Is $1million enough

[dmpi]

Where do you live? Are you single? I find it hard to believe that somone could make it on 15K/year.

Me too. 15K is not enough... but I guess you can get food stamps & live in low-income housing.

 

[Mr._johngalt]

Where do you live? Are you single? I find it hard to believe that somone could make it on 15K/year.

You are kidding right? To most of the world 15K per year is an
unimaginable fortune.

JG

 

[Mr._johngalt]

I used to think TX was over the top with the "God, guns, and football"

God bless Texas! If it was not there I might have to emigrate.

JG

 

[saluki9]

You are kidding right? To most of the world 15K per year is an
unimaginable fortune.

JG

Based on local prices and local standards of living. Here it would barely pay my property tax bill and groceries.

 

[Mr._johngalt]

Based on local prices and local standards of living. Here it would barely pay my property tax bill and groceries.

Yeah, I know, but I could do it right in the USA. As a single?
No sweat!

JG

 

[obryanjf]

Based on local prices and local standards of living. Here it would barely pay my property tax bill and groceries.

If your goal was to live on 15k; or in the OP's case 40k or so, then the geography does not match the goal.

job

 

[Mr._johngalt]

Single.

SW Ohio.

Small paid for house.

1989 Ford Festiva less than 2000 miles per year.

Don't go to restaurants or movies.

Could drop DSL, Cell phone, cable TV, water softener.

Am currently paying people for yard work & house cleaning.

And for those of you who might be wondering:

Single (almost)

Rural Illinois

Small paid off house

8 year old SUV

Don't go to movies but I do eat out.

No DSL, cable or water softener. Prepaid cell only.

I do my own yard work and house cleaning, but I do hire
out almost all repairs/home improvement stuff.

JG

 

[Texas Proud]

Where do you live? Are you single? I find it hard to believe that somone could make it on 15K/year.

My mom has for many years.... not that hard with a paid house, paid car, over 65 so no medical insurance... also, no cable, DSL, mowed her own lawn until she was in her early 80s... does not go out to eat except with her kids.. doesn't travel far anymore unless with a group..

From what I can tell, she is less than $12K...

 

[GMueller]

I take the initial question as asking whether $1M, without any other source of income, is sufficient to sustain the typical early retiree (Sorry Mr. Galt, you are not typical). Your typical/average retiree seeks to sustain a typical/average American lifestyle. Most would agee that the typical middle-class lifestyle has a price tag of about $40K per year in today's dollars. Can a $1M nest egg safely and consistently generate enough income to sustain the average middle-class lifestyle? Perhaps, but IMHO it would retire taking on more risk than I feel comfortable with. I want a $40K/year lifestyle with very little risk. Why, because I don’t want to worry about how I’m going to make ends meet when I retire, or worry that a “down year” in the market could send me back to work, or that I might have to "cut back" drastically. So, in my opinion, ER requires more than $1M nest egg. Without a pension, or any other source of income, I venture that $1.2 – 1.5M would be a more reasonable target. And, I think you will find that a great many of the successful early retirees who participate in this discussion group fall within that profile. For those that have ER'd on less, more power to you! But, I would recommend a slightly larger nest egg for most early retirees . . . especially for someone who contemplates "pulling the plug" at age 45.

 

[nun]

I venture that $1.2 – 1.5M would be a more reasonable target.

Does this $1.2M-$1.5M include a house?

 

[donheff]

And for those of you who might be wondering:


No DSL, cable or water softener. Prepaid cell only.

JG - do you do all your posting on a dial-up or is there a hip, Internet cafe in that rural location? Surely not a library?

 

[RockMiner]

Can a $1M nest egg safely and consistently generate enough income to sustain the average middle-class lifestyle? Perhaps, but IMHO it would retire taking on more risk than I feel comfortable with. I want a $40K/year lifestyle with very little risk. Why, because I don’t want to worry about how I’m going to make ends meet when I retire, or worry that a “down year” in the market could send me back to work, or that I might have to "cut back" drastically. So, in my opinion, ER requires more than $1M nest egg. Without a pension, or any other source of income, I venture that $1.2 – 1.5M would be a more reasonable target.

