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

[MarieIG]

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.

The issue was, as far as I saw it, the first retiree in the article was cutting back on his food. Something is wrong with that picture. It is possible to stretch yourself too thin.

Typically, the people on this forum beat it to death before making a mortgage vs. no mortgage determination, so are much more informed re: income vs. expenses.

 

[Midpack]

Based on the article our WR is too low, but we're fine as is despite no pension, annuity or SS yet. One day we'll get better at BTD...working on it. Then again when the market meltdown that some are predicting happens, we'll probably by just right.

 

[disneysteve]

I can't begin to imagine how I would spend that much in one year. I have spent over $30k only once in ER

Depends where you live and what you're doing for health insurance. We just started COBRA which comes to just under 2K/month so that's 24K/yr right there. Add 8K for property taxes. Food, other insurances, gas, travel, entertainment, home and auto maintenance, taxes, etc. and it's not hard at all to get over 100K. I'm estimating our need to be 130K/year.

 

[daylatedollarshort]

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!

If you had a low interest rate mortgage for $300K per the earlier post, wouldn't you have made even more money if you had invested that money in stocks? I'm would only do the arbitrage with a fixed income investment myself, so just asking.

 

[EarlyandLate]

If you had a low interest rate mortgage for $300K per the earlier post, wouldn't you have made even more money if you had invested that money in stocks? I'm would only do the arbitrage with a fixed income investment myself, so just asking.

Sorry, not sure I'm understanding your question correctly. I did invest in stock index funds. IIRC, my mortgage was 7.5% back then. I'll take a 3x return on my money any day over a 7.5% cost.

 

[stepford]

Just to agree with several others posters in this thread. I retired earlier, have more savings and spend significantly less than any of the examples shown in the article. Maybe the retirement mindset we cultivate around E-R.org is atypical.

 

[street]

After reading the article of the 4 millionaires and their spending history. I would come to believe that many people have similar lifestyles. Maybe not from people here on this site but sure there are many that do.

A comment on mortgages has always been as eye catcher for me. I'm not for or against a mortgage in retirement what works for the person is all that matters. No wrong or right way IMO.

The interesting thing is all experts and professional advice to retirement is "always have no debt and make sure everything is paid off".

I think if there is any argument to having debt or not is from the golden rule not to have debt in retirement from professionals.

 

[daylatedollarshort]

Sorry, not sure I'm understanding your question correctly. I did invest in stock index funds. IIRC, my mortgage was 7.5% back then. I'll take a 3x return on my money any day over a 7.5% cost.

Mortgage rates were pretty low this last decade, not 7.5%. You stated you invested the money you weren't paying on your mortgage in stock index funds and came out ahead by investing the money not going to mortgage payments. But stocks have had much higher returns this past decade than mortgage rates. Mortgage rates dropped to 3.35% a decade ago. If you had a 3.35% mortgage this past decade and invested that money in stock index funds, wouldn't you have made even more money, than you did without the mortgage?

 

[Car-Guy]

There have been endless discussions on this forum about how much is enough, and of course "it depends".

From my POV, for just me and the DW, if I were retiring today at ~60 with no debt and only SS to depend on, I'd want at least 2m in cash accounts. Maybe even 2.5m if that were all in tax deferred accounts. And that's just to be "sort of" comfortable. No mansions/jet's/yacht's, fancy cars, etc.

3+m would be much better.

If I were turning 60 in 5 or 10 years, I'd be planning on a lot more than that, the way things are going.

 

[cyber888]

Only 1 person has $2 million - the first one. And the rest has $1 mil - 1.8 mil. And they are spending $92,000 - $144,000 a year, and they have mortgages - I guess that's why they are spending a lot more. But seems like they are managing their retirement.

 

[Yipper]

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.

I used to feel thrilled to be mortgage free finally and it came after all three daughters were out of college too. But then I saw sub-3% interest rates and figured, why pay full cash for the second rental property? I can keep hiking rent to match inflation or at least more than the 2.75% rate on my new mortgage… I’m really coming out ahead.

In the process of selling one of the rentals and will have more than enough to retire the mortgage but can’t see the reason if I can beat 2.75% with TIPS and I-bonds, good corporates, etc.

 

[Major Tom]

The issue was, as far as I saw it, the first retiree in the article was cutting back on his food. Something is wrong with that picture. It is possible to stretch yourself too thin.

I don't know why, but I was reading the statement about mortgages as a broad, blanket statement, as opposed to it being specifically directed at the retirees in the article. I don't know why I did that. My mistake.

