Is this Amount of Income Enough to Retire Early On?

[FUEGO]

Here in the Chicago area there are some accomodations available in the $600 - $700 range. But I'd spend a lot of time hanging around those buildings before signing a lease to ensure I'd be a happy camper while living there. I think it would be hard to find a community where my middle class values would be commonly shared in that price range.

YMMV as far as cost of living. Chicago is on the more expensive end of things, particularly with regard to housing from what I gather.

Some cities/regions are high rent for whatever reason. Plenty of other perfectly nice cities, regions, or parts of cities are not high cost of living, for whatever reason. $700 rent gets you a crappy place to live with sketchy roommates in some cities. In other cities, it gets you a decent, yet basic apartment or townhome in a decent part of town (where the median income of your zip code is a little less than the median income of the city overall).

 

[NW-Bound]

I think your definition of "affordable" housing and mine are different. Just saving the downpayment for a $120k townhouse would be a challenge on a $20k/yr pre-tax income. Then the PITI, association fees and utilities would need to be paid. Kind of a stretch on $20k pre-tax.

The OP was asking about retirement living on $20K. So, can we assume that our hypothetical retiree has saved at least the money to own a little townhouse?

We are helping our daughter look to buy a 1000-sq.ft. townhome in a nice area. People were paying $220K for them at the top of the market. There are several on the market now, at prices around $80K. This is absolutely a nice subdivision.

Back to the original question, I think the $20K is ample if it weren't for the medical costs.

 

[Bestwifeever]

The OP was asking about retirement living on $20K. So, can we assume that our hypothetical retiree has saved at least the money to own a little townhouse?

OP said: "This amount would have to cover all living expenses, including mortgage/property taxes/utilities/ or rent and health insurance."

So no, the hypothetical retiree will not have the money to own a little townhouse--he will have to pay for housing out of the $20K, whether mortgage payments or rent.

 

[NW-Bound]

If so, I think our hypothetical retiree should keep on working until he is 65. A link I provided earlier about a woman full-time RV'er shows that she is living well on $20K, which includes her medical insurance. However, at least she has the travel trailer+towing truck as assets. If a person has absolutely no asset, well, he better keeps working until he has some.

Let's take the problem another way. The original question is whether he can retire, and not to retire early. At 65, he gets Medicare, and the question of medical costs is lifted. Then, yes, I think he can retire.

 

[MasterBlaster]

Stop wurkin' and start livin'

You can retire on that amount with money to spare. You just have to live the right way:

Do you wanna work for the man the rest of your life ?

 

[youbet]

The OP was asking about retirement living on $20K. So, can we assume that our hypothetical retiree has saved at least the money to own a little townhouse?

We can assume whatever we want. That's what makes these "how much $$$ does it take" discussions kind of silly. At the $20k range, housing and medical insurance are the keys. Some people assume they'll have both covered outside of their "income" and others assume they'll have to pay for both. OP didn't say he had a house, just $20k of income. So that's what I was thinking through. It's all hypothetical.

Back to the original question, I think the $20K is ample if it weren't for the medical costs.

Sure, why not? It's all what you assume. In my case I live in a modest home in a Chicago suburb. I take nice vacations regularly, have a small RV, dine out, enjoy live entertainment in the city, have 3 cars, pay my special needs grandson's therapy bills, help MIL financially and, well, you get the picture. My income? Just a few hundred bux over the $20K OP is asking about. It can be definitely be done! It just depends on the circumstances and assumptions!

Speaking of assumptions...... I assume you are spending more than $20K. And it's probably a good guess that at some point in your life your could have stopped working (I know you're still PT) and retired with a $20K spending level with a 100% prognosis of success. Yet, you keep accumulating. Maybe $20K isn't enough?

 

[haha]

Oh come on now, lets not get ridiculous, it isn't that hard to find affordable housing in a good area. My parents live in one of the most affluent areas in the country, and there are town houses (1500 sq ft) a couple blocks away that buy/sell in the low 100k range. I actually saw some of my former engineering college graduates living over there.

i would certainly like to see a listing. i can only speak of the places I have lived, and NONE of them fit your description.

Ha

 

[haha]

I have been to Topeka, Kansas (many times) and that pretty well describes that town, also.

You guys just love to argue. In what sense is Topeka, KS northeast? Northeast of Guymon, OK?

I remember reading of some yogi who lived on air and water, no need for food. I bet that would help quite a lot too.

Ha

 

[youbet]

Some cities/regions are high rent for whatever reason. Plenty of other perfectly nice cities, regions, or parts of cities are not high cost of living, for whatever reason. .

Housing prices vary from place to place? Who would have known? Thanks for keeping us up on this stuff!

 

[MasterBlaster]

very low cost housing area...



