would be hard pressed to justify spending more just because we can. For now, there is peace of mind in knowing we have a cushion in our budget planning.

 

[Gumby]

Our spending has been remarkably steady for about the past 15 years now. In the days when we made four times as much as we do now, we just saved more. If all goes according to plan, we will have income of about two times our current spending (using a 4% withdrawal rate) when we retire in about 4-1/2 years.