Who needs a million $ cash to retire

[Car-Guy]

Back in the late 80's to early 90's my parents (and my MIL and FIL) all retired with about 350k NW in each family. That is far less than 1m in today's dollars. They had zero debt, small pensions and SS. They owned their own homes and each had one nice (but inexpensive) car. Neither ever took another trip after retiring or had any hobbies to speak of. The word boring comes to mind when I think how they lived but they seemed comfortable. Their biggest activities/events over their retirement years were doctor visits.

When my in-laws passed away after ~15 years of retirement, they still had a NW of about 300k. However, my parents had a NW of 1m when they passed after about 25 years of retirement. Both lived in middle class neighborhoods in the same area of town.They lived what I would consider very frugally. And neither invested in the market.

So yes, you can still retire with less than a million, but as I hear Ken Fisher say everyday on TV, , is that retiring well?

 

[MissMolly]

Actually, $350K in 1980 is worth about $1,066,594 in today's dollar.

$350,000 in 1980 → 2018 | Inflation Calculator

 

[Car-Guy]

Actually, $350K in 1980 is worth about $1,066,594 in today's dollar.

$350,000 in 1980 → 2018 | Inflation Calculator

I said late 80's and early 90's..... Big difference from 1980.

 

[kcowan]

My dad retired in 1994 at age 63.5 with a small pension and SS and about $250k and a house which had just been paid off. My mom was still alive but with a terminal illness which would sadly take her life just over a year later, a month before turning 60.

My dad has been doing well in the last 25 years although his $250k has shrunk by about 1/3 (which is not too bad for 25 years retired). He knows my brother and I will support him if he outlives his money. My brother is not retired but is wealthier than I am.

Wow the similarities are uncanny! Mom died at 57 of breast cancer and Dad was 65 and just retired. Small pension plus he owned his house and a humble cottage built with his own hands. Died 30 years later with $200k remaining. Brother had retired at age 42 and lived off his own investments.

 

[HFWR]

I need a million. Just drop that check in the mail.

 

[gwraigty]

Just to keep the roof over my head is almost $30k per year:

Property tax $13,000
Home insurance $3,500
Utilities $6,500 (electric, natural gas, water, cable and phone)
Maintenance & repair $6,500 (1% of value)

Sounds like we're in a similar ballpark range..

Prop tax: $9K
Home Insurance: $2K
Utilities: $7.8K
Maint & Repair: endless
Cars (2 jeeps): $12K (leases, gas, insurance)

<snip>

I've been thinking of starting a "show us your expenses" thread, but not sure how many people would be comfortable doing that. For us, at a high level - $60K "core" expenses (housing, grocery, cars, insurance, utilities, etc)..$25K HC..$10K+ taxes..$10K vacation..close to $100K yearly easy. I can't fathom how anyone does that on $20K-$25K.

(No disrespect intended for those who can live sub $50K...but I sure don't see how you can do it in a typical subdivision lifestyle).

Property tax - $2667.12 (23 year old 1900 sq. ft. home in subdivision, paid cash for new construction, recent comparable sales $190K)
Home insurance - $264.17
Utilities - $4030.82 (last yr. figures, water/sewer/refuse, electric, gas, internet, phone)
Car insurance - $757.60 (2 cars)
Car payments - $10251.72 (2 new cars through 2023)
Umbrella insurance - $169.00 ($1M)
Car repairs - $136.09 (last yr. figures)
Groceries - $7800 (4 people)

Total above - $26076.52

Home maintenance & repairs - usually negligible most years (furnace filters, etc.), last year replaced entire upstairs flooring for around $3K, new dryer $659.89, this year so far, replaced broken bedroom window for $648.38, 1 gal. paint for dining room, new garage shelving made from dismantling old furniture w/new brackets, put in a 10 foot driveway extension for $4,000, have contracted for a new roof quoted at $7,600, suspect stove and AC might be going, so who knows? Expenses will definitely be higher than usual this year.

Medical expenses - out-of-pocket varies from nothing to something, $6134.14 last year for daughter's foot surgery and son's hearing aid, this year so far, $283.49

Vacations - not taken yearly anymore, most expensive for 4 people was a trip to Orlando in 2012 for about $5K for a week-and-a-half, last vacation was in 2017 to Gettysburg, PA, road trips always, that's just our style

 

[Andre1969]

The way I see it, you need $1M or more, if not in investments, but a combination of investments and SS/Pension equivalents, if you want a high success rate of a good retirement, where there's almost zero percent chance of something going wrong.

