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Old 06-10-2013, 10:17 PM   #61
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What some of us are taking exception to is the idea that no one with a million dollar portfolio could happily live on $60-70k when that is simply false. Of course, not everyone could do so.
Well I couldn't agree more with this. Many people live well and happily on that or less.

I guess I must not have realized that this was in contention, it is so obviously true. My bad. Even on on my worst day I would not disagree with this statement.

I do think that the extreme frugality and flexibility often found around here may not be typical of most retirees, many of whom do not like to take what they see as a step down after retiring. So the author's framework, while clearly not universally applicable, or perhaps not even completely logical, is likely fairly often descriptive of reality as perceived by Joe and Jill Average NYT readers who are accustomed to the modestly affluent life they have been living while working. Many retirees also have some fairly extensive and expensive bucket lists.

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Old 06-11-2013, 06:31 AM   #62
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If you are retired you don't have to drive during rush hours. Even so, 68K a year is the median household income in a middle class neighborhood 1 hour - 1.5 hours (rush hours) from SF, one of the most expensive cities in the U.S. If you don't have the expenses of a younger family with kids, saving for both college and retirement, making 7%+ SS and Medicare payments and making mortgage payments, you could probably live nice, a normal middle class lifestyle for even less.
We relocated to Ohio in '96 (because our son was 7, and we knew we had to find a way to save for college, retirement etc.). Prior to the move, though, we had lived in the Bay Area for 12 years. Despite the size of our mortgage, we could live a middle class life.......that is, until we adopted our son. I then cut back to teaching part-time; so, between the reduced salary and the cost of childcare, our budget got very tight.

Nonetheless, I had many colleagues who found a way to live on a teacher's salary in the Bay Area.They might have had to commute an hour each way, in order to afford a house. Or they might have decided to not have children, or they had just one. But they did find a way to make it work. And they were able to retire without relocating.

My best friend from college lives in Marin, in a paid-off house, on way less than $68,000/year. She and her DH are retired on disability, but would never think of moving. They economize, garden, DIY......because Marin will always be "home."
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Old 06-11-2013, 09:48 AM   #63
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The first thing to do is to define "middle class standard of living". I would not define it as the lifestyle of someone making the statistical average income. Most people making below average income are subsidized. Either by government, family & friends or loans. I believe that average income levels provide a very low standard of living in most cases. Using the statistical averages for cost isn't very useful either. For example, where I live a single person renting a typical one bedroom apartment and paying for medical insurance on the open market would almost reach your $33.5k per year with those two items only.

I'm guessing that my definition of middle class is higher than yours. I'm also comparing costs to the San Francisco Bay Area. Depending on someone's particular situation, a middle class lifestyle here could cost between $50k and $75k per year.
I'll agree that many people living in the US are subsidized. But, the number I gave you was chosen to exclude them. Note that it is median earnings of "full-time, year-round" workers. Very few of those people get significant subsidies. If we looked at the entire population, we'd discover that more than 50% live on less than the $45k.

I'll agree that housing is more expensive in the SF area, and that people who buy individual health insurance pay more than those who have employer subsidized health insurance. But, when I make comments about "most Americans", I also include the people who live in fly-over country and people who have lower-than-average health insurance costs. I wouldn't pick the high cost area and say that represents "most".

I forgot a link in a prior post, it should have been ftp://ftp.bls.gov/pub/special.reques...byage/aone.TXT
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Old 06-11-2013, 09:53 AM   #64
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What some of us are taking exception to is the idea that no one with a million dollar portfolio could happily live on $60-70k when that is simply false. Of course, not everyone could do so.
I don't think I'd be able to live happily on $60-70K per year. I just don't think I could ramp up my lifestyle to spend that much money!
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Old 06-11-2013, 10:36 AM   #65
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I don't think I'd be able to live happily on $60-70K per year. I just don't think I could ramp up my lifestyle to spend that much money!
+1. I hear you!
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Old 06-11-2013, 11:52 AM   #66
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I think what has been demonstrated here is that most on the board do not fit the sample of people in the mind of the authors. A big part of the culture here is lbym, general thrift, and a deep bias toward analysis and resulting adjustment of behavior.

