How much is enough

[bobbee25]

Everything is paid for, house, cars, new furnature, ....

I figure a budget that also includes all potential house/ appliance repairs, 2000/ year for a car, ... seems comfortable.
(Have set aside enough for a new car now)

Then I calculate how much income we would probably receive, using 5.5 - 6 % return and 3% inflation.

While I realize that there is not definitive answer, being realistic:

1. how much over the comfortable annual budget would be realistic and permit a good nights sleep ?
2. How much additional savings not used for retirement income.?

$2000 -3000 over budget and $30,000 for miscelaneous ?

 

[Cut-Throat]

Dude,

2000 -3000 over budget and $30,000 for miscelaneous ?

I have no idea what you are proposing here? What I do is budget twice for what I Have to have. Food, clothing, shelter. For me budgeting an extra $30K would be more than twice what I have to have.

 

[bobbee25]

To clarify, I made a realistic annual budget, a little on the high side. Then we set aside enough in the income producing funds to produce a return that is 2 or $3,000 over that annual budget.
In addition we would have around $30,000 - $40,000 in savings.
In other words, if you feel that you can live comfortably today on x number of dollars a year, and the calculators indicate that you have a 99% chance of having that amount plus 2 or $3000 a year, is it really enough.

 

[dex]

I think your question is this:
1. Amount needed to exist in retirement - food, clothing, shelter, gas, cable TV, telephone, internet, health ins., taxes, etc?
2. How much extra is needed for enjoying life - travel, hobbies, wine etc


You should be able to compute #1. Number two you should also be able to estimate based upon your interests.

My estimates are:
$19.3K for number 1
$25.7K for number 2
$45.0K total - Grow at 5% per year
The above assumes no debt, house & car paid etc.

Now, I'm not retired this is my plan or goal at this point.
I'm guessing I could reduce these totals somewhat and I have been tracking my expense and that $19.3K looks correct.

I really haven't planned out the $25.7K. I'm thinking this should cover travel and education etc.
There are others on the board who have a much smaller budget and it very much a personal decision and retirement goal decision.

 

[Cut-Throat]

In other words, if you feel that you can live comfortably today on x number of dollars a year, and the calculators indicate that you have a 99% chance of having that amount plus 2 or $3000 a year, is it really enough.

Many, Many variables here. - I can paint you scenarios that you'll be rolling in dough or I can paint them that you'll be lining up in the Salvation Army soup line. - Probably somewhere in between.

If termites eat your house down and you have uninsured health problems you could be broke in a couple years. The more savings you have and the less you need to spend, the better your chances of portfolio survival. Once you hit 90 though, A SWR of 15% is pretty safe bet!


One thing is for sure, no one gets out of this life alive. So don't worry too much, we'll all be dead in the long run 8)

 

[Bob_Smith]

To clarify, I made a realistic annual budget, a little on the high side. Then we set aside enough in the income producing funds to produce a return that is 2 or $3,000 over that annual budget.  
In addition we would have around $30,000 - $40,000 in savings.

bobbee25, I really think it depends on your age. Those closer to pension, SS, etc. can probably cut it a bit closer than very young retirees. I'm 52. My numbers are very close to yours (about $40,000 extra and $6,000 over the first year's annual budget, with extras built into the budget). I ER'd in May. No debt, no mortgage, etc. My biggest concern is that health insurance costs will swamp my $6,000/yr extra and start eating into my budget before Medicare kicks in. I'm willing to take that risk at 52 with 13 years to go until Medicare. I probably wouldn't have risked it at 42.

On the other hand, my attitude is changing as I get into ER (almost two months into it now). I'm not worrying as much as I used to. I look at it this way: I had virtually no security when I was working because my economic fate was in the hands of employers. I lived check to check until about 13 years ago when I set my sights on ER. I have more security now than I have ever had - minus the work.

 

[bobbee25]

I came up with a similar number, around 45K, the calculaters show around 48k after income taxes using 5.5 - 6 % w3% inflation. Then I would have another savings account with around 55k. Seems good.
However, I am a little nervous cutting off the salary and taking the plunge.
What is SWR ?

 

[Bob_Smith]

What is SWR ?

Safe Withdrawal Rate

 

[Cut-Throat]

What is SWR ?

Stands for Historical Safe Withdrawel Rate

 

[cute fuzzy bunny]

Stands for Historical Safe Withdrawel Rate

Dont go ***** on us man. Have another glass of wine.

My low-end floor budget is about 30k a year, which does include budgeting for car and appliance replacement, new furniture, all sorts of stuff. Its pretty comprehensive. I could conceivably lower that by 10-15k a year but we're talking no cable tv, ISP, expensive food, that sort of drop...not too exciting.

