all you need is ~600K by age 50 to retire

[foxfirev5]

Just one year into ER and I've discovered that expenses pop up with great regularity:

Roof repairs 8k
Water Softener 2k
New car 20K
Even a simple dental cleaning resulted in a crown popping off.

Fortunately these items barely put a dent in our cash reserves. However who knows what's next and how Mr Market will behave in the future. The OP's plan would scare me to the point that I'd rather w*rk (shudder) than live on the edge.

 

[joeea]

So the absolute minimum you need to save by 50 to retire safely is 600K. For each later year you retire, you can reduce the 600K by 50K / year. Does this sound reasonable? Not saying we can retire with 600K at 50 as it depends on economy and its good to have some buffer, but if we want a number this sounds like the absolute min. needed

It appears that you have concluded you can live on $3900/month (and perhaps less than that for the 17 years between 50 and 67).

Remember that out of that must come all of your expenses including housing, food, transportation, travel, medicare costs (it's not free), other healthcare costs, taxes, etc.

Some could (and do) live on that amount. Many others would prefer to have more.

You are still young and you hate working. But don't let that confuse what it really would take for you to retire. Try to be realistic.

Work harder to determine what your real expenses will be in retirement before you try to conclude how much you will need.

 

[Geld ist Freiheit]

OP is not entirely off the mark.

The median US household income is something in the low to mid $50k range.
An 8% rate of return on $650,000 and you'd be making more passively than a lot of folks do w*rking full time. OP said for 2 people, median household is more than that so there's a little cushion there.

That being said, banking on a consistent 8% going forward in today's market is going to be sporty. If you can handle a lower rate of return until SS or pensions kick in to stem the bleeding, you may be able to glide it in.

As others have mentioned, the are a lot of sticks waiting to pounce on your spokes:
Cost of healthcare
Medicare
Sequence of returns
Tax code changes
SS changes
Illness / accident
Etc

If you were laid off, couldn't find w*rk, and lived in the right area, you'd find a way to get by.

I'd use that number more of a gauge on how I'm going than as a green light/go for launch indicator.

 

[Dawg52]

Where I live, it could easily be done at $3,900/mo. I know some who do it on that or less. Just depends on where you live and what you want out of retirement. Lot's of variables...

 

[Music Lover]

I know dozens of people who earned $3900 a month or less when working and then retired happily on even less than that. Of course, here in Canada we don't have the health care costs that the US does.

My house is paid off and my basic monthly living expenses are well under $1500 a month. I have no interest in expensive toys, and my hobbies are inexpensive.

 

[athena53]

Interesting coincidence: my/our invested assets passed the $500K mark when I was 50 and DH was 65, after DH and I sold our houses in NJ, married and moved to a LCOL area when I changed jobs. (We had substantial equity in the houses but I hadn't included it till it was turned into cold cash.)

I worked for another 11 years. It's made all the difference. I know there are people here who could have made that work, especially with DH's SS, but I'm a traveler and so was DH. I'm also well aware, from watching DH age, that you get to the point that you want to hire out things that were previously DIY- you're no longer comfortable on ladders, you really don't feel like tearing apart the toilet, etc. I clean my own house and mow my own lawn but that lawn is a real cardio workout because of the grade of the hill on which the house sits. Someday I'll have to hire that out, too.

It would have taken a lot more than that for me to feel comfortable retiring at age 50.

 

[Sniggle]

I would not want to 'survive' for my last 30-40 years on the planet.

That being said, if you found someplace that had abundant natural recreation activities and enjoying them was what made you happy, then it could work.

 

[rayinpenn]

$3,900 hmmm... let's see
Monthly expenses ..
Real Estate tax $800
Insurance on home $100
Health insurance until 65 $2000
Car insurance $200
Utilities $200

It might work if I gave up eating, the $3600 dentist bill, estimated $3k out of pocket for my knee operation. Yup I need to move and only eat oat meal.

 

[Gumby]

Good points on the medicare expenses. I wasn't aware of them.

Assuming a 3.4% pct return, on 600K, you would make about 1700 interest per month and rest of what you need monthly comes from the capital.

