$2.27 million to feel wealthy - 3% withdrawal rate

[ESRwannabe]

There's a recent Bogleheads thread from a doctor just out of residency who calculated he could retire to his home country (SE Asia) in as little as 5-7 years and live very well...nice house/maid/cook/gardener/etc. or go for a U.S.-based retirement...after 15-20 years.

I don't doubt it. I've been following expat youtubers and bloggers for years and you can maintain almost an identical standard of living for 2-3 times less money outside the US.

Around $500 a month would get you a nice, safe, fully furnished apt (bigger than a studio but maybe smaller than a 1-bedroom in US), with a pool, small weight room, and house cleaning in most of Asia and Latin America. This apt would be conveniently located, by a beach if desired or by public transportation if in a larger city.

For $200 a month you could eat out every meal, and a good many of those would be fancy meals or western food. Health care costs are cheap enough to be paid out of pocket, but you could also keep some insurance for $100 a month. Daily transportation options are also cheap. Everything is super cheap when compared to the US.

All the info I have seen tells me that you can have a really nice standard of living on $1,500 a month. Actually, I think it would be a better standard of living than what I currently have. I live in one bedroom apt already. So no change there. That would probably be the biggest sacrifice for most people that have a house.

 

[marko]

My definition of Rich/Wealthy is having enough money to buy virtually anything you want within reason. It means you can live anywhere including places like San Francisco if you so desired. You can travel first class, buy expensive items, basically almost anything you like. No, it doses not include choosing which NFL team you want to buy.

Nicely put! And my take as well.

Once you get over the idea that you're never going to own a yacht big enough to put a helicopter on, you've established the right mindset.

Of course, you were never likely to own a yacht big enough to put a helicopter on so....

 

[street]

I'm not sure I would even want yacht big enough to put a helicopter on. Lol I would be another problem and more to contend with. Not for me and would spend that money on a fly fishing river land instead.

 

[24601NoMore]

Well, at least around this area, the health insurance alone costs $25k a year. Real estate tax for a small house starts at $10k. There are a lot of other necessities that easily add up. Not much left for food, transportation, utilities, kids related expenses, travel, etc. I am sure there are lower cost of living areas. But I would imagine $90k/yr income does not get a family of four or five to feel wealthy in most part of US.

Exactly! It surprises me when I see people post that they can live on $18K (HOW? - are they REALLY tracking every last penny of expense? I'm doubtful, and suspect these are more broad-brush estimates than numbers from Quicken or a similar app. Our property taxes and utilities alone are $18K+). Our "core" (food, clothing, cars, property taxes, utilities, charities / gifts [not excessive by any means], etc) expenses are $60K+. Add HC ($20K+), Fed and State taxes and maybe one nice two-week vacation out of country (flying coach and using FF miles) and you're at $90-100K+ quickly. And we consider ourselves middle (definitely not upper) class - and as I've said before, that includes buying our clothes at Kohls (never Nieman Marcus or similar), driving Chrysler cars (not even BMWs let alone anything fancier) and clipping coupons..

Now, if I moved to the Appalachians or some other super LCOL area and bought a really low cost, ramshackle house and farmed my own food..slaughtered my own cattle..purified my own water from the nearest stream..but we live in the upper Midwest in a relatively "average" neighborhood, and I wouldn't exactly say we're in a HCOL area like NY or SanFran..

 

[monte1022]

I knew at 55 that things were looking pretty good for DW and I. Working in WY/PA/WV coal mines for 35 years, I knew we were blessed with good fortune and health.

I had several hourly guys that worked for me who owned large family farms, worked in the mines part of the day, then went home to manage small herds of cattle, grow corn and hay to feed them. Great men, hard workers, could always count on them to get a job done, always smiling. Several of them hit it big with the shale gas; one guy worked for a year collecting $60,000 a month in gas royalties; thought it was a big farce and was going to crap out after a few months. Others kept working for a year or two, because they didn't want their co workers to think they were rich. Some waited til 55(and 30 years) to get their union medical card. Always felt pretty happy for them, even though we made it different ways. The one guy still tends to his cattle, cuts hay, grows corn but has a real pretty barn, beautiful fence line and fence, shiny tractor and even a bigger smile.

