Retire on 3k per month thoughts...

[EngineeringMyFinances]

Quote:

Originally Posted by TexasGal As a single person, I am living on about $2K net right now and it is just enough. [snip] I am 60 now and don't plan to get into any of my tax-deferred savings/investments until age 70 if I can wait that long.

Have you thought about converting some of your tax-deferred savings to Roth now while in the 15% bracket?

[rjk514]

We have been doing just fine on this amount, (about 28k to 30k) now
and, suspect times are going to get tough here in the USA and 36K will look
pretty sweet in months, years to come...these corporate folks and companies are
building stuff no one will be able to afford...lets see, I think I'll go buy a
35K car or a 3K TV....I think not.. actually already have them but,.the 36K per year is after tax...net to live on...no debt....own house...new cars ;and its just Social Sec..(mine and my wifes) and 4% from the egg...when we cash in the chips, the kids can have whats left of the egg and the house, etc....thats why we sent them to college for, so they can figure out how to split it up....
Life is short, we are 62, and 59...so closer to the End of the Line, hmm good
song title...I don't expect to live to 90 as the actuaries should have some idea
to longevity....I think 78 is close and if I do live beyond that I'll be eating soup
with a straw....quality of life and all that ...love to golf and should be shooting
in the 200's by then anyway...there...done with my rant...RJK-out

[TexasGal]

Quote:

Originally posted by EngineeringMyFinances: Have you thought about converting some of your tax-deferred savings to Roth now while in the 15% bracket?

I haven't considered taking anything out of my existing 401k plan which is with Vanguard. At 62 I have to tell them if I want to roll it over or leave it there, and I can leave it with them until 70-1/2. I have lots of investment options as long as I leave it where it is now so I never thought of touching it. I also have a Roth IRA with Vanguard, but the bulk of my portfolio is 401k. In order to start moving anything to a Roth, I'd have to roll all of it out and then begin the process. I don't understand the tax consequences of leaving the 401k untouched well enough to do it at this time, but I certainly read posts where others moving theirs

How much money could I save if I begin converting to Roth now as opposed to waiting until I am 70 and begin taking distributions from the IRA where I place my money after rolling it over from 401k?

As you can probably tell, I recognize that this issue is part of many financial plans, but I don't understand how to actually make the transition.

TG

[EngineeringMyFinances]

Texas Gal:
Here's a post on my blog as to how the conversion process worked for me. Whether or not you have the option depends on the rules for your 401(k), I'd read the Summary Plan Description carefully and make sure you understand exactly what they say. If you're retired I can't imagine that you'd be prevented from rolling over part of it, but again read your SPD carefully. If you have other 401(k) plans from other employers you should be able to roll them over.

As to whether or not it's to your advantage to do the conversion depends on present tax rates Vs future tax rates. From your description, you probably have several thousand dollars that could be converted at a 15% marginal rate. Your marginal rate could be higher in the future due to taxation of SS benefits and RMDs, and even higher if as I believe is likely tax rates will be increased in the future.

[FIREd]

Once the house is paid for, it would be quite easy for my wife and I to retire on $3000 a month net. Our mandatory expenses (including health insurance, home and car maintenance, property taxes, insurance, food, gas and what not) right now amount to about $27,000 a year, so it would leave about 9K per year for fun stuff. That's $750 a month in disposible income, not bad in my opinion, but not nearly enough for DW. Our annual expenses break down as follows:
cars (repairs, insurance, taxes, gas, depreciation) $5500, Home (repairs, insurance, taxes) $5100, Health insurance and medical expenses $5500, Food $5400, Utilities $5500. Total $27,000.

