Middle Class Assumptions on ER

[Helena]

My thought, too. To me, keeping expenses low is a source of pride, because it means I've got the courage and smarts to live independently, relatively free from social programming about consumerism/materialism and what the "good life" supposedly requires. It also seems like evidence to me that I've managed my finances pretty well in my life, so that I'm not saddled with lots of expenses.

My retirement expenses will be about 32K/yr. I could be more frugal, but I'm not a fanatic about it.

Excellent!

 

[Helena]

I think many on this Board talk "apples and oranges".. Without medical and maybe dental insurance from a previous employer insurance for medical and dental costs can cost $15,000/year.. I think when one considers and states costs that has to be made clear. Then there is rent/home ownership costs, insurance-before one even gets to essentials like eating.

As my former company never ceased to remind us...
our compensation included great company benefits,
not just our salary. A word to the wise for young
people who are now seeking employment.

.

 

[Oz investor]

i will be very surprised if i incur , large dental bills

i had them all removed in 1975 ( on my 3 rd set of dentures though )

almost treated like at early retiree by the mainstream back then ... but who is smiling , eh ??

 

[FI_RElater]

I haven’t noticed a problem with assumptions here

haven’t been here all that long, but it seems that the audience here is mostly lower end of the scale (1/2 - 1 1/2 large) given above for “middle income” with only a few having any pension It also appears that many are taking SS early (62) to supplement and are trying to reduce costs as much as possible. The audience seems to also be more diverse with a wider range of salaries, locations, and (potentially) retirement expectations

Contrast that with the (apparent) audience of:

Bogleheads - - larger numbers, generally, with expectations of lower than 4% WR, due to fixed income returns. It also seems to have a bias of more coastal (NE, NY, Bay Area, LA) with higher costs as well as having more individuals as physicians, lawyers, business owners, etc.

Mr Money Mustache- - those with lower wealth, cutting costs to the bone, those trying to exit the “race” as fast as possible.

Us: w exited the race later than most here (59, for me) but had high earnings beforehand (in 33% marginal bracket) but saved (a lot) and have pension. (here, 59 isn’t considered “early” while at BH it’s slightly early to normal) But even before retirement, we spent between 57-62 k/yr and saved the rest....(and had taxes more than most here spend in retirement). We planned on a max 3.5% WR, and haven’t come close to that yet, but also expected that the gravy train we were in would end (...and indeed it did for those left behind for spouse as a massive layoff occurred a couple of years after, and I was already maxed out with only half of any COLA added to salary if I had stayed .... so we exited at about the right time)

based on the chart given above, while we could be above the forth quintile if we wanted, we only spend about 40k above pension (and that’s before SS for either). we try not to extrapolate our situation to others; there’s plenty of people around us that are nowhere near the typical “early-retirement”crowd here much less the BH crowd...so we can understand (plus we both were the “struggling student” types in earlier times and I certainly remember when the cupboard was bare in childhood, living in a trailer, ...)
{but we have a harder time trying to understand the mindset of those in HCOL or VHCOL areas who seem to need well over 100k; indeed, when someone posts that 100k is near poverty level in their area we cannot help but shake our heads... we certainly wouldn’t want to live there, and we (might) be able to}

 

[Dtail]

haven’t been here all that long, but it seems that the audience here is mostly lower end of the scale (1/2 - 1 1/2 large) given above for “middle income” with only a few having any pension It also appears that many are taking SS early (62) to supplement and are trying to reduce costs as much as possible. The audience seems to also be more diverse with a wider range of salaries, locations, and (potentially) retirement expectations

Contrast that with the (apparent) audience of:

Bogleheads - - larger numbers, generally, with expectations of lower than 4% WR, due to fixed income returns. It also seems to have a bias of more coastal (NE, NY, Bay Area, LA) with higher costs as well as having more individuals as physicians, lawyers, business owners, etc.

Mr Money Mustache- - those with lower wealth, cutting costs to the bone, those trying to exit the “race” as fast as possible.

