Article - 35% of Millionaires won't be able to retire

[marko]

Aaron has an uncommon budget.

But for people who have no mortgage, no car payments, no debts, and who do not have expensive hobbies or habits, and who do not travel, don't have extensive repair or remodeling work on their house, what do they spend money on?

My property taxes are $12K. State income tax is just under $10K.

DW's Health insurance is another $15K (soon to go away as she joins Medicare next year).

Our travel spending is around $25K per year.

Landscapers and snow removal runs another $6K

It adds up!

 

[scrabbler1]

Remember that Aaron, like me and several others in this forum, are single with no kids. Those 2 traits alone will greatly decrease one's household spending.

I don't live in a house, like Aaron does. I live in an apartment in a large co-op complex, so my share of the co-op's expenses is small. That includes large expenses such as roof replacements in the last few years, expenses which were covered by the co-op's reserve fund and did not require a special assessment.

Despite a similar lifestyle to Aaron, I am impressed at how low his expenses are. I spend $6k on housing, $4k on medical; both are reduced by state rebate checks and federal (ACA) subsidies. The remaining ~$11k is for everything else, mainly food, utilities, car insurance, and income taxes.

 

[COcheesehead]

My withdrawal rate as of today is 2.16% which is meaningless if you don’t know 2.16% of what.

 

[NW-Bound]

I'm in that group...

Well, I am also in that group, with a few additions.

I have 2 paid-for homes. No car payment, but I paid cash for a new one in 2021. I spent money on travel. Quicken shows my charity/gift category is more than travel.

Still, I have a way to go to reach $100K/year, and I can afford to spend more than that.

Can't eat/drink more, can't travel more. Perhaps I can give out money more, but I am not ready for that.

 

[NW-Bound]

My withdrawal rate as of today is 2.16% which is meaningless if you don’t know 2.16% of what.

It is meaningful in the sense that it's way below the 4% SWR.

Or is the SWR now 3%?

 

[daylatedollarshort]

Aaron has an uncommon budget.

But for people who have no mortgage, no car payments, no debts, and who do not have expensive hobbies or habits, and who do not travel, don't have extensive repair or remodeling work on their house, what do they spend money on?

One can only eat/drink so much, unless he drinks Louis XIII Cognac and eats imported Kobe beef each day. If you are into shopping Hermès goods and collecting Ferraris, then the sky is the limit.

We can't live on $12K a year but I'm happy with how much we've optimized our budgets since we retired. Our spending is $100K less than it was when we were working and we live in the same house, upgraded one of the cars, have done extensive home upgrades, go out more and don't have to work. Some of that was due to the kids growing up and moving out, less job and small business costs, and less income taxes, but the rest was just optimizing every expense. My light bulb moment came from looking for something to read on vacation and picking up a homesteading magazine. We didn't want to live quite that rural or have crops or chicken, but I realized those people seemed to have pretty nice, low stress lives with lots of exercise, fresh air, family time and no commutes. I've been into sustainable living and urban homesteading as a hobby ever since it has really changed our budget for the better.

 

[aja8888]

Interesting looking at these low dollar budgets. Next year, our health and Medicare costs (for two) will be as follow (unless something really goes south):

Medicare Part A,B - $3,960
Plan G Sup Ins Plan premiums - $5,400
Sup Plan Deductibles - $400
DW's Part D drug cost (est) - $3,000
My Part D drug cost (est) - $400

Total = $13,160

Then there are the house and living expenses.

If DW needs home health care on a continuing basis, add $12,000 (est)

We are in the Golden years!

 

[NW-Bound]

When I first retired, my expenses were in the 6 figures. I still had college tuition to pay and one mortgage. I was paying about $10K for pre-ACA insurance, for a plan with $10K deductible. And I hit that deductible 3 years in a row due to a severe illness.

I am now on Medicare. No debt. No support to my children. I am not spending money on much at all. WR of 1% instead of 3.5%.

Goes to show spending a lot of money does not make you happy. It may mean the reverse.

Not having to spend a lot of money means I can look at the market gyrations with calmness. And this may allow me to make the right decisions to make more money. Yes, I still like to make more money as a pastime, even if I don't need it.