I am not a miner and probably will never see a royalty check. However, the rest of this statement is definitely still part of my life. Our family has owed "the" farm since the mid 1800s. We even have a sheepskin deed for the land dated 1793.

 

[NW-Bound]

... Once you get over the idea that you're never going to own a yacht big enough to put a helicopter on, you've established the right mindset.

Of course, you were never likely to own a yacht big enough to put a helicopter on so....

I'm not sure I would even want yacht big enough to put a helicopter on. Lol I would be another problem and more to contend with. Not for me and would spend that money on a fly fishing river land instead.

Choppers are dangerous and can get yourself killed.

How 'bout something smaller, like this 105' spanking new boat? Quite affordable at $500K, particularly if you sell your home and live onboard.

The fuel tank of 5000 gallons will take some getting used to, for it to not hurt each time you refill it.

 

[street]

^ I like that but to eccentric for me. I still would buy some fly fishing land instead. I might even do that at some point any way. All that swaying and bouncing on that boat might not do well with me. LOL

 

[gwraigty]

Exactly! It surprises me when I see people post that they can live on $18K (HOW? - are they REALLY tracking every last penny of expense? I'm doubtful, and suspect these are more broad-brush estimates than numbers from Quicken or a similar app. Our property taxes and utilities alone are $18K+). Our "core" (food, clothing, cars, property taxes, utilities, charities / gifts [not excessive by any means], etc) expenses are $60K+. Add HC ($20K+), Fed and State taxes and maybe one nice two-week vacation out of country (flying coach and using FF miles) and you're at $90-100K+ quickly. And we consider ourselves middle (definitely not upper) class - and as I've said before, that includes buying our clothes at Kohls (never Nieman Marcus or similar), driving Chrysler cars (not even BMWs let alone anything fancier) and clipping coupons..

It's easy for me to say to the penny what our annual expenses are. All bills are ultimately paid out of one account and it's simple addition. I'm sure at one time that my husband and I lived on $18K, since he barely made $20K when we married in 1992. After 2 kids, that number went up, of course, but we still spend nowhere near the numbers you're talking about.

Property taxes are $2667.12 for the year on our 1900 sq. ft. home that would sell for $180K to $190K. Utilities aren't that expensive for us either. Food is probably our single biggest expense at $150 to $200 per week. Clothing expenses are negligible. We've been buying new cars for years, most recently Ford and Chevrolet.

Last year our spending was a little over $38,000 for a household of 4 adults. That included a little over $6,000 in medical expenses for my daughter's foot surgery and my son's hearing aid. Plus, we spent a few thousand having our flooring replaced upstairs, new carpeting for 4 bedrooms, hallway, stairs. If not for those things, our spending would have been closer to our usual of just under $30K.

 

[daylatedollarshort]

Exactly! It surprises me when I see people post that they can live on $18K (HOW? - are they REALLY tracking every last penny of expense? I'm doubtful, and suspect these are more broad-brush estimates than numbers from Quicken or a similar app. Our property taxes and utilities alone are $18K+). Our "core" (food, clothing, cars, property taxes, utilities, charities / gifts [not excessive by any means], etc) expenses are $60K+. Add HC ($20K+), Fed and State taxes and maybe one nice two-week vacation out of country (flying coach and using FF miles) and you're at $90-100K+ quickly. And we consider ourselves middle (definitely not upper) class - and as I've said before, that includes buying our clothes at Kohls (never Nieman Marcus or similar), driving Chrysler cars (not even BMWs let alone anything fancier) and clipping coupons..

Now, if I moved to the Appalachians or some other super LCOL area and bought a really low cost, ramshackle house and farmed my own food..slaughtered my own cattle..purified my own water from the nearest stream..but we live in the upper Midwest in a relatively "average" neighborhood, and I wouldn't exactly say we're in a HCOL area like NY or SanFran..

The Consumer Expenditure Report was a real eye opener for us after living in a high cost of living area for years. We put our expenses side by side and looked for variances, and realized we could really optimize our expenses much better than we had been, even without the cattle or water purifier or having to relocate.

