$1,000,000 and the clothes on your back

And my life is nothing like what it was before.
Interesting...............

John Galt
 
John I don't want to understate the impact of replacing the job with time to do what one wants; that's huge. But most ERs, I suspect, have very much the same lives they had before in other respects - same families, same house, same town, same friends, same cars, same hobbies (just more time spent doing them), etc. I think what Jarhead was saying is that some may view ER as a way to start over and create an entirely new life, when in reality that's not likely to occur. You bring to ER what you had before, and who you were before, and all the obligations that entails.
 
I used a simple retirement payout calculator to determine how much income I can generate per month if I build a portfolio that will stay 2% ahead of inflation for 35 years. I consider that fairly conservative.
$1,000,000 at 5% with 3% inflation will provide $3397.90 per month (in todays dollars) and leave one broke at the end of the 35 year period
A combination of stocks, mutual funds and Treasuries should produce this by historical standards.

Being single I would begin with the perpetual traveler lifestyle. From what I've read by other posters and Paul and Vicki Terhorst's $50 a day rule (which is now probably $90). $2700 a month will do it. I always overspend the norm so I would add another $20 a day plus $400 a month to maintain my medical insurance. No working income means no more Social Security payments and income taxes should be minimal since the million is after tax dollars. Interest and dividends would be taxable income. So that would put me at $3700 a month (already in a deficit). No problem when Social Security kicks in it will make up the difference with excess. Medical insurance payments stop at age 65.

After the travel life the $3397.90 of todays money should be able to maintain a reasonable lifestyle in one of the warm weather areas of the US. I would probably rent (maybe buy a reasonably priced condo) and I do not need a Porshe.

Each of our desires will vary so I can understand why some need more, some less. I think one very important point made was a what age one plans on quitting their job. If you are 60 and married with SS checks 2 years away your cash requirment doesn't need to be that much. If your 40 your looking at possibly 50 more years and the million may not cut it.

My 2 cents about $1,000,000
 
On the money Jarhead! When people ask what ER is like, I tell them it's great, and it is. But my life is almost exactly like it was before - minus the job - and plus an extra 40 hours/week to do what I want to do. But in many ways it's the same. All the same infrastructure is still in place and must be paid for. It's not magic, and it doesn't change most things.
Click to expand...


Like TH, I thought retirement was sitting on the beach with a Mai Tai. I'm taking out the garbage every week! :eek:
 
If you are 60 and married with SS checks 2 years away your cash requirment doesn't need to be that much. If your 40 your looking at possibly 50 more years and the million may not cut it.

[/quote]

Okay, I am 40, so if I'm looking at another 50 more years, a million may not cut it. So how much money would?
 
How do you highlight the quote like everyone else did. My e-mail before this one attempted to, but as you can see, was not successful. Help!
 
Hmmm - maybe it's me but aren't we looking at the wrong end of the stick - ala take your expenses and multiply by 25 - and then make durn sure your portfolio covers all your expenses in real money - aka dvidends and interest with some inflation fighting capability.

Unfortunately - history provided us with a tailwind from 1993 - 2004 so our 350k went to ballpark 1 mil.

I really really don't want to change our comfortable (read cheap) lifestyle of the last twelve years.
 
I do not know how to highlight the quote. I am looking though the forum to find out how.
Maybe the experience posters will tell us.

But... how much money one needs at 40 to pack it in depends on the risk you are willing to take, the amount of money you require each month to live and the number of years it has to last.

If its conservative investing, about $3800 over 50 years the numbers I get are:


For an account of $ 1400000 at a interest rate of 5 % with an inflation rate of 3 % a year
Your Initial Monthly Payout : $ 3792.95
Over 50 Years
 
How do you highlight the quote like everyone else did.  My e-mail before this one attempted to, but as you can see, was not successful.  Help!
Click to expand...

If you look at the upper right hand portion of every post you will see the word 'quote' and 'modify'. Just click quote and Wa La! 8)
 
Sounds like some people can do it and some can't depending on lifetime expectancy and standard of living.

Looks like the average income needed per year is in the $40K to $50K range for a married couple. So with a SWR of 4%, it should be doable for the average family if they start at age 45 to 50.
 
