Is Everyone a Multi-Millionaire?

[rodi]

But living on 25-30k a year is Spartan. When I write I think about a married couple. But even for single guy who needs to buy medical insurance 25-30k is not splurging by any way.

I think reasonable money start at 60k a year as a minimum. This not far from average US Family income. I am not talking life style of rich and famous here. I am talking about decent living.....

For that you would need 1.6 Million in your computations. And that puts you into my numbers

I think you need to look at several things. What is your annual budget (including taxes).

I have a family of 4 and just retired with less than 1.6M of investible assets. I'm over 50 - but not by much, currently 52, but will be 53 soon. But I still think I'm ok because of the following:
- I have a paid off house. No mortgage payment or rent saves a lot. I only need to cover taxes, insurance, maintenance... not the mortgage payment as well.
- I have an income unit on our property. That adds a nice COLA adjusted income stream.
- I have a small pension that will kick in at age 55. (very small) - it's enough to cover utilities and a few meals out.
- DH is collecting SS already.
- I prefunded the kids 529's and the balance will be paid with the SS they get as dependents of a retiree collecting SS.
- I *will* be getting social security in the future... so I can draw an amount closer to 4% now, dropping when the pension kicks in to 3.5%, and dropping even more when I start drawing SS.

Our total budget for a family of 4 is $84k/year. This is slightly more, per person, than your $60k for 3 people - but it's what we have been spending - so it requires no extra belt tightening. It works primarily because of income streams we already have or will have in the future.

 

[NW-Bound]

... You live extremely frugal life. Like Montana cabin style...

This cabin?

Or this "cabin"?

The first is a historic cabin in Yellowstone NP. The second is a mansion on sale for $5M.

 

[Dog]

The cabin in Yellowstone appeals to me more than the mansion - simpler lifestyle!


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[Fermion]

There is something to be said for the lower consumption, simpler lifestyle.

I wouldn't make fun of it. I could be a lot happier in a very small space with only a few essentials.

$20,000 is probably the minimum to be able to have a warm, safe living space and afford quality ingredients for cooking. Much more than that is just extra weight you eventually pay to lose.

 

[Major Tom]

$20,000 is probably the minimum to be able to have a warm, safe living space and afford quality ingredients for cooking. Much more than that is just extra weight you eventually pay to lose.

Oh crap, my 3 kitties and I must be slumming it on our expenditure of $17K/year then

Only kidding. Although there are many variables, I think most would agree that 20K is at the low end of comfortable, healthy living (speaking in a very broad sense, of course.) Jacob, naturally, would probably disagree I seem to remember he claimed annual expenses of somewhere in the region of 7 or 8K.

Yes, the Yellowstone cabin does look rather fun and inviting.

 

[NW-Bound]

OK, I will link in some interior photos of the Yellowstone cabin due to the interest.

This cabin is 224 sq.ft. I am not sure if the square footage includes the little addition where the stove and sink is located. No mention of a toilet.

Cute as this cabin is, I think my small class C motorhome of 200 sq.ft. offers more comfort and convenience. Its wall of 1" insulation does not offer the same protection against the harsh winter, but that's what its wheels are for: to go where it's more hospitable. That's my housing of last resort.

 

[daylatedollarshort]

Here is couple living in a 12 X 12 cabin in the woods without electricity. I would not live that extreme but it makes a 2 or 3 bedroom condo look pretty roomy -

 

[eta2020]

The interesting part to me (anyways) about many forum members isn't their wealth they created but the relative frugal or conservative nature in which they spend from it.


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Well I live in expensive high tech area of US. Couple living on 60k is very frugal indeed. Just property taxes on average expensive houses are about 20k, cheap houses 5k.

Maybe that is why I can't imagine living on less then 60k a year. Living on 30k looks unimaginable to me.....

 

[Tailgate]

Blessed to have 2 pensions, SS and a little over 500k invested.

I have a good retired friend who has about 7million from the sale of his business at age 40. He's now 56 and told me he worries about money every day. He has lived off bond income for years and has retained his initial stash but now has moved to stocks because of low bond yields.

 

[Hamlet]

We are going to spend more on daycare/pre-school this year than some people spend for their entire budget.

 

[daylatedollarshort]

Well I live in expensive high tech area of US. Couple living on 60k is very frugal indeed. Just property taxes on average expensive houses are about 20k, cheap houses 5k.

Maybe that is why I can't imagine living on less then 60k a year. Living on 30k looks unimaginable to me.....