Healthcare expenses have been kind of a wild card for us, but there are posters here in other states even without an ACA subsidized plan with reasonable rates, so worst case we could have moved and stayed retired. And many (maybe most?) on this forum report much lower property tax and utility bills than $18K.

 

[USGrant1962]

It really depends on what stage of life one is in. For a retired couple with pension+SS and Medicare, $4.5mm ($2.27x2?) seems quite comfortable. For a relatively young couple still raising school-aged kids, retiring early on NW of $4.5mm seems quite precarious. I would say, $20mm probably gets most people under most circumstances to feel comfortable. But even at that level, not everyone can afford to go first class whenever they fly, stay in five star hotels wherever they travel to, send kids to private schools without thinking twice, etc. 24/7 comfort, but not 24/7 luxury.

Yikes! $20M at 3.5% withdrawal, which is generally considered a perpetual withdrawal rate, is $700K per year. That is your standard for "comfortable"?

 

[24601NoMore]

It's easy for me to say to the penny what our annual expenses are. All bills are ultimately paid out of one account and it's simple addition. I'm sure at one time that my husband and I lived on $18K, since he barely made $20K when we married in 1992. After 2 kids, that number went up, of course, but we still spend nowhere near the numbers you're talking about.

Property taxes are $2667.12 for the year on our 1900 sq. ft. home that would sell for $180K to $190K. Utilities aren't that expensive for us either. Food is probably our single biggest expense at $150 to $200 per week. Clothing expenses are negligible. We've been buying new cars for years, most recently Ford and Chevrolet.

Last year our spending was a little over $38,000 for a household of 4 adults. That included a little over $6,000 in medical expenses for my daughter's foot surgery and my son's hearing aid. Plus, we spent a few thousand having our flooring replaced upstairs, new carpeting for 4 bedrooms, hallway, stairs. If not for those things, our spending would have been closer to our usual of just under $30K.

Appreciate the insight, but still hard to fathom..."all" of your spend is from one single account? ATM withdrawals? Checks? Credit Card payments, etc?

You don't move "any" money from one account to another?

Your food budget is actually higher than ours ($350/mo). But our car expenses alone are > $10K and that's for two mid-range Chrysler products..Property taxes are near $10K..

It'd be great to hear from those tracking "every" penny in Quicken what their real expenses are. I spend a few hours a week tracking, so it's hard for me to comprehend a scenario where there's "one" account that pays everything as we have many accounts that money moves from/between..

That all said, guess it depends on what part of the country you live in also..but you can't live "middle class" where we live ("average" neighborhood in a MCOL area) for south of $90K/yr and that's being super anal about every single dollar spent including clipping coupons and eating leftovers several nights a week..I suspect many that live near/around us are probably 20-50% higher than we spend..

 

[ugeauxgirl]

The median household income in the U.S.is around $60K. $4.5M at just 2% withdrawal rate would be $90K a year, so I'm curious why you think that amount would be precarious for a young couple?

+1. We don't live in a hcol area. We have a paid for home and our property taxes are less than $1k. Our kids go to great schools and their college accounts are funded. Our healthcare (which we buy privately) is less than 10k per year. We have never spent more than 75k even though 15k of it is travel. We don't have 4.5 million and we're retiring next year. I have analyzed this a million different ways. Please tell me why 4.5 million is "precarious."

 

[ugeauxgirl]

It really depends on what stage of life one is in. For a retired couple with pension+SS and Medicare, $4.5mm ($2.27x2?) seems quite comfortable. For a relatively young couple still raising school-aged kids, retiring early on NW of $4.5mm seems quite precarious. I would say, $20mm probably gets most people under most circumstances to feel comfortable. But even at that level, not everyone can afford to go first class whenever they fly, stay in five star hotels wherever they travel to, send kids to private schools without thinking twice, etc. 24/7 comfort, but not 24/7 luxury.

Suze Orman, is that you?

 

[Physics Guy]

Exactly! It surprises me when I see people post that they can live on $18K (HOW? - are they REALLY tracking every last penny of expense? I'm doubtful, and suspect these are more broad-brush estimates than numbers from Quicken or a similar app.