Add to that any travel, dining out, major home repairs/upgrades, non-basic wardrobe items, other luxuries, tuitions, any debt payments, etc. We dont really travel much except by car, we hardly eat out, and my house is almost brand new and very low maintenance. We have no debt and dont want any.

That 30k per year is pretty well insulated with "fluff" and "pad", but I'll bet 10 years from now I'll have spent ~300k give or take a few percent. Miscellanous spending and stuff you dont think of is truly the budgets death of a thousand cuts.

 

[oldcrowcall]

As soon as I retired the furnace went and I had to have the roof reshingled. The pets (2 dogs) are getting old and pet care is way over what I estimated. Car repairs and gas are very high. All in all repairs and capital items are higher than expected. Outside of that my budget is pretty good!

 

[O.T.Sea]

As soon as I retired the furnace went and I had to have the roof reshingled. The pets (2 dogs) are getting old and pet care is way over what I estimated. Car repairs and gas are very high. All in all repairs and capital items are higher than expected. Outside of that my budget is pretty good!

Two things I did as I was getting mein scheiss together before leaving work was put aside, separate and aside form my "living money", the cost of a new car. Took a look at what car I'd buy at the moment if my current car got totaled. Then I took that amount of bread and put it in I-Bonds. Since I KNOW a car will be something I will need someday I figured it was prudent to take that expense now and just protect it's purchasing power. That way there's no $15,000-$20,000 suprises, perhaps at a time when I could least afford it or worrying about whether it would affect my withdrawl rate.

I also, set aside, apart from my "living funds" about $50,000 bucks (it might actually have been only 30,000 but I've made so much money since then it's mere icing on the cake), to fund those kinds of surprise, emegency bite-you-on-the-ass, lightening bolt, screwed-by-life expenses.

I actually did an audit of my life up till that time to see just how many "emegencies" I had actually had that fell outside the normal limit of annual expenses and how much they actually cost me. The numbers were quite encouraging. Over 20 yrs I hadn't really had to shell-out big-time for too many things. And even most of them were rather mundane and non-back-breaking. Things like car repairs at inopportune times, or trips home for a funeral or something.

In fact what was most glaring was that MOST of these friggin' "emergency" blind-sidings were all related to HAVING A JOB! They all seem to revolve around non-reimbursed travel/loging/relocation related impositions, or car repairs/replacements. There were some house related things too..roof, 50 foot tree cracked vertically from the cold needed emergency removal, furnace blew the first weekend after I moved in. But how many times in your life is that stuff gonna happen?

 

[bobbee25]

Sounds like I am in the ballpark. I am anxious to start ER (At 60) but have been leary of leaving the salary. The longer you stay the more you have, but the less years to enjoy it.
It would be great to just answer posts and drink wine !

 

[John Galt]

That's pretty much what I do, i.e. answer posts and
drink wine, plus fishing, boating, motorcycles,
good books, good movies, sleeping in, naps,
lunches with friends, more fishing,
but you get the idea.

John Galt

 

[fredx]

Well, I'm new to this forum, but it appears to me that I'm a bit out of the norm here. I'm 38 now, having retired early at 35. I was able to do this by keeping my needs minimal. I truly *detest* having a job, enough so that I'm perfectly content to watch my pennies in order to avoid having to seek paid work!

Anyway, how much is enough? In other forums (e.g. http://www.simpleliving.net/ ), I've been substantially higher than other folks. Here, I think I'm substantially lower. After housing and health care and taxes, my budget is about $1000/month. Now for the funny part: I consistently under-spend that. About $7-800 is more typical. That's convenient, because when my condo HOA did a big chunk of work and I got a special assessment of almost $4500 last year, I was able to write a check and forget about it. Likewise, when I broke a tooth and had to pay $880 out of pocket for a crown, I was fine.

I own my tiny studio condo in San Francisco free and clear, and don't own a car. I walk everywhere, which saves lots of money in both transportation and health expenses.

I get bored in the traditional "retirement" lifestyle, so I stay pretty active with about half-time volunteer work, along with other activities. But I do like take naps in the afternoon pretty often.

Cheers,

- Fred

 

[sgeeeee]

Hi fredx,

$700 - $800 per month in San Francisco sounds amazing to me. The naps sound nice too.

 

[Bob_Smith]

Hi Fredx,

Very interesting post. If you wouldn't mind, I'd be interested in seeing a breakdown of your annual expenses. I live in a relatively low cost rural area (with 2 kids still at home) and estimate I need around $41,000 based on past expenses and a great deal of number crunching. There's a fair amount of padding in there, however. I'm very interested in getting a feel for how low I could go if the need arose. I have several relatives who lived on very little, yet they were quite happy (most are deceased now).

Regarding detesting the job and doing what it takes to stay ER'd - I couldn't agree more.