Us: w exited the race later than most here (59, for me) but had high earnings beforehand (in 33% marginal bracket) but saved (a lot) and have pension. (here, 59 isn’t considered “early” while at BH it’s slightly early to normal) But even before retirement, we spent between 57-62 k/yr and saved the rest....(and had taxes more than most here spend in retirement). We planned on a max 3.5% WR, and haven’t come close to that yet, but also expected that the gravy train we were in would end (...and indeed it did for those left behind for spouse as a massive layoff occurred a couple of years after, and I was already maxed out with only half of any COLA added to salary if I had stayed .... so we exited at about the right time)

based on the chart given above, while we could be above the forth quintile if we wanted, we only spend about 40k above pension (and that’s before SS for either). we try not to extrapolate our situation to others; there’s plenty of people around us that are nowhere near the typical “early-retirement”crowd here much less the BH crowd...so we can understand (plus we both were the “struggling student” types in earlier times and I certainly remember when the cupboard was bare in childhood, living in a trailer, ...)
{but we have a harder time trying to understand the mindset of those in HCOL or VHCOL areas who seem to need well over 100k; indeed, when someone posts that 100k is near poverty level in their area we cannot help but shake our heads... we certainly wouldn’t want to live there, and we (might) be able to}

Commenting on my bolding only.
When they did a relatively recent survey here on spending, there was IIRC at least 15-20% of the respondents who spent over 100k and certainly they all don't live in HCOL areas.
Thus even in MCOL areas, there can be many who spend over 100k and not because they have to.

 

[Katsmeow]

Yes, but the OP asked why we focus more attention on folks with less than $1M (that think they can retire) and folks with more than $4M (that think they can't retire). The asterisk you mention is what we are asking about. It is not bias against these two groups it is just knowledge that they are outside the norms and as you suggest there needs to be a dive into the details to determine if their situation is indeed different.

This is where I disagree. People with less than $1M who retire are not outside the norm. The vast majority of retired people. Over 80% of retirees have a net worth of less than a million dollars.

https://dqydj.com/retiree-net-worth-retiree-wealth-america/

Retiring with less than a million dollars is the norm. One reason that many seem to be struggling with whether someone can live on $40k a year (4% of $1 million) is that they are entirely discounting and not including pensions and Social Security.

 

[Nature Lover]

Yes, but the OP asked why we focus more attention on folks with less than $1M (that think they can retire) and folks with more than $4M (that think they can't retire). The asterisk you mention is what we are asking about. It is not bias against these two groups it is just knowledge that they are outside the norms and as you suggest there needs to be a dive into the details to determine if their situation is indeed different.

This is where I disagree. People with less than $1M who retire are not outside the norm. The vast majority of retired people. Over 80% of retirees have a net worth of less than a million dollars.

https://dqydj.com/retiree-net-worth-retiree-wealth-america/

Retiring with less than a million dollars is the norm. One reason that many seem to be struggling with whether someone can live on $40k a year (4% of $1 million) is that they are entirely discounting and not including pensions and Social Security.

Actually, you both make good points. FlintNational regarding what falls into general norms here in this ER community group, especially for those without pensions and many years from receiving SS; and Katsmeow regarding the fact that further details should be considered in a normal retirement decision (something that FlintNational would agree with based on his post).

I think OP would be surprised at how many people on this site have pensions, annuities, or other income outside of their stock/bond market investments; and how many have lower expenses (or planning to move/arrange things so that they can live on much less than others). And if that's important to resolve, I'm sure we have a poll or two on the subject.

 

[Helena]

This is where I disagree. People with less than $1M who retire are not outside the norm. The vast majority of retired people. Over 80% of retirees have a net worth of less than a million dollars.

https://dqydj.com/retiree-net-worth-retiree-wealth-america/

Retiring with less than a million dollars is the norm. One reason that many seem to be struggling with whether someone can live on $40k a year (4% of $1 million) is that they are entirely discounting and not including pensions and Social Security.

Back in 1978 my father retired and took SS early at age 62 with much less than $100,000 in the bank. He had no pension and no other company benefits. But he did get a little extra monthly income from a small rent house. The main reason he was able to retire early... he was totally out of debt.

I was able to retire early at age 55 [SS at age 62] with a nest egg worth a lot less than a million. But I too was totally out of debt.

The main theme here... one can live on a lot less before and after retirement if one is not wasting money paying debt interest to others.

.

 

[EvrClrx311]

It's not a lack of consideration, but rather a lack of awareness. Point is, the vast majority of humans simply assume the world sees things the way they do, which makes sense because your view of the world is your measure of it. Right? We all base advice off of experiences, and unless or until we dive into the differences with people... we tend to superpose our own experiences into situations others encounter, as a means to relate and help. I don't think it's malicious, but devoid of specifics in detail, we kind of run with what we are told and answer the "is it enough" off of our own view of the situation (what would work for us).

Anecdotal story... that has more to do with extroversion and introversion, but can also be applied here (assume one, introversion, is $30K and another, extroversion, is $200K for metaphorical purposes)... loose analogy ahead...

