How much to do need to live off of in RE

[jimmycarter]

I am curious to get some answers as to how much money one needs in retirement. I suppose some say it all depends on what your salary was prior to retirement but I know some people can do it with less. How much for a couple? How much for a single person? Guesses or estimations are welcome. Thank you all very much.

 

[Martha]

This is a tough question depending on individual circumstances, but I do think rules of thumb, like 70% of pre-retirement income, are next to useless. I have seen ranges here from $12,000 to $100,000 plus a year.

It is helpful to look at your specific circumstances, like:

1. How many people are you budgeting for?

2. A big variable that has increased greater than inflation is healthcare costs. Do you have retiree health insurance? If not, costs vary widely by age, where you live, health, and type of policy you purchase (amount of deductible, are drugs covered, etc). I have seen costs here for the policy alone vary from less than $200 a month to more than $1000 a month. There also are copays and deductibles; dental and eyeglasses often are not covered. If you are retiring very young, be prepared for big increases in these costs.

3. What are your housing costs? Mortgage? Rent? Fully paid for home? Utility costs? Property taxes vary widely throughout the US. Don't forget to budget for repairs. New roofs, furnaces, appliances, etc.

4. What are your vehicle expenses? Even if you car is paid for, need to budget for replacement, insurance, gas, repairs.

5. What kind of taxes do you expect. Is your income coming from after tax investments, a 401(k) or pension?

6. Food, clothing, and other day to day living needs. Are you an Amy Dacyczyn type, the frugal zealot, who scrimps, saves, and recycles? Or the type that wants to do some traveling, eat out once in a while, etc?






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[jimmycarter]

Martha,

Thank you for your replies. I suppose the cost that I worry about the most is healthcare. It is truly the "X" factor if you will. Healthcare involves two uncertainties, the individual's health and the cost of medical care. My emergency fund can tackle most expenses, even moderately large ones such as a big house or car repair.

 

[Martha]

JC, couldn't agree more. The two things I worry about in early retirement are healthcare inflation and a bad stock/bond market "conspiring" together to make our plans fall apart.

But I can't spend all my time worrying. Might be dead tomorrow.

 

[retire@40]

There were some posts here a few months back on this topic.  If I remember correctly, most people responded with current detailed spending budgets for 2 people in the $40K range.  Of course, you would need to gross this up for income taxes, so that would bring you to about $50K in total gross income. 

 

[Martha]

There were some posts here a few months back on this topic. If I remember correctly, most people responded with current detailed spending budgets for 2 people in the $40K range. Of course, you would need to gross this up for income taxes, so that would bring you to about $50K in total gross income.

There are quite a few budgets posted if you look at the most viewed topics, especially the ones for living on $3000 a month and the $50 dollar a day thread (which most seemed to agree was not very doable).

 

[ex_CFO_now_RVer]

Hi!

Everyone's retirement situation is different.  My situation is that while working, my wife and I traveled the USA on my company's expense account,  health benefits were provided at no cost and I had a new company car each year.  Thus, we were able to save  75% of our after tax income for 15 plus years.  Now that I am ER'ed, we need about $100,000 (to be indexed for inflation) versus the $40,000 we were spending before.  We will now have to pay our own travel, health, car and motorhome expenses.

My mother and stepfather live on about $20,000, but dont travel.   I also have a friend who lives on about $350,000, lives in south Florida and travels the world, first class.  He and his wife have a nice life, probably worth $50 million.

Everyone is different and that is a good thing!

Dave

 

[Mountain_Mike]

My rule of thumb is retiring when I have the ability to generate $50,000 per year, with a paid-off house. I'm closing in on it!

 

[Sparky]

2004 was our first full year of ER. We spent $34,000.

We have catastrophic health insurance ($5,000 deductible) for >$2400 per year for both. We're 44 and 45 and pay outright for high blood pressure and high cholesterol meds. Otherwise we're healthy.

Mortgage is paid off. No kids, 1 dog. It's amazing what federal taxes are when they're not taxing INCOME.

We're living a little cautiously, but still have our wine and go out to dinner when we want (which is not that often).

All in all, not bad ...

 

[Mr._johngalt]

Hello Sparky! Sounds like us except that we spent about 25K,
including $3,800 for health insurance. We have 4 dogs and we
also pay cash for all meds.

JG

 

[Sparky]

Hello Sparky!  Sounds like us except that we spent about 25K,
including $3,800 for health insurance.  We  have 4 dogs and we
also pay cash for all meds.

JG

Are you getting your meds from Canada? We are, and are saving about 30-40% over US prices.

That is, until the US drug companies shut that down (Pfizer already has).

 

[GTM]

I am curious to get some answers as to how much money one needs in retirement.  

As summarized before most on this board need about $40k per year to live. If you are invested moderately I think you will need $1 million in cash to substain that.

In Charles Schwab's book he says one needs $250,000 dollars in cash for every $1000 per month withdrawn. So $3333. per month requires $833,583 in cash. Thats moderate investing.

If your portofolio is conservative $340,000 in cash for every $1000 per month or a bank book worth $1.133,553.

 

[Mr._johngalt]

25K (gross) for 2 people and 4 dogs. No problem. $50 per day is
still doable.

JG

 

[Mr._johngalt]

We are not getting our meds from Canada. Neither of us takes
any prescription meds on a long term basis, with one exception.
I negotiated a price for generic with the pharmacy and the cost is quite low. We've been lucky so far.

JG

 

[cute fuzzy bunny]

Hey JG...you know it doesnt count to split up your posts to one paragraph per in order to stay ahead of me, now dont you?