IMO many (if not most) of the people who have managed to accumulate that much capital are also accustomed to living pretty well. While 40k/yr may be very doable in some areas, for many it would feel very tight, especially for a couple. No one likes the sensation of barely keeping your head above water. If it includes a paid for house and cars we're getting warmer.

Not everyone wants to live like a Possum...exceptions like Mr_johngalt duly noted.

 

[modhatter]

Well, here'e a thought. Since the OP states he is single. One solution to increasing his income would be to marry. If he is a man, as I am assuming, there are a multitude of women out there looking for a good man.

Or, if opposed to marriage, you can just live together and share all expences. There are always options for men if you get financially pressed.

 

[audreyh1]

IMO many (if not most) of the people who have managed to accumulate that much capital are also accustomed to living pretty well. While 40k/yr may be very doable in some areas, for many it would feel very tight, especially for a couple.

Not necessarily. In fact it's the LBYMers who are far more likely to have accumulated $1M and these folks are used to living modestly. "The Millionaire Next Door" is does a great job of refuting the myth that those folks living large are also the ones which a high net worth. In reality, it's usually the opposite.

Then, when you are looking at a SINGLE person, which the OP is, $40K is not so lean. Of course, it's highly dependent on the cost of living in a particular geographical location.

Sure, $40K per year is modest, but is it doable - absolutely. Especially if your current monthly expenses are $1500/month - that's only $18K per year.

Audrey

 

[Corporateburnout]

Not necessarily. In fact it's the LBYMers who are far more likely to have accumulated $1M and these folks are used to living modestly. "The Millionaire Next Door" is does a great job of refuting the myth that those folks living large are also the ones which a high net worth. In reality, it's usually the opposite.

Then, when you are looking at a SINGLE person, which the OP is, $40K is not so lean. Of course, it's highly dependent on the cost of living in a particular geographical location.

Sure, $40K per year is modest, but is it doable - absolutely. Especially if your current monthly expenses are $1500/month - that's only $18K per year.

Audrey

We need to underline "cost of living in a particular geographic location". $1500 a month won't get you far in the northeast. My daughter is one year out of college makes 38K per year and barely makes with 2 roomates in Boston.

 

[heyyou]

nun, the OP, is single, frugal, house-less, and willing to move. By asking the question, nun has shown an interest in foregoing more employment. Audrey is right. Other than health care, nun is in good shape financially. The poster with $15K expenses of property tax and food needs to save $375K (25 multiples) extra just to cover those expenses. I'm sure that is a nice home but I couldn't afford that when working and most certainly not in retirement. I'm glad that I can see what others have and say "Oh, I can't afford that." They feel better until I say "I retired a year ago."

 

[saluki9]

I'm sure that is a nice home but I couldn't afford that when working and most certainly not in retirement. ."

Ha "nice home" it's actually a small 2 bedroom condo that I've been trying to sell for 3.5 months.

 

[Mr._johngalt]

Not everyone wants to live like a Possum...exceptions like Mr_johngalt duly noted.

I'm not doing the "Possum living" thing, but it's awfully nice to know that
I could.

JG

 

[Mr._johngalt]

JG - do you do all your posting on a dial-up or is there a hip, Internet cafe in that rural location? Surely not a library?

Dial-up, but as soon as this blasted machine dies (again) I am considering
going with the library 100% and junking this piece of crap.

JG

 

[RockMiner]

I'm not doing the "Possum living" thing, but it's awfully nice to know that
I could.

I stand corrected...was exaggerating to make a point

I understand the LBYM thing, (I are one) but I'd like to see actual numbers on how many people with modest incomes actually get to $1MM of investable assets. It's not so easy. Obviously, some manage it but my sense is that savings correlate pretty well with income (though not 1:1). Sure, I've known a number of big spenders who probably have very little put away, but saving is a LOT easier for those with more coming in. That said, a life of LBYM has to make for an easier transition to ER.