I just spent four days on the other side of the country (I'm from Virginia), driving up and down the coast of Oregon, alone, doing photography. I had the most serene time - I saw so many things, and had a few interactions with people but for the most part is was an adventure in solace. When I got back yesterday, I was completely full on my introversion scale having spent so much time alone. My, also introvert, friend told me I probably needed time to "unwind" from my trip and I said "hell no, lets go do something... I'm ready to be around people again." I brought this up when we were hanging out, and he described how his view of vacations are exhausting because he normally goes with his extroverted family and needs time to recover whenever he comes back. Made perfect sense in that context... he recognized the perspective difference before I had even asked him about it.

It's all relative.

Same with money... when we don't have bigger context, we apply our own situation (he was applying his, sadder view [that's another story entirely] of what vacations do to his energy levels and presumed it did the same to mine, until more context was added) to the details that are shared. "Is it enough?" is a common one here, and we have our own life experiences to answer the question from our own perspective. It isn't until we can fully put on the hat (for context) of the person answering the question that we can fully appreciate where they are coming from. So really this all boils down to the need for people asking the question to provide more context... or for those answering the question to ask for more context. Otherwise, we are simply giving our answer based on our lives in their situation (which isn't very helpful).

Personally... I'm probably going to be happy somewhere between $30K and $200K... Let's call it $115K... but that's just me

 

[pj.mask]

My points are two: no mention of expenses, only income "assumed" needed by those in that bracket. Again, note the use of the 4%. If I can get 7% (easily obtainable in rental real estate, or holding private paper, for example) I need much less...

That’s not how the 4% rule works and I would argue housing is not exempt from ‘bear market returns’ (bad renter, major repairs, natural disasters/fire). The stock market returns on average ~10% but after taking out inflation you save the surplus over ~4% to help out for the down years.

 

[Perryinva]

Small note, just my opinion. Completely free of debt is really only a part of an ER if it is required to make the income work AND the objective is to ER at that level. Plenty that have a decent sized mortgage, say even $3000-3500, (P&I&Taxes&HOA) appear to be living on a high income. Because they start at $36-42k before even eating. But their portfolio might be $2m. They just chose liquidity and higher income over lower expenses and lower income. If $1.2M generates $48k and $24k goes to P&I, then it is no different than someone with the same house paid off ($450k) and $750k. Its just where they are holding their money.

 

[Oz investor]

regarding the HCOL for some

do they anticipate ( much ) higher inflation ?

do they anticipate rising costs related to dependents , relatives ( or growing children )

and not everyone manages to have a partner for life ( so possible an ex-?? and an estranged family )

do they plan extensive travel ( and holidays ) or maybe moving to a better climate

yes some projected costs of living raise an eyebrow for me , but most people members seem to have a very different lifestyle to me .

i seem to be in the ( protective ) custody of the Fun Police for the next few years , a laptop and internet connection are the big hobbies currently ( for the life i am permitted to live )

if you can go out and enjoy the next 5 ( or more ) years good for you

over in Australia a politician ( a former deputy house leader ) , bitterly complained he couldn't live on $300k a year ( plus perks ) and he is still in parliament and not in any hurry to retire .

so cost of living can vary quite a bit , between families

 

[daylatedollarshort]

We used to spend a lot more so I know it is pretty easy to do and it is not something I personally want to go back to. In hindsight I wish we had lived more like we do now and retired earlier. We have the same house, upgraded the cars and go out more than we used to so we feel kind of stupid for not paying more attention to our expenses in earlier in life. I don't think in our case we were really getting good value at our higher spending levels. Part of our issue is our area has gotten more expensive over the years so we saved a lot in retirement just by making small adjustments like changing where we shop and get our cars repaired.

 

[Dtail]

We used to spend a lot more so I know it is pretty easy to do and it is not something I personally want to go back to. In hindsight I wish we had lived more like we do now and retired earlier. We have the same house, upgraded the cars and go out more than we used to so we feel kind of stupid for not paying more attention to our expenses in earlier in life. I don't think in our case we were really getting good value at our higher spending levels. Part of our issue is our area has gotten more expensive over the years so we saved a lot in retirement just by making small adjustments like changing where we shop and get our cars repaired.

Once in awhile, I feel the same, but try to look forward. Same with knowledge of investments in addition to spending.
But hey, we cut our expenses quite a bit and moved to a MCOL area.
Plus sometimes one forgets the enjoyment at that time when one was spending.
One crazy but non typical example for us, we spent $1,300 on 2 tickets to Lady Gaga concert and DGF dressed up like L.G.
Had a blast but wouldn't spend over $200 total on a concert now.