 

[Mr._johngalt]

Hey th, no "post splitting" here..............................
I usually strive for brevity (it being the soul of wit and all) .
Unless.................. I really get "pumped" about something. As long as I stay away from political discourse I am able to stay relatively in control
of my pontifications Anyway, since I have opinions on everything and absolutely no shyness about sharing them, well.............
it gives me quite an advantage post-wise.

JG

 

[cute fuzzy bunny]

Well now that you're a member, you CAN go back and edit a post to add content to it ya know...

 

[cute fuzzy bunny]

Otherwise, two can play at that game I have to sit home all day waiting for a refrigerator delivery, so I can probably catch you by late this afternoon...

Besides, I've deleted at least 300-400 of my posts over time. Can I have those back now?

 

[charlie]

GTM, my wife and I collect about $20k per year in SS ..... draw
down about $24k from $600k in investments and clear 8-12k
per year from a part time business. You don't need no stinking
$1-2 mil in investments if you are lucky enough to live in the
right part of the country and are already into SS.

Cheers,

Charlie

 

[Mr._johngalt]

Hello Charlie! You are preaching to the choir in my case, obviously.

Since I left for good in 1998, the financial aspects of ER have actually been pretty easy, and.................I still have one year, 4 months
and 5 days to SS

JG

 

[Eagle43]

Charlie, JG,
You both speak truth. And to think, I still have SS coming, first check in July. Life is good!!

 

[Spanky]

Charlie, JG,
You both speak truth. And to think, I still have SS coming, first check in July. Life is good!!

Life is good when you have little. Life is also good when you have a lot. Therefore, you can be happy either way and really depends on you attitude.

Spanky

 

[preben]

Single (or with partner paying her share). Good living in Thailand. About $20k/year which include international health insurance.
I will use more if returns on investments allow same. Cheers!

 

[spike]

We stayed in a hotel in Thailand I think is was $400 per month, included food 3 squares, maid service and laundry. I love Thailand, a little warm for me, but very cheap living, nice people. I could of bought a decent house for 8 grand. The Thai massage is the best in the world also.

 

[cute fuzzy bunny]

In response to the original question of "how much does it cost", here are our budget numbers. My budget spreadsheet is fairly legendary (well...to me anyhow) in its detail, breadth and depth. It is very conservative...I go for the high end on ranges and add padding, tax and anything else I can think of.

Here are my particular parameters:

- Two adults, one baby. Baby costs about $1200 annually in incremental costs.
- Paid-for home, two paid-for cars
- Eat most meals at home, but we eat very good quality food
- No big vacations, mostly day trips to fun places
- Our "movie entertainment" is netflix and a cheap home theater setup
- No odd or unusually expensive hobbies
- I do about 98% of home and auto maintenance myself

These numbers include tires, oil changes, replacement cars and appliances, maintenance, painting, tissue paper, q-tips, soap...just about everything. We buy mostly at warehouse clubs and I while I use every manner of coupon, 10% off cose and zero payments/zero interest leverage, I dont include those in the budget.

It does not include medical insurance as thats paid out of my wifes paycheck, so you will need to add that in.

Monthly bills: $2382. This includes taxes, insurance, food, clothes, "stuff" I buy, utilities, cable tv, cable internet, etc. It also includes monthly 'miscellaneous' costs like soap, tp, paper towels, and all other manners of expenses. Even includes gas and oil for the lawn mower, bug spray, yada yada.

Annual capital costs (not inflation adjusted), including setting aside funds for cars, major appliances, furnaces, house painting and so forth: $5326

That makes our annual costs $2382x12 + $5326, or ~$34,000 a year. $93 a day.

So the bottom line is that a family of three can live in a very nice house with two very nice cars (initial capital outlay for those ~$300k) plus $34k a year if you do your own cooking, dont travel a lot, and do a lot of DIY work.

That means you can retire with $300k to pay off the house and cars and $850,000 @4% SWR to just squeak by. Fortunately I'm well ahead of the 'squeak by' numbers and the wifes monthly income more than covers our annual costs to boot.

As needed, add your medical insurance, your rent or mortgage, car payments and other debt, meals out and vacations you want to pay for, hobby expenses, expensive booze or other habits, and you should have a good approximate number to work with.

If you think I missed something, here are my 'categories':

Monthly bills:

Home Ins
Home Tax
Baby
Nat Gas
Water
Elec
Trash
CATV/BB
Phone
Car Tax
Car Ins
Gas
Food
Med
Misc
Movie rentals
"my misc crap that I buy"

The "misc" above breaks down to:

Shampoo
Conditioner
Soap
Lotion
Toothpaste
TP
Kleenex
Shaving Cream
Razors
Bandaids
Rubbing alcohol
Hydrogen peroxide
Deodorant
Wash cloths
Towels
Dog and Cat food
Dog biscuits and jerky
Costco/Sams memberships
Wormer/dog/cat meds/vet
Car maintenance
Bug killers
Fertilizer
Mower gas + oil
Drinking water
Books, music
Laundry det
Cleaners
Fireplace Logs
OTC meds
Vitamins etc
Paper towels
Foil
Plastic wrap
Small baggies
Big baggies
Dish soap
Dishwasher detergent
Garbage bags
Stamps
Batteries

I then add a 30% pad to this to cover little things, oversights, or occasional buys, plus 7.5% sales tax.

For capital costs, I include annual 'set-asides' for:

Car replacements
Water heater
Furnace
AC compressor
Housepaint
Refrigerator
Dishwasher
Range
Microwave
Washer and dryer
Car tires
Computers
Printers
Tivos/DVR's
Televisions
Living room set
Bedroom set
Gas grill
Clothes
Exercise equipment
Personal care tools (electric toothbrushes, etc)
Vacuum Cleaner
Steam Cleaner
Tools