I have a feeling most people wouldn't retire, if they ran their numbers through FireCalc and it only gave them a 51% chance of success. I know I wouldn't. But, when you think about it, the majority of people who do retire with a 51% chance of success DO make it!

 

[gwraigty]

You might be missing my point,, most people will never save 1 million dollars cash. Most people will live off their SS, part time work, possible pension and a small 401K (double everything if married). Leave any of those things out and people still will retire. "Media" can talk till they are blue in the face but most people will not save that much cash. Therefore most people don't need a million dollars in cash to retire. Hope that helps....

Agree with most of what you say. Not necessarily the bolded part. That would assume a 2 income household. Some of us chose to be a one income household. It's still doable.

 

[Teacher Terry]

The COL increases on our pensions is important. The first 3 years no raises but now we get them yearly.

 

[ShokWaveRider]

Some Simple Math: 65 year old Couple Life expectancy 25 years:

$60k Per Year Needed for "Comfortable" QOL.

$1m Cash Nest Egg returning 3% Minimum

Spouse / Partner 1 - SS average $1500

Spouse / Partner 2 - SS Average $1000

SS = $2,500 pm - $30K Per Year

$1m @ 3% with 1.5% personalized inflation will survive annual withdrawals of between $46k & $66k leaving $50k in account after 25 years.

So given these very conservative metrics the couple will have a surplus of between $16k and $36k per year going forward.

So $1m is very doable all things being equal.

 

[Lawrencewendall]

Just closed out YTD spending by category and it lines up with last year's spending. About 70k annually. This is considered HCOL area (Baltimore/Washington corridor).

 

[NW-Bound]

25X expenses is indeed a very frequently cited/recommended number for ER..of course, if you're getting retiree medical or ACA subsidies, have PT work, etc that may affect the recommended number..

The multiple of 25X corresponds to the 4% SWR that is somewhat universally accepted. Some people go to a lower number such as 3-3.5% for a safety margin.

Thanks to the bull market and Bernicke's effect, I was at 2.7% WR last year, and heading lower as I have fewer things to splurge on.

And I am now that close to FRA SS and Medicare. Heh heh heh... Finally, getting old is good for something.

There are several comments about subsidized ACA in this thread as if that makes it free/cheap.

For some it may, but for us, no, it makes it doable, but still a much higher premium than I paid as part of employed benefits. Instead of paying about $200 a month pre-tax for premiums for 2, we now are happy to have an ACA bronze plan, and pay a subsidized $450 a month, with a high deductible. And we know that can change year by year, so our budget is to expect $10k, and wiggle $20k if we have to. With a pre-50 ER, that means a big wild card for a long period.

For most, ER means planning on your healthcare to be one of the expenses that goes up in retirement, pre-medicare at least, hence contributing to the need to build a stash for ER.

Your former employer heavily subsidized the insurance. A couple of years ago, my brother-in-law already complained about the high premium he had to pay. If memory serves, it was $600-700 for the two of them, and the deductible was a few $K. And that was common among siblings who still worked.

Your point is noted about young ERs in the 50s having a longer period till Medicare to worry about. I survived 7 years already, and only have 3 more to go. Heh heh heh...

 

[kimcdougc]

I retired at 50 and DH at 57 over 4 years ago. DH has a pension that is non-cola. It is $17.5k a year. We had 1 mil when we retired but took out about enough cash to cover us through 62. DH taking his ss in January after turning 62 this November. I will not take mine until 67. With all the income streams coming on line in the next few years. We will be be good even with $22,000 per year healthcare premiums on the ACA. Been working for 4 years. So far so good.

Looking for our retirement (renting a house from my DD now till we can find something. We have been here 3 years). Looking nationwide for the house. Will put down a large down payment (with proceeds we have from selling our house 3 years ago). Unless we get stuck staying in a long term care facility for lots and lots of years we live like want, eat out and travel quite a bit. Just got back from a trip to Europe for our 40th anniversary. Flew fist class all the way. Total cost for a 18 day trip (Trans Atlantic cruise to get there) was around $10,000.

Total annual cost are around 60k per year. Includes all expenses, insurance, travel, health care etc.

FIREcal gives us 98% success rate. Enough for us.

We pick and choose what we do in this life. I have found we have fun when we are out camping and paying $17 a night for a campsite. We have fun when we eat McDonalds but also when we eat a nice expensive restaurant. Point is - you can be super happy with a low cost retirement just as well as with a $10 million retirement. Life is what you make it and how you react to all of your experiences. (Health is one of the biggest things we all have to worry about.)