So if you spend 3900 per month, it will last for about 16.8 years. I think 3900 is a decent amount to have a comfortable living; rent of a 1 BR apt is 700$-900$ in lot of cities.

But you won't safely have $3900 per month from 50-67. Among the other things I mentioned earlier, your plan does not appear to include inflation. At a modest 3% inflation rate, that $3900 you started with will require drawing $6446 from your stash the year before you reach full retirement age. That is why I suggested using FIRECalc. It does account for inflation, and market risk. And, as I noted earlier, it says you'll be able to safely spend only $2700 per month, with an annual increase for inflation.

Second, in case I was not clear earlier, you and your spouse also will not have the equivalent of $3900 per month at age 67, because social security is calculated on your highest 35 years of earnings, and zeroes are added to the equation if you haven't worked for 35 years. Unless you started working at age 15 and immediately started paying the max FICA and never stopped, you will not get $2600 a month, your spouse will not get $1300 a month, and together you will not get $3900 per month. You should go to the SSA website and calculate your SS payment using your actual numbers. It will likely be much less.

So, while you may think you can live on $3900 per month (and you may be right) you will not have $3900 per month.

That said, better to have $600k at age 50 than nothing.

 

[Music Lover]

$3,900 hmmm... let's see
Monthly expenses ..
Real Estate tax $800
Insurance on home $100
Health insurance until 65 $2000
Car insurance $200
Utilities $200

It might work if I gave up eating, the $3600 dentist bill, estimated $3k out of pocket for my knee operation. Yup I need to move and only eat oat meal.

Utilities: $200
House insurance - $70
Property taxes - $200
Auto fuel and insurance - $300
Groceries - $300
Phone/internet/cable - $200

total - $1,270

Add in $700 for maintenance and miscellaneous expenses and I'm at $2000, leaving $1900.

 

[Fermion]

The scary thing about this thread is that $600k by age 50 is actually far above what most of America has.

If having $600k is doom and gloom, then we as a nation are heading for big trouble fast.

I am not sure having $3 million is going to protect you against the mobs who don't even have $30,000.

I guess time will tell.

 

[trixs]

$3,900 hmmm... let's see
Monthly expenses ..
Real Estate tax $800
Insurance on home $100
Health insurance until 65 $2000
Car insurance $200
Utilities $200

It might work if I gave up eating, the $3600 dentist bill, estimated $3k out of pocket for my knee operation. Yup I need to move and only eat oat meal.

This just goes to show how everyone has different expenses...

Monthly expenses ..
Real Estate tax $200
Insurance on home $80
Health insurance until 65 $0
Car insurance $95
Utilities $200

Income of $3900 per month would leave us with about $3300 in spending money per month with a payed off home. Of course the biggest factor is insurance cost and real estate taxes.

 

[Fermion]

I ran our numbers since we stopped working at age 46.

According to SS estimator we still get $2412 a month at age 67 for one spouse and half of that is about $1200, so we are talking $3600 for a couple who quit working at 46 and have all zeros after that.

It isn't *that* far off of $3900 a month and this is a real world example.

We do have more than $600,000 in investments though...

 

[Gumby]

The scary thing about this thread is that $600k by age 50 is actually far above what most of America has.

If having $600k is doom and gloom, then we as a nation are heading for big trouble fast.

I am not sure having $3 million is going to protect you against the mobs who don't even have $30,000.

I guess time will tell.

But most of America does not stop working at age 50.

 

[FANOFJESUS]

We could live very nice on $3900 We live on way less now. In fact with that budget we could buy a home in the suburbs and buy a new Camry.

 

[Music Lover]

I know there are a lot of well off people on this site, but it surprises me that so many think that $3900 a month is undoable. Millions of people live very comfortably on less than that.

 

[euro]

I know there are a lot of well off people on this site, but it surprises me that so many think that $3900 a month is undoable. Millions of people live very comfortably on less than that.

Agreed - it's a highly personal thing. Like many others here, I COULD live on 3900 if I had to, but I don't prefer that. I would not have chosen to RE and just continued to work, instead. Which is of course what the majority of people (are forced to) do.

