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Old 07-24-2014, 09:19 AM   #261
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Well I live in expensive high tech area of US. Couple living on 60k is very frugal indeed. Just property taxes on average expensive houses are about 20k, cheap houses 5k.

Maybe that is why I can't imagine living on less then 60k a year. Living on 30k looks unimaginable to me.....
Median household income in the U.S. is just over $50K. The 2011 Consumer Expenditure Survey shows households 65 and older spending an average of $39K ($41.5 inflation adjusted):

http://www.bls.gov/cex/2011/Standard/age.pdf

Across developed countries, the average household net-adjusted disposable income is much lower than the U.S.:

OECD Better Life Index

Location, location, location makes a big difference in how much it takes to live a middle class life.
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Old 07-24-2014, 09:20 AM   #262
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..... My total portfolio is $1.3M but 1/3 of it is untouchable for the next 8 years because it is in an IRA.
Couldn't you do Roth conversions and then withdraw after 5 years penalty free?

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Example 1. Jeremy is 40 years old and would like to tap the $50,000 of funds in his traditional IRA. If he takes a withdrawal now, he will be subject to ordinary income, and a 10% early withdrawal penalty. If Jeremy converts his IRA to a Roth IRA, he will also be required to report the amount as ordinary income; however, he can now take a withdrawal of his "after-tax" principal from his Roth IRA (the conversion amount) without an early withdrawal penalty. The end result: Jeremy could entirely circumvent the IRA early withdrawal penalty by simply doing a Roth conversion first and taking the money thereafter, so the 5-year conversion rule is designed to prevent this!

Example 2. Continuing the prior example, if Jeremy completes his conversion and waits 5 years, he will be eligible to withdraw his Roth conversion principal without any early withdrawal penalty; this is true because he has met the 5-year requirement for conversions, even though he would only be age 45 at the time. Thus, while the 5-year conversion rule prevents individuals from outright dodging the early withdrawal penalty from their IRAs, it does allow them to potentially gain access to their IRAs prior to age 59 1/2, albeit with a 5-year waiting period! (Though notably, any gains on Jeremy's conversion would still be taxable, as even if he has met the 5-year requirement for conversions and contributions, he has not met the 59 1/2, deceased, or disabled requirement to receive tax-free qualified distributions from his Roth IRA.)
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Old 07-24-2014, 09:21 AM   #263
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I think reasonable money start at 60k a year as a minimum. This not far from average US Family income. I am not talking life style of rich and famous here. I am talking about decent living.....
This is entirely dependent on where you live and your monthly expenses. If you own everything free and clear it is VERY easy to live on $30-35k a year here in the ATL, health insurance included. And I'm talking about a couple, not a single person. And there's tons of ways to travel cheap too, like playing credit card bonus games.

I am impressed that scrabbler can live on $25k a year in LI, NY though - I thought I was a serious LBYM but he's got me beat.
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Old 07-24-2014, 09:22 AM   #264
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I see many people that think they can live on $30K, and retire early. The trouble it is way risky. No pension, limited SS, no good way to increase income other than work minimum wage, etc. Its not impossible, but a lot of sacrifices.
No, it's not impossible or risky. There are TONS of ways to save money everyday, especially if you are a deal-hound like me. And scrabbler is proof that it's not risky at all.
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Old 07-24-2014, 09:30 AM   #265
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We are going to spend more on daycare/pre-school this year than some people spend for their entire budget.

I hear you on this. When I had a baby and a toddler (so baby was in the "infant" room with a 1-4 staff ratio, and toddler was in the "two's room (1-6 ratio) we were paying about $23k/year in daycare. This was 11 years ago - so it would be more expensive now.

We looked at nannies, home daycares, and whether it made sense for one of us to quit out jobs. At the time our concerns with a nanny or home daycare was coverage for when the nanny or home daycare provider was sick, on vacation, etc. I had a spreadsheet outlining all the different options and costs that I put together while I was on maternity leave with son#2. We ended up going with a national chain daycare (kindercare) which was in the mid-range of prices. Montessori would have added $2k/kid/year.