Now, if I moved to the Appalachians or some other super LCOL area and bought a really low cost, ramshackle house and farmed my own food..slaughtered my own cattle..purified my own water from the nearest stream..but we live in the upper Midwest in a relatively "average" neighborhood, and I wouldn't exactly say we're in a HCOL area like NY or SanFran..

Your numbers seem almost as crazy to me at 18k does to you. We live in an older middle class suburb in a MCOL area. I can't give you exact numbers (one of the beauties of FI is not having to worry about the numbers at that level of detail) but we did our annual planning recently so I can give some decent numbers. Our basic spending (which is not a bare bones level) is 59k. We don't have kids at home but the numbers are very similar to what they were with one high school aged kid a few years ago.

 

[Housewife]

Suze Orman, is that you?

Haha, I wish. I just happen to live in a HCOL area, where property tax starts at ~$10k for a small fixer upper and easily runs to $20k for an average home. Our HC premium is $25k with a $11k deductible for a family of four. That does not include any dental expenses, or orthodontist treatment for children. Adding food, utilities, cars/gas, insurance, etc., it would be quite heroic for a family of four to maintain a normal living on $38k/year (or even $75k/year) budget in the area, without receiving something (food, housing, health care, etc) that is heavily subsidized.

Now, that is just basic living. To achieve a middle class living, there are additional expenses such as entertainment, travel, kids EC activities (sports, music, summer camps, etc.). That could be easily $20-30k. Those may not be absolute necessities, but we all incur those expenses.

I suppose it all comes down to where you live. $4-5mm NW might be a large sum in some areas, but may not be quite as reassuring in others. I remember reading an article on financial samurai. A two income family with children in Brooklyn, making $500k (I think). After all said and done they do not have much $ left after expenses. The article went through a detailed run down of their expenses / cash flows. The conclusion is that they are actually doing slightly better than breaking even (eg, in fact they are saving something through 401k), but their “core” expenses are indeed quite high. At that level of expenses, $4-5mm NW certainly would not make that couple feel wealthy.

So the key seems to be, accumulate the nest egg as quickly as possible, and move to LCOL area to make the most of it

 

[24601NoMore]

Your numbers seem almost as crazy to me at 18k does to you. We live in an older middle class suburb in a MCOL area. I can't give you exact numbers (one of the beauties of FI is not having to worry about the numbers at that level of detail) but we did our annual planning recently so I can give some decent numbers. Our basic spending (which is not a bare bones level) is 59k. We don't have kids at home but the numbers are very similar to what they were with one high school aged kid a few years ago.

Sounds like our 'basic' spending is roughly the same ($59K vs. $60K). Add in HC ($20K+ - we don't get subsidies), vacation ($10-20K) and other "lumpy"/unexpected spending and you're quickly at $90K+..

 

[razztazz]

Your numbers seem almost as crazy to me at 18k does to you. We live in an older middle class suburb in a MCOL area. I can't give you exact numbers (one of the beauties of FI is not having to worry about the numbers at that level of detail) but we did our annual planning recently so I can give some decent numbers. Our basic spending (which is not a bare bones level) is 59k. We don't have kids at home but the numbers are very similar to what they were with one high school aged kid a few years ago.

I live on less than 20 grand. About 18 give or take in a given year. Yes, I'm single. I have no spendy hobbies or habits. A small dog and guitar strings. I do not have to pay for medical insurance, though. But if you live in the right State and have a genial MAGI (much talked about here by peeps who make / spend a great deal more than I do) you can get an ACA policy for little or nothing.

I do not live in the "Outlands". I wish I could but at 62 I need to be close to civilization and modern stuff. I live in the Omaha Nebraska metro area. Just under a million body count.

 

[ugeauxgirl]

I suppose it all comes down to where you live. $4-5mm NW might be a large sum in some areas, but may not be quite as reassuring in others. I remember reading an article on financial samurai. A two income family with children in Brooklyn, making $500k (I think). After all said and done they do not have much $ left after expenses. The article went through a detailed run down of their expenses / cash flows. The conclusion is that they are actually doing slightly better than breaking even (eg, in fact they are saving something through 401k), but their “core” expenses are indeed quite high. At that level of expenses, $4-5mm NW certainly would not make that couple feel wealthy.