Sounds like some people can do it and some can't depending on lifetime expectancy and standard of living.

Looks like the average income needed per year is in the $40K to $50K range for a married couple.  So with a SWR of 4%, it should be doable for the average family if they start at age 45 to 50.
Click to expand...

Not so fast. - The original premise was just the clothes on your back. The $40K figure often sited is usually with a paid off house, furniture, cars etc.

I think it's a bit tight. Trailer on a Trout River trout Bum Tight 8)
 
Well, getting specific.............our combined SS
benefit, based on the latest annual statement would be about $2200 per month at 62. That's about what we are living on presently, and of course this excludes income from all other sources. This is why I have stated
that if I lost 100% of my investment portfolio
(but not my real estate) I would still be ERed and not
forced back to work nor reduced to dumpster diving.
And, we own a car, a truck, a motorcycle, a boat and 2
homes. Plus, no debt. Anyway, a "trout river trailer bum" lifestyle sounds pretty good to me :)

John Galt
 
So John, if you were a long ways away from SS, like many posters here, you'd need at least $660,000 (plus your home, cars, and personal possessions) if you planned to live off passive investments and live the lifestyle you're now living, right?

$26,400/year x 25 = $660,000 (assuming 4% WR)

So if you had only the clothes on your back you'd be looking at what... maybe $750,000 to maintain your current lifestyle? Not all that much different than what others are saying they'd need.
 
How about a different look?

With a million, most anyone could manage a moderate middle class ER lifestyle with no frills.

With two million, most anyone could manage an upper middle class ER lifestyle with reasonable frills.

Less than the 1 mil...chancy...more than 2 mil and you shouldnt be bothering to waste your time with considerations such as this.

Lifestyle wise, I took ER to be the oppportunity to re-evaluate my life and make a lot of changes. In fact I've hinted at this change several times lately. I see some people propose ERing and freezing their pre-ER lifestyle. Pretty good if you have $2M+, but otherwise...why wouldnt you consider making change if it could enable or assure a long ER?

I live in a smaller, but still nice house that cost half what my old one did. I didnt need that big huge honking house. My wife and I (pre marriage) had 5 cars between us. Now we have 2. We used to have a couple of mortgages and some car payments. Now we dont. We used to eat out all the time and take off to some island paradise for 2 weeks out of every year. Now we dont.

Net loss of "quality of life"? Zero. Cost? Less than one tenth of what it used to be.

I'd also caution those who are evaluating plans that eat principal and have an expected end date. You might not end when your plan does. Considering people born in the early 1900's could count on ~57 year lifespans and today its over 70...with medical advances coming faster every year, those of us in the 45-60 range might count on living to 90 or 100 with reasonable health...
 
Like TH, I thought retirement was sitting on the beach with a Mai Tai. I'm taking out the garbage every week! :eek:
Click to expand...

How about this...I have a little sand in my shoes and some budweiser in the fridge? :p
 
Considering people born in the early 1900's could count on ~57 year lifespans and today its over 70...with medical advances coming faster every year, those of us in the 45-60 range might count on living to 90 or 100 with reasonable health...[/quote]

Maybe we can temporarily ER at 50 and then go back to work at 79.
 
I see some people propose ERing and freezing their pre-ER lifestyle.  Pretty good if you have $2M+, but otherwise...why wouldnt you consider making change if it could enable or assure a long ER?
Click to expand...
Not necessarily freezing their pre-ER lifestyle. Certainly some are in the position to make changes and lower expenses without suffering too much. But some here propose retiring on very small amounts, which would require massive reductions for most of us. It's not realistic, IMO. And it's not about the people on the high end who have the luxury of freezing at the pre-ER level; it's more about the people on the low end who are already very close to locked in, simply because their expenses can't be cut all that much more. I expect there are some super-saver types here who live in modest homes, drive economy cars, don't take very many exotic trips, etc. It costs about so much to live a decent life, and if you go too much below that, it's not a pretty sight.
 
If you look at the upper right hand portion of every post you will see the word 'quote' and 'modify'. Just click quote and Wa La! 8)
Click to expand...