 

[aaronc879]

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

Sounds like you could have/should have retired several years earlier. Do you regret working longer than needed or are you happy to give a lot of money to your heirs?

 

[NW-Bound]

Only 1 person has $2 million - the first one. And the rest has $1 mil - 1.8 mil. And they are spending $92,000 - $144,000 a year, and they have mortgages - I guess that's why they are spending a lot more. But seems like they are managing their retirement.

At their age, they are no ERs. The first one at 61 now retired 3 years ago at the age of 58. After 33 years as a policeman, he has a nice pension of $83K after taxes and insurance.

The other ones also did not retire early, and probably have a decent pension in addition to SS. They certainly did not live on just their stash of savings like ERs do.

Well, that's what working late gets you. I worked until 55, and when I claim SS at 70, it will be a reasonable amount (but nothing like the policeman's pension).

PS. The main thing is these retirees seem to be in good health, including the 84-year old man who worked until 70.

And healthy as they are, I don't think they have to limit themselves to 4% WR, and can go quite a bit higher if they like to.

 

[NW-Bound]

Sounds like you could have/should have retired several years earlier. Do you regret working longer than needed or are you happy to give a lot of money to your heirs?

No. I retired at 55, after switching to part-time consulting at 47. My wife quit at 50. That's plenty early.

I could not retire earlier than that due to my children still in college, plus it felt a lot safer having an income during the 2008-2009 Great Recession.

I did not expect to have what I have now. It all came from the largesse of the market god, who might change his mind and take it all back any time.

 

[NW-Bound]

And no, I do not regret working longer. After working part-time since the age of 47, I had plenty of time off and international travel.

And I missed work, which I enjoyed. I liked to design and build things to see them work. Would have worked longer if office politics did not p*ss me off. They still wanted me back, but I said no.

 

[MarieIG]

I don't know why, but I was reading the statement about mortgages as a broad, blanket statement, as opposed to it being specifically directed at the retirees in the article. I don't know why I did that. My mistake.

I probably wasn't clear. Whether or not to keep a mortgage is very fact specific. We recently had a member who had started a thread on the issue - but - he had negotiated a nice golden parachute, paid off his debt, charted his expenses (repeatedly), had a COLA'd military pension, and a dirt cheap mortgage.

 

[cyber888]

Yeah, the first guy has a very nice pension at $83,000. I don't see a problem with this guy except for his expenses at $144,000. He just needs to add $61,000 to his $83,000 to get to $144,000.

At their age, they are no ERs. The first one at 61 now retired 3 years ago at the age of 58. After 33 years as a policeman, he has a nice pension of $83K after taxes and insurance.

The other ones also did not retire early, and probably have a decent pension in addition to SS. They certainly did not live on just their stash of savings like ERs do.

Well, that's what working late gets you. I worked until 55, and when I claim SS at 70, it will be a reasonable amount (but nothing like the policeman's pension).

PS. The main thing is these retirees seem to be in good health, including the 84-year old man who worked until 70.

And healthy as they are, I don't think they have to limit themselves to 4% WR, and can go quite a bit higher if they like to.

 

[FREE866]

These articles always annoy me for some reason


I don't identify with any of the people mentioned, as usual

 

[Aerides]

(And they're having to cut back because their grocery bill when from $300 to $600).

I found that odd, for two people who spend $140k per year, when was a $300 grocery bill the norm? I mean I know it can/could be done, but that might have been a lot longer ago than implied (like, it didn't go from $300 to $600 in 2 years, even with today's inflation, most stuff hasn't literally doubled in anywhere near that short of a timeframe).

And still with a $140k annual spend, $4 bagged-salad was where he drew the line.

 

[anethum]

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.

This retired cop lives in Montgomery County, MD and I presume he retired from that county's police force. Pay and benefits are often excessive there. For example, "executive" county government positions can be paid more than federal government cabinet secretaries.

There was a big police retirement scam that went on there for decades. Basically, their contract allowed the majority of them to retire on disability, even if it was a very minor disability.

https://www.washingtonpost.com/opin...ability-scam/2012/05/07/gIQAlAyv8T_story.html

It's probably behind a paywall, so here are a few key details:

"The problem arose from a one-size-fits-all disability system that awards an officer two-thirds of his final year’s salary for life, whether suffering from a sore elbow or full paralysis. (Most claims are closer to the sore-elbow variety.) Better yet — for police, not taxpayers — the awards are tax-free, meaning officers could net an amount very close to their full pre-retirement salary, even if their disability was relatively slight.