A few varmits cooked over an open fire. A bottle of vin collapso and thou.

retire now - The good life awaits you !

 

[youbet]

You can retire on that amount with money to spare. You just have to live the right way:

Do you wanna work for the man the rest of your life ?

Darn it MB, every time you put that picture up, it sets off a laughing spell here at our house! At the bottom of our recent portfolio dip, we pictured that lifestyle as being just a small step away! Mr and Mrs youbet, the kids, the grandkids and my MIL living in a rotting slide-in camper in desolation and squallor.

But hey, better than workin' fer da man!

 

[easysurfer]

Or..you can build your own:

Tiny house movement thrives after real estate bust - USATODAY.com

 

[BunsGettingFirm]

I think most people looking to RE in the next few years may be looking forward to subsidies for health insurance. I know I am. They are offering subsidies for those "earning" up to 400% of the poverty level. And "earnings" are defined as your 1040 AGI, an income stream which can be optimized to get you an optimal level of subsidies (assuming you have some Roth, some taxable accounts, and some Trad IRA's/401ks).

Haven't read about these subsidies, but I'm more looking at retiring overseas where I can buy health insurance from bupa or International Health, Life and Income Insurance for expatriates for ~ $1000 a year.

As for the OP, what is the particular attachment to the Northeast US? Family or some other obligations? I live in Boston, and you can certainly pay all of your living expenses plus some small indulgences on your budget if you had a paid-off house in a county without very high real estate taxes and if you had employer subsidized health care. You can even eat out at a cheap buffet 2-3 times a week for $10 a piece during lunch hours. However, expensive meals such as sashimi dinner will have to be curtailed to once a month. I spend less than $2000 a month, but I am still working 5 days a week, so I'm not trying to fill 7 days a week with entertainment and diversions.

 

[79protons]

Come on guys, it really is pretty easy.

$1,000,000 invested in intermediate term municipal bond fund (like Vanguard), throwing off a real return of, say 2%, would give you a perpetual $20,000 inflation adjusted for eternity with zero taxes. In fact, you would be eligible for every scrap of welfare the government allows. In 2014 you will get a health care subsidy that pretty much entirely covers your medical costs. Probably some other stuff you could get too, but not sure what is income tested vs means tested.

So designing the budget for a cheapo 2014 retirement monthly budget:
Healthcare costs - $50/month
Rent - $500 (this gets you a nice safe 2bd house in rural deep south...good climate and pretty low crime)
TV - antenna
Internet - library
Utilities - $75
Food+Toiletries - $200
Car - public transportation or bicycle
Entertainment - hiking, biking, reading, fishing, go to library and spend 8 hours/day bragging on early-retirement about how you manage to live on 20K a year
Clothes - Thrift shop - $25


Total Monthly costs: $850
Total Monthly tax free income: $1667
Surplus: $817

Not real sure what to do with the surplus...I guess re-invest it in the municipal fund?

 

[Moemg]

So designing the budget for a cheapo 2014 retirement monthly budget:
Healthcare costs - $50/month
Rent - $500 (this gets you a nice safe 2bd house in rural deep south...good climate and pretty low crime)
TV - antenna
Internet - library
Utilities - $75
Food+Toiletries - $200
Car - public transportation or bicycle
Entertainment - hiking, biking, reading, fishing, go to library and spend 8 hours/day bragging on early-retirement about how you manage to live on 20K a year
Clothes - Thrift shop - $25


Total Monthly costs: $850
Total Monthly tax free income: $1667
Surplus: $817

Not real sure what to do with the surplus...I guess re-invest it in the municipal fund?

No way would you be paying $75 in utilities in the deep south unless you really like to sweat .

 

[BunsGettingFirm]

No way would you be paying $75 in utilities in the deep south unless you really like to sweat .

You forget that he will be spending 8 hours a day bragging on ER.org in the public library where there is free aircon. The point is that even in 79's half-tongue-in-cheek budget, there is room to spare. There is not preparing for ER, and there is being scared to death that you'll never ER or even LR. I hope the OP can find the balance between the two types of responses and make up his own mind.

 

[79protons]

Well, I grew up in south Georgia without air conditioning. We spent a lot of time at the public pool or the local lakes/rivers. Fans help a lot, and also you can just deal with it, like about a billion+ people do in India.

I think the issue people are having with living on $20,000 is they have been spoiled. They simply MUST purchase the name brand bag of flour instead of the store brand, or upgrade their cell phone when the new Iphone 27 on the latest 8G network comes out. I think it could be quite fun living on $20K...the only reason I am not doing it now is because I don't have the $1 million yet and am living on the left coast as cheap as possible (still expensive) socking it away as fast as possible. All in all the climate here sucks compared to Georgia (29 degrees and rain here, 78 degrees and sunshine in Georgia). Salary here is 4x more though...