Just checking to see if this quote thing works....
 
But... how much money one needs at 40 to pack it in depends on the risk you are willing to take, the amount of money you require each month to live and the number of years it has to last.

If its conservative investing, about $3800 over 50 years the numbers I get are:


For an account of $ 1400000 at a interest rate of 5 % with an inflation rate of 3 % a year
Your Initial Monthly Payout : $ 3792.95
Over 50 Years
Click to expand...
Does this $1.4 million include the house one lives in or not? If it doesn't, I guess I'll need some more.
 
Being single I would begin with the perpetual traveler lifestyle. From what I've read by other posters and Paul and Vicki Terhorst's $50 a day rule (which is now probably $90). $2700 a month will do it.
Click to expand...

From my discussions with the Kaderli's (on this board under some threads - try searching for "perpetual traveller") they do it as a couple on about $24K per year.  The Terhorsts' on their webpage still say that it is possible to do $50/day (as a couple) if you don't spend those days in Paris or Tokyo.  In pricing out some of the costs of living while I was in Italy I would figure you could stay long term in Rome for maybe $2000-$2500 / month for a couple.

plus $400 a month to maintain my medical insurance.
Click to expand...

You can do much better than this for insurance if you are living outside the US.  I've done some preliminary pricing on this and I can get high deductible (~$2000) insurance for my wife and I for somewhere between $2000 and $2500 per year.  Factor in that you can get excellent treatment in many parts of the world for a lot less than in the US and the extra you have to pay shouldn't be all that high.  Maybe $250/month for a couple and probably $125/month for a single total.  $400/month is way too high.

If you put that together you would have:
$2500/month for general living
$250/month for insurance
--------
$2750/month = $33,000 / year

Add in some for travel expenses (overestimated) for maybe $38K / year total as a couple.  As a single person you could do this for less.  Maybe not half but probably 2/3 or $24K.

That's also high because it's priced out as if you lived in Rome all year round.  Add in some time in Hungary, a bit of time in Thailand, spend the northern hemisphere winter in South America etc. and your costs go down - way down.

$1M invested could easily provide for a nice PT life with some safety too.  If you want to have some more safety and maybe be able to buy a pied a terre in a couple of years to spend some part of the year in (though that would probably reduce your expenses too) then add in one or two hundred thousand for a total of $1.2M.
 
I have set a $1,000,000 nestegg as my retirement goal. I expect to achieve that goal in 3 years. I'm presently saving 80% of our family income. We live (as civilians) on a U.S. military base in Japan and enjoy free housing. Good used cars are readily available in Japan for $1,000 (or less). Consequently, we are able to save about $70k per year, but that's living tight to the belt. We are willing to sacrifice now so that we can achieve an early retirement. We've put most of our current savings into perhaps the most conservative investment there is outside of a passbook account, i.e., U.S. Savings Bonds (a combination of EE and I bonds). When we retire, we intend to convert most of our assets into TIPS. My wife and I are used to, and confortable with, a modest lifestyle, but neither of us tolerate risk very well. We've looked at the numbers from every angle and it appears to us that we need a minimum of $1M to generate sufficient income to fund our retirement without dipping into the principle and without incurring sleepless nights. We intend to stay overseas when we retire, probably in the Philippines. By the way, despite popular belief, it isn't that much cheaper to live in a 3rd World country -- basically, "services" are very cheap, but "goods" (especially those that are imported) are at least as expensive as they are in the States. Once social security kicks in (if there is any) and once my pension kicks in (about $17K), we may move back to the States. The pension and social security is our safety net. I read the postings of others who have retired with a much smaller nestegg, but most of those who have done so retired during the middle of perhaps the greatest bull market that we have ever experienced. I doubt that we will enjoy such a tailwind in the future. In fact, I rather suspect that we are looking at a long stretch of substandard returns. To allow some margin of safety, I personally believe that $1M is the minimum nestegg one needs to retire early in todays economic environment. Unfortunately, that puts early retirement out of reach for 90 percent of the population. I'm sure there are many who will try to retire on less, but unless we see a repeat of the great bull market of the 80's & 90's, I fear that many of these early retirees are going to run out of cash before they run out of time . . .
 