 

[Alex The Great]

$2.667 Housing insurance- Includes an extra property
$1,222 Car insurance- 3 vehicles
$12,305 Health insurance- 2 people
$2,430 Property Tax- Home plus second property
$220 Auto Plates- 3 Vehicles
$2,811 Electric
$1,200 Water, Sewer, garbage
$12,079 Credit card- Covers fuel, food, etc. 3 people eating, spending on son
$600 Internet
$600 Cellphone
$6,000 Taxes
$44,001 TOTAL

This is a budget for me i.e. single, living in SF Bay Area:
$903 Housing insurance- 1 property
$671 Car insurance- 1 vehicle
$6,000 Health insurance- 1 person (projected)
$14,000 Property Tax
$209 Auto Plate- 1 Vehicle
$1,100 Electric
$1,000 Water, Sewer, garbage
$12,000 Credit card- Covers fuel, food, etc. 1 person eating
$600 Internet
$70 Cellphone
$6,000 Travel
$42,553 TOTAL

 

[Samsung4321]

We 2, Australian Capital Territory, living expenses; add $A4,000 for indulgences:

$A500 Housing insurance
$A250 Car insurance (Third Party Property only)
$A3,300 Health insurance (Hospital - other free)
$A3,000 Property Tax
$A1,000 Auto Plates ("Rego + Motor Accident Injury")
$A2,000 Electric
$A1,500 Water, Sewer, Rubbish
$A5,000 Credit card (Groceries, Household, Petrol)
$A700 Internet
$A900 Cellphone
$A0 Taxes (Income)
$A18,150 / y Total.

Compare Aus 2 * Full-time adult average annual total earnings: $A190,000.

 

[NW-Bound]

We 2, Australian Capital Territory, living expenses; add $4,000 for indulgences:

$A500 Housing insurance
$A250 Car insurance
$A3,300 Health insurance
$A3,000 Property Tax
$A1,000 Auto Plates
$A2,000 Electric
$A1,500 Water, Sewer,
$A5,000 Credit card
$A700 Internet
$A900 Cellphone
$A0 Taxes
$A18,150

I see nothing for food, let alone drinks.

Perhaps food is listed inside indulgences?

PS. OK, the post has been edited to put food inside credit card category.

 

[Car-Guy]

Interesting looking at these low dollar budgets. Next year, our health and Medicare costs (for two) will be as follow (unless something really goes south):

Medicare Part A,B - $3,960
Plan G Sup Ins Plan premiums - $5,400

I guess I should feel lucky... Our medicare advantage insurance premiums are only going to be about $6800 next year and that includes drug and dental. (Dental coverage is pretty poor, but it's something)

 

[Samsung4321]

Comparing High and Low Indulger's budgets shows which expenses will go from those down to their first million during a recession.

 

[aja8888]

I guess I should feel lucky... Our medicare advantage insurance premiums are only going to be about $6800 next year and that includes drug and dental. (Dental coverage is pretty poor, but it's something)

DW was on a MA plan for a year (trial period) but hit the medical deductible early and then her drugs cost us quite a bit since there is no cap on drugs on her MA plan. Since it was so costly, we switched back to the Sup plan and Medicare.

MA plans work for some folks, but in our case, there were a lot of surprises. One was Prolia, which under Medicare was 100% covered, and under the MA plan was $600 for the two injections. More things like that too......O2 machine rental was covered under Medicare and under MA was $360/yr, etc.

I was surprised when I found out that the max deductible on the MA plan only covered medical stuff and not drugs.

 

[Car-Guy]

DW was on a MA plan for a year (trial period) but hit the medical deductible early and then her drugs cost us quite a bit since there is no cap on drugs on her MA plan. Since it was so costly, we switched back to the Sup plan and Medicare.

MA plans work for some folks, but in our case, there were a lot of surprises. One was Prolia, which under Medicare was 100% covered, and under the MA plan was $600 for the two injections. More things like that too......O2 machine rental was covered under Medicare and under MA was $360/yr, etc.

I was surprised when I found out that the max deductible on the MA plan only covered medical stuff and not drugs.

Again, I guess I should feel lucky... We have a max OOP for drugs of $2500 per yr/person. Have you looked for a better drug plan?

 

[aaronc879]

Interesting looking at these low dollar budgets. Next year, our health and Medicare costs (for two) will be as follow (unless something really goes south):

Medicare Part A,B - $3,960
Plan G Sup Ins Plan premiums - $5,400
Sup Plan Deductibles - $400
DW's Part D drug cost (est) - $3,000
My Part D drug cost (est) - $400

Total = $13,160

Then there are the house and living expenses.

