Survey finds $880,000 is magic number

[Looking4Ward]

A few weeks ago my 90 year old uncle did his first parachute jump. I have a picture of him standing on a prattle board and his 80 year old lady friend sitting by his feet.

I bet that's a cool picture.

 

[Dog]

My take from the article is that you just need to have enough $ to lead a comfortable retirement. $880k may be the sweet spot for the average retiree without debts and mortgage. Just as important is to have engaging interests/hobbies (a reason to get out of bed)....whatever that may be for you as an individual.
My FIL retired and just sits and watches TV all day. Keeps asking what DH and I will do with our time when we retire. I haven't had any trouble finding things to do. But I know lots of retirees that seem bored and I don't think they thought about or planned how to spend their time.

I liked the article.


Sent from my iPhone using Early Retirement Forum

 

[daylatedollarshort]

I don't really get the emphasis on magic numbers not including pensions and SS. At 3% SWR $880K would generate $26.4K in retirement income. With zero pension and $12K SS that would be $38.4 in retirement income.

A $500K portfolio with a $50K a year pension and $50K in SS would generate $115K annually. Portfolio savings by itself is a meaningless number. Then there is factoring in cost of living (Detroit vs. Manhattan), debt and a host of other factors.

A study from Vanguard on retiree income found that for wealthier retirees (defined as $100K+ in financial assets), nearly half of nonhousing wealth came from SS and pensions -

https://personal.vanguard.com/pdf/CRRRIP.pdf

"Our survey respondents had a median income of $69,500 for the prior year (Figure 2). Median financial assets are $395,000. When the lump-sum value of Social Security and pension benefits were added in, median nonhousing wealth was $1.1 million."

So for most wealthier retirees, financial assets accounted for 35% of nonhousing wealth. I don't see how the 35% number would be the sole driver of happiness / financial security.

 

[Spanky]

No offense, but I'm not going to base anything in my life off of a survey of what makes others happy.

Agreed - but what makes you happy?

 

[Spanky]

$880,000 is just a number, which is very different for everyone. Some people would never be happy no matter how big this number may become. Their insatiable desire to want more may never end. Happiness is highly individualistic. What' make some one happy may not may you happy. In my opinion, happiness is highly correlated to the level of expectations and desires. The more you want or expect, the less happier you are.

 

[haha]

WOW. What an arrogant post. Most people would kill to retire with 880k.

880k well diversified is enough to not have to worry about putting food on the table and keeping the lights on. That happy place that allows a person to sleep at night.

You can pursue a hobby on 880k invested properly. Not to mention SS and a pension that some people still have.

880k is a realistic happy place retirement number to start with. Yes 2 or 3 million is better. But 880k is reality.

I won't bother to give a reasoned response to someone who is so off base. You are attacking me ("arrogant"), I am not attacking you, I am not even sure I have ever read one of your posts before. And I won't ever again, so adios.

Sure, 880k is also plenty, even if you have no ss or pension, but your wife is an heiress. Good for you! Way to make realistic plans.

All I said that most here would probably not choose to retire on $880k, again without a lot of alsos like those that you helpfully supplied. If you doubt this, do a poll.

Myself, I plan to retire to a corncob-cement ketch and spend the rest of my life sailing the South Seas, on 25 cents/day. All you need is faith.

Ha

 

[dvalley]

In my case I'm shooting for $1.2MM with a 3.5% SWR ($42k without SS) and hopefully I can quit before my 50th b.day. My budget is loosely based on what I'm currently spending and what sort of things will be reduced/eliminated (child support, mortgage etc) in the future when I retire:

Mortgage: 0
prop taxes: $2000
utilities: $3500
house up keep, maintenance: $2000
Car/RV insurance/gas/repairs/AAA etc: $8000
Food: $7000
Pets: $1500
Entertainmet: $3000
Healthcare: $2500 (ACA silver plan for 2 adults with $35k income and financial help)
Income taxes 15%: $5500

Total: $35000 (add another $5k for a buffer and I'm at $40k per year and I live in SoCal).

 

[brett]

I think that the number really depends on your age, your health, where you live, your lifestyle, your home ownership situation, your retirement plans, and whether you have any sources of monthly income-indexed or non indexed.

An 'average' number is meaningless to most people.

 

[RunningBum]

Agreed - but what makes you happy?

I don't have a set answer for this. It actually doesn't have much to do with money. Having enough money reduces/eliminates the stress of being in debt, and worrying about how I will support myself in the future. Not having those worries puts me in a better state of mind to be able to be happy. Some of the happiest people in the world may be strapping to get by day-to-day, but I've lived that way and I'm happier now.

It also gives me much more leisure time to do things I choose to do rather than having to work, and also gives me the funds I need to pursue things I want, whether it is equipment for my hobbies or ability to travel different places. Again, it's no guarantee of happiness, but I'm more likely to be happy if I'm able to do what I want to with fewer restrictions on time or money.