 

[Hamlet]

If you look at all of the articles that list retirement assets for 65-year old folks, it appears that more than half of Americans retire with less than $200K in their retirement accounts (GAO says Americans between 55 and 64 average $107,000). These 'average' folks typically live off that and SS. Of course, it's possible. But with that level of assets, they're not going to be retiring at 55 or earlier, most likely.

This forum is the "Early Retirement" forum. Not the "On Time" or Average Retirement Forum. Folks here who want to retire early, typically shoot for 50 to 55, but some as late as 59 or so... To retire that early (that many years before pension or SS kicks in, you really do need 25X your annual spend saved up.

My folks retired with less than $400K in retirement savings. But they had STRS (California State Teacher's Retirement System) benefits, rather than SS, and it paid substantially more, given their work history. It was doable, but that level of assets has limited my dad's travel, especially after the divorce.

Yup. SS and Medicare fund a mostly adequate retirement for many people who are retiring after 65. If you live in a modest, paid-for home, SS and Medicare can cover the bulk of your expenses as an older retiree. Add in the pensions that a lot of people used to get and the situation looks even better.


If you want to retire at 50, though, you need a lot more money. You have to replace enough income to cover all of your expenses, plus pay for health care. You may still have children at home or at college that you need to fund. You have a lot time until you are going to get SS and Medicare, plus you have to worry more that the deal on those programs will change before you start collecting. You are typically very exposed to stock market fluctuations. That all adds up to the belt and suspenders approach that most people here advocate.

 

[ESRwannabe]

Not retired yet (I'm 43).

I have 17+ in a pension worth around $500k-$600k currently.

I have around $100k in 401k/Roth combined and around $430k in taxable.

 

[NW-Bound]

... You are typically very exposed to stock market fluctuations. That all adds up to the belt and suspenders approach that most people here advocate.

Despite the belt and suspenders, I am still prepared to walk around in my shorts if TSHTF.

When I often talked about the prospect of losing both my homes and having to live in my class C motorhome, a few posters here thought I was scared. No, I was just joking.

But even if that became true, it would just add spice to life. Scary was when I was faced with a life-threatening health problem.

 

[FIREchief]

I believe that your question is somewhat rhetorical, but I will offer an answer.

Question: Who needs a million $ cash to retire?

Answer: A person who a) can't or won't work anymore, b) has no pension, c) has only meager SS earnings, d) doesn't have wealthy family ready to step in to subsidize their living expenses and e) wants to live a reasonable lifestyle in a safe/simple residence in a reasonable or low cost of living area.

Change any of those (and perhaps other) variables, and the answer changes.

You might be missing my point,, most people will never save 1 million dollars cash. Most people will live off their SS, part time work, possible pension and a small 401K (double everything if married).

At this point, I'm not really sure what your "point" is. I suggested that somebody who won't work and has no pension might need that $1M, yet you respond that a person without $1M will need to work and have a pension. Isn't that really saying the same thing?

 

[GravitySucks]

The way I see it, you need $1M or more, if not in investments, but a combination of investments and SS/Pension equivalents, if you want a high success rate of a good retirement, where there's almost zero percent chance of something going wrong.

I have a feeling most people wouldn't retire, if they ran their numbers through FireCalc and it only gave them a 51% chance of success. I know I wouldn't. But, when you think about it, the majority of people who do retire with a 51% chance of success DO make it!

I imagine most of the other 49% make it too. Either by adjusting their spending or living on just SS and government subsidise.

 

[HI Bill]

Hawaii is not a low cost of living state. Maybe if you live off the grid, farm your own food, fish, and raise chicken and cattle.

As of 2017:

MOST EXPENSIVE PLACE TO LIVE IN U.S.? HAWAII, WHERE TOILET PAPER COSTS MORE THAN ANYWHERE IN THE WORLD


https://www.newsweek.com/most-expensive-place-live-us-hawaiitoilet-paper-costs-more-628977

In case you didn't catch it, I was joking about Hawaii being low cost of living...partly! My point was, that to have a $13K annual property tax bill means either you live in a super high property tax state, or you have a mansion worth millions.

Hawaii has the lowest property tax rate in the nation. Gas is cheaper than CA. Food is expensive, but shopping at COSCTO and Sam's Club helps mitigate that. We buy 95% of our groceries at COSTCO and Sam's Club.
Electricity rates are among the highest in the country, but you don't have to pay for A/C or heating in most places here. So utility bills can be lower than many places in the continental US. No one except lawyers (on court day) wears suits, so the clothing budget is minimal. I bike to work, and my wife and I spend about $30K annually on essentials, living in Honolulu. I eat out once or twice a week. The problem is for folks who don't own their home, as the cost of housing is high. All of that said, I lived in Monterey, CA, and the cost of living there was higher than Honolulu!

