Retire on $500k?

[Onward]

Shoestring FIRE-ees, there is hope!

Here’s what he found: Most people can be happy in retirement with savings of about $500,000. A higher number can buy more happiness, but only to a point.

Retire On $500,000? This Advisor Thinks Clients Can

 

[cooch96]

i consider this (FIRE with $500k) as my B or C plan. I think it could work fine for me because my wife loves her job and plans to work there as long as possible. She only makes enough to keep her gas tank filled and support all the nearby Starbucks, but her full time employment would provide health insurance and other such benefits.

 

[rodi]

Woo hoo.
Granted it's easier if:
a) you're not looking at a 40+ year retirement.
b) you have pensions OR
c) you have low expenses.

My dad retired with less than 500k in investable assets. But he had a paid for house, he had a small pension, my mom had a bigger pension, and they had a paid for house. The pensions and SS covered their expenses - and he just grew the investments.

 

[scrabbler1]

I had only $600k in my taxable accounts when I ERed in late 2008. I also had $234k in a Rollover IRA which I really couldn't access easily. It generated more than enough to cover my expenses each month and still does today. And it has grown to over $800k now, while the IRA has doubled in value without adding a single dollar from the outside.

 

[Fred123]

The article claims that a retiree can withdraw $3000/month from that $500K, which would be a 7% withdrawal rate. That probably isn't sustainable. Using his example ($3K/month SS) and a 4% SWR would give you about $55K/year, not the $70k he implies. Still doable, but only with either SS or a pension or both.

 

[Major Tom]

Is there even a causal relationship between the amount of your savings and how happy you are? Aside from the fact that insufficient income can cause stress, I'm inclined to think that the amount of happiness a person feels has much more to do with their disposition than how much money they have.

 

[Golden sunsets]

Is there even a causal relationship between the amount of your savings and how happy you are? Aside from the fact that insufficient income can cause stress, I'm inclined to think that the amount of happiness a person feels has much more to do with their disposition than how much money they have.

I do think there is a direct correlation, but the added contentment presumes good health. The peace of mind that I experience on a daily basis because of our financial situation is a pleasant feeling but would disappear abruptly if health issues intervened.

 

[UnrealizedPotential]

If the mortgage is paid off, and you have company health care, then maybe. Maybe I missed it, but I did not see where the 500k was invested. If it was in an annuity could it be possible to take out 3k monthly out of 500k? The bottom line is I do not like this. I would need alot more money. IMHO.

 

[Senator]

perhaps they have two or three thousand in Social Security income, and they can take another $3,000 monthly from their investments. They look at that and decide that they can live a good life on $6,000 a month.

$6K a month, or $72K a year, is very feasible. Especially if you are 65+ and are collecting SS.

The issue with early retirement is the first $2-$3K for SS is not even there until at least 62. And if you have only $500K, and the market goes south, you have only $250K maybe.

That is why many people go OMY. All you may have is your investable assets for a long while.

If I was 80, I could probably get by with $5K, plus SS.

 

[Fermion]

With a $500k portfolio you will likely pay no federal tax and pay no tax on your SS benefits. This is a pretty big deal.

Also, your medical can be very cheap pre Medicare as you should be able to qualify for a subsidized silver plan with cheese (cost sharing).

Those two factors alone could make a $35k to $45k income go a long way.

 

[NW-Bound]

The article's opinion relates to normal retirees, not early retirees, as he talks about SS. At the end of the article, the term "early retirement" is defined as retirement at 60 or 62. Then, I agree that a retiree can live comfortably with a stash of less than $500K.

I know this because my own mother has been living very well on around $30K/yr. That comes from SS, her pension, and IRA and savings withdrawal. A widow, she lives alone in a modern paid-off 1,800 sq.ft. home that needs little work. She drives a car that's 10-year old. Her Medicare supplement costs little compared to what workers or early retirees pay for insurance. Her children often make cash gifts or help with her travel expenses, all of which add up to a few more $K/yr.

An early retiree, meaning one in his 40s or early 50s, has a much tougher job managing expenses to live on just a $500K stash. It is a lot more feasible now with ACA, but one still needs to be really frugal and resourceful. It's a totally different game.

 

[Rushmore]

I quit w@rking almost 7 yrs ago when I was 55 with about that and a paid for newer house. I do have to pay my own health insurance. It may not be the retirement for many, but work was killing me physically and the trade off has been well worth it. I am happy for the little things like being able to sleep in a little bit if I couldn't sleep at night(usually due to back pain).

Unless something huge happens in the next week, I should come in spending under 25k this year. The past 4-5 years I have been right at 20k. It would have been close to 20k but I had several extra expenses: a niece getting married, some repair work on my car(hopefully so I can drive it longer), and I splurged on a nice patio set.

Sure it is not the jet set life of the rich and famous, but I am quite content. The increase in physical quality of life is well off set by the little bit of extra money a few more years of working would have given me. I suppose an added bonus is the physical pain and limitations I have made some of the things that people spend money on like international travel a lot less appealing. Even if I was more physically able, I would most likely have continued camping, hiking etc for most of my recreation.

