Poll: How much income do you need to retire?

[Lucantes]

I personally don't see anything wrong with $200K per year. If you have $5MM+ in assets - why not ? A few toys, a few upgrades, a few international vacations, a CC membership - $200K can go very quickly.

4% WR, that would be seen as the norm wouldn't it (maybe considered a lil' high by today's low interest rate standards however? but still not lunacy)?

 

[urn2bfree]

I personally don't see anything wrong with $200K per year. If you have $5MM+ in assets - why not ? A few toys, a few upgrades, a few international vacations, a CC membership - $200K can go very quickly.


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I am not saying that it is not possible. I am not saying there is anything "wrong" with $200k per year. I will say it seems a bit extravagant for most people.

I am wondering if it is accurate. Could that amount be inflated by erroneously assuming continued higher income taxes that actually should be much lower in retirement? Are there other current expenses that are likely to go down or disappear like tuitions and kids' cellphones and car insurance etc? Are they including money they are saving in this figure? That should not be part of this calculation.


I am looking for a little better breakdown than sort of hand waving, yadda yadda yadda.

Their house and cars are paid for.
We are told property taxes are substantial. Let's say that means Westchester County, NY- the most expensive county property taxes in the nation. Average property tax per year there is around $10,000. Let's go crazy and maybe quadruple that to $40,000. Health insurance? $30,000? We still have $130,000 to spend. Country club? $30,000? Still have $100,000 a year to spend using what I think are already inflated estimates...
We are talking recurring expenses here. I am sure one could spend that much once in a while, but a few toys, upgrades, even expensive vacations are hard to sustain yearly for an entire retirement. These don't explain how they are planning on spending $16,000 every month, every year, for years...
Like I said, mostly I am curious what that kind of spending gets you...



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[Totoro]

Some items I've seen with bigger spenders among friends:

• A live-in house maid. Even after the kids are gone
• Rearranging the house interior every year
• Owning several sports cars, swap them out every six months
• 300$ bottles of wine several times a month. Invite some friends over and impress them
• A boat
• 5 star hotels on your vacation
• Top of the line luxury clothing, also for your (grand)children
• Professional gardening services and pool maintenance, optional personal masseur and psychologist
• Professional chef preparing your meals to deal with your allergies
• Golf

All of these make me cringe, but it adds up quickly. Many folks have a talent for spending


Compared to any sense of median or normal though, all that is indeed extravagant.

[Edit] Most of these items indeed will drop off once health starts failing. On the other hand I've seen folks (including my grandfather) well in his 80s going on luxury cruises quite often.

 

[wingfooted]

I am looking for a little better breakdown than sort of hand waving, yadda yadda yadda.

OK, see a theoretical breakout below. A $200K limit is really going to reign in some of the luxuries. A 'problem' for $5MM+ asset folks is that taxes are still a major expense category as you will be depending on your portfolio to throw off 5% or so in capital gains / dividends per year and most of these will be taxed at the higher marginal federal, state + ACA rates. And the tax situation may indeed be even worse if a good percentage of your assets are in non Roth IRA's and you are making RMD's.

All expenses are annualized:

Capital Gains Tax on 5% portfolio appreciation @ $5MM @ 25% $62,500
Real Estate Tax $22,000
Upkeep, $1MM house at 3% per year $30,000
Second home / condo - assoc fees $12,000
Maid @$1500 per month $18,000
Grounds keeper @$1000 per month $12,000
Power @ $500 per month $6,000
Medical @ $3000 per month $36,000
Salon/Massage $5,000
Health Club / Trainer $4,800
Food @ $1200 per month $14,400
Dining Out - Once per week @ $150 $7,800
New Car @ $50,000 every three years $16,667
Upkeep on sailboat/power boat $12,000
Gas / Diesel $5,000
Telephone/Cell $3,500
Internet / Cable $2,500
New laptop & ipad every two years $3,000
Gifts / Charitable $5,000
Clothes / Misc @ $3000 per month $36,000
Three vacations per year, business class tickets + $15000 spend money (each) $72,000


Annual Spend $323,667
Amount Available $200,000

Where do you cut from here ? $200K could almost be consider poor folk ?