Home and Utilities: $859/mo
Auto $113/mo (gas & insurance)
Grocery/Internet/Restaurants/Subscriptions: $1041

Total Base Spending: $2415 ($28,980 annually)
Discretionary Spending (travel, etc.): $1761 ($21K annually).

 

[NW-Bound]

... when you think about it, the majority of people who do retire with a 51% chance of success DO make it!

I imagine most of the other 49% make it too. Either by adjusting their spending or living on just SS and government subsidise.

If we are talking about the success rate as computed by FIRECalc and similar retirement calculators, let's not forget the rate is typically computed over a 30-year retirement period.

Yet, hard statistics show that only 46% of the 55-year-olds make it to 85. The less lucky 54% don't live long enough to have to worry about being broke at the end of the 30-year period. We will not hear them complain about lack of money.

 

[ShokWaveRider]

In case you didn't catch it, I was joking about Hawaii being low cost of living...partly! To have a $13K annual property tax bill means either you live in a super high property tax state, or you have a mansion worth millions.

Hawaii has the lowest property tax rate in the nation. Gas is cheaper than CA. Food is expensive, but shopping at COSCTO and Sam's Club helps mitigate that. Electricity rates are high, but you don't have to pay for A/C or heating in most places here. So utility bills can be lower than many places in the continental US. I bike to work, and spend about $30K annually on essentials.

Problem is home prices for a newcomer in HI are OTT. Very high prices and mostly very old and in need of server upgrading. Otherwise we would move there in a heartbeat. I w*rked in Honolulu for while.

 

[Offgrid Organic Farmer]

We have 2 military pensions, 2 401k's, 2 SS, 1 ESOP and my wife currently has 29 years with the federal government. I think we should be just fine once we decide to retire.

Mike

I have one military pension [E6 High-Year-Tenured at 20], we have been doing fine, so far.

 

[Music Lover]

Sounds like we're in a similar ballpark range..

Prop tax: $9K
Home Insurance: $2K
Utilities: $7.8K
Maint & Repair: endless
Cars (2 jeeps): $12K (leases, gas, insurance)

It truly amazes me that people say they can live on < $20K. I guess if you own your cars and drive them into the ground and live in a pretty modest house, maybe. (Then again, in X years, you'll have a big capital expense to replace your car(s)). But if you try to do an "average, middle class" lifestyle and live in a sub..good luck on anything under $50-60K, and that's not living large.

I've been thinking of starting a "show us your expenses" thread, but not sure how many people would be comfortable doing that. For us, at a high level - $60K "core" expenses (housing, grocery, cars, insurance, utilities, etc)..$25K HC..$10K+ taxes..$10K vacation..close to $100K yearly easy. I can't fathom how anyone does that on $20K-$25K.

(No disrespect intended for those who can live sub $50K...but I sure don't see how you can do it in a typical subdivision lifestyle).

I live in a nice house in a good neighborhood, house is paid off.

Prop tax - $2800
House insurance - $800
Utilities/cable/internet/phone - $3500
maintenance & repair - less than $2000 per year, some years just a few hundred $$. I'm very handy.
auto fuel and insurance - $2500

Total - about $12,000 per year. My music hobby generates a small net gain each year...it's negligible but it pays for itself. We don't think expensive travel is all that exciting, and we both like to cook. Adding in entertainment, vacations, food, etc., and my "base" expenses are about $20,000 per year and I live very comfortably with no sacrifices.

And that's just me alone in the house. My GF sold her house and is moving in with me and we'll be sharing expenses.

 

[frayne]

Don't know if you need a million dollars to retire but sure is nice to have it.

 

[FIREchief]

I live in a nice house in a good neighborhood, house is paid off.

Prop tax - $2800
House insurance - $800
Utilities/cable/internet/phone - $3500
maintenance & repair - less than $2000 per year, some years just a few hundred $$. I'm very handy.
auto fuel and insurance - $2500

Total - about $12,000 per year. My music hobby generates a small net gain each year...it's negligible but it pays for itself. We don't think expensive travel is all that exciting, and we both like to cook. Adding in entertainment, vacations, food, etc., and my "base" expenses are about $20,000 per year and I live very comfortably with no sacrifices.

And that's just me alone in the house. My GF sold her house and is moving in with me and we'll be sharing expenses.

No costs for healthcare??