No wonder we are bristling at claims that if you have piled up One Million that you are bound to spend no less than 150k per year.
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Old 06-11-2013, 12:16 PM   #67
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I believe his comes from SS, inherited assets and TIAA-CREF university system retirement. I would like to know more about this, but I don't think he really knows. My understanding is that this is a defined contribution plan, but he thinks of it as if it were a pension. Maybe he annuitized?

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After all these years, I can finally tell haha something he may not already know! YES!

He is probably a participant in the TIAA-CREF Traditional plan. This is a unique beast. It is a guaranteed fixed annuity, with the advantage that every year the TIAA board can vote to pay above that amount, based on the funds performance. To date, it has always outpaced inflation. And, to date, they have only voted once or twice not to go above their guaranteed yearly minimum.
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Old 06-11-2013, 12:26 PM   #68
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I think what has been demonstrated here is that most on the board do not fit the sample of people in the mind of the authors. A big part of the culture here is lbym, general thrift, and a deep bias toward analysis and resulting adjustment of behavior.

No wonder we are bristling at claims that if you have piled up One Million that you are bound to spend no less than 150k per year.
I agree with what you are saying, however I don't think it is limited to the posters here. The Millionaire Next Door book noted that your average millionaire household lives like many of the posters here. They are cheap dates and Costco shoppers, "savers and investors in a population of hyper consumers."

That is how they got to be millionaires.
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Old 06-11-2013, 08:54 PM   #69
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I'll agree that many people living in the US are subsidized. But, the number I gave you was chosen to exclude them. Note that it is median earnings of "full-time, year-round" workers. Very few of those people get significant subsidies. If we looked at the entire population, we'd discover that more than 50% live on less than the $45k.

I'll agree that housing is more expensive in the SF area, and that people who buy individual health insurance pay more than those who have employer subsidized health insurance. But, when I make comments about "most Americans", I also include the people who live in fly-over country and people who have lower-than-average health insurance costs. I wouldn't pick the high cost area and say that represents "most".

I forgot a link in a prior post, it should have been ftp://ftp.bls.gov/pub/special.reques...byage/aone.TXT
I agree with you than more than 50% of the population lives on $45k or less. My original point is that to have a fully funded, no geographic limitation, comfortable, worry free middle class lifestyle, it is not uncommon at all to need $50 to $75 per year. If you have no pension and receive only $15k to $25k in SS, you will need a $1M+ portfolio to guarantee your standard of living indefinitely.
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Old 06-11-2013, 09:26 PM   #70
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Originally Posted by Katsmeow View Post
What some of us are taking exception to is the idea that no one with a million dollar portfolio could happily live on $60-70k when that is simply false. Of course, not everyone could do so.
This is how you with your own personal views and biases view the article. I didn't see where the article specifically said that NO ONE with a million dollar portfolio could happily live on $60k-$70k. I saw it as giving examples of how some people couldn't. That's my view. You're welcome to yours.
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Old 06-11-2013, 09:32 PM   #71
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the number I gave you was chosen to exclude them. Note that it is median earnings of "full-time, year-round" workers. Very few of those people get significant subsidies.
I don't think that's true Independent. Most "full-time, year-round workers get medical insurance subsidies, employer contirbution to SS, pension or 401k plan subsidies, etc. These benefits are NOT included in the annual salary numbers published by our gov't.
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Old 06-11-2013, 09:39 PM   #72
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I don't think I'd be able to live happily on $60-70K per year. I just don't think I could ramp up my lifestyle to spend that much money!
I don't spend $50k a year either. But, I find it ironic that I have a married couple who make significantly more than I do that have a negative net worth, and have less fun with their money than I do. There are just some people that money "leaks" from them with nothing gained from it. Coming from Midwest I am shocked at what prices can be. I was just talking to a man from Vancouver area while in Vegas this past week who is a hockey fan like me. The total price of what he paid for one game including parking and beer at a Canucks game was about the same price for a half a season I would pay watching the Blues play. He said $50 to park for a game. Unbelievable, I can find free parking when I go. I have talked to Blackhawks fans at Blues games say its cheaper to drive to Chicago airport and fly to STL and watch a game and stay overnight, than to do it locally there.
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Old 06-11-2013, 09:46 PM   #73
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After all these years, I can finally tell haha something he may not already know! YES!

