Who needs a million $ cash to retire

[HI Bill]

Just to keep the roof over my head is almost $30k per year:

Property tax $13,000
Home insurance $3,500
Utilities $6,500 (electric, natural gas, water, cable and phone)
Maintenance & repair $6,500 (1% of value)


There is just no way we could survive on a 4% draw from a million dollar portfolio.

Woah! That's a hefty property tax bill. If you had to, you could move somewhere cheaper, such as Hawaii. I only pay $750 annually in property taxes for a $350K property. Also, we only pay $1,800 annually for utilities.

 

[24601NoMore]

Just to keep the roof over my head is almost $30k per year:

Property tax $13,000
Home insurance $3,500
Utilities $6,500 (electric, natural gas, water, cable and phone)
Maintenance & repair $6,500 (1% of value)


There is just no way we could survive on a 4% draw from a million dollar portfolio.

Sounds like we're in a similar ballpark range..

Prop tax: $9K
Home Insurance: $2K
Utilities: $7.8K
Maint & Repair: endless
Cars (2 jeeps): $12K (leases, gas, insurance)

It truly amazes me that people say they can live on < $20K. I guess if you own your cars and drive them into the ground and live in a pretty modest house, maybe. (Then again, in X years, you'll have a big capital expense to replace your car(s)). But if you try to do an "average, middle class" lifestyle and live in a sub..good luck on anything under $50-60K, and that's not living large.

I've been thinking of starting a "show us your expenses" thread, but not sure how many people would be comfortable doing that. For us, at a high level - $60K "core" expenses (housing, grocery, cars, insurance, utilities, etc)..$25K HC..$10K+ taxes..$10K vacation..close to $100K yearly easy. I can't fathom how anyone does that on $20K-$25K.

(No disrespect intended for those who can live sub $50K...but I sure don't see how you can do it in a typical subdivision lifestyle).

 

[ShokWaveRider]

Woah! That's a hefty property tax bill. If you had to, you could move somewhere cheaper, such as Hawaii. I only pay $750 annually in property taxes for a $350K property. Also, we only pay $1,800 annually for utilities.

And where can one get a $350k property in Hawaii, today not in 1970?

 

[Mountain skier]

Agree on both counts. I had hoped (in vain, obviously) that my post #2 and Aerides post #3 would have nipped this in the bud, quickly. But, no.

This is a good thread

 

[rothlev]

not everyone pays 10k in property taxes. We pay around $500 in Cherokee county (Atlanta area). middle class retirement 55 community. I think it all boils down to personal preferences and income. If you can't pay 10k you can certainly find a cheaper option. I am not sure that my quality of life suffers in any way by picking a county with low property taxes. ( senior tax breaks )

That said our retirement expenditures are still way higher than I originally guesstimated that they would be. Travel eats up a lot of money, and we just get bored and eat out and spend more on leisure activities. Thankfully pensions cover our expenses.

 

[Teacher Terry]

We live in a low property tax state. 840 per year, home insurance 600, utilities 5280, cars paid for with low miles and no repairs in past 6 years, insurance 960 and gas1500. Biggest expense is HC between 9-12k. Mortgage is 5400/year.

 

[Dtail]

Our top 4 expenses which are housing, food, travel and healthcare are budgeted for 58k yearly.

 

[MarieIG]

Just to keep the roof over my head is almost $30k per year:

Property tax $13,000
Home insurance $3,500
Utilities $6,500 (electric, natural gas, water, cable and phone)
Maintenance & repair $6,500 (1% of value)


There is just no way we could survive on a 4% draw from a million dollar portfolio.

The carrying costs for our house are roughly the same. Property tax - a little higher, utilities higher, home owners (about $1,000 less - our house is worth less- and would be cheaper to rebuild), maintenance, typically less unless we get a lumpy expense, i.e. the AC goes, new roof, etc.

 

[UnrealizedPotential]

Sounds like we're in a similar ballpark range..

Prop tax: $9K
Home Insurance: $2K
Utilities: $7.8K
Maint & Repair: endless
Cars (2 jeeps): $12K (leases, gas, insurance)

It truly amazes me that people say they can live on < $20K. I guess if you own your cars and drive them into the ground and live in a pretty modest house, maybe. (Then again, in X years, you'll have a big capital expense to replace your car(s)). But if you try to do an "average, middle class" lifestyle and live in a sub..good luck on anything under $50-60K, and that's not living large.

I've been thinking of starting a "show us your expenses" thread, but not sure how many people would be comfortable doing that. For us, at a high level - $60K "core" expenses (housing, grocery, cars, insurance, utilities, etc)..$25K HC..$10K+ taxes..$10K vacation..close to $100K yearly easy. I can't fathom how anyone does that on $20K-$25K.

(No disrespect intended for those who can live sub $50K...but I sure don't see how you can do it in a typical subdivision lifestyle).