 

[swakyaby]

$3M in non-housing investments. This is for a couple with no pensions, a paid off mortgage, the need to pay all health care costs, the desire to early retire, and the desire to maintain one's current standard of living-- with perhaps a few extra splurges each year.

 

[Independent]

Here is a chart on typical net worth by age in the U.S., and this includes housing. The cutoff for the top 70th percentile age 65+ is $334K. Not that many households ever get to $880K, present company excluded:
Typical net worth by age: Where do you stand?

Thanks. People here often post stuff on net worth, but it usually isn't split by age.

The USA piece comes from this Census report https://www.census.gov/people/wealth/files/Wealth distribution 2000 to 2011.pdf

For ages 65-74, the median of the top quintile (presumably, the 90th percentile) of "households" is about $1 million, including home equity but excluding pensions and SS.

It drops to $770,000 for people over 75, but presumably the higher ages have more one person households.

These are 2011 numbers. I'd guess that if these higher net worth households own stocks, their net worth has gone up faster than the CPI since then.

 

[rodi]

Agh!!! Sorry to hear that. When it rains, it pours!

Oh well, c'est la vie I suppose. It probably wouldn't be a good idea to schedule an expensive international dream vacation this year.

Hey - I resemble that remark, LOL. But the money for my vacation was set aside and not included in my "retirement funds". But the expensive medical stuff my kids have incurred has definitely given me some second looks at my budget. (Fortunately, we've saved in other areas enough to cover the medical costs that have *almost* hit the family high deduction threshold.) I guess this is why we build in emergency funds, budgets to replace paid off cars and home maintenance, medical funds, etc, into our overall retirement budget. Thank goodness retirement has meant spending less on clothes, transportation, and utilities.

 

[youbet]

All I said that most here would probably not choose to retire on $880k

+1

Count me in that group. $880k would mean living on $30k annual or so, a tough nut here in the Chicago suburbs unless you have other things going for you. But, if you have other things (paid for house, pension, SS, working spouse, future inheritance, hobby income, sugar daddy, past employment provided benefits, whatever.......) then you aren't choosing to retire on $880k. You're choosing to retire on $880k plus a lot of other stuff.

To me, living on the income from $880k in investments means just that. You show up in town with nothing but a couple of suitcases and begin living on about $30k/yr. Possible? Sure! But is that what you would choose to do? Not me! Probably not a lot of folks who have choices, even if one of those choices is to continue working a bit longer.

I always marvel when folks mention retiring with seemingly tiny resources but later reveal a mountain of resources they just happen to have in their back pocket. Or, if their low income survival is dependent on an unusual lifestyle few would choose.

 

[youbet]

I enjoy doing Civil War reenactments while golfing in my Scottish dance attire...

Oh! That was you!

 

[youbet]

Firecalc gives $880K invested in a 60/40 portfolio a 100% chance of lasting 30 years with an initial withdraw of $28.5K adjusted by 3% inflation each year.

I think that and SS would provide a comfortable living for many people.

Yep. The $880k doesn't do it. You need extras such as SS. At least for me.

 

[ER1970]

You could still live fairly close to NYC if needed on 880k and land on your feet.

Really? Show me where(that's not a complete dump)?

 

[NW-Bound]

Posters often hasten to comment based on just the thread headline.

The OP included this quote.

Quote:
"Once families reach a certain level of savings, the amount of monetary increase needed to reach higher levels of happiness slows down. For example, in order to reach a financial level where more money doesn't really buy any more happiness, families need to reach approximately $880,000 in stocks, bonds, or cash assets, such as CDs, according to my data."

And as mentioned, I read the article which then talked about SS and a paid-for home.

My mother has nowhere near $880K, but she's got a nice comfortable modern 3-bedroom home, SS, and pension. She's fine.

 

[youbet]

Posters often hasten to comment based on just the thread headline.

The OP included this quote.



And as mentioned, I read the article which then talked about SS and a paid-for home.

Yep. There's no doubt that resources and individual needs and circumstances outside of "investible assets" are a huge factor frequently ignored.

With the demise of MegaCorp DBP pensions and related benefits (stock options, profit sharing accounts, etc., and retiree health care, I'm confident that for many folks, the size of their FIRE nest egg will become more critical. But for now, pensions, SS, misc retiree benefits, financial and non-financial assets considered outside of the FIRE portfolio are a big factor.

If you want to, and the article somewhat eludes to, say you have $880k plus SS (assume a goodly amount I guess) and a nice paid for home, then it becomes more livable than the $880k alone. Especially if you jump to the conclusion you have no special needs (handicapped adult child living with you for example) and live in a reasonably low cost area.