He is probably a participant in the TIAA-CREF Traditional plan. This is a unique beast. It is a guaranteed fixed annuity, with the advantage that every year the TIAA board can vote to pay above that amount, based on the funds performance. To date, it has always outpaced inflation. And, to date, they have only voted once or twice not to go above their guaranteed yearly minimum.
Thank you, for the undeserved compliment, and for the answer that very likely explains my friend's situation. He has mentioned that occasionally his check increases. It is so funny, when we in college together he majored in economics but has no interest at all in money today, other than he always seems to have plenty. The university he retired from is a private school, but my understanding is that the UW and UW Medicine faculty also get their retirement through TIAA-CREF. All that I know love it.

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Old 06-11-2013, 09:47 PM   #74
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I agree with you than more than 50% of the population lives on $45k or less. My original point is that to have a fully funded, no geographic limitation, comfortable, worry free middle class lifestyle, it is not uncommon at all to need $50 to $75 per year. If you have no pension and receive only $15k to $25k in SS, you will need a $1M+ portfolio to guarantee your standard of living indefinitely.
The NY Times are article referred to a couple, so Social Security would be ~$15K each, 30K household. According to the consumer expenditure survey from 2011, average annual expenses for 65+ households of 1.7 members are $39K.

1.7 members X $15K SS per member = $25.5K total household SS.

$39k expenditures - $25.5 household SS = $13.5 portfolio draw down needed.

$1M investment portfolio / $13.5 = 74 years of portfolio draw down covered at a zero real return.
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Old 06-11-2013, 09:58 PM   #75
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The NY Times are article referred to a couple, so Social Security would be ~$15K each, 30K household. According to the consumer expenditure survey from 2011, average annual expenses for 65+ households of 1.7 members are $39K.

1.7 members X $15K SS per member = $25.5K total household SS.

$39k expenditures - $25.5 household SS = $13.5 portfolio draw down needed.

$1M investment portfolio / $13.5 = 74 years of portfolio draw down covered at a zero real return.
While your math is undoubtedly accurate, it's naive.

DW and I spend a multiple of $39k annually, living modestly in suburban Chicago. We would not have RE'd if doing so meant living on $39k.

I have no problem with your desire for you and your spouse to live on (pay taxes, provide housing, food, entertainment, medical care, clothing, gifts to the grandkids, etc.) $39k. We just chose another path.
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Old 06-11-2013, 11:21 PM   #76
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While your math is undoubtedly accurate, it's naive.

DW and I spend a multiple of $39k annually, living modestly in suburban Chicago. We would not have RE'd if doing so meant living on $39k.

I have no problem with your desire for you and your spouse to live on (pay taxes, provide housing, food, entertainment, medical care, clothing, gifts to the grandkids, etc.) $39k. We just chose another path.
The 39K isn't from my budget. As I noted in my post, it is from the "consumer expenditure survey from 2011, average annual expenses for 65+ households of 1.7 members are $39K."

The Consumer Expenditure Survey is from the Department of Labor. Here is the link to the table by age of household -
http://www.bls.gov/cex/2011/Standard/sage.pdf

If you want to call the Consumer Expenditure Survey numbers naive, I guess that is your choice. Usually people do not assign human qualities to numbers from tables.

