31% think $250K is enough to retire on

[nun]

The article is better than most in that it at least recognizes that low income people need less money to continue their current spending.

I guess the question is "If I were earning $30k per year at a job that I didn't like, I had saved $250k (which is 8x may annual income), and I were 65, would I continue to work?"

That's a different view of what's "enough".

The meta-question is, how do you save $250k earning $30k a year?

 

[LOL!]

The meta-question is, how do you save $250k earning $30k a year?

Game show. Lottery. Inheritance. Law suit.

 

[nun]

Game show. Lottery. Inheritance. Law suit.

Many actually have those as strategies.

The obvious way is to earn $150k and live on $30k. Then you can save enough to support that LBYM lifestyle.......unfortunately most people don't earn enough and if they do they don't save enough

 

[tryan]

The AGE of our retiree plays a major role ... mom is making it work on ~240k with dad's pension and SS. Says she wants to "live a little" so I am scrubbing the numbers to determine a decent burn rate of her assests.

I am thinking 10% (she's 72 and in excellent health ... her mother died at 89). A reverse mortgage is the last line of defense. She jokes about her check bouncing at the funeral home.

OK fire away!

 

[rescueme]

I am scrubbing the numbers to determine a decent burn rate of her assests.

I am thinking 10%

As compared to what? What is the current rate of asset withdrawl?

Are we talking a 9% gap (assuming a 1% currenet withdrawl) or are they already at 8%?

It makes a difference...

 

[HFWR]

Many actually have those as strategies.

The obvious way is to earn $150k and live on $30k. Then you can save enough to support that LBYM lifestyle.......unfortunately most people don't earn enough and if they do they don't save enough

A simplistic modeling of how one would save $250k over a 30yr "career":

 

[tryan]

As compared to what? What is the current rate of asset withdrawl?

She's been at 5%. So I am looking at doubling the withdrawl rate. As she slows down she won't be able to spend as much. Probably gift it to the kids to shelter what's left.

 

[deserat]

Hmm...

I only look at the 1st picture shown on that Web link, but it surely does not portray a serene lifestyle like I imagine on Walden Pond.

Something is wrong here!

PS. This is more what I am talking about here!

Note: picture linked in from Andy Baird's Web site (Upgrade frenzy)

More thread hijack - my mom lived in a motor home for years - we as a family (before parents divorced) lived in a Winnebago for a few months. I love his solar panels and it looks really nice - just enough room and amenities...not bad at all!

 

[haha]

The AGE of our retiree plays a major role ... mom is making it work on ~240k with dad's pension and SS. Says she wants to "live a little" so I am scrubbing the numbers to determine a decent burn rate of her assests.

I am thinking 10% (she's 72 and in excellent health ... her mother died at 89). A reverse mortgage is the last line of defense. She jokes about her check bouncing at the funeral home.

OK fire away!

Not as a criticism, but an observation. Say she lives as long as her mother, that gives her another 17 years. With today's conditions, it would be very hard to get any real, after tax return (even if she pays no income tax) on reasonably safe assets. ( I wanted to say risk-free assets, but then someone will remind me that such a thing does not exist, there is always inflation..... Who knew?)

So she is almost sure to run out of money, possibly fairly early in the game. You could find some higher yielding assets that would produce more income in the best case, but if things go wrong you may find yourself as cleanup batter. If that might be OK, there are possibilities.

Ha

 

[nun]

A simplistic modeling of how one would save $250k over a 30yr "career":

Working from your monthly $313 number and 5% return. If you earn $30k a year you might take home $1800 a month. So that $313 is 17% of your take home pay before you've paid for housing, medical, car, food etc. Saving 17% of income for high earners is relatively easy....but on $30k a year it would be difficult.

 

[NW-Bound]

The title of the article is somewhat misleading.

The gist of the quoted article was that it would be possible to retire with only $250K in savings. Note the key word is to retire, and not to retire early, which means such retirees expect to draw on some pensions or at least SS. Then, it would make more sense. Some of the $250K of savings may be in the form of a residence owned clear of mortgages. Even then it is still tough.

I know elderly people who have even less than $250K, who have to rely on their children for support. Most of the time, it is in the form of their offsprings giving them free room and board, which frees the SS for their entire discretionary spending.

More thread hijack - my mom lived in a motor home for years - we as a family (before parents divorced) lived in a Winnebago for a few months. I love his solar panels and it looks really nice - just enough room and amenities...not bad at all!

It is still related to the thread, as a possible way to live on $250K, is it not?

Though I do not need to live like this out of necessity, the adventurous aspect of this lifestyle interests me (just out of curiosity, as I like my "stuff" too much and it would not fit in any RV). So, I have been following the blogs of some full-time RV'ers, particularly the people with smaller rigs and not quarter-million diesel pushers. Some people reported their expenses, and they ran in the mid $20K. And their little comfortable rigs still cost some initial money.

So, without any income, one still needs more than a $250K portfolio to live comfortably as a vagabond.

 

[Major Tom]

NW-Bound - I was in the middle of sending you this as a PM so as not to disturb the flow of the thread too much, then saw your previous post and figured that - hey - the RV'ing life is related to the discussion of being able to retire on 250K.