 

[dallas27]

You really cant figure out how to retire with a cell phone bill of less than $3,500? Come on,


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[Hermit]

I will just break into the $50,000 - $75,000 bracket this year. Medical will be over $15,000. Early next year I turn 65 and my kids are getting their own medical insurance. I don't know what my medical insurance will be, but it should be quite a bit less than this year. I will also cut the cell phone bill from over $2000 to probably around $200 which is more than I paid before the kids talked me into paying for fancy phones for them including data plans. I should easily be in the $25,000 - $50,000 bracket next year. I have wrestled with the notion of giving myself a "raise" to $70,000 per year, but I don't know what I would spend it on. More toys may be may be in the picture.

 

[Dash man]

There's a big difference between "needs" and "wants." The needs should include your primary home (even that may be able to be downsized), utilities, food, taxes, a vehicle and health care. Most other things fall into the wants category.


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[Bestwifeever]

Is no one else curious about this $200+ annual expenses?
Can we see a rough breakdown of this?
What are these expenses of over $16,000 a month?
Country club dues?

To quote the White Coat Investor- “If you can’t live on $200,000 a year, you have a spending problem, not an earning problem."


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I know at least three families, pretty good friends, who pay $52k in property taxes on their first home, have a country club membership ($50k to join, who knows the mandatory annual dues/cost required for golf and food), and enjoy a vacation home in the pricier parts of the country. They are not spending the rest of their time budgeting. All very nice people, worked very hard their whole lives, and now enjoying the results.

Most of the people we know are living on $50k or less for everything, also very nice people who worked very hard all their lives, and now enjoying the result. No one complains.

 

[urn2bfree]

OK, see a theoretical breakout below. A $200K limit is really going to reign in some of the luxuries. A 'problem' for $5MM+ asset folks is that taxes are still a major expense category as you will be depending on your portfolio to throw off 5% or so in capital gains / dividends per year and most of these will be taxed at the higher marginal federal, state + ACA rates. And the tax situation may indeed be even worse if a good percentage of your assets are in non Roth IRA's and you are making RMD's.

All expenses are annualized:

Capital Gains Tax on 5% portfolio appreciation @ $5MM @ 25% $62,500
Real Estate Tax$22,000
Upkeep, $1MM house at 3% per year $30,000
Second home / condo - assoc fees $12,000
Maid @$1500 per month $18,000
Grounds keeper @$1000 per month $12,000
Power @ $500 per month $6,000
Medical @ $3000 per month $36,000
Salon/Massage $5,000
Health Club / Trainer $4,800
Food @ $1200 per month $14,400
Dining Out - Once per week @ $150 $7,800
New Car @ $50,000 every three years $16,667
Upkeep on sailboat/power boat $12,000
Gas / Diesel $5,000
Telephone/Cell $3,500
Internet / Cable $2,500
New laptop & ipad every two years $3,000
Gifts / Charitable $5,000
Clothes / Misc @ $3000 per month $36,000
Three vacations per year, business class tickets + $15000 spend money (each) $72,000


Annual Spend $323,667
Amount Available $200,000

Where do you cut from here ? $200K could almost be consider poor folk ?

Ok like I I said- looks like more of a spending problem. New car every 3 years? Why not a new boat every 3 years too? Three $24,000 vacations every year!? And a second home? How often is this maid coming? And my local fitness center for a family membership is less than a third that cost. Phone seems too high. As is the miscellaneous. And if really buying a new computer every two years is that going to be $6000? Because you have it listed as $3000 a year which every 2 years means $6000. Too high. Food budget for 2 people also very generous. I don't know what a groundskeeper costs but sure seems a lot.