 

[RobbieB]

I'm going the other way. Spending twice what I did while working and loving it -

 

[athena53]

regarding the HCOL for some

do they anticipate ( much ) higher inflation ?

<snip>

do they plan extensive travel ( and holidays ) or maybe moving to a better climate

yes some projected costs of living raise an eyebrow for me , but most people members seem to have a very different lifestyle to me .

<snip>

so cost of living can vary quite a bit , between families

Absolutely. Two of my biggest budget items are travel and donations to charity. I'm also putting money in my two granddaughters' college accounts and am nearly finished with 24 monthly payments of $1,000 each to my BIL (late husband's brother) and his wife to help them out.

Peel all of that back and my COL is a lot less. You'll also notice from the many posts here on the subject that medical expenses can be a big % of income for retirees in the US- premiums, high deductibles under the ACA plan, dental, vision and hearing care (the last 3 not covered by traditional Medicare).

 

[Dtail]

I'm going the other way. Spending twice what I did while working and loving it -

Hey don't get me wrong Robbie B. Still spending over 100k yearly, but trying to concentrate it more on Entertainment/Travel and eating out to some extent.

 

[RobbieB]

Good job!

I'm blowing 2 grand for 2 nights at the Mark Hopkins in San Francisco -

Never ever would have done that while I was working.

 

[indiajust]

I'm in the shallow end with Major Tom and scrabbler1, spending in the low 20's. I wrote a mortgage with half my taxable side and I live off those payments, everything else is in stock/REIT/MLP. The Roth awaits. Pushed off the treadmill at 45 in 08, I have embraced destiny.

 

[joeprintz]

I agree.. I doubt many retire say at 62 with minimal social security and no pensions with less than a million dollars in investments.- especially if that supports two people with kids- even if they are grown.

 

[daylatedollarshort]

Once in awhile, I feel the same, but try to look forward. Same with knowledge of investments in addition to spending.
But hey, we cut our expenses quite a bit and moved to a MCOL area.
Plus sometimes one forgets the enjoyment at that time when one was spending.
One crazy but non typical example for us, we spent $1,300 on 2 tickets to Lady Gaga concert and DGF dressed up like L.G.
Had a blast but wouldn't spend over $200 total on a concert now.

We go to quite a few concerts, but the groups we like usually don't cost a lot any more, like Chicago and REO. Those tickets often go on sale for under $20 each in our area. Our inside joke last year after seeing Styx and REO in concert together was that was the best $12 we ever spent. Mainly we go to see local / regional cover bands at clubs and park concerts so that is usually free, small cover charge or we attend with seat filler tickets.

 

[Dtail]

We go to quite a few concerts, but the groups we like usually don't cost a lot any more, like Chicago and REO. Those tickets often go on sale for under $20 each in our area. Our inside joke last year after seeing Styx and REO in concert together was that was the best $12 we ever spent. Mainly we go to see local / regional cover bands at clubs and park concerts so that is usually free, small cover charge or we attend with seat filler tickets.

I saw Chicago probably about 8 years back. There was a good substitute voice for Peter Cetera. That sometimes can be an issue for older original bands; if their voices haven't held up or the substitutes don't really sound the same.
Up north, I saw a Journey cover band years ago and the lead singer was spot on in looks and hitting the high notes.

 

[ExFlyBoy5]

Up north, I saw a Journey cover band years ago and the lead singer was spot on in looks and hitting the high notes.

Saw the "real" Journey a couple of weeks ago and they have done a good job with Arnel Pineda as he sounds almost EXACTLY like Steve Perry. It's almost scary how much he sounds like him. And I say "new", but Pineda has been with them since 2007...so not so new, I suppose.

 

[jkern]

I agree.. I doubt many retire say at 62 with minimal social security and no pensions with less than a million dollars in investments.- especially if that supports two people with kids- even if they are grown.

Retired at age 51 in 09' with no pension, no SS (not yet anyways), and $900k investment portfolio.

 

[daylatedollarshort]

I saw Chicago probably about 8 years back. There was a good substitute voice for Peter Cetera. That sometimes can be an issue for older original bands; if their voices haven't held up or the substitutes don't really sound the same.
Up north, I saw a Journey cover band years ago and the lead singer was spot on in looks and hitting the high notes.

We saw Chicago this summer at an outdoor amphitheater. They sounded a bit different with new members but still amazing. We also have a very good Chicago cover band in our area we saw at a concert in the park last week.