From the DOL web site -

The Consumer Expenditure Survey (CE) program consists of two surveys, the Quarterly Interview Survey and the Diary Survey, that provide information on the buying habits of American consumers, including data on their expenditures, income, and consumer unit (families and single consumers) characteristics. The survey data are collected for the Bureau of Labor Statistics by the U.S. Census Bureau.


The CE is important because it is the only Federal survey to provide information on the complete range of consumers' expenditures and incomes, as well as the characteristics of those consumers. It is used by economic policymakers examining the impact of policy changes on economic groups, by businesses and academic researchers studying consumers' spending habits and trends, by other Federal agencies, and, perhaps most importantly, to regularly revise the Consumer Price Index market basket of goods and services and their relative importance.
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Old 06-11-2013, 11:32 PM   #77
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The 39K isn't from my budget. As I noted in my post, it is from the "consumer expenditure survey from 2011, average annual expenses for 65+ households of 1.7 members are $39K."

The Consumer Expenditure Survey is from the Department of Labor. Here is the link to the table by age of household -
http://www.bls.gov/cex/2011/Standard/cusize.pdf

If you want to call the Consumer Expenditure Survey numbers naive, I guess that is your choice. Usually people do not assign human qualities to numbers from tables.

From the DOL web site -

The Consumer Expenditure Survey (CE) program consists of two surveys, the Quarterly Interview Survey and the Diary Survey, that provide information on the buying habits of American consumers, including data on their expenditures, income, and consumer unit (families and single consumers) characteristics. The survey data are collected for the Bureau of Labor Statistics by the U.S. Census Bureau.


The CE is important because it is the only Federal survey to provide information on the complete range of consumers' expenditures and incomes, as well as the characteristics of those consumers. It is used by economic policymakers examining the impact of policy changes on economic groups, by businesses and academic researchers studying consumers' spending habits and trends, by other Federal agencies, and, perhaps most importantly, to regularly revise the Consumer Price Index market basket of goods and services and their relative importance.

Did you link the correct charts? I can't find the $39k or the 1.7 members/consumer unit or any numbers pertaining only to consumer units 65 yo or older.

My comment was not in reference to the numbers, but to their use in your calculations.
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Old 06-11-2013, 11:46 PM   #78
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Did you link the correct charts? I can't find the $39k or the 1.7 members/consumer unit.

My comment was not in reference to the numbers, but to their use in your calculations.

http://www.bls.gov/cex/2011/Standard/age.pdf contains the $39K and 1.7 members/consumer unit for "65 years and older" youbet.

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Old 06-11-2013, 11:46 PM   #79
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Did you link the correct charts? I can't find the $39k or the 1.7 members/consumer unit or any numbers pertaining only to consumer units 65 yo or older.

My comment was not in reference to the numbers, but to their use in your calculations.
I did the size one by accident. I updated my link to the age tables.
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Old 06-11-2013, 11:51 PM   #80
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I did the size one by accident. I updated my link to the age tables.


Ah..... I see the correct info now. Thanks, and also to omni550, for the correction.

This would be a matter of opinion, but I would use the income of the 65 - 74 yo group ($52.5k) as a benchmark rather than the non-tax expenditures ($39k) of the 65 to infinity group. Two reasons:

1. In FIRE planning, I preferred to look at gross income levels of various demographic groups as opposed to non-tax expenditure levels and compare those to my plans for retirement income.

2. We've discussed here on the forum a number of times the impact of extreme aging on spending levels. There seems to be a reduction in spending as folks reach the late 70's and up. So rather than include the folks in that category, I'd use the 65 - 74 number as opposed to the 65 to infinity number which includes the much lower 75 and older group.

But, we all decide how much is enough and build our models based on how we interpret the data. I just think your $39k is too optimistic for 2 people. I'd go with the $52.5 number.

I'm not sure how to account for the 1.7 member average comsumer unit size. 2 person units might need a few more bux?
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