Is $1million enough

[astromeria]

My son, a single teacher, lives in a nice town in Eastern Massachusetts and only this year hit $45K in income. He does have subsidized health insurance (IIRC he pays $100/mo plus copays). He also has 11% of his paycheck swooped off into the MA Teacher's Pension Fund. On what;s left, he lives in a small but OK 1-BR apartment in cute downtown Walpole, a 5-minute walk from the commuter train station, supermarket, drug store, Chinese restaurant(!), etc. Over the 5+ years he's been out of school (and never working a second job or during the summer), he saved $20,000. He travels in the summer--camping, Europe, my house--wherever. He says he's not doing without a thing he wants (other than his own condo, but that's coming).

Now if you need to live in a pretty, 3-BR single-family home in an upscale burb or apt in Boston, $40k might be a stretch without roomies.

[nun]

Quote:

Originally Posted by donheff Also, keep in mind 50% of his nest egg is already taxed. Since he says he just sold his house and we recently came out of a fall there are probably very few capital gains in that chunk of money right now. I'll bet he pays closer to 1.5%-4% on the taxed funds he withdraws initially, gradually increasing as the years go by.

Thanks for the comments, its interesting to see how people's expectations and opinions differ. I realize that to do this I'll be living on a lot less than most folks, but I think I can do it by getting a small place to live (under $200k) and maybe doing some seasonal work - always wanted to be Santa Claus.
The after tax money is truely after tax, free and clear in 75% in index funds, 25% in MM/CDs. I've accounted for the capital gains on the house money.

[Sam]

Quote:

Originally Posted by Rock On an old thread I proposed defining generic ER for a couple 50 yrs of age as $1MM liquid, plus cars and a house all paid for. FWIW there weren't too many takers at that time though it still seems doable.

Doable is understatement. I believe there were many silent takers. The ones who voiced their disagreements will probably continue to do so with $2MM, 3MM, or even more.

[unclemick]

1993 - 300k his and her's plus a duplex cranking out 6k/yr rent. No health insurance.

Really really cheap bastardhood and 0ne yr temp work AND Mr Market in the 90's allowed crossing 1mil around 1998,99, 2000 - not exactly sure.

Wouldn't look pretty on a spreadsheet in hindsight - but compared to work - ER was more better.

Post Katrina - right at 1 mil plus small pension plus early SS. Yes - and BC/BS health insurance.

Sort of miss the good old days when I was really cheap. Salvation Army is still my favorite clothing store - Walmart is second.

heh heh heh heh heh heh - more than one way to skin a cat.

The number is different for everybody.

Here is the formula I came up with.

(( Bare Bones annual spending * 2) - Annual Pension Amt) * 25 = NEST EGG

This will give you flexibility to cut spending during a market downturn. - The flexibility is the (*2) part!

So for example you decide that $20,000 would cover all the necessities for the year. Food, Clothing, Taxes, Insurance, Shelter, Transportation. And that you received a $10K pension per year.

((20K * 2) - 10K ) * 25 = $750K

[Sam]

Quote:

Originally Posted by Cut-Throat The flexibility is the (*2) part!

Isn't that too much flexibility? 8)

Quote:

Originally Posted by Sam Isn't that too much flexibility? 8)

I don't think so. - The expenses portion is truly bare bones. No entertainment, travel, eating out etc. - You have got to allow for that. And it if you don't have excess built into your budget, you cannot pare back in market downturns or if unplanned expenses occur.

What multiplier would you use?

[free4now]

For more than a half a year I've been living off about a million after taxes. Living in the SF Bay Area is expensive, and after trying to make it work on about 40k a year for a few months I decided that was too bare bones for me... didn't include enough budget for getting out of the house and doing things. So I'm now spending at a burn rate of about 50-55k/year, recognizing that this is not sustainably safe, and exploring my options for moving to a cheaper location or taking on some work to bring in more income.

[Sam]

Quote:

Originally Posted by Cut-Throat And it if you don't have excess built into your budget, you cannot pare back in market downturns

Market downturn is already included in your "25", or 4% withdrawal rate.