I am assuming you are talking about costs in the U.S.
Living in the United States is very expensive. It's just an expensive place to live. There are many places in the World where it costs much less to live than in the U.S. , but there are few places where it is more expensive.

As for people who can survive on less than $50K, I would say it just depends. Way too many variables to give an easy answer. Part of the answer is that some people have more expensive tastes than others. It's not a right or wrong thing, just a matter of taste. But to those who do have higher expectations, they have to pay for that.

That takes big money.

 

[Teacher Terry]

Interesting enough even with our low housing expenses our house is worth 350.

 

[jollystomper]

Having grown up and lived all my life in relatively HCOL areas in the US, my bias was also not seeing how anyone could retire with less than at least a million, and that is the minimum we aimed for, even with a fairly good pension. But there are a lot more LCOL areas that HCOLs, and once DW and I started looking around, many years before we retired, we were surprised at how many relatively inexpensive other areas there were, particularly for housing. There are many places where, with a modest lifestyle one can be comfortable in retirement (factoring in SS and potentially a pension) without a lot of money.

 

[scrabbler1]

I'm always fascinated a how the budgets vary so much among us early retirees.


I live on under $30k per year although sharp increases in my health insurance premiums are pushing my annual spending closer to $30k. I live on Long Island, NY, just east of NYC, a pretty high COL area. I don't own a house, which keeps my housing costs low. I live in a small apartment in a large, well-run co-op complex, an apartment I have owned outright since 1998.


I split up my expenses into 3 broad categories: Housing, medical costs, and everything else. Housing (which is about 1/3 property taxes) is about 27%, medical is about 35%, and everything else is about 38%, with no single remaining item more than 10%.

 

[daylatedollarshort]

We have retired friends (single) who live on around $30K a year in nice houses in a HCOL area. (Full disclosure - one has since sold her house for a retirement community condo and I don't know how that changed her budget). Both have or had mortgage free homes they bought when prices were lower and fixed up before they retired, Prop13 here in California keeps their property taxes low and they are on Medicare. So say $2K property taxes and $5K for premiums and out of pocket health care, that leaves $23K for other expenses like groceries, utilities, transportation and travel. They seem comfortable.

The Consumer Expenditure Report shows average spending of around $80K for San Francisco-Oakland-Hayward and over 40% of that is housing. Adjusting the $80K downward for a retiree household of just one person and very low housing costs, then their $30K budgets seem to not be too far off from the CES numbers.

 

[njhowie]

Woah! That's a hefty property tax bill. If you had to, you could move somewhere cheaper, such as Hawaii. I only pay $750 annually in property taxes for a $350K property. Also, we only pay $1,800 annually for utilities.

Hawaii is not a low cost of living state. Maybe if you live off the grid, farm your own food, fish, and raise chicken and cattle.

As of 2017:

MOST EXPENSIVE PLACE TO LIVE IN U.S.? HAWAII, WHERE TOILET PAPER COSTS MORE THAN ANYWHERE IN THE WORLD

For the seventh year in a row, Hawaii has been voted the worst state in which to make a living by MoneyRates, a personal finance website. To work out the stats, MoneyRates looked at the median salary, taxes, the unemployment rate and the general cost of living.

https://www.newsweek.com/most-expensive-place-live-us-hawaiitoilet-paper-costs-more-628977

 

[MI-Roger]

Using the 4% Safe Withdrawal Rate value, and dividing it into a $40K annual pension amount, illustrates that pension level is equivalent to having $1M of investments. Which is why those of us without pensions are so fixated on achieving a savings balance of $1M or more. This investment balance will allow us to continue our pre-retirement lifestyles while our health is still good.

A person with a $30K annual pension, who plans to continue the lifestyle their working career salary of $75K or less provided, may only require $200K of savings or even less.

Having a pension makes a HUGE difference in the amount of retirement savings necessary!

 

[wrigley]

You are assuming that both stay alive .

OHHHH......those sneaky "what ifs"

Mike

 

[wrigley]

Thanks to both of you for your service. We also have 2 military pensions, 1 county pension for DW 2nd act. However, my goal for early retirement (I count my 62 as earlier than I had planned) was to have $1.2M so I could draw 4% from other sources. I figured what we spent prior to retirement and added in extra for medical and travel. I'm happy to report 9 months in it is working for us



Certainly don't NEED over $1M but I didn't work for 40 years and save so we could make ends meet. I want to enjoy our golden years". ha

Well thanks to both YOU for your service as well!

I turn 62 in about 2 1/2 years. My wife in about 4 1/2 years. We really haven't discussed our plan to retire yet, but you can tell that elephant is in the room more and more lately. I really like my job and the company I work for is booming. My wife, on the other hand, would leave her job tomorrow and never look back. We've saved for most of our adult lives and want to have plenty of "our time" to enjoy it!