[heyyou]

Upon retirement, 401ks are eligible to be rolled over into a traditional IRA which may have lower fees and usually has better fund choices. Any dollar amount of a T-IRA can be converted to a Roth IRA by transferring the money, then paying the extra taxes as though that amount was income. If your 401k is about $400,000 or more, you should expect to pay noticeable taxes after age 70.5 when your Required Minimum Distributions (RMDs) from your TIRA get added to your Social Security. If your RMD income plus half of your SS adds to more than $32K for couples, most of your SS is taxed. Find Scott Burns's articles about "torpedo tax" for a better explanation. So there is an advantage for someone with low early retirement income to convert some of a TIRA to a RIRA each year of retirement until the RMDs kick in on the remaining TIRA. One tries to stay in the same tax bracket, but run their income to the upper edge of the bracket. See Fairmark.com for much better info.
Joe

[EngineeringMyFinances]

I could live on $3K/month and am doing that now. Two things make me think that might not get me by in retirement:
(1) I'll have more free time to spend money. And no, my working costs are not that great.
(2) Health / long term care.
I've estimated I could spend that much at age 62, but think I should work a few more years to have a bit extra. But when I hit 62 I'll see what I think then.

[tulak]

I'm looking at our monthly budget and assuming that our mortgage is paid for, our fixed expenses are $1107/month. On top of that, we currently average around $2200/month for variable expenses (food/entertainment, etc), but that is including youngs kids. I expect this to be lower in retirement (only if it needs to be, of course).

Of course our numbers are higher right now, because we do have kids, in a private school no less, not to mention a mortgage. However, we try to keep our expenses low and are planning on being able to retire on around $50k/year after the kids, and mortgage, have moved on.

I'm always amazed that when I break down the numbers, it really doesn't take that much to get by and still live comfortably.

[dumpster56]

1000 dollars a week really is a fantastic number with a small or no mortgage and real estate taxes in the 3K range.

[rjk514]

Some of you folks must not be very frugal if you can't get by on
3K per month...for 2-people with no debt....(operative term is
NO DEBT)....try harder...do less...walk more...if it means working
longer or doing a little less in retirement, its a easy choice...

[Khan]

As of this morning I have spent $17,000 so far this year (not including buying a car, which I last did in 1989).

[Gumby]

My retirement budget assumes that the young wife and I will not want to change our standard of living. Not counting the mortgage P&I (which will stop coincident with our retirement), our actual current cash outlay is about $4.5k per month ($760/mo. for real property tax alone - yikes!). To this, we will add $2k per month for a sinking fund to be used for car purchases, larger home repairs (such as periodic painting, new roof, etc.) and vacations. We figure that the reduction in commuting expenses will be offset by health care costs. Accordingly, my retirement budget is $6.5 k per month (after taxes) for two.

[SecondCor521]

I spend right around $6K per month, but about 2/3 of that is direct kid expenses and mortgage interest, so with a paid off house and the kids grown, I think I can live comfortably on $2K per month.

2Cor521

[haydee]

Are most people assuming health care is covered. I am not sure how you can plan for health care. Sure, I could do $3k/month NOW paying for private insurance, but dont know what health care is going to be costing. We are in our 30's, and health care for people in their 60's is more expensive, as I can see when plugging numbers in esurance, plus its been going up at a higher rate of inflation. So being able to live on $3k now for me does not mean that I can leave on $3k plus inflation in the future.

[JohnP]

The "Fog of Finances while saving for retirement" is slowly clearing... it is showing me that we are more like Gumby than the 3k/mo crowd. We live modestly in a 3 br condo and LBYM. Like Gumby, we planned to retire at the same level of living as we enjoyed while working - it has worked out that we've been able to successfully continue our lifestyle into retirement.

We're 64 and 66. This month is the first where we don't have income from a job and corresponding savings into tax deferred retirement accounts since DW has finished her part-time teaching stint. I've developed what I call my Cashflow Budget which now only has six major topics, Household, Insurance, Auto, Medical Out-of-pocket, Taxes and Personal. Everything is becoming easier since we are retired-retired, the mortage is paid and both cars are paid for.