 

[platypus19]

Hi Fred

I don't own a car now either. It takes a bit of effort to learn how to walk and use public transit effectively but it works for me. Of course, not many people live in places where that is possible. I live in a medium sized Texas city that has a fairly intact urban core. The bus system is well managed and a monthly metro pass is only $10.

I typically buy groceries for only two or three days at a time. I try to combine 2-4 errands every time I go out to make up for my slow speed of travel. I carry taxi phone numbers in my wallet just in case, and if absolutely necessary I can always rent a car.

The exercise is great and I like the relaxed pace of life on foot. For my afternoon naps I have a screened in terrace with a big hammock and a featherbed topper!

 

[haha]

Hi Fred

I don't own a car now either.<snip> I live in a medium sized Texas city that has a fairly intact urban core. The bus system is well managed and a monthly metro pass is only $10.

Platy,
Would you tell what city that is? I don't like the expense of cars, and I really like to walk- I do it for pleasure and exercise nearly everyday. I lived in Boston and NYC without a car, but never tried it anywhere else. Austin?

Mikey

 

[haha]

After housing and health care and taxes, my budget is about $1000/month.  Now for the funny part: I consistently under-spend that.  About $7-800 is more typical.  

Fred, I may be misunderstanding what you wrote. Are you saying that you spend $700-$1000 per month, not including housing, health care and income tax? Or do you mean with those expenses included?

Last year there was a poster here who said she lived in San Francisco on a take home of $850. She did have paid health insurance at her job, but she was able to pay everything else, including a basement apartment and an old car out of those earnings. Her very low expenses even in an expensive city like San Francisco gave her the confidence to retire early with minimal assets.

Mikey

 

[John Galt]

Let's say you just go without health insurance and get
lucky with your health, and let's say you live where
you can and do go without a car (that alone might
make you healthier). Then, assume you live with friends and/or relatives (shared housing), and that you
enjoy activities that are free or very cheap. Finally,
assume that you only have yourself to worry about
(no pets, no kids, no spouse). Why, you could live on practically nothing.

John Galt

 

[platypus19]

Mikey

Yes, I live in Austin. The Northcross neighborhood here has just about everything I need within convenient walking distance.

Austin pros: something of a college/government town, very accepting of nontraditional lifestyles such as ER

Austin cons: high property values/taxes, summer is humid and hot, sudden urban sprawl in recent years, inadequate roadways with congested traffic.

 

[fredx]

Hi Fredx,

Very interesting post. If you wouldn't mind, I'd be interested in seeing a breakdown of your annual expenses. I live in a relatively low cost rural area (with 2 kids still at home) and estimate I need around $41,000 based on past expenses and a great deal of number crunching. There's a fair amount of padding in there, however. I'm very interested in getting a feel for how low I could go if the need arose. I have several relatives who lived on very little, yet they were quite happy (most are deceased now).

Regarding detesting the job and doing what it takes to stay ER'd - I couldn't agree more.

Howdy Bob,

A quick breakdown of my expenses would be $114/month health care (low-end PPO plan, plus dental HMO), $173/month condo HOA, $1400/year property tax, $20/month utilities ($4 electric (yes, I conserve!), $16ish phone including LD), $200/month food (I buy mostly organic), $50/month beer (I like beer), and the rest is discretionary. I fritter lots of money away on tasty Thai dinners out, travel, etc.

As I said, my budget allows for up to $1000/month excluding health care and housing, which means about $1400/month including them. But I consistently under-spend that by a few hundred a month.

My income is low enough that I'm able to live below taxable levels. I haven't had to pay state or federal income tax in a few years now. We'll see if that changes after the taxes go back up to compensate for Bush's wars. :-(

I like to work; it's jobs I hate. Therefore, I take on volunteer work that gives me pleasure. I work a lot for a major international environmental non-profit, which flies me to remote parts of the world sometimes for work, so even though I'm not paid, I do get free travel to places like the Amazon and Europe. Likewise, I volunteer at a local art-house movie theatre which shows excellent films which I enjoy. In return for volunteering, I get loads of free movie passes. I'm also a volunteer docent for the National Park Service, showing folks around the Point Bonita lighthouse in the Marin Headlands once a month. That's merely an excuse to go watch the crashing waves and the seals and the raptors for an afternoon, and chat with happy people on vacation.

I live cheaply, but really very richly. I kinda dig it.

Cheers,

- Fred

 

[fredx]

Fred, I may be misunderstanding what you wrote. Are you saying that you spend $700-$1000 per month, not including housing, health care and income tax? Or do you mean with those expenses included?

No, that's excluding housing & health care, and I haven't had to pay tax at my income level.

I own my tiny studio condo free-and-clear. Paid cash for it, actually.

Cheers,

- Fred

 

[haha]

Platy,

Thanks for your location. I spent a few weeks in Austin in the late 70s- a very cool place IMO.

Fred,

Thanks for clarifying. Your life does sound very nice.

Mikey