Median household income in the U.S. is just over $50K. The 2011 Consumer Expenditure Survey shows households 65 and older spending an average of $39K ($41.5 inflation adjusted):

http://www.bls.gov/cex/2011/Standard/age.pdf

Across developed countries, the average household net-adjusted disposable income is much lower than the U.S.:

OECD Better Life Index

Location, location, location makes a big difference in how much it takes to live a middle class life.

 

[pb4uski]

..... My total portfolio is $1.3M but 1/3 of it is untouchable for the next 8 years because it is in an IRA.

Couldn't you do Roth conversions and then withdraw after 5 years penalty free?

Example 1. Jeremy is 40 years old and would like to tap the $50,000 of funds in his traditional IRA. If he takes a withdrawal now, he will be subject to ordinary income, and a 10% early withdrawal penalty. If Jeremy converts his IRA to a Roth IRA, he will also be required to report the amount as ordinary income; however, he can now take a withdrawal of his "after-tax" principal from his Roth IRA (the conversion amount) without an early withdrawal penalty. The end result: Jeremy could entirely circumvent the IRA early withdrawal penalty by simply doing a Roth conversion first and taking the money thereafter, so the 5-year conversion rule is designed to prevent this!

Example 2. Continuing the prior example, if Jeremy completes his conversion and waits 5 years, he will be eligible to withdraw his Roth conversion principal without any early withdrawal penalty; this is true because he has met the 5-year requirement for conversions, even though he would only be age 45 at the time. Thus, while the 5-year conversion rule prevents individuals from outright dodging the early withdrawal penalty from their IRAs, it does allow them to potentially gain access to their IRAs prior to age 59 1/2, albeit with a 5-year waiting period! (Though notably, any gains on Jeremy's conversion would still be taxable, as even if he has met the 5-year requirement for conversions and contributions, he has not met the 59 1/2, deceased, or disabled requirement to receive tax-free qualified distributions from his Roth IRA.)

 

[GTFan]

I think reasonable money start at 60k a year as a minimum. This not far from average US Family income. I am not talking life style of rich and famous here. I am talking about decent living.....

This is entirely dependent on where you live and your monthly expenses. If you own everything free and clear it is VERY easy to live on $30-35k a year here in the ATL, health insurance included. And I'm talking about a couple, not a single person. And there's tons of ways to travel cheap too, like playing credit card bonus games.

I am impressed that scrabbler can live on $25k a year in LI, NY though - I thought I was a serious LBYM but he's got me beat.

 

[GTFan]

I see many people that think they can live on $30K, and retire early. The trouble it is way risky. No pension, limited SS, no good way to increase income other than work minimum wage, etc. Its not impossible, but a lot of sacrifices.

No, it's not impossible or risky. There are TONS of ways to save money everyday, especially if you are a deal-hound like me. And scrabbler is proof that it's not risky at all.

 

[rodi]

We are going to spend more on daycare/pre-school this year than some people spend for their entire budget.

I hear you on this. When I had a baby and a toddler (so baby was in the "infant" room with a 1-4 staff ratio, and toddler was in the "two's room (1-6 ratio) we were paying about $23k/year in daycare. This was 11 years ago - so it would be more expensive now.

We looked at nannies, home daycares, and whether it made sense for one of us to quit out jobs. At the time our concerns with a nanny or home daycare was coverage for when the nanny or home daycare provider was sick, on vacation, etc. I had a spreadsheet outlining all the different options and costs that I put together while I was on maternity leave with son#2. We ended up going with a national chain daycare (kindercare) which was in the mid-range of prices. Montessori would have added $2k/kid/year.

We're now past this very expensive time. It cracks me up when I hear coworkers talk about how the teen years are "so expensive". I quote what we paid in daycare and they shut right up. Even with additional car insurance - it doesn't add up to over $20k/year for 2 kids in extra *required* costs.

 

[explanade]

Heard that it costs $240k to raise a child the first 18 years of his or her life.

Then there is college, which could potentially double that amount.

 

[Fermion]

My parents live on a golf course in the deep south in a 2bd apartment for $600 a month. There is a local restaurant with the best sweet tea, chicken, green beans, fried okra for about $5 with tax. They cook a lot of meals though using local farm produce. I think their budget is about $1500 a month.

Imagine a couple who is earning $40,000 a year in interest and dividends from their investments living like this, spending $20,000 a year to live on a golf course. You could take a two week vacation to Europe flying first class and still have enough money left for another two week vacation to Costa Rica, or a 10 day cruise in a luxury cabin.

I guess it is all about cost of living in areas. Where we are, $600 a month barely covers our real estate tax.

 

[daylatedollarshort]

This is entirely dependent on where you live and your monthly expenses. If you own everything free and clear it is VERY easy to live on $30-35k a year here in the ATL, health insurance included. And I'm talking about a couple, not a single person. And there's tons of ways to travel cheap too, like playing credit card bonus games.

