Here’s What a $2 Million Retirement Looks Like in America - WSJ

[Huston55]

Nothing surprising in this story but, it's interesting to read about real life retirement experiences from a 'somewhat' diversified group of retirees. One theme that emerges is, "fill your time with something meaningful."

https://www.wsj.com/articles/heres-what-a-2-million-retirement-looks-like-in-america-11661702455

 

[ShokWaveRider]

Nothing surprising in this story but, it's interesting to read about real life retirement experiences from a 'somewhat' diversified group of retirees. One theme that emerges is, "fill your time with something meaningful."

https://www.wsj.com/articles/heres-what-a-2-million-retirement-looks-like-in-america-11661702455

We spend half of what any of those folks do and need or want for nothing. We have no Mega Pension and I am waiting till 70 to take my SS. We do more Non-Qualified Cashish than they have though. The only difference I can see with some is that we do not have a mortgage and only 1 home. We do live in a resort area, so no lack of things to do.

 

[pacergal]

blocked article, but what happened to the $1 million retirement that was normal a few years ago??

 

[MarieIG]

We spend half of what any of those folks do and need or want for nothing. The only difference I can see with some is that we do not have a mortgage and only 1 home. We do live in a resort area, so no lack of things to do.

Getting down to one house was one of my pre-retirement goals. (Inherited my parents' home so had two for a while.) I also never regretted paying off our mortgage early as that gave us some breathing room. Paying a mortgage is not a discretionary expense so if you have one, not paying it is not a (great) option.

I did note that the retiree from the police department had a healthy pension, which would to a certain extent offset or pay the two mortgages. This is completely different from taking all funds out of a portfolio. Also, was he and his family getting paid for medical insurance? Hopefully, neither of his two mortgages was an ARM. There was also mention of car loans. There was no mention as to whether his pension was joint and survivor.

Also, while there was mention of mortgages with the retirees, their entire spend was listed, not broken down to list discretionary vs. non-discretionary. With inflation, that can make a difference.

One of the retirees was consulting with a working wife. Hmmm.

Another worked to an extent until his 80s.

The woman reduced her expenses by ditching her Manhattan residence for Naples, although she still had two residences and her spend was still not chump change.

These retirees had the advantage of a good market run. Would like to see where they are end of 2023.

 

[W2R]

We spend half of what any of those folks do and need or want for nothing. The only difference I can see with some is that we do not have a mortgage and only 1 home. We do live in a resort area, so no lack of things to do.

Like you, I was aghast at how much these retirees were spending! True, I don't have a mortgage or a kid in college, and neither have nor want a second home.

Personally I have never had a hard time figuring out things to do in retirement. I have a hard time imagining that.

 

[Spock]

I find that article very misleading as to "Here’s What a $2 Million Retirement Looks Like in America".

First case was a guy with 2M in savings, but gets 83K a year in pension. His pension alone is 2.3x our average annual spend! (And they're having to cut back because their grocery bill when from $300 to $600).



It kinda highlights thoughts I've had for quite a while that investment recommendations (asset allocations, bond rating risk levels, "safe" spending rates) are extremely different between "fat" FIREs and "lean" FIREs.

 

[EarlyandLate]

I was also surprised that they all had second homes and were actively paying mortgages, especially at their ages. The mortgage should have been "retired" long ago. On the second home thing, I can understand if there is a family lake house or something that has been an important asset to the extended family for decades, but one lady had two homes, both in resort areas. My dad always said "It's cheaper to rent paradise than to own it". I think that is especially true if you need a mortgage to own paradise.

Oh well, each is the master of his own money.

 

[disneysteve]

First case was a guy with 2M in savings, but gets 83K a year in pension.

Plus he has an additional 350K in other savings, his wife still works, and she has 400K in retirement savings.

They don't have $2M. They have $2.75M, a pension, and still have one income.

It's always nice to see an article with real life examples. I just wish they wouldn't bury the details like that.

 

[Montecfo]

Agree on the misleading.

Spending can add up with second homes, school tuition, travel and charity.

 

[Huston55]

blocked article, but what happened to the $1 million retirement that was normal a few years ago??

Yep. I linked a free version but, perhaps it’s free only once. Do what I did and google the title, which should get you to a free version.

 

[rodi]

I found the article interesting. Like everyone else I was surprised by the second homes (not all of them had this, though). And surprised how pensions were not mentioned. The guy in Texas was interesting, he delayed SS till 70, so that covered half his nut. His wife was still working part time at a wine business. And he, apparently, did a lot of consulting. I think he was the one that had an ARM mortgage... or maybe that was the former exec in Chicago... That would make me nervous.

None seemed to be in dire straits...

My spend is somewhat lower than most of them - but not by much. But I still have 2 kids in college and am in the 'actively travelling' phase of retirement. And we have rental and DH's SS covering over half of our spend.

 

[Huston55]

Plus he has an additional 350K in other savings, his wife still works, and she has 400K in retirement savings.



They don't have $2M. They have $2.75M, a pension, and still have one income.



It's always nice to see an article with real life examples. I just wish they wouldn't bury the details like that.

It’s actually $1.3m+$0.4M+$0.35M=$2.05M; plus the fat $83K/yr (after taxes & insurance) pension. A quick search reveals that his Maryland pension is CPI adjusted (w/ 3%/yr cap). So, @3.3% discount rate, his pension is worth ~$2.5M, making his total “equivalent NW ~$4.5M.

 

[Huston55]

I was also surprised that they all had second homes and were actively paying mortgages, especially at their ages. The mortgage should have been "retired" long ago.