If DW needs home health care on a continuing basis, add $12,000 (est)

We are in the Golden years!

I dread Medicare as it is significantly more expensive than ACA for low income people.

 

[aja8888]

Again, I guess I should feel lucky... We have a max OOP for drugs of $2500 per yr/person. Have you looked for a better drug plan?

Yes, there are none in our area. DW takes two drugs that are Tier III and that sets the stage for the drug plan. No generics for those two. The other 10 drugs are generics and cost is minimal. It is what it is. One year, one drug cost went nuts and the plan would have cost us $14,000 for the coming year. We were lucky that her breathing Doc could get her on a much cheaper one.

Everything is good with Medicare and the MA insurance plans until you really get sick and need a lot of hospitalization/skilled care and expensive drugs.

It's a good thing we don't need any cancer drugs.

 

[NW-Bound]

I dread Medicare as it is significantly more expensive than ACA for low income people.

The tax and social assistance system in the US is a patchwork full of inconsistencies. Yet, no politicians talk of fixing it. I wonder if they know, or care.

 

[disneysteve]

But for people who have no mortgage, no car payments, no debts, and who do not have expensive hobbies or habits, and who do not travel, don't have extensive repair or remodeling work on their house, what do they spend money on?

Monthly:

$630 property tax
$74 home insurance
$252 gas/electric
$78 water
$217 synagogue dues
$210 life insurance
$256 disability insurance (I'm still working)
$37 sewer/municipal
$1,960 health insurance
$3,760 credit cards (paid in full every month)
----------------------------------------------------
$7,474 x 12 = $89,688/year

The credit cards encompass almost everything not itemized including many thing like auto insurance, alarm, medical copays, travel, groceries, dining out, car gas, car maintenance, internet, streaming services, etc.

There's probably another $10,000 or so not counted above like charitable giving, gifts, lawn care and snow removal, one-time expenses, and things we use cash for. So roughly 100K all in. There are some reimbursed expenses buried in there, like doing my mom's grocery shopping and picking up her prescriptions. There are also some deductible business expenses like ebay fees, shipping costs, supplies, and such. That probably shaves off $5,000 or so taking us down to the 90-95K range.

 

[Car-Guy]

^^^^^


Income Tax?

 

[disneysteve]

^^^^^


Income Tax?

Of course, I wasn't even counting that. I was just listing routine spending to answer the question of what people spend their money on when they're debt-free.

 

[CRLLS]

Everything is good with Medicare and the MA insurance plans until you really get sick and need a lot of hospitalization/skilled care and expensive drugs.

My thoughts are that it is not the various plans themselves. Most people think they are invincible (for the rest of their life). They take the least expensive Medicare plan they can find. Then later they realize differently. As for the Part D, at least a poor choice can be corrected each and every year without underwriting. Those on Medicare Advantage plans, I have no idea. There are too many choices to make a generality.

 

[audreyh1]

I dread Medicare as it is significantly more expensive than ACA for low income people.

I’m looking forward to Medicare as our premiums drop significantly, teeny deductible and is like being on a very broad PPO again plus out of state coverage. As you can infer we haven’t enjoyed subsidies on ACA.

 

[aaronc879]

I’m looking forward to Medicare as our premiums drop significantly, teeny deductible and is like being on a very broad PPO again plus out of state coverage. As you can infer we haven’t enjoyed subsidies on ACA.

Deductible for part A & B is almost $2K and there is no out of pocket max so it can get VERY expensive. My ACA deductible is $50 with a $900 max out of pocket. My premium was free this year and goes to $18.XX/mo next year. What you consider to be cheap I consider to be very expensive.

 

[Fermion]

Deductible for part A & B is almost $2K and there is no out of pocket max so it can get VERY expensive. My ACA deductible is $50 with a $900 max out of pocket. My premium was free this year and goes to $18.XX/mo next year. What you consider to be cheap I consider to be very expensive.

Is there any kind of safety net to Medicare, or do they eventually require you to pretty much bankrupt yourself before you are covered fully? I know it is something like your home, 1 car and some household items are exempt, plus about 10k in cash.

Hmm....are gold coins considered household items?...