Household includes all expenses to keep the doors open
Elect 70
Gas 120
Cable 55
Inter 25
Phone 80
HOA 320
Water 60
PropTx 450
Tot 1180/mo

Insurance includes recuring Ins expenses.
HC 300
LTC 200
Life Ins 100
Property 70
Medi Pt B 95
Vision 15
Tot 780/mo

Two Cars '98 and '01
Gas & Maint 400/mo

Out of Pocket Med 150/mo

Personal includes discretionary expenses -
Food, Clothes, Misc, Vacations 1200/mo

Total of 1180+780+400+150+1200= 3710/mo not incl Fed & State Tx

We usually have a 6-10k Vacation that isn't included here also - we went for the open-heart surgery and cardio rehab option instead - $6-10k Vacations to restart in 2008.

JohnP

[Corporateburnout]

It would be extremely difficult for us to live on 3k per month especially in the area we live in (the northeast). My ER budget is 5.5K per month including a couple of vacations per year.

[OAG]

Our budget for 5 of the past 7 years has averaged less than $24K, last 2 years it has gone up to about $28.5K. Lived in Florida for 17 of the last 19 years and OHIO for the past two years. Increased budget due, primarily, to RE taxes on a fully paid for $350K condo. We travel a bit (last two years to Virginia twice, Chicago twice, Florida 3 times, and NY (Niagara Falls) once). We stay with friends, family or (in the case of NY) Military Lodging facilities, visit things that do not cost much like walking trails, parks, water falls, etc.,. I guess it is what you want to do and how much you want to "spend" doing it. We do this because it is what we want to do and not because we cannot afford to do more as we have budgeted expenses covered at about a 4:1 ratio (Income to Expenses).

We own one car (3 years old that cost $50K when we bought it new), do not carry any type of life insurance (to old and do not need to give anyone a windfall to waste) with the exception of one small paid up policy and have medical insurance covered at no cost.

So to OP yes you should be able to do it fine on $3K per month even considering medical expenses.

[Bigritchie]

Quote:

Originally Posted by JohnP The "Fog of Finances while saving for retirement" is slowly clearing... it is showing me that we are more like Gumby than the 3k/mo crowd. We live modestly in a 3 br condo and LBYM. Like Gumby, we planned to retire at the same level of living as we enjoyed while working - it has worked out that we've been able to successfully continue our lifestyle into retirement. We're 64 and 66. This month is the first where we don't have income from a job and corresponding savings into tax deferred retirement accounts since DW has finished her part-time teaching stint. I've developed what I call my Cashflow Budget which now only has six major topics, Household, Insurance, Auto, Medical Out-of-pocket, Taxes and Personal. Everything is becoming easier since we are retired-retired, the mortage is paid and both cars are paid for. Household includes all expenses to keep the doors open Elect 70 Gas 120 Cable 55 Inter 25 Phone 80 HOA 320 Water 60 PropTx 450 Tot 1180/mo Insurance includes recuring Ins expenses. HC 300 LTC 200 Life Ins 100 Property 70 Medi Pt B 95 Vision 15 Tot 780/mo Two Cars '98 and '01 Gas & Maint 400/mo Out of Pocket Med 150/mo Personal includes discretionary expenses - Food, Clothes, Misc, Vacations 1200/mo Total of 1180+780+400+150+1200= 3710/mo not incl Fed & State Tx We usually have a 6-10k Vacation that isn't included here also - we went for the open-heart surgery and cardio rehab option instead - $6-10k Vacations to restart in 2008. JohnP

Wow John, I cannot imagine having to pay 450+ a month just for property tax, I just pay 400 per year. That just blows my mind.

[haydee]

Where do you live? I pay $4,000+/year and I thought I was doing good. I am in Seattle.

Quote:

Originally Posted by Bigritchie Wow John, I cannot imagine having to pay 450+ a month just for property tax, I just pay 400 per year. That just blows my mind.

[Corporateburnout]

Quote:

Originally Posted by haydee Where do you live? I pay $4,000+/year and I thought I was doing good. I am in Seattle.

I wondered about that myself. I pay $4800 in property tax as well.

Living in Boston, Seattle or San Diego is much more expensive that the mid western or southern states. That is why 3k per month does not work for everybody.