Quote:

Originally Posted by Cut-Throat What multiplier would you use?

If I were to use your formula, I would use 1.5 (150%).

[haha]

For me the advice to quit now and look for a cheap place to live would be the deal breaker. I don’t mean a fancy house- mine is anything but- but a decent neighborhood in a the city or town where you like to be, where you like or least don’t hate the weather, where your friends and family are, where you can walk to interesting places and events if you enjoy that.

I would far rather find an ok job and stay where I wanted to stay than go looking for cheap. It’s like buying an ugly suit, because no one else wants it so it is cheap.

People who mention small southern towns- I sure hope they know what small Southern towns are like before they head off to one. The Bible Belt would not be everyone’s cup of tea.

I was eating at a Cracker Barrel Restaurant with a friend and her parents, sibs, etc not too far outside Nashville. Suddenly I thought I was having a heart attack. Turns out I was on the verge of panic, merely at the idea that I might have to listen to these people for another hour or so.

I should add that my family is from the South, and has been for a couple hundred years at least, so I am not complaining about something I know nothing about.
Ha

[wabmester]

Quote:

Originally Posted by Sam If I were to use your formula, I would use 1.5 (150%).

Why not just use your actual ratio? For example, if half of your expenses are discretionary, then 2.0 would be the right multiplier.

[Nords]

Quote:

Originally Posted by wab Why not just use your actual ratio? For example, if half of your expenses are discretionary, then 2.0 would be the right multiplier.

I'd say that 2.0 gives enough flexibility to avoid risking your life by saying "Sorry, honey, but that's a discretionary expense!"

[SecondCor521]

My ratio of (budgeted/barebones) is 1.42, but I've already cut back on a lot, so I think a higher number like 1.75 would be more reasonable.

2Cor521

[Sam]

Quote:

Originally Posted by Cut-Throat Do me a favor and look at your spending and weed out all of the discretionary items (Dining out, cable TV, Travel, vacations, Hobbies,) - I'm betting your budget could be cut in half.

What? You actually want me to work?

Seriously, the difference here might be in the definition of discretionary. What I might consider absolute neccessity might be different from yours, and vice versa.

[Sam]

Quote:

Originally Posted by Nords I'd say that 2.0 gives enough flexibility to avoid risking your life by saying "Sorry, honey, but that's a discretionary expense!"

Chicken!

Quote:

Originally Posted by Sam Seriously, the difference here might be in the definition of discretionary. What I might consider absolute neccessity might be different from yours, and vice versa.

Well, my formula said "Bare Bones" - Not "Non discretionary". 8)

[Sam]

A rose by any other name...

Quote:

Originally Posted by wab Why not just use your actual ratio? For example, if half of your expenses are discretionary, then 2.0 would be the right multiplier.

1.5 it is.

[unclemick]

2.0

CT must have read my mind.

heh heh heh

[Nords]

Quote:

Originally Posted by Sam Chicken!

Buk buk buk buk-awk!

We didn't make it to 20 years of marriage by taking stupid chances...

[Zoocat]

Quote:

Originally Posted by HaHa For me the advice to quit now and look for a cheap place to live would be the deal breaker. I don’t mean a fancy house- mine is anything but- but a decent neighborhood in a the city or town where you like to be, where you like or least don’t hate the weather, where your friends and family are, where you can walk to interesting places and events if you enjoy that. I would far rather find an ok job and stay where I wanted to stay than go looking for cheap. It’s like buying an ugly suit, because no one else wants it so it is cheap. People who mention small southern towns- I sure hope they know what small Southern towns are like before they head off to one. The Bible Belt would not be everyone’s cup of tea. . Ha

I agree with Ha, having lived in the Bible Belt for six long years, and I'd rather work full time at Wal Mart than go back, no matter how cheap it is. Living in a compatible community where you can make friends and, above all, make a HOME is more important than almost anything else, for me anyway. I would rather live in a cheap apartment in a community I love than a nice house in some out of the way place. Also, if you have never lived overseas, then a test run is in order before making any important decision about that. Good luck!