$1Mil Enough? Age 35

[MasterBlaster]

As of 2010, the median income in the US was $29,000. The average is likely around $50,000.

That figure may be the median for singles. Median family income is closer to the higher number

 

[Mulligan]

Been tracking spending for 15 years now. My monthly for food, gas, utilities doesn't change much each month. But you made some good observations...since I pay insurance premiums and taxes in a lump sum once each year, I haven't put them in a monthly expense column. To be fair and accurate on future planning, I should divide those yearly lump sum amounts by 12 and add to the monthly net. Thanks for pointing that out.

Anyone who has saved a million by 35 (congratulations!) and lives on a $1000 a month doesn't need my advise but I still will throw out a few thoughts anyways... Kids can become more expensive as they get older... A few things that have hit me with mine in case you haven't already planned for it. 1) will they get cars? 2) car insurance will go up for family when they start to drive 3) will your wife's insurance cover any dental issues for them 4) hobbies/ sports activities along with camps 5) dances, proms, presents, weddings etc. These things always seemed to be draining my wallet quite often and I only had one!
I thought I was frugal living on about $3000 a month being single with mortgage of $800, but that is obviously not the truth. I don't know how you do it on $1000, but it certainly must take some planning and discipline that I don't have.

 

[Letj]

As of 2010, the median income in the US was $29,000. The average is likely around $50,000.

Oh no, that can't be true, it has to be closer to $50K. There's no way half of the US live on less than $29K.

 

[aaronc879]

That figure may be the median for singles. Median family income is closer to the higher number

You're right. For households, the median is $50,000. The average is $70,000. I hadn't realized it was that high. I'm more in touch with the low end jobs. Most people I know make under $40K.

 

[Letj]

You're right. For households, the median is $50,000. The average is $70,000. I hadn't realized it was that high. I'm more in touch with the low end jobs. Most people I know make under $40K.

Most people I know live in households comprising of two income household and make way in excess of $100K. I often have to remind myself that this is not most of America.

 

[gardenfun]

Our property tax is $2k/yr. We purchased the house for $170k; it's value has risen dramatically due to our area. Tax increases in California are capped at 2% per annum.

Not to pile on about the home equity, but many homes in the outer suburbs of the bay area that were worth $200,000 in the late 90's/early 2000's did indeed triple their value, only to come crashing to earth when the bubble burst in 2006/2007.

The recent runup in prices has restored some of the "value", but counting on home equity can be risky.

 

[FIRE'd@51]

Will your wife be retiring as well?

This is the key question. If your wife is an executive at a major hospital, I assume she is making six figures. If you are asking if you have enough assets to be a stay at home Dad with her continuing to work, I would guess it would be a layup for you, since her income will likely cover your family's needs. If she stops working, you don't have enough.

 

[scrabbler1]

Been tracking spending for 15 years now. My monthly for food, gas, utilities doesn't change much each month. But you made some good observations...since I pay insurance premiums and taxes in a lump sum once each year, I haven't put them in a monthly expense column. To be fair and accurate on future planning, I should divide those yearly lump sum amounts by 12 and add to the monthly net. Thanks for pointing that out.

That sounds like a pretty big "oops" you have there. My own expenses, which are about $18k a year (single person, no kids, no debts, 50 years old, early retiree), include about $5k which are paid not monthly but less frequently such as income taxes and auto and home insurance.

Add me to the list of those who are surprised at your low food bills. I pay about $200-$225 a month for food and that may be on the low side compared to most people here. I very rarely eat out but I do not grow my own food (I live in a studio apartment in a co-op complex).

 

[haha]

First, my food budget doesn't include restaurant meals; I've actually allocated that expense in the "entertainment" category (any luxury/excesses are in that category).

Second, we cook our meals and eat mostly rich dishes (a staple we grew up on) and we have lots of fresh fruits and veggie plants in our backyard (tomatoes, potatoes, apples, oranges, garlic, onion, etc.), so we save b/c we don't need most store bought fruits and veggies. I grew up poor, so I learned early on how to spend wisely (coupons are a must). Keep in mind that most Americans live on substantially less then we do, so when you ponder how anyone could have a food budget under $1k just think of the Walmart cashiers, the fast food workers, the gas station attendants, the retail clerks, etc.--I assure you they all live more frugally than I and many have larger families to feed.

So why ask us? Many of us a lot older than you and with no young children would strongly prefer not to try to live like this, but if you want to, what is stopping you? It is not yet against the law.

Ha

 

[MasterBlaster]

So why ask us? Many of us a lot older than you and with no young children would strongly prefer not to try to live like this, but if you want to, what is stopping you? It is not yet against the law.

Ha

Oh it's really quite easy living on little. A sack of beans and a sack of rice once a month will feed em'. The question becomes... Do you want to live like that ?

Here's some picture suggestions for inexpensive living. Stop workin' for the Man ! The good life awaits you !

 

[AllDone]

Most people who live on that kind of money don't do it by choice. It sounds, though, like you are talking about retiring and becoming a house-husband while your wife continues to work? People will raise eyebrows about it, but as long as it works for you both, it's fine. Maybe you ought to explore some other options? A sabbatical, a change in work responsibilities, a job change, a career change, starting a business? Are you sure you are not thinking about retirement because you are feeling depressed? Maybe it would be worth discussing with your doctor?

 

[RunningBum]

I see many posters commenting that $1Mil is not enough to retire on, but I haven't found any posts that explain the reasoning behind such an opinion. Please excuse my naivety, but I'm lost in the shallow depths of my ignorant bliss. Perhaps someone can educate me and correct the error in my thinking.

