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Re: $1,000,000 and the clothes on your back
Old 10-29-2004, 09:17 PM   #41
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Re: $1,000,000 and the clothes on your back

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.
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Re: $1,000,000 and the clothes on your back
Old 10-29-2004, 09:33 PM   #42
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Re: $1,000,000 and the clothes on your back

Quote:
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?
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.
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Re: $1,000,000 and the clothes on your back
Old 10-29-2004, 09:35 PM   #43
 
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Re: $1,000,000 and the clothes on your back

Quote:

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)
Just checking to see if this quote thing works....
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Re: $1,000,000 and the clothes on your back
Old 10-29-2004, 09:42 PM   #44
 
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Re: $1,000,000 and the clothes on your back

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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
Does this $1.4 million include the house one lives in or not? If it doesn't, I guess I'll need some more.
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Re: $1,000,000 and the clothes on your back
Old 10-29-2004, 10:24 PM   #45
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Re: $1,000,000 and the clothes on your back

Quote:
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.
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.

Quote:
plus $400 a month to maintain my medical insurance.
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.
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 03:18 AM   #46
 
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Re: $1,000,000 and the clothes on your back

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 . . .
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 03:51 AM   #47
 
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Re: $1,000,000 and the clothes on your back

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
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 04:36 AM   #48
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Re: $1,000,000 and the clothes on your back

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.
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 04:52 AM   #49
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Re: $1,000,000 and the clothes on your back

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.
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 06:53 AM   #50
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Re: $1,000,000 and the clothes on your back

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Does this $1.4 million include the house one lives in or not? *If it doesn't, I guess I'll need some more.
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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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 10:02 AM   #51
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Re: $1,000,000 and the clothes on your back

Quote:
Good used cars are readily available in Japan for $1,000 (or less).
Yeah, I've noticed that too but the shaken (road tax + car roadworthiness check) can get expensive too - about $1000 or more every 2 years. *One of the plans for our "perpetual traveller" portion of retirement is to buy an older car in Japan and spend 6 months to 1 year travelling through the 4 main islands (Honshu, Shikoku, Kyushu, and Hokaido) and hit a lot of *the small towns. *We would probably try to sell the car at the end of the trip if possible and if not perhaps just "donate" it to a relative.

Quote:
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.
You may want to think about at least having a small portion (20% at least) in equities. *I'm not sure how old you are but if you've got a long retirement planned then you will need some growth.

Quote:
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.
That's true for the imported goods but a lot of the cost savings is that those imported goods and even the locally produced durable goods only make up a small percentage of one's expenses. *If you can reduce the cost of half the things (or likely more) in your budget that are "consumables" (food, rent, utilities, etc.) then that obviously reduces one's overall expenses. *Also, many of the locally produced "durable" goods one can buy in 3rd wold countries can be quite a bit cheaper. *Just my experience from trips to Thailand, China, India, etc.
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 10:17 AM   #52
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Re: $1,000,000 and the clothes on your back

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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, as has been pointed out to you numerous times you retired so close to being able to draw social security that it makes a significant difference to your ability to retire. *Most of us planning to retire in our 40's have a long stretch to support ourselves without it and with it being so far in the future we can't know what amount it will bring in with enough reliability.

Of course collecting SS does bring into question how "pure" a "believer" you are in the cult of Rand though. * Wouldn't a true holder of the name "John Galt" just move into the hills, leave all those messy ties to society behind and wait it out until society begged him to come back - much like a 3 year old holding their breath until they got what they wanted?
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 10:49 AM   #53
 
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Re: $1,000,000 and the clothes on your back

Hello Hyperborea! Good questions. Here are some answers:

First, it is true that being close to SS takes a lot of pressure off. However, don't forget that I semiretired
at 49 and retired 100% at 54, and no working spouse
until 2002. Like Rush Limbaugh, I just make it look
easy

As far as my devotion to "Randian" ideas, I have to
live in this world and have no problem with getting whatever I can from the government. To do otherwise
simply to make a point would be madness IMHO.

Finally, I don't expect anyone to beg me to "come back"
and I would not if they did.