+1 on carrying a mortgage into retirement.

 

[NW-Bound]

I only glanced through the article, and did not look at the details of their income and expenses, but here's the highlight in the article.

John Fitzgerald, age 61
Savings and Investments: $2 million
Annual Spending: $144,000

James Compton, age 84
Savings and Investments: $1.5 million
Annual Spending: $100,000

Judy Hall, age 75
Savings and Investments: $1.8 million
Annual Spending: $110,000

Bob Bradley, age 73
Savings and Investments: $1 million
Annual Spending: $92,543


I am older than the 1st person, but younger than the remaining 3.

I have more than 2x the net worth of the highest one, but spend less than them all.

Yes, I also have 2 homes, but I have no mortgages, so perhaps that makes a difference.

 

[daylatedollarshort]

I was also surprised that they all had second homes and were actively paying mortgages, especially at their ages. The mortgage should have been "retired" long ago. On the second home thing, I can understand if there is a family lake house or something that has been an important asset to the extended family for decades, but one lady had two homes, both in resort areas. My dad always said "It's cheaper to rent paradise than to own it". I think that is especially true if you need a mortgage to own paradise.

Oh well, each is the master of his own money.

I'm pretty sure most of us with under 2 - 3% fixed rate mortgages are happy we kept them right now, especially those with the equivalent in TIPS or I-bonds making 8 - 11%. Even 1 year Treasuries are at 3.49%. That is like free money on the difference.

A 6% mortgage / investment differential on $300K mortgage is an extra $18K per year, which can then be invested for even more income.

 

[disneysteve]

Since my wife and I are actively discussing buying a 2nd home, I can't fault them for that. However, when we buy, it will be with cash. We paid off our home in 2019 and have been debt-free ever since and intend to stay that way.

 

[marko]

It also depends on where you live. Here in the North East, (North of Boston) spending $140k would be "living well" but not luxuriously, with housing (and property and income taxes) being the biggest expenses.

 

[Dtail]

Between consulting and still working on boards, a couple of them were not really retired until recently and not early either. Decent article overall.

 

[GenXguy]

It’s actually $1.3m+$0.4M+$0.35M=$2.05M; plus the fat $83K/yr (after taxes & insurance) pension. A quick search reveals that his Maryland pension is CPI adjusted (w/ 3%/yr cap). So, @3.3% discount rate, his pension is worth ~$2.5M, making his total “equivalent NW ~$4.5M.

That true, I didn't take the time to do all the math, but was figuring it was more like $4M or so in equivalent net worth.

Heck, I've got $2M as a single guy, but no pension, and no SS for about 10 years, so it's just not enough. It makes a huge difference when someone has a big pension and other retirement income. It's super misleading for them to call it a $2M retirement.

 

[Huston55]

It makes a huge difference when someone has a big pension and other retirement income.

Yes, other retirement income can make a big difference. That’s one of the reasons for the (SIRE: Secure Income Retire Early) designation often discussed here and elsewhere. There’s a good thread on that here (E-R.org) somewhere if anyone wants to read and/or link it.

 

[aja8888]

The article would have been more meaningful if they broke out everyone's spending.

 

[scrabbler1]

We spend half of what any of those folks do and need or want for nothing. We have no Mega Pension and I am waiting till 70 to take my SS. We do more Non-Qualified Cashish than they have though. The only difference I can see with some is that we do not have a mortgage and only 1 home. We do live in a resort area, so no lack of things to do.

I can't begin to imagine how I would spend that much in one year. I have spent over $30k only once in ER, and that due to an income spike which raised my income taxes. And my savings and investments is similar to theirs, around $1.7M. Sorry, but I simply cannot relate to the people in the article.

 

[EastWest Gal]

The first one caught my attention, because of the sentence "Mr. Fitzgerald also considers himself fortunate as he also has a roughly $6,900 pension after taxes and insurance (italics mine). That's an additional $84K/year, worth, which is an additional $2million over his life expectancy. That is an astounding pension. That is my annual spend goal without adding our catching up on deferred home maintenance and other lumpy expenditures, which bring our annual spend to about $100K. And he's worried about a $600/month food bill. They stopped buying bagged salads. Gee whiz. I doubt I've bought more than 20 bagged salads in my life.

This article lost me because of the high annual spends, ignoring pensions, spouse's retirement savings, part-time consulting work and working spouses. These details show that this was a sloppy fluff piece, not something I would expect from the WSJ.

 

[Major Tom]

The mortgage should have been "retired" long ago.

I wouldn't go as far as to say that. Certainly, for many people, having the mortgage paid off before retiring gives an extra sense of security, which it is hard to argue against. However, if you can easily afford to pay for a mortgage, why not have one? Especially at the recent low interest rates, there's an argument to be made in favor of carrying a mortgage.

To be clear, I am simply pushing back against what I see as the broad, blanket statement that their mortgages should have been paid off a long time ago. I am not advocating for everyone carrying a mortgage in their retirement. To each his/her own.

 

[EarlyandLate]

I wouldn't go as far as to say that. Certainly, for many people, having the mortgage paid off before retiring gives an extra sense of security, which it is hard to argue against. However, if you can easily afford to pay for a mortgage, why not have one? Especially at the recent low interest rates, there's an argument to be made in favor of carrying a mortgage.

Since the standard deduction was raised so much, I never itemize on taxes anymore. When I paid off my mortgage in 1999, the money I would have paid for that just went into index funds instead. I think I'm pretty happy with the way that turned out!