We're now past this very expensive time. It cracks me up when I hear coworkers talk about how the teen years are "so expensive". I quote what we paid in daycare and they shut right up. Even with additional car insurance - it doesn't add up to over $20k/year for 2 kids in extra *required* costs.
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Old 07-24-2014, 09:34 AM   #266
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Heard that it costs $240k to raise a child the first 18 years of his or her life.

Then there is college, which could potentially double that amount.
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Old 07-24-2014, 09:34 AM   #267
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My parents live on a golf course in the deep south in a 2bd apartment for $600 a month. There is a local restaurant with the best sweet tea, chicken, green beans, fried okra for about $5 with tax. They cook a lot of meals though using local farm produce. I think their budget is about $1500 a month.

Imagine a couple who is earning $40,000 a year in interest and dividends from their investments living like this, spending $20,000 a year to live on a golf course. You could take a two week vacation to Europe flying first class and still have enough money left for another two week vacation to Costa Rica, or a 10 day cruise in a luxury cabin.

I guess it is all about cost of living in areas. Where we are, $600 a month barely covers our real estate tax.
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Old 07-24-2014, 09:37 AM   #268
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This is entirely dependent on where you live and your monthly expenses. If you own everything free and clear it is VERY easy to live on $30-35k a year here in the ATL, health insurance included. And I'm talking about a couple, not a single person. And there's tons of ways to travel cheap too, like playing credit card bonus games.

I am impressed that scrabbler can live on $25k a year in LI, NY though - I thought I was a serious LBYM but he's got me beat.
I know a couple of retired singled women who have trouble spending more than $30K a year in the Bay Area. They have very low property taxes due to a Prop 13 tax base from 40 or so years ago, their cars are paid for, they have mortgage free homes they updated before they retired and Medicare for health insurance.
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Old 07-24-2014, 09:40 AM   #269
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Well I live in expensive high tech area of US. Couple living on 60k is very frugal indeed. Just property taxes on average expensive houses are about 20k, cheap houses 5k.

Maybe that is why I can't imagine living on less then 60k a year. Living on 30k looks unimaginable to me.....
It very well could be, in your location, from what you are saying.

We are in a very advantageous period of time right now because of what could be viewed as a 1:1 exchange rate between ultra-expensive parts of the US, and the rest of the US.

A smarter person than me would take a job in the ultra-expensive areas (where presumably jobs pay more?), and then after accumulating a big nestegg, retire to flyover country (where expenses are often much less). I didn't do this but to me it sounds like the way to go.

I have to say that I am shocked by how high property taxes are in some locations. It is much less than that, here. I suppose that we do pay more in sales tax than some locations, though.
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Old 07-24-2014, 09:57 AM   #270
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Heard that it costs $240k to raise a child the first 18 years of his or her life.

Then there is college, which could potentially double that amount.

We intend to help our kids with the cost of college, but they'll be sorely disappointed if they're expecting us to kick in $240K.
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Old 07-24-2014, 10:02 AM   #271
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If you are maxing out your OOP every year, you are dealing with a major health issue, and not traveling, etc. I think you can assign your travel budget to help offset the OOP in this scenario.

We just have sufficient funds set aside to cover one year max OOP, assuming the more likely occasional event. So something less than max OOP is part of our annual budget based on past years.
On avg for the past 3 years our OOP (what we actually paid plus what insurance paid) has been $7k. I have a chronic non life threatening condition that requires monthly treatment. In addition, in each of the past three years we've also had surgeries (Carpel Tunnel x2, Hip Replacement, Hysterectomy). The only time we weren't active was 3 months recovery from the hip replacement. You can absolutely hit the 12.6k per year and still travel and spend money.
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Old 07-24-2014, 10:02 AM   #272
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When I started this thread, it was 12 pages. Now it's 14, so this comment comes from about page 8 or so...


This is a link to a paper that calls "BS" on the the whole "anything over 75 grand doesn't make you happier":
http://www.google.com/url?sa=t&rct=j...71667212,d.cGU
I think I agree. I think Dan Gilbert is interesting. Look for his TED talk if you're not busy today.