My net worth has increased slightly since I quit w@rking but I have continued spending about the same.

 

[Senator]

I splurged on a nice patio set.

This is exactly it. Once person's splurge is another's person's "Gotta have".

Congrats!!

 

[PhrugalPhan]

I'm guessing the $500k is for a couple (it isn't explicitly mentioned in the article).

This hits home for me as this year as my total savings / investments / etc went over $500k, and I have a paid off house, car, etc... But if I include my GF who has more savings than I do (though no house), there are days it makes me think we are working only for the health insurance and the pension payoff (4 more years for her, 8 for me).

 

[Tadpole]

I would imagine that it takes a lot more money to retire a 45 and live to be 80 than it does to retire at 65 and live to be 100.

 

[Independent]

The article claims that a retiree can withdraw $3000/month from that $500K, which would be a 7% withdrawal rate. That probably isn't sustainable. Using his example ($3K/month SS) and a 4% SWR would give you about $55K/year, not the $70k he implies. Still doable, but only with either SS or a pension or both.

+1

Nobody here would suggest a $36k annual withdrawal from a $500k portfolio. IMO, that's a terrible idea.

On the other hand, he's also assuming this couple has $36k of Social Security. A more realistic $20k annual withdrawal gives them $56K of annual income. Their FIT would be virtually zero.

If they have a paid-for house (his other assumption), their $56k will support a perfectly average "older couple" budget.

We can debate whether the average couple is "happy".

 

[foxfirev5]

I agree, this forum aside, that most near retirees would be happy with 500k saved. It's kind of refreshing to see that you may not need 3 million+ to be happy. While some of the facts are questionable the theme may be worth consideration. When I look back home to those now retiring, that amount far exceeds what most have. Pretty darn happy people I might add.
Maybe attitude trumps assets.

 

[NW-Bound]

Looking at my past 12-month expenses, it looks like if I did not have the high cost for healthcare and the extraneous "stuff" that brought me only marginally more pleasure, I could live quite OK on $56K/yr. When we become an "average older couple" who no longer care much about travel, it will be no sweat living on that amount.

In fact, we may end up spending even less than the above, judging from what my mother currently spends. If my father were still alive, their expenses certainly would not double as they shared the same home, and just one car.

But, but, but I never underestimate the pleasure I get from counting money. By now, everybody here already knows this. And many share this feeling, I am sure, but are too bashful to admit it.

 

[clifp]

I think most of the research seems to point to 75K as being the point of diminished marginal utility. I don't remember the specifics is that salary vs spending for a couple or for a family. But in any event, the million plus social security or pension gets you close to the figure.

I also agree that $500K is plenty for most people at age 62 or so. I don't think it is enough for somebody in their early fifties or even 555.

 

[Elbata]

I would imagine that it takes a lot more money to retire a 45 and live to be 80 than it does to retire at 65 and live to be 100.

Never thought about it, but yes, I would agree.

Part of that reasoning is of course as one gets older, there's the been there done that sort of thing, but also a bit of extra wisdom kicks in too.

 

[chrisaukcam]

Retire on $500k

I am inclined to agree with Rushmore. Keep your expenses low. From what I can see $500k is what I will have saved back in about 4 years. Bills will be paid off then and if you use SS + a withdrawal from the $500k, then it should last for a long time. I am figuring on withdrawing $1.5k per month - or less.

 

[kaudrey]

I would imagine that it takes a lot more money to retire a 45 and live to be 80 than it does to retire at 65 and live to be 100.

+1

I was talking to my dad the other day and he mentioned that they spent much less this year and last year than the prior years. My parents are 77, and although my dad is in great health, my mother is not. She can no longer travel comfortably for long distances nor play golf or do other things on which they used to spend money. SS and my dad's small pension covered their expenses, which certainly wasn't true when they first FIRED (20 years ago, at 55).

 

[Sunset]

I think most of the research seems to point to 75K as being the point of diminished marginal utility. I don't remember the specifics is that salary vs spending for a couple or for a family. But in any event, the million plus social security or pension gets you close to the figure.

I also agree that $500K is plenty for most people at age 62 or so. I don't think it is enough for somebody in their early fifties or even 555.

The 75k was for happiness of workers, weird part I always found was that CEO's who make millions seemed pretty happy even though it was far above the 75K limit for workers

 

[Ed_The_Gypsy]

With a $500k portfolio you will likely pay no federal tax and pay no tax on your SS benefits. This is a pretty big deal.

BEWARE! This is an unsupportable generalization.

Similar to my situation and I ran the numbers. I will have a high SS benefit. If I leave the assets in my TIRA, the MRDs and the Tax Torpedo will hit me hard and the survivor (after one of us dies) even harder.

 

[Ed_The_Gypsy]

I sure as hell hope one can retire happily on $500k.

Granted it's easier if:
a) you're not looking at a 40+ year retirement.
b) you have pensions OR
c) you have low expenses.

We only have a little more $500k now. (We had more three months ago. ) House is paid off. Max SS coming in 3 years. Living in a relatively low-cost-of-living area in a zero income tax state helps. Only $400/mo pension. A 30 year retirement is optimistic but possible. 15-20 more likely.