Mike

 

[NW-Bound]

If you look at all of the articles that list retirement assets for 65-year old folks, it appears that more than half of Americans retire with less than $200K in their retirement accounts (GAO says Americans between 55 and 64 average $107,000). These 'average' folks typically live off that and SS. Of course, it's possible. But with that level of assets, they're not going to be retiring at 55 or earlier, most likely.

This forum is the "Early Retirement" forum. Not the "On Time" or Average Retirement Forum. Folks here who want to retire early, typically shoot for 50 to 55, but some as late as 59 or so... To retire that early (that many years before pension or SS kicks in, you really do need 25X your annual spend saved up.

My folks retired with less than $400K in retirement savings. But they had STRS (California State Teacher's Retirement System) benefits, rather than SS, and it paid substantially more, given their work history. It was doable, but that level of assets has limited my dad's travel, especially after the divorce.

YES.

People retiring early with many years to go before SS, having no pension, and paying for their own health insurance need beaucoup money. 25X their annual expenses.

Now with ACA, some even get practically free health insurance. That certainly makes it easier. Pre-ACA, many posters lamented about not being able to get health insurance at any price.

I was able to retire pre-ACA because we had no pre-existing conditions, and the premium for a $10K/year deductible, $1M lifetime benefit limit, was not too expensive. It cost less than $10K/year.

How soon people forget!

 

[24601NoMore]

YES.

People retiring early with many years to go before SS, having no pension, and paying for their own health insurance need beaucoup money. 25X their annual expenses.

25X expenses is indeed a very frequently cited/recommended number for ER..

 

[24601NoMore]

YES.

People retiring early with many years to go before SS, having no pension, and paying for their own health insurance need beaucoup money. 25X their annual expenses.

25X expenses is indeed a very frequently cited/recommended number for ER..of course, if you're getting retiree medical or ACA subsidies, have PT work, etc that may affect the recommended number..

 

[Aerides]

There are several comments about subsidized ACA in this thread as if that makes it free/cheap.

For some it may, but for us, no, it makes it doable, but still a much higher premium than I paid as part of employed benefits. Instead of paying about $200 a month pre-tax for premiums for 2, we now are happy to have an ACA bronze plan, and pay a subsidized $450 a month, with a high deductible. And we know that can change year by year, so our budget is to expect $10k, and wiggle $20k if we have to. With a pre-50 ER, that means a big wild card for a long period.

For most, ER means planning on your healthcare to be one of the expenses that goes up in retirement, pre-medicare at least, hence contributing to the need to build a stash for ER.

 

[Austin704]

My grandparents retired in 1973 with about $50k in savings ($288,000 in 2019 $) and only SS for income. They had no debt. They paid cash for cars. They never invested in the stock market (didn’t trust it) and laddered CDs instead. They didn’t go out much or travel a lot but they didn’t seem to care about that. They lived a simple life in the Texas Hill Country and died in their early 90s. And they still had money in the bank when they died. I marveled then and now at what they could do with a such limited means. Yet they never seemed to want for anything and they were generous with us grandkids. It can be done, but I definitely would not be comfortable with such limited income and assets. Better to have too much and not need it, I say.

 

[workmyfingerstothebone]

My folks retired with less than $400K in retirement savings. But they had STRS (California State Teacher's Retirement System) benefits, rather than SS, and it paid substantially more, given their work history. It was doable, but that level of assets has limited my dad's travel, especially after the divorce.

You validate my original posting: your parents don't have 25X in expenses saved but they have income that covers their expenses (I hope they do). Similar to us ..... less the divorce.

 

[workmyfingerstothebone]

I believe that your question is somewhat rhetorical, but I will offer an answer.

Question: Who needs a million $ cash to retire?

Answer: A person who a) can't or won't work anymore, b) has no pension, c) has only meager SS earnings, d) doesn't have wealthy family ready to step in to subsidize their living expenses and e) wants to live a reasonable lifestyle in a safe/simple residence in a reasonable or low cost of living area.

If this person has $20K in annual SS payments and is covered by Medicare or other low cost insurance, then a 4% withdrawal rate will allow them to maintain a style of living similar to a typical "middle class" person in the USA.

Change any of those (and perhaps other) variables, and the answer changes.

(I suspect I've given more thought to this answer than was put into the original question. )

You might be missing my point,, most people will never save 1 million dollars cash. Most people will live off their SS, part time work, possible pension and a small 401K (double everything if married). Leave any of those things out and people still will retire. "Media" can talk till they are blue in the face but most people will not save that much cash. Therefore most people don't need a million dollars in cash to retire. Hope that helps....

 

[workmyfingerstothebone]

A person with a $30K annual pension, who plans to continue the lifestyle their working career salary of $75K or less provided, may only require $200K of savings or even less.

Having a pension makes a HUGE difference in the amount of retirement savings necessary!

Exactly!