But most of all the taxes seem too high. Dividends are going to generate around 2% per year and even if you are counting on 5% per year appreciation of the portfolio-when Capital Gains are considered, that does not mean you sell off all your capital gains and pay taxes on them every year. You could balance losers and winners and pay zero capital gains when you liquidate. Even if you cannot and have to liquidate some of it to pay for many of these extravagances, most of that amount will be return of principle, not taxable- so your tax burden will be lower. Total income therefore will be lower than what you are assuming(especially after subtracting that big real estate tax off the income) and might not put you into these high tax brackets you used. Thus your tax costs estimates are again too high.




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[jabbahop]

one more big expense

Aside from very high property taxes (primary home and vacation camp)

We have one son in private high school - $10K/year

 

[urn2bfree]

Aside from very high property taxes (primary home and vacation camp)

We have one son in private high school - $10K/year

But for the purposes of budgeting for retirement, 4 years of high school tuition is not likely to be an ongoing expense- certainly not for most of the retirement period and not for most people.


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[aaronc879]

Where's the >$25,000 category? I would be very happy with $24K/yr to spend including taxes. I wouldn't even know how to spend more than that...but i'd be willing to learn. This is for 1 person in small-town midwest with small paid off condo.

 

[rothlev]

Is no one else curious about this $200+ annual expenses?
Can we see a rough breakdown of this?
What are these expenses of over $16,000 a month?
Country club dues?

To quote the White Coat Investor- “If you can’t live on $200,000 a year, you have a spending problem, not an earning problem."



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No, I don't think so.
I am in the around 70k a year in spending. we are not high maintenence by any definition. Many people I know have way higher medical, ( ours is federal ), way higher property taxes ( georgia is very generous to seniors on this) , Travel can easily eat up a ton of money. We go on one trip a year. Our home is on the small side , and I am careful with internet and phone expenses. I could easily see doubling our spending with more travel, visits to family, etc... what about a 2nd home for a warm climate, what about gifting money to children, grandchildren, etc... Really, it isn't that hard to spend money.

 

[AnIntentionalRoad]

There's a big difference between "needs" and "wants." The needs should include your primary home (even that may be able to be downsized), utilities, food, taxes, a vehicle and health care. Most other things fall into the wants category.

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Even these basic categories leave a lot of room for interpretation.

For instance, is owning a home a need? How big of a home before it becomes a want?

Is shopping at Aldi a need and shopping at Whole Foods a want?

What type if vehicle is a need? Some on this forum get by on public transportation so clearly owning a vehicle is not strictly a need.

When it comes down to it, a human needs so little to survive that almost everything in our lives is a want. That makes trying to compile meaningful stats pretty futile.

 

[AnIntentionalRoad]

Ok like I I said- looks like more of a spending problem. New car every 3 years? Why not a new boat every 3 years too? Three $24,000 vacations every year!? And a second home? How often is this maid coming? And my local fitness center for a family membership is less than a third that cost. Phone seems too high. As is the miscellaneous. And if really buying a new computer every two years is that going to be $6000? Because you have it listed as $3000 a year which every 2 years means $6000. Too high. Food budget for 2 people also very generous. I don't know what a groundskeeper costs but sure seems a lot.

But most of all the taxes seem too high. Dividends are going to generate around 2% per year and even if you are counting on 5% per year appreciation of the portfolio-when Capital Gains are considered, that does not mean you sell off all your capital gains and pay taxes on them every year. You could balance losers and winners and pay zero capital gains when you liquidate. Even if you cannot and have to liquidate some of it to pay for many of these extravagances, most of that amount will be return of principle, not taxable- so your tax burden will be lower. Total income therefore will be lower than what you are assuming(especially after subtracting that big real estate tax off the income) and might not put you into these high tax brackets you used. Thus your tax costs estimates are again too high.

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So what is your point? If someone can afford it, does it matter? Should someone who's built up a large portfolio spend a small fraction of it and aim to leave the rest to his or her heirs to squander?

I don't understand what point you are trying to make.

We have a $5MM+ portfolio, a family of four, a vacation beach house (not a condo), a paid off sailboat, two paid off luxury cars, etc.

With all that, we are still living below a 4% WR.

So, what does that mean? Is there some moral judgement you would like to state? Or would you just prefer to continue to make passive aggressive moral judgements?