 

[52andout]

Let's take the problem another way. The original question is whether he can retire, and not to retire early. At 65, he gets Medicare, and the question of medical costs is lifted. Then, yes, I think he can retire.

just want to point out Medicare is not free. You pay for it. The part b (doctors visits) premium will be over $100 per month next year. Part D (drug coverage) is an additional premium. The plan does not cover all of what you need. Copays and out of pocket can add up to a lot of money if you get sick. I know this as I help MIL with her health insurance claims.

I am painfully aware of medical costs myself as our premiums went up 68% this year and with a hx of cancer and back surgery after a fall on the ice we'll lose everything either condition required treatment without good insurance. Any of us at any time could have a heart attack, fall down the stairs or be diagnosed with a disease. Quite a gamble to not have good health insurance.

While it is possible to live on $20,000 a year (slightly above minimum wage working fulltime) it is certainly not anything I would willingly do.

 

[FUEGO]

Haven't read about these subsidies, but I'm more looking at retiring overseas where I can buy health insurance from bupa or International Health, Life and Income Insurance for expatriates for ~ $1000 a year.

The Obamacare/Health Care Reform that kicks in in 2014 will give subsidies to those making less than 400% of Federal Poverty Level ($88000 AGI for family of 4). This will make health insurance nearly free for those living at 133-150% of FPL ($33000 AGI for family of 4). I'll be able to pull $45-50k a year from the portfolio fairly easily without exceeding $33000 AGI, hence get free or very cheap health insurance.

$50k/yr and paid off house goes a long way here in the southeast.

 

[aaronc879]

No way would you be paying $75 in utilities in the deep south unless you really like to sweat .

Well, in this particular example, the budget shows the person renting. That usually includes all utilities except electric. I could get by with less than $75/mo average for just electric even in the deep south. It costs much more to heat in winter than to cool in summer. Just think, if your ideal temp in 72, then you have to cool less than 20 degrees average in deep south summer but have to heat 50 degrees or more in northern winter. So $75/mo for just electric should be very doable unless you have a McMansion and that's a whole 'nother problem.

 

[79protons]

Well, in this particular example, the budget shows the person renting. That usually includes all utilities except electric. I could get by with less than $75/mo average for just electric even in the deep south. It costs much more to heat in winter than to cool in summer. Just think, if your ideal temp in 72, then you have to cool less than 20 degrees average in deep south summer but have to heat 50 degrees or more in northern winter. So $75/mo for just electric should be very doable unless you have a McMansion and that's a whole 'nother problem.

And actually there is probably a way, if you are motivated enough, to get some government assistance on your electric bill. I would already feel a wee bit bad about having the rest of you pay for all of my health care costs though, and so probably would not pursue this.

Perhaps a use for the extra ~$800 a month we have leftover from our $20K a year deep south income could be set aside to buy a small farm with a peanut subsidy alotment (where they pay you NOT to grow peanuts). Or maybe just take a road trip to Panama City, FL every two months and eat seafood/fly kites.

 

[Moemg]

Well, in this particular example, the budget shows the person renting. That usually includes all utilities except electric. I could get by with less than $75/mo average for just electric even in the deep south. It costs much more to heat in winter than to cool in summer. Just think, if your ideal temp in 72, then you have to cool less than 20 degrees average in deep south summer but have to heat 50 degrees or more in northern winter. So $75/mo for just electric should be very doable unless you have a McMansion and that's a whole 'nother problem.

I looked at that but he was referring to a two bedroom house and they do not usually include utilities .

 

[79protons]

Actually I just checked the local paper online in the town in south Georgia where I grew up:

2BR-2BA Duplex in a very quiet neighbor hood for only $425 a month plus a security deposit. Rent includes water and security light

So rent was a bit cheaper than I had thought. This leaves an extra $75 added to our $817 surplus per month on a $20K/year income.

So now we have to figure out what to do with almost $900 extra a month, tax free!

If you are willing to not live exactly in the town where I grew up:
AVAILABLE NOW!! 907 Nardo St., Valdosta Ga. 2bd/1ba, dinning room, carport, central heat, fenced yard, Includes, Stove & Washing Machine Included. Very Clean, $380mo/$380dep. No Pets.

 

[aaronc879]

I looked at that but he was referring to a two bedroom house and they do not usually include utilities .

I've only rented apartments, no houses, so i'm not sure what's usually included. Even now that i'm an owner I only pay electric. Everything else is covered by the condo fee.

 

[haha]

My parents live in one of the most affluent areas in the country, and there are town houses (1500 sq ft) a couple blocks away that buy/sell in the low 100k range.

I am still waiting for the info so I can go to Realtor.com and find a 1500 sq ft townhouse "in one of the most affluent areas of the country" in the "low $100k range."

Please, give an end to my suspense.