 

[ggbutcher]

It's interesting how the simplistic premise of this thread digs at the heart of what a lot of us here consider in securing out future. The OP certainly missed such considerations as medical (what a lot of my otherwise well-prepared acquaintances are struggling with) and contingencies, but living on $3700/mo is not so unreasonable. I periodically re-assess our mandatory living expenses, and I come up well below that number even for non-nominal scenarios.

That's the most significant thing I came to when I started actually planning out our retirement, the distinction between mandatory and discretionary expenses. Now, my definition of "mandatory" is more along the lines of "three hots and a cot" (yes, military service can really lower your expectations ).

I think the most important aspect of this perspective has been to plan for certain things while income is in-coming, particularly a paid-off, well-repaired house in a reasonable cost-of-living area, and health care that doesn't break the bank (well, that was more at the expense of 20 years and a couple of hours of indentured service to the U.S. Air Force).

Frankly, in spite of all the things that it's missing, I'm praying our kids at very least have a plan along the OP's lines in mind.

 

[Fedup]

The scary thing about this thread is that $600k by age 50 is actually far above what most of America has.

If having $600k is doom and gloom, then we as a nation are heading for big trouble fast.

I am not sure having $3 million is going to protect you against the mobs who don't even have $30,000.

I guess time will tell.

It's not scary, it's reality. My sister had that amount 10 years ago with a paid house. She is still working. She may retire when she gets to be 65.

 

[Gumby]

I know there are a lot of well off people on this site, but it surprises me that so many think that $3900 a month is undoable. Millions of people live very comfortably on less than that.

I make no judgment as to whether $3900/month is adequate for the OP (or millions of other people;US median household income in 2015 was $4710/month*), but I am quite sure that his plan will not generate that amount.

* source Median income jumps 5.2% in 2015 - Sep. 13, 2016

 

[rothlev]

Many, if not the majority of middle income families in the U.S. live on this amount or less. They even pay social security taxes and income taxes on this income. Retirees whose primary income is from social security pay neither income taxes nor FICA. Medical expenses that are not affordable are often written off by hospitals. Not saying this is a generous income, but if you aren't supporting children, and own your home it is quite liveable and comfortable.

 

[scrabbler1]

I retired in late 2008 with $600k in my taxable account, after moving $300k from my company savings/retirement plan into it by cashing out the company stock at favorable tax rates. The taxable account generates about $2,400 a month, slightly more than what I have needed to cover my expenses. I own my small apartment outright, and the added medical expenses resulting from some medical issues which have arisen in the last 2 years aren't hampering my budget.


I do have an IRA which is the first of my "reinforcements" I can tap into when I turn ~60 in 6 years. That, and SS and my frozen company pension will put me in an even better financial position than I am in now. And that $600k nest egg at the end of 2008? It has risen to $900k. The IRA's value has doubled.

 

[Chuckanut]

I see no reason why a person cannot live well on $600,000 and SS if that satisfies their needs.

For some of us, simply not having to get up every morning and go to work is the ultimate luxury. Others are like the guy in the Caddy commercial who works like a dog (and probably makes his underlings work even harder and longer) so he can have lots of toys to impress the hoy polloi. N'est-ce pas?

Maybe this commercial should be the treatment for OMY syndrom?

 

[Fedup]

But OP is asking a question at age 50 for 4 persons.

 

[daylatedollarshort]

I know there are a lot of well off people on this site, but it surprises me that so many think that $3900 a month is undoable. Millions of people live very comfortably on less than that.

Most people in the U.S have no choice. They don't have the income to spend more. $3.9K a month is $46.8K a year. Median household income in the U.S. at $56.5K is not much more. From the U.S. Consumer Expenditure Survey from my earlier post: "Total annual expenditures averaged $49,279 among older households. Expenditures declined from $56,267 for the 55–64 age group to $36,673 for the 75-and-older group."

What many here view as "barely surviving" would be a normal middle class life to most U.S. households, especially for households with employer group health insurance or those who are old enough for Medicare.