I am impressed that scrabbler can live on $25k a year in LI, NY though - I thought I was a serious LBYM but he's got me beat.

I know a couple of retired singled women who have trouble spending more than $30K a year in the Bay Area. They have very low property taxes due to a Prop 13 tax base from 40 or so years ago, their cars are paid for, they have mortgage free homes they updated before they retired and Medicare for health insurance.

 

[W2R]

Well I live in expensive high tech area of US. Couple living on 60k is very frugal indeed. Just property taxes on average expensive houses are about 20k, cheap houses 5k.

Maybe that is why I can't imagine living on less then 60k a year. Living on 30k looks unimaginable to me.....

It very well could be, in your location, from what you are saying.

We are in a very advantageous period of time right now because of what could be viewed as a 1:1 exchange rate between ultra-expensive parts of the US, and the rest of the US.

A smarter person than me would take a job in the ultra-expensive areas (where presumably jobs pay more?), and then after accumulating a big nestegg, retire to flyover country (where expenses are often much less). I didn't do this but to me it sounds like the way to go.

I have to say that I am shocked by how high property taxes are in some locations. It is much less than that, here. I suppose that we do pay more in sales tax than some locations, though.

 

[ProspectiveBum]

Heard that it costs $240k to raise a child the first 18 years of his or her life.

Then there is college, which could potentially double that amount.

We intend to help our kids with the cost of college, but they'll be sorely disappointed if they're expecting us to kick in $240K.

 

[Live And Learn]

If you are maxing out your OOP every year, you are dealing with a major health issue, and not traveling, etc. I think you can assign your travel budget to help offset the OOP in this scenario.

We just have sufficient funds set aside to cover one year max OOP, assuming the more likely occasional event. So something less than max OOP is part of our annual budget based on past years.

On avg for the past 3 years our OOP (what we actually paid plus what insurance paid) has been $7k. I have a chronic non life threatening condition that requires monthly treatment. In addition, in each of the past three years we've also had surgeries (Carpel Tunnel x2, Hip Replacement, Hysterectomy). The only time we weren't active was 3 months recovery from the hip replacement. You can absolutely hit the 12.6k per year and still travel and spend money.

 

[sengsational]

When I started this thread, it was 12 pages. Now it's 14, so this comment comes from about page 8 or so...


This is a link to a paper that calls "BS" on the the whole "anything over 75 grand doesn't make you happier":
http://www.google.com/url?sa=t&rct=...x_iMX-QP24yDmaqO22fSfcg&bvm=bv.71667212,d.cGU
I think I agree. I think Dan Gilbert is interesting. Look for his TED talk if you're not busy today.


Then a tip of the hat to the best LOL of the thread:

buy two-ply toilet paper and split it.

And finally a question...

Here is couple living in a 12 X 12 cabin in the woods without electricity. I would not live that extreme but it makes a 2 or 3 bedroom condo look pretty roomy -

How did they get running water without electricity? Did they build it on top of a (powerful) spring? Do they go down to the river and walk 5 gallon buckets back, climb a ladder and pour them into a raised tank?

 

[GTFan]

I have to say that I am shocked by how high property taxes are in some locations. It is much less than that, here. I suppose that we do pay more in sales tax than some locations, though.

Definitely. My house is worth around $125k, prop tax is $1k a year. Same house in TX would probably be 3-4x that. That's one reason why my Dad moved from San Antonio to the FL panhandle 12 years ago after he retired.

Well that and the living's a lot better in the panhandle, from his experience. Just have to dodge the occasional hurricane.

 

[Andre1969]

I wonder if that 75K is before or after taxes? I make about $75K right now, and would definitely be happier with more. But after they take out taxes, SS, 401k, insurance, etc, it's about $36K. So jumping from $36k net to $75K net would make me VERY happy. Probably happier than doubling from $75k to $150K would. Or, maybe not. It would be nice to find out, though!

As for a house with running water and no electricity, well I didn't look at the video, but is it perhaps a pump that you have to prime, first? My mom and stepdad have running water in their barn, but you have to pump the handle a few times to get it started.

Or maybe the cabin is situated on a hillside, and tied into an aquifer with some of the water trapped uphill, so it has some pressure?

 

[daylatedollarshort]

And finally a question...

How did they get running water without electricity? Did they build it on top of a (powerful) spring? Do they go down to the river and walk 5 gallon buckets back, climb a ladder and pour them into a raised tank?

I think they live in a guesthouse on a property with a water hook up:

Diana's Innermost House

They seem to just live more of a tiny house life than a homesteading type one, like they don't grow their own food.