I guess my ignorance and lack of any planning
saved me. Otherwise I would still be working and
trying to pile up that magic million so I could ER safely :)

John Galt
 
I'll give you my motivation squared, and you give me a million bucks. Then I will be really comfortable, and I don't think think I will miss the motivation at all.

Motivation isn't really quite everything. But in the right circumstances it can count for an awful lot. If you have zero bucks, all the motivation in the world won't give you a happy retirement. If you have $10 million, money can buy you pretty much anything you see that you want. Most of us are somewhere in the middle of the two extremes. In most of the various circumstances that pop up in the middle, motivation counts for a whole bunch more than what most people intuitively would think it would.

The root confusion is due to the human propentity to transform "wants" into "needs." If you start from the belief that you have no choice but to be a wage slave until you turn 65, the temptation is strong to rationalize all sorts of spending to make those years more enjoyable. If you start with the idea that breaking free of paycheck dependence is the most exciting thing you can "buy" with your money, you find that you can have a happy middle-class existence on an amount of money that most other middle-class people consider shockingly low. JohnGalt is referring to the magic that causes one to see things differently as "motivation" and I think he is right to suggest that he has been able to purchase a whole bunch of life satisfaction through use of this motivation jazz.

Not everyone finds the JohnGalt vision of early retirement appealing, of course. I think that to a large extent that is because many see a way to have the best of both worlds--an escape from the rat race PLUS the consumer goods that are available to those spending more than JohnGalt does. For those able to pull that off, I can see why the JohnGalt vision might appear too limited. But if the choice is between working at a job you don't like all that much and cutting back to the JohnGalt lifestyle, I think that an argument might be made that the JohnGalt lifestyle is not so limiting at all.

The only one who can really answer the question of whether the JohnGalt lifestyle involves sacrifice or not is JohnGalt. My sense is that he feels certain that he made the right choice. It seems to me that in the case of JohnGalt this ephemeral thing called "motivation" generated benefits of considerable monetary value. Motivation is not quite everything, but it's worth a lot more in bottom-line practical terms than many prople realize, in my view.
 
There are lots of pieces in a Retire Early plan that work in different ways for different people: (1) Some count on Social Security, some don't; (2) Some continue to earn money post-"retirement" by doing a different sort of work, some don't; (3) Some have families to support, some don't; (4) Some have family members that help out with health insurance, some don't; (5) Some live in high-cost areas of the country, some don't; and on and on. Because there are so many variations, I am skeptical of placing too much emphasis on rules of thumb.

That said, there are certain rules of thumb that seem to work across the board, not perfectly but well enough. The "Multiply by 25" rule (or its inversion, the 4 percent rule) seems to work well in a lot of circumstances. Those who like stocks use it to determine what they can take out each year from their stock portfolios. But I use it too, and I have zero invested in stocks today. There are others with middle-ground positions on the effects of stock valuations who also use some variation of the Multiply by 25 Rule.

My sense is that the "You Need $1 million and the Clothes on Your Back" maxim is a sort-of-useful rule-of-thumb. It doesn't work perfectly for everybody and it doesn't work for some hardly at all. But in most cases some of the moving pieces result in a need for more savings than is held by most others and others cause a need for less, and the overall effect is to bring the particular aspiring early retiree to a need for saving an amount that is somewhere near the median of what we all are seeking to save. My guess from what I see on this thread is that that median point might be somewhere near $1 million. It doesn't work perfectly for a good number, but it could kinda sorta work for most. So it's a not-bad maxim for communicating to neewcomers how much in the way of accumulated capital is generally needed to pursue the Retire Early dream.
 
Does this $1.4 million include the house one lives in or not?  If it doesn't, I guess I'll need some more.
Click to expand...

The calculator used to determine the $1.4 million figure is strictly mathematical and does not take historical market data into account like Firecalc does. I used conservatative figures of 5% return and 3% inflation.
If a higher return is expected then the money required for retirement is less.

It will calculate a monthly return over a number of years based on the data you provide. It does not take into consideration any assets such as a home.

Firecalc seems more suited for such planning.
 
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