I can tell you with confidence that if we had our paid for house, our SS and $880k (about $50k total annual income to spend), I would definitely be happier with more. I'm saying that based on reverse engineering our current situation. We spent about double that $50k and some of the things we'd have to give up to get down to $50k would be unpleasant for us. So I assume having enough more than the $880k so that we could spend $100k would make us happier. I guess we'd be exceptions to the data posted in the article. We'd definitely be happier if we had SS, our paid for home and then received an increase over the $880k.


I understand that your mom's situation could be different.

The devil is in the details but our comments tend to be on the generalities.

 

[purplesky]

That's not what the article says. It doesn't say $880K is where you think "that's good enough", it's where apparently people say "more than that won't really make me any happier."

And my point is, some survey number is meaningless to me. Your number is meaningless to me. What's meaningful to me is the number I came up with for my situation. I can't imagine letting someone else's number or influence me in any way. Nor their lifestyle. Someone else may decide they'd be just as happy living in some super low cost area with less money. Good for them. That's not what I'd call my sweet spot.

I am happy. I have my health. I have hit my happiness number, so I do get the point of the article that there is a number, and it's not huge for most people, at which you not only don't need any more money, but where it wouldn't really improve your life. Sometimes I think about what it would be like to have 2x or 10x the amount of money, and I really can't come up with much that would make my life any happier. About all I come up with is that I might splurge for 1st class travel (and more travel) and get a class B RV but those things aren't worth me working longer or taking more risks with my investments to get to.

The 880k number is a starting point for financial security.

I think Mr. Moss is just making the point that at 880k saved a family can achieve that first and most important level of feeling happy about their money situation.

The math starts to work for the average family as you get that close to a million.

Mr Moss is really writing for the millionaire next door crowd. Not high income earners.

 

[purplesky]

Really? Show me where(that's not a complete dump)?

Apparently Mr Moss wasn't addressing you and your situation. He is talking about the average family.

I guess a very long train ride would be in store for you.

 

[Big_Hitter]

I like $2.5M

 

[purplesky]

Posters often hasten to comment based on just the thread headline.

The OP included this quote.



And as mentioned, I read the article which then talked about SS and a paid-for home.

My mother has nowhere near $880K, but she's got a nice comfortable modern 3-bedroom home, SS, and pension. She's fine.

Yes Mr Moss says approximately 880k.

People get freaked out about their expensive city with only 880k saved and I would imagine Mr. Moss would advise those individuals to save more than approximately 880k.

 

[Spanky]

having 880k in nyc is very different from 880k in houston.

i live in queens , not even manhattan and i would not even have considered retiring if all i had was 880k.

The article does not suggest $880K is what you need to retire! It says, " more money doesn't really buy any more happiness."

 

[daylatedollarshort]

Besides factors like SS, pensions and mortgage free housing - optimized expenses can be worth more than $880K over a 40 year retirement, without a change in overall lifestyle.

A possible sample (YMMV) -

1. Lawn vs native garden - $500 a year lower water bill - $20K over 40 years.
2. Price shop insurance, high deductible only - $1K a year lower insurance - $40K over 40 years.
3. Monthly energy bill - $350 vs $50, $3.6K yearly, $144K over 40 years
4. Renegotiate cable bill - $100 vs $50, $600 yearly, $24K over 40 years
5. Low cost cell phone carrier - $100 vs $50 yearly, $600 yearly, $24K over 40 years.

There is a $246K possible difference in total retirement funding needed with just those 5 expenses optimized vs not. Add in more and it would not be that hard to even surpass the impact of $880K in savings for some households. Financial assets are just one of many factors impacting overall financial security.

 

[aja8888]

Besides factors like SS, pensions and mortgage free housing - optimized expenses can be worth more than $880K over a 40 year retirement, without a change in overall lifestyle.

A possible sample (YMMV) -

1. Lawn vs native garden - $500 a year lower water bill - $20K over 40 years.
2. Price shop insurance, high deductible only - $1K a year lower insurance - $40K over 40 years.
3. Monthly energy bill - $350 vs $50, $3.6K yearly, $144K over 40 years
4. Renegotiate cable bill - $100 vs $50, $600 yearly, $24K over 40 years
5. Low cost cell phone carrier - $100 vs $50 yearly, $600 yearly, $24K over 40 years.

There is a $246K possible difference in total retirement funding needed with just those 5 expenses optimized vs not. Add in more and it would not be that hard to even surpass the impact of $880K in savings for some households. Financial assets are just one of many factors impacting overall financial security.

To add to the above way to save, a guy I know was pricing caskets and was shocked to see how expensive they were. His plan was to buy one now and store it for the "big day". Rather than spend the cash and put it in storage and buy a cemetery plot on top of that, he spent a lot less for a pre-paid cremation instead. Said he saved thousands.