To directly answer those questions, most people simply have much more in expenses than you do. I assume/hope they are saying that $1M isn't enough for them to retire on, not for anyone to retire on. $1M isn't enough for some, and is more than enough for others. It shouldn't matter to you whether it is enough for others, it's all in your own numbers. For myself I choose not to live as frugally as you seem to be living with those numbers, so I didn't stop when I hit $1M.

One other factor to consider is that $1M in appreciated stocks is not the same as $1M in a Roth IRA. In the first case you'll have to pay capital gains tax if or when you start liquidating stocks. It doesn't seem to be enough to break your plan, but it's just something to think about.

 

[Gumby]

I have lived on less than $12k a year. It's not an experience I would ever want to repeat.

 

[REWahoo]

I have lived on less than $12k a year.

Me too - but it was in 1970...

 

[aaronc879]

Me too - but it was in 1970...

Nice avatar. You look exactly as I pictured you

 

[NW-Bound]

To the OP, my compliments to you for having accumulated $1.6M networth at the age of 35 plus extra college savings, and for living on just $12K/yr, which of course most of us find difficult to imagine.

However, as others have pointed out, your $1M stash can support a withdrawal rate of 2X or 3X of what you are spending now. So, you are set. And people who manage to save something like this would know to get themselves out of trouble if their finance runs short later, such as getting back in the job market, or to find a low-pressure part-time work.

You are good to go if you like, my friend. Hope you will be happy with the free time you have, and not wonder what to do all day like some of us.

 

[daylatedollarshort]

Some things I can think of we spent money on not in your budget - braces for each kid - one had to be redone, reaching out of pocket max in medical bills some years, major dental work, new roof, sewer line breaking, helping out relatives, major foundation issues, major plumbing issues, major car repairs, replacing cars, cars for kids, prom tickets and clothes, new PCs and laptop - us and kids, car insurance for kids (ouch!), four figure vet bills, legal fees for our trust, legal fees to have trust revised and many more non-recurring expenses.

If you can live on 12K a year good for you but I would not know how to do it for a family with kids, pets and a house to keep up. Last year we had around 20K in medical expenses alone (co-pays, deductibles, travel and out of network costs), plus premiums. I budget 5K just for home repairs and upgrades each year.

 

[NW-Bound]

Nice avatar. You look exactly as I pictured you

For people who might not know, that's Rob Ford, the current and controversial mayor of Toronto, Canada. How REWahoo "identifies" with Rob Ford is another story.

 

[REWahoo]

Looks like the mayor is about to go postal, eh?

 

[NW-Bound]

Well, substance abuse can do strange things...

Sorry to the OP for the thread hijack.

 

[JacqJolie]

I also didn't account for possible future appreciation of income (the savings has grown approx. 40% per year thanks to stock market).

Spending < $12k / year on the few items you include as necessities would be easy to do and isn't far off from my current spending in those categories here in Canada and the only thing I can seem to grow is dandelions. And we like to eat steak and crab legs. Real spending that I don't want to have to cut is more like 2.5 times that (not including mortgage which triples it) for a somewhat similar sized family that likes to wear clothes (except the fur-kids). So yes, for me, $1MM would be a clear FI point without a working spouse.

I've taken several sabbaticals or worked extremely flexible contracts (eg. only quarterly reporting / corporate tax prep one year) through the years starting in my 30's. Were I to do it again at your age, that's exactly what I would do rather than go for the RE part of FIRE. It gives you a break, no gap in the resume and time to figure out what you want to really do with your life. Do you know what that is? That's more important than the magic FI number IMO at your age.

What I'd really like to know is how you're getting the 40% returns? And this isn't including contributions? Or is this a statement based on just the past year? If not, can you explain how you're investing to get that kind of return YOY?

 

[NW-Bound]

Hmm... I missed the OP's post about 40% return. This level is achieved by some small-cap ETFs this year. Check out IWO, or even Vanguard MF VISGX. Of course people who are conservative and diversified investors like myself and most geezers here cannot get that.

 

[daylatedollarshort]

Investments that can go up 40% in one year usually can go down the same amount other years. Unless the money gets moved to less potentially volatile investments before you quit work, you have to count on some bear markets along the way. Sequence of returns matters.

 

[Bert Cooper]

4) yes, partly b/c it was my sacrifice to led us to financial independence. I graduated from college in my teens and slaved 15 yrs in the corporate world to amass the earnings that paid for the house and is the basis for most of the savings. I'm burnt out and they all agree I deserve time to relax.
Thanks for your reply.

Good for you. We're about the same age, I've also sacrificed for 15 years and am burnt out, but have much, much less to show for it. I've always been a late bloomer, apparently that applied to savings rate, too.

I would be looking at ER, too, if I was in your position. I think EWR concerns others are sharing are valid. FWIW, you still have a lot of life to live. If I was doing what you're doing, I'd be considering PT employment doing something interesting or income producing hobbies, just for my own entertainment as much as anything. Two birds one stone.

 

[kikechico]

To answer the OP's original question....

Yes you have enough money to retire with the way you are living today. It seems that you been tracking your expenses for a while so you know how much you need and seems that you are living comfortably. You should be able to pull 30K a year if you want. Just pull the trigger and enjoy life with your family.

Me, my wife and two cats spend around 17K a year but we go out to eat and have fancy cells phones and spend money on services that we really don't need etc etc. I can't imagine spending 30-40K a year. I guess I would spend money every month on stuff that I don't need.

Dager if you don't mind can you share the specifics on how you are getting a return of 40% per year? what stock or funds are you investing on?

I am 28 and we are shooting to retire when we hit 750K; with a return of 7% I will hit the mark around 36-37. I would not mind retiring earlier

Thanks.