Then a tip of the hat to the best LOL of the thread:
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buy two-ply toilet paper and split it.
And finally a question...
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Here is couple living in a 12 X 12 cabin in the woods without electricity. I would not live that extreme but it makes a 2 or 3 bedroom condo look pretty roomy -

How did they get running water without electricity? Did they build it on top of a (powerful) spring? Do they go down to the river and walk 5 gallon buckets back, climb a ladder and pour them into a raised tank?
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Old 07-24-2014, 10:06 AM   #273
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I have to say that I am shocked by how high property taxes are in some locations. It is much less than that, here. I suppose that we do pay more in sales tax than some locations, though.
Definitely. My house is worth around $125k, prop tax is $1k a year. Same house in TX would probably be 3-4x that. That's one reason why my Dad moved from San Antonio to the FL panhandle 12 years ago after he retired.

Well that and the living's a lot better in the panhandle, from his experience. Just have to dodge the occasional hurricane.
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Old 07-24-2014, 10:13 AM   #274
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I wonder if that 75K is before or after taxes? I make about $75K right now, and would definitely be happier with more. But after they take out taxes, SS, 401k, insurance, etc, it's about $36K. So jumping from $36k net to $75K net would make me VERY happy. Probably happier than doubling from $75k to $150K would. Or, maybe not. It would be nice to find out, though!

As for a house with running water and no electricity, well I didn't look at the video, but is it perhaps a pump that you have to prime, first? My mom and stepdad have running water in their barn, but you have to pump the handle a few times to get it started.

Or maybe the cabin is situated on a hillside, and tied into an aquifer with some of the water trapped uphill, so it has some pressure?
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Old 07-24-2014, 10:20 AM   #275
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And finally a question...

How did they get running water without electricity? Did they build it on top of a (powerful) spring? Do they go down to the river and walk 5 gallon buckets back, climb a ladder and pour them into a raised tank?
I think they live in a guesthouse on a property with a water hook up:

Diana's Innermost House

They seem to just live more of a tiny house life than a homesteading type one, like they don't grow their own food.
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Old 07-24-2014, 10:30 AM   #276
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We intend to help our kids with the cost of college, but they'll be sorely disappointed if they're expecting us to kick in $240K.
Well apparently some colleges are $60k just for tuition alone. Not just the elite private universities either.

Of course this is like retail price and often many students get loans, aid and other things but then you add housing and the fact that the lifestyles of college students is better than it used to be when I went to college, it's no wonder student loans hang over some people for decades after they graduate.
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Old 07-24-2014, 10:45 AM   #277
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I think they live in a guesthouse on a property with a water hook up:

Diana's Innermost House

They seem to just live more of a tiny house life than a homesteading type one, like they don't grow their own food.
Thanks for the link. The comments revealed that they DO use electricity (to pump from the well and fill the cistern): "There is an agricultural well on the property, and water is pumped from it to a cistern on the hill above us, from which it is gravity fed to the house through underground lines." So although not totally off the grid, it's quite an awesome lifestyle choice.
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Old 07-24-2014, 10:56 AM   #278
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If 3% ends up failing in the future, how secure do you really think the 1) Government pensions are going to be?
Much, much more secure.
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Old 07-24-2014, 11:02 AM   #279
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Much, much more secure.
Based on hope?
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Old 07-24-2014, 11:05 AM   #280
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When I was younger, my mother was friends with a couple that moved to the woods in VT when they retired. Nice cabin, but no running water, no electricity, heated the cabin with wood. Sponge baths, no hot water, ran a generator only an hour or so each day to pump water from the creek.

He was ~60+ I think, and they had to be living as cheaply as anyone. Way under $30K a year. But as far as I am concerned, that is not a viable long-term lifestyle. It’s OK for a fly-in moose hunt, but not for day-to-day living. I had relatives that did it, even my Dad on the farm, but I do not want to be working every minute trying to get through the next. As you get older, cutting wood for heat becomes something like work. And there is something about hot showers that you get used to.

You can live on very little, but if you are going to make every financial decision a major focus of your life, I would rather work another year. If you have to eat at home because you cannot afford the $20 it takes to eat out, you are on the brink of disaster.

A few items people miss are the income tax and car payment expenses. They can live on $75K, but need $90K+ in income to have $75 after taxes. The same for car payments. No payments now, but driving an unreliable car could be a death sentence when you are too old to fend for yourself if it breaks down.

It’s great to save in retirement, but if you have to skimp every day just to make it work, it’s not for me.
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