Thanks very much for posting that link to Andy Baird's site. I've only just begun reading it but it looks like it's going to be very inspiring. It has already opened me up to the possibility of a Lazy Daze motorhome; up until yesterday, I was convinced that only a Roadtrek would work for me.

And now back to our regularly scheduled programming.....

 

[tryan]

So she is almost sure to run out of money, possibly fairly early in the game. You could find some higher yielding assets that would produce more income in the best case, but if things go wrong you may find yourself as cleanup batter. If that might be OK, there are possibilities.

Running out of the 240k in 10 years is acceptable ... but not preffered. If I can get 15 years out of it, it's a homerun (but 1/15 vice 1/20 isn't going to change her life much). She still has SS and pension ($2400/mo total) and a house for a reverse mortgage (assuming a nursing home doesn't get it).

At some point it becomes "use it or loose it" (to a nursing home). Just not sure if 72 is that point (in great health) ...

 

[tangomonster]

I have a friend who is 55. She was amazed that a few of her peers at the table at a social gathering no longer had a mortgage. (She works for the PO and makes a decent income, but has to recent due to a recent foreclosure and bankruptcy due to poor management). I've always wondered how much money she thinks we have since we retired at 52 and have no pensions and buy our own insurance.

This topic reminds me of a cruise I took over 20 years ago. The waiter was hoping to retire early by 30 by saving $100,000. Obviously, 100K was worth more 20 years ago than it is now, but still not enough for 50+ years of retirement, especially in his country (Israel, with high cost of living). But probably fun for him to dream....

 

[Independent]

The meta-question is, how do you save $250k earning $30k a year?

Excellent question. Put away $3,000 per year for 40 years, and have the money (on average) double during that time? Then recognize that your retirement income goal can be $3,000 less because you weren't spending that.

I wouldn't be surprised that a fair number of the people who said $250k would be enough aren't on track to have $250k.

 

[NW-Bound]

Thanks very much for posting that link to Andy Baird's site. I've only just begun reading it but it looks like it's going to be very inspiring. It has already opened me up to the possibility of a Lazy Daze motorhome...

I myself learned of Andy Baird from this forum, from a mention by Martha. You can search the forum to get old threads related to RV. Some people like the Lazy Daze, which is a fine motor home, but one can get other brands which are less expensive but in the same class C (motor homes built on a Ford or Chevy commercial van chassis). For full-time RV'ing or even extended traveling, the RoadTreks are just too small for most people.

Get a class C, then tow behind a small car like Andy is doing, and have a ball touring North America!

Running out of the 240k in 10 years is acceptable ... but not preffered. If I can get 15 years out of it, it's a homerun. She still has SS and pension ($2400/mo total) and a house for a reverse mortgage (assuming a nursing home doesn't get it).

$2.4K a month + an owned home. That's the situation of my mother. As I mentioned, she has been living fine, and does not even want to sell her rental property yet. By the way, the rental home is not even being rented out right now, so does not generate any revenue for her.

So, unless your mom is in an area with a higher cost of living, I do not see any problem. Or perhaps my mother is a lesser spender.

 

[haha]

Running out of the 240k in 10 years is acceptable ... but not preffered. If I can get 15 years out of it, it's a homerun (but 1/15 vice 1/20 isn't going to change her life much). She still has SS and pension ($2400/mo total) and a house for a reverse mortgage (assuming a nursing home doesn't get it).

At some point it becomes "use it or loose it" (to a nursing home). Just not sure if 72 is that point (in great health) ...

If you stated her income goal I missed it, but with a paid for home and $2400/month locked down, she can get a pretty good income just by setting aside a little cash for emergencies, then investing the rest in dividend growing high quality equities such as PG, JNJ, ABT, WMT, WM, PEP, MSFT, SYY...etc. Some of these are higher quality than others, and they also differ on other dimensions. I just tossed them out as reasonable candidates. There also may be ETFs that invest in this type of stock.

$200,000 invested in a selection of these will yield between $6 & $7 thousand the first year, and this very likely growing fairly rapidly. If it were me, I would like the positive psychological aspect of getting more every year, even with low inflation. Her SS and pension will fill the role of fixed assets.

I assume you have already considered and rejected your special skill area of income producing real estate? (With you as manager.)

Ha

 

[nun]

Excellent question. Put away $3,000 per year for 40 years, and have the money (on average) double during that time? Then recognize that your retirement income goal can be $3,000 less because you weren't spending that.

I wouldn't be surprised that a fair number of the people who said $250k would be enough aren't on track to have $250k.

If $3k a year can be saved form $30k salary (~$20k take home pay) $250k could be built up. But on such a low salary finding $300 a month would be difficult. At 66 the worker would get maybe $12k SS. If we use the 80% rule for income that would leave $12k to find, maybe less as no FICA would be required. 4%x$250k=%10k. Maybe just enough to keep the person at the same poverty level they lived at all their working life.