I DO think it has a lot to do with where you live- where I live 75K a year without a mortgage is a LOT of money. (Not enough to buy an NFL team or a Yacht, but those both sound like a headache to me).

As to your other point, I know couples (around here) who make $200K per year and spend every nickel, accuse the other of wasting money, and don't have anything to spare for retirement. I know couples who make 70K, who are saving 12K per year for retirement- they also have kids who are in sports and take vacations. I don't doubt that financial Samurai says it can't be done, but I also don't doubt that someone who has the will to do it, has found a way to do it. "Necessities" can be relative to your situation.

 

[Physics Guy]

Sounds like our 'basic' spending is roughly the same ($59K vs. $60K). Add in HC ($20K+ - we don't get subsidies), vacation ($10-20K) and other "lumpy"/unexpected spending and you're quickly at $90K+..

The basic spending I mentioned included HC costs (without subsidies) although we have rarely incurred significant HC expenses outside of the cost of the insurance so we do not include the full cost of our deductible in our budget. Instead it is treated like car replacement and major home repairs (roof) and budgeted as a small monthly "transfer" (nothing actual moves) into a virtual account.

 

[W2R]

I suppose it all comes down to where you live. $4-5mm NW might be a large sum in some areas, but may not be quite as reassuring in others.

Exactly!

What's most important here (from my point of view), is not that those in HCOL areas could spend less for the same lifestyle in an LCOL area. We all know that can be done. But many people have very good reasons to live in HCOL locations, such as family, friends, surroundings that they enjoy, and many other reasons.

What I am trying to say is that I regard HCOL location as being a purchase and the important thing for all of us to realize what we are purchasing and for how much. For example, if someone lives in an area that costs them $20K/year more than another area, are they getting sufficient value for their money out of that $20K/year purchase? If so, great! Often it is. If not, relocating is always an option.

By discussions like the present one, we can figure out how much we are paying for location and figure out if it is worth it for us.

 

[NW-Bound]

... I'm sure at one time that my husband and I lived on $18K, since he barely made $20K when we married in 1992. ...

$18K back then is worth almost $33K now due to inflation.

I just looked at the Quicken screen, and saw that if I cut out discretionary items I could halve our expenses. These items include gifts, donations, travel expenses, hobby expenses, home projects, and the expenses of the 2nd home.

After cutting these extraneous expenses, I still eat the same food, drink the same booze, live in the same home, watch the same youtube videos, surf the same Web sites. I don't think I would call it a big decline in living standards.

Why don't I do it? My WR is low enough as is, and I have not drawn SS. I don't need to look for ways to blow dough, but not really have to cut back either. I do think I will spend less in the future though. Getting too old and tired to travel, etc... I may also run out of ideas and energy to do home projects. Just sitting in a rocking chair does not cost much.

 

[Scuba]

THey appear to be quite wealthy, but with the cost of all that, I find it just as likely that they're up to their eyeballs in debt. Guess I can't fathom the annual cash flow required for that lifestyle. Taking care of the yacht alone must consume a couple mil per year!

I guarantee you if they have any debt, they have liquid assets to pay it off many times over. They have a lot of wealth.

 

[Scuba]

Choppers are dangerous and can get yourself killed.

How 'bout something smaller, like this 105' spanking new boat? Quite affordable at $500K, particularly if you sell your home and live onboard.

The fuel tank of 5000 gallons will take some getting used to, for it to not hurt each time you refill it.

No kidding re the fuel tank. On my former boss’ boat, we wanted to contribute to the cost of a 10-day trip they had invited us on. We thought we’d buy them a tank of fuel until we realized that would set us back about $10K!

 

[NW-Bound]

Yachts are real fuel guzzlers. Never owned even a small boat, but I read that a yacht like the above would burn 30 gal/hr just cruising slowly at 8 knots. I guess you don't talk miles per gallon, but yards per gallon.

A real big yacht with a helipad? I read that they cost $500K for each fill-up. It's insane.

 

[NW-Bound]

Oops. The $500K price for that yacht appears to be for the hull only. A complete boat is going to be a few mils, depending on customization.