 

[Dash man]

Even these basic categories leave a lot of room for interpretation.

For instance, is owning a home a need? How big of a home before it becomes a want?

Is shopping at Aldi a need and shopping at Whole Foods a want?

What type if vehicle is a need? Some on this forum get by on public transportation so clearly owning a vehicle is not strictly a need.

When it comes down to it, a human needs so little to survive that almost everything in our lives is a want. That makes trying to compile meaningful stats pretty futile.

I wasn't intending to take this down to Maslow's heirarchy of needs, but just a reasonable maintenance of existing living conditions, not necessarily the current lifestyle.

 

[MichaelB]

The question from the original post

There have been several polls as to how much you spend on various items in retirement. I got to wondering how much income do you think you need to retire. Here are my criteria. "In order for me to retire comfortably, I think I need $xx,xxx, before tax, inflation adjusted income per year."

The question asks us what we each feel we need, not how much we feel others should need.

 

[Mulligan]

So what is your point? If someone can afford it, does it matter? Should someone who's built up a large portfolio spend a small fraction of it and aim to leave the rest to his or her heirs to squander?

I don't understand what point you are trying to make.

We have a $5MM+ portfolio, a family of four, a vacation beach house (not a condo), a paid off sailboat, two paid off luxury cars, etc.

With all that, we are still living below a 4% WR.

So, what does that mean? Is there some moral judgement you would like to state? Or would you just prefer to continue to make passive aggressive moral judgements?

I personally think sometimes we get caught up interpreting others through the prism of our own lifestyle/budget. In reality it is all the same. Who plans a retirement where their lifestyle is worse than what they are experiencing working? I am in the 75k pre tax range retirement income and that is definitely no where near 200k. But I darn sure wouldn't have retired if I was going to have to lower my lifestyle. That to me would be the same principal for higher income people. Why retire if you have to give up all the things you enjoy and are accustomed to?


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[steelyman]

The question from the original post


The question asks us what we each feel we need, not how much we feel others should need.

It's good to restate that.

My answer is, "just enough to do what I want to do".

 

[daylatedollarshort]

Is no one else curious about this $200+ annual expenses?
Can we see a rough breakdown of this?
What are these expenses of over $16,000 a month?
Country club dues?

To quote the White Coat Investor- “If you can’t live on $200,000 a year, you have a spending problem, not an earning problem."

Well, I'm not curious because we used to live like that but I don't have $10M to retire on so we had to either keep working full time or cut back. We cut back. We're very sorry looking back we didn't choose many more years of free time and FI over the higher spending levels, especially since my husband had very long hours, a long commute and a high stress job for many years.

We live in a beautiful place with many parks and view trails right around our house and for years we didn't really enjoy it because we were working too much. We have time now to declutter and dispose of our old papers and when we come to some of our old charge bills we just cringe at how much we used to spend. The real light bulb moment for us is that we live in the same house and actually drive nicer cars these days. We just got rid of a lot of the superfluous spending that wasn't really adding any enjoyment to our lives.

 

[Bestwifeever]

?...I darn sure wouldn't have retired if I was going to have to lower my lifestyle...

This is exactly what DH said when I put us through a bare bones budget couple of years before re'ing and showed him on paper that we could easily survive financially at that level--"we're not retiring to live like that."

Even as a couple we had two very different threshholds for the minimum we could happily live on, so not surprising that different posters here have different takes on it.

 

[rockyj]

...Here are my criteria. "In order for me to retire comfortably, I think I need $xx,xxx, before tax, inflation adjusted income per year."