 

[HFWR]

Working from your monthly $313 number and 5% return. If you earn $30k a year you might take home $1800 a month. So that $313 is 17% of your take home pay before you've paid for housing, medical, car, food etc. Saving 17% of income for high earners is relatively easy....but on $30k a year it would be difficult.

Yep...

The irony is that, in this example, the person earning $30k is used to living on it. If you're used to living on, say, $75k, then you'll have a rather rude awakening when you start trying to live on what $250k will throw off.

 

[BLS53]

Working from your monthly $313 number and 5% return. If you earn $30k a year you might take home $1800 a month. So that $313 is 17% of your take home pay before you've paid for housing, medical, car, food etc. Saving 17% of income for high earners is relatively easy....but on $30k a year it would be difficult.

That's the fly in the ointment of LBYM that goes unspoken on these forums. And I think the threshold of pain is a bit higher than $30K.

 

[BLS53]

If $3k a year can be saved form $30k salary (~$20k take home pay) $250k could be built up. But on such a low salary finding $300 a month would be difficult. At 66 the worker would get maybe $12k SS. If we use the 80% rule for income that would leave $12k to find, maybe less as no FICA would be required. 4%x$250k=%10k. Maybe just enough to keep the person at the same poverty level they lived at all their working life.

I wouldn't call $30K poverty level. At least in the U S, it's defined as $10,890 for a single person. The median income is only around $40K.

If we're talking household income with several dependents, then I agree.

Many workers at this wage level, just keep working until they reach SS eligibility age, and their take-home pay and potential SS benefit are equal. Some will work part time if they need to make up a shortfall between their prior full-time income, and what they now get from SS.

Retirement planning is an afterthought with this demographic. Contrary to some opinions, the sky doesn't fall down upon them when they reach retirement age.

 

[nun]

I wouldn't call $30K poverty level. At least in the U S, it's defined as $10,890 for a single person. The median income is only around $40K.

If we're talking household income with several dependents, then I agree.

Many workers at this wage level, just keep working until they reach SS eligibility age, and their take-home pay and potential SS benefit are equal. Some will work part time if they need to make up a shortfall between their prior full-time income, and what they now get from SS.

Retirement planning is an afterthought with this demographic. Contrary to some opinions, the sky doesn't fall down upon them when they reach retirement age.

On $30k for a single person retirement planning won't be a priority as there will be more immediate things to worry about, like food and a roof. I think that it's a bit of a fantasy to think that with such a low salary there'd be anything left over for meaningful retirement saving. Given the low median salary of $40k is it a wonder that retirement savings in the US are so low.

In any reform of SS I hope that the benefit of the poorest in our society is protected or increased as without SS someone who earned $30k a year would have the sky falling on them later in life.

 

[nun]

Yep...

The irony is that, in this example, the person earning $30k is used to living on it. If you're used to living on, say, $75k, then you'll have a rather rude awakening when you start trying to live on what $250k will throw off.

The only way the maths works out is if you have a $30k lifestyle on a $75k salary and save the surplus.

The $30k earner won't have enough of a surplus to save
Most $75k earners don't have the discipline to live on $30k and save

 

[Andre1969]

This topic reminds me of a cruise I took over 20 years ago. The waiter was hoping to retire early by 30 by saving $100,000. Obviously, 100K was worth more 20 years ago than it is now, but still not enough for 50+ years of retirement, especially in his country (Israel, with high cost of living). But probably fun for him to dream....

Well, $100K really does seem like a whole different number when you're on the bottom looking up. The first mutual fund I had ever bought into was American Century Growth (back then it was 20th Century Growth). This was in the fall of 1991. I think it had been recommended in some money magazine that my Granddad subscribed to, and in the past year, it had jumped about 20%.

Well, I was young and naive at 21, and figured that it could return 20% consistently. I was still in college, working part time at a department store, and making $6.50 per hour. So to me, the thought of having $100K seemed really rich. And IF it could return a consistent 20%, well, that would be $20K in the first year! And if it kept it up, $24K in the next!

Naturally, it didn't play out that way.

Fast forward to four years later, late 1995, and I was in a marriage that was falling apart fast. I was out of college, but was only making $10.83 per hour (I had to look it up in my records; my memory isn't THAT good!). I still had the part time job, which might have been up to around $8.00 per hour. Combined, I was making around $27,000 per year. I also had a condo that would be lucky to break even on. And debt was pushing $15-20,000. So yeah, even at that point, $100K seemed like a lot of money. And while I didn't think I could retire on it by this point, I sure thought it would make life a lot easier!

Once I finally got out of debt and started focusing on saving and investing, $100K simply became one point in a long list of milestones. It did seem like a big deal the first time I reached that point, but once I got past it, and then $200K came up, it just didn't seem like a big deal anymore.

 

[Moemg]

My Mom is 95 and has been widowed for thirty one years . She lives on SS and a small pension from my Dad . She also has some CD's not more than $100,000 and she lives very nicely .She travelled a lot on this money including trips to Hawaii, Panama Canal , New Orleans . She has seen almost every Broadway play and she does not skimp on clothes or eating out . She rents and has not owned a home since my Dad died and she just sold her car three years ago . So it is possible to live nicely on small amounts .