The effect is that huge numbers of officers claim disabilities and retire with generous awards at a relatively young age, then go out and find other jobs paying almost as much as, and in some cases more than, they make as police."

There was finally some police pension reform in the county several years ago, though it's still generous. I don't know if the guy in the WSJ article has one of those scam disability pensions, but the article says his $84,000 was after taxes & insurance. So if it's not a disability pension, it's probably a 6 figure pension, which is nuts IMO. And if it is a disability pension and he doesn't have to pay income taxes, it's equivalent to a 6-figure pension. So the guy has had to cut back on his grocery expenses. Where's my teeny tiny violin?

 

[TheWizard]

It's fun to be rich in retirement, yes indeed...

 

[marko]

And still with a $140k annual spend, $4 bagged-salad was where he drew the line.

True. But as a few posts have observed, there's no breakdown on the other $139.006K. If you live in a HCOL area, $140k might be close to breaking even just with normal everyday living expenses. I could see someone around our area being on the edge of having to find small ways to economize.

If you're making $140K and suddenly spending $145K due to inflation, that $4 bag of salad does come into play.

As I noted earlier, around here $140K doesn't go as far as in other parts of the country.

 

[jollystomper]

These folks are in the same "ballpark" as I am. DW and I possibly could have been potential subjects for that article. so I found the article and interesting comparison.

The positive thing is that they did the basics very well: lived below their means to save and invest, to even have the opportunity to retire. They are comfortable in retirement, and doing what they want to do.

The pension aspect does make a difference. While my pension is not as large, and not a COLA pension, it is large enough to cover the majority of our spending. I would have retired if it did not.

A breakdown of the spending in more detail would be helping, but I did not find their spending outrageous. Across the 4 of them, the average annual spend is about $111,500. That is less than our annualized spend, in 50 months of retirement, of $114,000. Now, if you take out our taxes, charity, and gifts, the rest of our annualized spending - which one could argue is what we are actually living on - is about 64,000. I would be curious what their spend exclusive of those categories are (they may or may not have been included, it was not clear to me unless I missed something).

Grocery spending expenses can be a function of ones taste. I do not find $600/month in groceries terrible; ours has averaged $533/month (it does include about 18 months of having a DS at home with us). Our total food spending (groceries + takeout + dining out + snacks) averages closer to $700/month. However this is something we would be comfortable controlling more, if we felt a strong impact from the strain of inflation.

Some of the expenses mentioned I would not have retired if they were large. One of my retirement "conditions" was to have no college expenses for children left to pay. And the balance on my mortgage was > $70K, small enough relative to my cash that I could pay if off early if I wanted (which I did 2 years after retiring). I would not feel comfortable with a large mortgage and payment to deal with.

Their stock allocations are much higher than mine (never been more that 40% since I retired), that is why some concerns over the market were brought out. I could not sleep well at night with that allocation, but that is me.

They have been much more productive than I have, still doing things to generate income. That would be the main difference from my situation - I have enough to choose not to work, have been selective in my volunteer activities, and am fine filling my time with hobbies, family, and friends right now. Their "work" energy puts me to shame .

Overall, it was interesting to read and compare how they were doing in retirement. While not as detailed, to me it was similar to the Money Magazine "profiles" of people they publish, with which I use to compare to see how we were doing, and see what ideas/actions/things to avoid I could gleam from them.

The comments on the article were also an interesting read .

 

[NW-Bound]

Yeah, the first guy has a very nice pension at $83,000. I don't see a problem with this guy except for his expenses at $144,000. He just needs to add $61,000 to his $83,000 to get to $144,000.

I read the article more closely. Yes, he had a retirement savings of $1.7M when he started retirement, and it has shrunken to $1.3M (a loss of 24%). He also has $350K of money outside of the retirement savings.

His wife has a savings of $400K.

So, that's a total of $2,050K between them. At 4% WR, that's $82K/year, more than the $61K they need to supplement his pension.

I think the man can resume buying his $4 prewashed/precut salad package. Or perhaps he has discovered his frugal self.


PS. We never buy prepackaged salad. A head of lettuce is $1. Tomatoes are 2 or 3 lbs for $1. Same with onion. Cucumbers are also 3 or 4 for $1. Celery is $1 for a bunch. We like food preparation. A retiree has lots of time, and needs to be moving about.