Monthly expenses

[Eagle43]

UM,

I'm into the backyard... resodding.

signed: unagile, immobile, but definitely hostile.

[rogersteciak]

My basic living expenses are $2,000 a month (one person), which means I need enough investment income on a pre-tax basis to cover this after-tax amount.* But it makes sense to plan for monthly expenses (and the associated investment income to cover them) that are two or three times the basic expenses to deal with contingencies such as illnesses and special projects (e.g. home repairs).

[haha]

Originally Posted by rogersteciak

My basic living expenses are $2,000 a month (one person), which means I need enough investment income on a pre-tax basis to cover this after-tax amount.* But it makes sense to plan for monthly expenses (and the associated investment income to cover them) that are two or three times the basic expenses to deal with contingencies such as illnesses and special projects (e.g. home repairs).

Hi Roger. Maybe not a bad idea, but this degree of margin of safety implies that you will need a pretty hefty wad.

$2000*12=$24,000 pa. For a 4% SWR, this implies almost $1mil.
Twice that $2 mil, 3x $3 mil!

Ha

[LOL!]

Originally Posted by HaHa

$2000*12=$24,000 pa. For a 4% SWR, this implies almost $1mil.
Twice that $2 mil, 3x $3 mil!

Since $600K is now almost $1mil, I guess I am a multi-millionaire now.
Twice that $1.2 mil, 3x $1.8 mil

[haha]

Originally Posted by LOL!

Since $600K is now almost $1mil, I guess I am a multi-millionaire now.
Twice that $1.2 mil, 3x $1.8 mil

* I often use a 40x figure myself; I forgot that 4% swr is considerably less demanding.

[rogersteciak]

Originally Posted by HaHa

Maybe not a bad idea, but this degree of margin of safety implies that you will need a pretty hefty wad.

$2000*12=$24,000 pa. For a 4% SWR, this implies almost $1mil.
Twice that $2 mil, 3x $3 mil!

The correct way to size up one's financial capital needs for retirement is to do a bottoms-up analysis by estimating one's annual money needs to cover expenses and then using a 4 percent (or whatever) safe withdrawal rate to derive the financial net asset need.

A top-down sanity check is that you will likely need somewhere in the $500K to $5 million range of financial net assets.* That's a big range, but if you live in an area where the cost of living is low and your needs are low, then $500K to $1 million is probably doable.

If you live in an area where the cost of living is high and your needs are high (but still within reason), then $3 million to $5 million is probably required.

The more financial net assets you can accumulate relative to your basic need, the safer you are in case the market goes through a major prolonged downturn (as it did in the 1930s and 1970s).

One alternative is to have a sideline business going that could support you at a basic level should the market tank and your financial net assets were marginal to begin with.

It all boils down to what you feel comfortable with doing and how much "insurance" you need to sleep well at night.* I like to err on the side of caution and have more net assets than I really need.* I can always give away the excess to charity if I end up with too much money.

[AltaRed]

For spouse and I, it takes about $4-4.5k/month net after taxes in a LBYM mode. We do not spend much of anything on hobbies, vacations are planned to keep costs down, and we do not have expensive toys.

Our biggest expense that seems to be excessive compared to many/most of the budgets I've seen in threads here are dining out and food in general for a total in the range of ~$1k per month.

We'll see how that changes after I commence ER in about 2 weeks!

[astromeria]

We stopped eating out much after I FIREd (and DH went on a college schedule so he also has time to do some cooking, especially in summer). It's become a pleasure to be performed in a relaxed way rather than a chore to be done late in the day, in a rush, when we're tired. I'm fussier about eating out these days--I don't want restaurant food unless its significantly better than what I make at home. So, I've stopped ordering things like shrimp & grits, coz ours are better. But I still go out for most Asian food--I should take some classes. Preferably in Thailand/Vietnam/India/Japan*

Back on the subject of monthly expenses, I redo my plan several times a year using our latest figures (but I'm no spreadsheetologist--I use TextEdit, a Mac program like Notepad). So if DH retired at the end of the current semester, here's the deal:

-- Provide a Social Security substitute for 5 years (till we reach age 62) by using $24k cash for year 1, and a ladder of CDs for years 2-5. I figure the 5% interest will more or less keep up with inflation.* (Or perhaps buy 4x24 in I-Bonds if the fixed yield goes up enough for my taste.) Check.

-- Provide the main income bucket via 4% withdrawals off of mostly stock investments. We want $36k/year so we need $900,000. Check.

-- Provide an emergency/freedom fund for things like insurance deductibles, next car, replacing major home systems, health issues...$200,000+. Check.

So I'm all set, with padding to boot...too bad DH doesn't want to retire yet