John Galt
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 12:21 PM   #54
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Re: $1,000,000 and the clothes on your back

Quote:
First, it is true that being close to SS takes a lot of pressure off. *However, don't forget that I semiretired
at 49 and retired 100% at 54, and no working spouse
until 2002.
"Semi-retired" is an order of magnitude easier. *I could semi-retire right now in my 30's. *I could cut back my income to maybe 1/3 of what I make now (roughly what I would need to pay for my lifestyle where I now live) and stop saving completely for "retirement". *I could cut back even further if I moved out of this high cost area. *Hopefully those income cuts would come with comensurate working hours and stress level cuts too. *I would then let my current stash roll around and grow for another 25 years (at low real growth rates) and it would be enough to support me - it would have grown, the amount of time that it needs to support me would have shrunk and I would also be able to be drawing one of the "social security" payments from at least one of the countries that says they will give me one.

Quote:
Like Rush Limbaugh, I just make it look
easy
Oxycontin in Rush's case.

Quote:
As far as my devotion to "Randian" ideas, I have to
live in this world and have no problem with getting whatever I can from the government. *To do otherwise
simply to make a point would be madness IMHO.
Obviously not a true believer then. *None of the followers of the cult of Rand that I've known have ever worried about the real world. Even Ayn herself didn't seem to from what I've read.

Quote:
Finally, I don't expect anyone to beg me to "come back"
and I would not if they did.

John Galt
IIRC isn't that what your namesake did?
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 12:38 PM   #55
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Re: $1,000,000 and the clothes on your back

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I guess my ignorance and lack of any planning saved me.
My bet is that it was the wifes paycheck...
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 12:47 PM   #56
 
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Re: $1,000,000 and the clothes on your back

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My bet is that it was the wifes paycheck...
That and The games not over yet.

If you end up flat broke at age 80 and just collecting SS, it may not have been a great retirement plan to begin with.
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 01:43 PM   #57
 
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Re: $1,000,000 and the clothes on your back

Hey! Are you guys ganging up on me ?

I was doing just fine without a "wife's paycheck",
thank you. It sure helps though.

As far as "not a great plan to begin with", I had no plan,
so....................................

Cut-Throat, the game is truly not over yet. Not by a long shot. And, I can conjure up a couple of
"gotchas" which might land me in ER hell. However,
I think the odds are heavily with me. Anyway, living
without risk is impossible, ER or no ER. I quote
Al Pacino once again "You can get killed walkin' your
doggie!" Or even better, Clint Eastwood, "Tomorrow
is promised to no one!"

John Galt
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 03:16 PM   #58
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Re: $1,000,000 and the clothes on your back

I dont think its really "ganging up" John, its just that you frequently propose that one can retire early with chump change and still do just fine "living by your wits".

As far as my reading on your situation goes, you were only retired for a very short time before marrying a working wife who contributes most or all of the income you use to offset expenses.

I only keep bringing up the working wife part because you dont, and because I think few people, if any, could manage even an extremely lower middle class lifestyle with under a half million bucks and nobody bringing home a paycheck.

Yes, if work is that horrible, one could manage some kind of subsistence level "retirement" by living in a group home or in a house with holes through the walls, driving a 25 year old car and eating whatever you can catch...I just dont think thats what most people have in mind when planning an early retirement.
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 04:01 PM   #59
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Re: $1,000,000 and the clothes on your back

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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.
Nah, you have entirely missed the point. We hear a lot of talk about John Galt's lifestyle - how he could retire on $250,000, motivation, and brain-power... But John just posted this:

Quote:
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...
Do the math. It would take ~$750,000 if you had nothing but the clothes on your back to live the $2200/month lifestyle John says he's living, with his home, vehicles, and personal possessions paid for. And that's making a 4% withdrawal - many here believe it's prudent to withdraw less. His $26,400 annual budget is well within the range of others who post here. All the rest is just smoke and mirrors.
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Re: $1,000,000 and the clothes on your back
Old 10-30-2004, 04:06 PM   #60
 
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Re: $1,000,000 and the clothes on your back

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Do the math. It would take ~$750,000 if you had nothing but the clothes on your back to live the $2200/month lifestyle John says he's living, with his home, vehicles, and personal possessions paid for. And that's making a 4% withdrawal - many here believe it's prudent to withdraw less. His $26,400 annual budget is well within the range of others who post here. All the rest is just smoke and mirrors.
As usual, you're right Bob_Smith. We all missed it.

But, as John says he has never really figured it out. But if he did, he would see that it costs him just about as much as it does us.
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