This is not just 'how much to cover expenses' but how much you think you need to live comfortably, pay bills, sock away a little for emergencies, travel, etc. (emphasis added)

I voted $75-100K. This is in today's dollars, all in, for two, before tax, no debt, retiree medical plan, living what we think is a comfortable but not particularly extravagant lifestyle, in neither a particularly high nor particularly low COL area, based on several years of tracking what it takes us to live "comfortably" as described by OP. Everyone has their own priorities and will make their own choices, so answers here will be all over the place. We are quite thrifty on some items, but there also is a fair amount of discretionary spending in our number - two cars, decent food ingredients, occasional dining out, going to the movies now and then, some travel, some charity, and occasional other indulgences. We could get along with much less if we really had to - i.e. if all that was needed to meet the OP's "live comfortably" standard was to be warm and secure in our house, with sufficient caloric intake, and to be able to see the doc now and then. But that doesn't seem to be the question that was asked.

 

[ER1970]

Is no one else curious about this $200+ annual expenses?
Can we see a rough breakdown of this?
What are these expenses of over $16,000 a month?
Country club dues?

To quote the White Coat Investor- “If you can’t live on $200,000 a year, you have a spending problem, not an earning problem."


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We are a 2-person household, both work FT (in mid 40/50 of age and both plan to ER in 3 yrs), 2 residences, 2 NON-luxury cars, no kids but 1 dog, no boats and no fancy CC membership. Yet our annual budget is in the mid 200K's. Yes I know... More work can be done on cutting the unnecessary spending, perhaps. Here is a rough breakdown of our current spending:

"mandatory spending":

co-op maintenance on the 1500sf apt: just shy of $3000/m ($36K/yr) including property taxes and electricity. We do get tax credit on the MT, about 50%
property taxes on the 2500sf vacation home: $12K/yr
up keeping, repairs, landscaping, pool, heating, A/C, etc on both: $30K/yr
cable for both places and cell phone: $2000/yr *2 = $4k/yr
housekeeper for both places (only come every 2 weeks): $150*2*2/m ($7200/yr)
insurance on both places plus cars: $7K/yr
buying our own health insurance + out of pocket: I haven't looked into this carefully, but would budget $30K/yr just to be safe

We may sell the vacation home when we retire, but in that case we will likely buy or rent a place for the winter, and the expenses will likely be the same or only slightly decrease.

Other spending:

groceries: $600/m*12=$7.2K/yr
dinning out: we spend at least $2500/m right now as we don't have much time to cook at home and we both eat lunch at work. this can be cut down to half if needed, but we both love dinning out so it is a choice of spending habit: $30k/yr
dog walker/food/boarding/vet: $10k/yr. when we retire we can cut down dog walker expenses significantly, but boarding will increase as we will travel more. offsetting each other= same or even increased total amount likely
other "luxury habit spending" including clothing, hair cut, facial treatment, massage, gym, etc: $20k/yr - (I can certainly cut down on clothing/shoe spending, but am not willing to cut down on massages!)

travel: right now we only take 1 OOP travel each year, and the rest are tagged along with business travel. so we are currently at $15k/yr but see this increase to at least $30k/yr

I haven't included taxes yet! Right now we are at the top bracket (and I don't even want to think about the $! but that's a golden headache to have I guess). when we retire we will need to figure out a way to play with taxes, and I will certainly look for advices from this forum.

this is a rough breakdown. each year it fluctuates a bit depending on whether we need to fix something in the apt/house, buy a new car (haven't in the last 3 yrs) or if we travel more. we also have elderly parents to take care of for the next 10 yrs at least, so home visits and other expenses will likely increase. I like to build a "buffer" in the total budget, so it came to $200K. But if we pay more attention to detailed spending and cut expenses, I think $150K is certainly achievable without sacrificing our current living standard.

 

[jabbahop]

But for the purposes of budgeting for retirement, 4 years of high school tuition is not likely to be an ongoing expense- certainly not for most of the retirement period and not for most people.


True - just for the next two years. We actually have several stages of spending. Now when kids in high-school, in 3 years when they are in college, and once they are out of college and hopefully independent, and finally when medicare kicks in. Based on our forecasts, there are some big spending differences that we are factoring in.

 

[nash031]

Though I selected $100k-125k, that is dependent on where we settle. If it's our current location, that's accurate. If not, it could be much less. Also depends on if our house is paid off or not... Either way, I'm planning for $100-125K, and if we don't need all of that... gravy!