Sorry for topic detour.

 

[nun]

Not necessarily. In fact it's the LBYMers who are far more likely to have accumulated $1M and these folks are used to living modestly.

Audrey

Exactly Audrey, I live in the NE and I've managed to save for ER by living below my means. I don't think I'm frugal, but others probably would. I drive a 15 year old car that I bought new and I don't spend a lot on clothes. I do go out a lot with friends, but my monthly spending is about $3.5k including everything, house, food, travel etc. If you take housing out of the equation I live on $2k/month. I intend to buy a small place and see if what i have left will generate $24k/year.

I've run some numbers and if I spend $200k on a small apartment I'll have $500k tax deferred and $300k after tax. Assuming 3% inflation, a 6% annual invetsment return that's taxed at 15% capital gains, a 20% income tax rate on my tax deferred money and an initial $24k/year withdrawal rate it works well. The fightening thing is that by the time I'm 90, with 3% inflation I'll be spending $100k/year. I don't actually think this is correct as I expect my spending to tail off if I get pasted sat 75 or 80.

Health Insurance is a concern if I stay in the US, what are the premiuns like for a healthy single person. Living in the NE I'm keeping a close eye on the MA law that mandates that everyone must have health insurance. I think they are capping the premiuns at $250/month

 

[Mr._johngalt]

Exactly Audrey, I live in the NE and I've managed to save for ER by living below my means. I don't think I'm frugal, but others probably would. I drive a 15 year old car that I bought new and I don't spend a lot on clothes. I do go out a lot with friends, but my monthly spending is about $3.5k including everything, house, food, travel etc. If you take housing out of the equation I live on $2k/month. I intend to buy a small place and see if what i have left will generate $24k/year.

I've run some numbers and if I spend $200k on a small apartment I'll have $500k tax deferred and $300k after tax. Assuming 3% inflation, a 6% annual invetsment return that's taxed at 15% capital gains, a 20% income tax rate on my tax deferred money and an initial $24k/year withdrawal rate it works well. The fightening thing is that by the time I'm 90, with 3% inflation I'll be spending $100k/year. I don't actually think this is correct as I expect my spending to tail off if I get pasted sat 75 or 80.

Health Insurance is a concern if I stay in the US, what are the premiuns like for a healthy single person. Living in the NE I'm keeping a close eye on the MA law that mandates that everyone must have health insurance. I think they are capping the premiuns at $250/month

Ah, the "People's Republic of Mass.", you gotta love 'em.

Here's the way I reached FI-ER.......Cadillacs and country clubs.
Big boats, big vacations and big lunch/dinner/drink tabs. Nice clothes,
big houses, nice furnishings, etc etc. In my case LBYM clearly
meant "Live beyond your means."
Disclaimer: I am not recommending
this to anyone. I have no regrets though.

JG

 

[Delawaredave]

I don't see how $1MM would support a comfortable ER anywhere in USA in their 40's and having to pay for a medical plan.

I see my expenses going up after ER - more free time for hobbies and entertainment will add expenses filling time that I was working.

Working friend of mine says there's a "financial double whammy" to his wife working:
1. Working makes money, and
2. Working reduces time she could be shopping....

Fortunately I have a lot of cheap hobbies...

 

[Spanky]

Working friend of mine says there's a "financial double whammy" to his wife working:
1. Working makes money, and
2. Working reduces time she could be shopping....

Fortunately I have a lot of cheap hobbies...

My hobbies are pretty economical, such as biking, walking, reading at the library. My concern is that my wife likes shopping and travel to Europe or Southeast Asia.

 

[Mr._johngalt]

My hobbies are pretty economical, such as biking, walking, reading at the library. My concern is that my wife likes shopping and travel to Europe or Southeast Asia.

Sounds like trouble.

JG