120K year Lifestyle

Yes you're correct. But my point is that the tax is primarily determined by the income/expenses, not the amount you can live on. Also there is a property tax which can be reduced regardless of what you actually spend.
Most tax that retired people pay, at least before RMD, is primarily determined by what they need to live on. You can have $150,000 in income each year, coming into deferred accounts and capital gains, but if you are even halfway smart, you have that arranged such that your taxable income is about what you actually need to live on. Unless you are doing preparation for RMD by Roth conversions or something.

I think the last sentence you posted was supposed to be "Also there is a property tax which can't be reduced regardless of what you actually spend"

This also would not be true in all states. In our state, if you are over age 61 and your income is below certain limits, you can reduce your property tax as well.
 
Thanks this is a very informative chart. It looks like with elimination of mortgage, vacation and travel, charity and gifts, and all others (not sure what it is) one can easy exist on $50K. Also the tax part can be substantially reduced if taken care well in advance.
Yes, we have set our "survival" retirement a little higher than that, around $65K. Have to have a little bit of fun :) .

Our Our federal and state taxes are currently driven by Roth conversions. But they are still on the relatively "high" side since, with my pension, DW"s SS, and investment income, we end up in the 22% federal tax bracket. But compared to my taxes when I was working, I am not complaining. Our state recently enacted a senior tax credit and partial pension deduction and that helps with state taxes - we just have to keep our AGI under $150K to get those.

Unfortunately we do *not* get a break on property taxes, they have gone steadily up. Our income is too high for the state senior benefit (which requires something like <$40K). For the first time last year, our property tax was higher than our state income tax, and this year they have gone up again to likely be close to twice our state income tax.
 
I would say doable if your overhead is reasonable. FL may not be the place. In addition to the prop tax issue, many insurers have left the state and rates are high. We spend ~150K in MI but are lavish with travel for now and other BTD. We could scale back and be comfortable at $120.
That is where I got ours pegged at when my lady retires in a year. $10k a month after taxes. I have been retired for 15 years, and havent budgeted, so I doubt I will need to when she retires either. Certainly not a lavish lifestyle but a lifestyle we have lived our entires lives and a bit better, so its more than enough for us.
 
If you owned your home and had no debt, 120k "around these parts" and you'd be able to live a very comfortable lifestyle, IMO. If I were to stop buying new cars every ~year, stop gifting to my DD and quit my casino trips, I could live on 120k.
 
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If you owned your home and had no debt, 120k "around these parts" and you'd be able to live a very comfortable lifestyle, IMO. If I were to stop buying new cars every ~year, stop gifting to my DD and quit my casino trips, I could live on 120k.
IOW all you have to do is stop having fun. ;)
 
We live on the shore of Long Island Sound in Connecticut. The taxes are high, as is the cost of living, but we live quite nicely on about $120k per year (which includes all taxes, even on Roth conversions, and substantial charitable contributions). It helps that we are mortgage free and have no need to support anyone other than ourselves.
 
When I retired 20 years ago, I would have never thought in terms of spending $10K/month. Now it seems "normal." I realize there has been a lot of inflation in the past 4 years, but even with that, $120K/year boggles my mind - but that's about what we spend - and that's before we send to our charities.
 
Health insurance premiums could significantly add to your expenses starting in 2026 when the ACA cliff returns, which it probably will. You could be paying upwards of $20,000 per year for health insurance premiums. One dollar over the 400% federal poverty level will cost you many thousands. In our area, the premiums for two people in their early 60s ranges from $1600-3300 per month. This year that income amount is just under $85,000. So you may want to beef up your cash reserves before going on ACA related health insurance, and sell from your taxable the assets with the least capital gains, so you'll be reporting less income than the cash you take out. Also look for tax loss harvesting opportunities.
 
Property taxes are high in FL. I know someone near Orlando, paid 550K two years ago. Their property taxes are $6500. But with a homestead exemption they are capped at a 3% increase per year after the initial hit. When looking for a home, don't go by what the current taxes are --that homeowner may have bought their home decades ago. The taxes will adjust when a new homeowner buys it.

Oh, and also homeowners insurance is crazy but you are probably used to that in CA.
I live in Florida and my taxes are about $3k/yr BUT I bought the house in 1983 and the taxes are capped. A similarly priced house today in my area (maybe a $300k less) that was bought a few years ago and doesn't have the taxes capped pays $14,500/yr. I don't know what it is like anywhere else but anyone moving to Florida and buying a house is not only going to pay a sizable price for the house but a sizable amount every year for property taxes. Then there are the Home, Flood, and Wind (hurricane) insurances.
 
I live in Florida and my taxes are about $3k/yr BUT I bought the house in 1983 and the taxes are capped. A similarly priced house today in my area (maybe a $300k less) that was bought a few years ago and doesn't have the taxes capped pays $14,500/yr. I don't know what it is like anywhere else but anyone moving to Florida and buying a house is not only going to pay a sizable price for the house but a sizable amount every year for property taxes. Then there are the Home, Flood, and Wind (hurricane) insurances.

Some reading for Florida home owners:

Inventory of Homes for Sale in the Biggest Florida Metros Piles Up to Highest in Years as Demand Has Withered​

Active listings of existing homes for sale in Florida soared by 32% year-over-year in May to 181,822 listings, up by 26% from May 2019, and up by 34% from May 2018, after a surge that started in late 2022 from very low levels. Since then, inventory for sale has quadrupled.
 
TLDR so this may have been covered.
A 4% WR @$120k doesn't explain things.

One can have a 4%WR PLUS SS, pension, and other incomes unconnected to the portfolio. Combined with these, $120 from the portfolio could be closer to a $200k spend/income.

Hitting Medicare age put an extra $26k into our spending (or savings) bucket.

Having said that, if $120k was our sole income, then no, we couldn't live our lifestyle on that without some major adjustments, living in a HCOL area.
 
Prices have dropped considerably around Vero Beach. Our renters just bought an 1800 square ft home in Rotonda West for 250k. Several 350k plus homes are now under 300k. I don't get why they just keep building and building without taking into consideration the infrastructure for medical services. 6 months to see a doctor but keep building and increase the population seems smart.
 
Prices have dropped considerably around Vero Beach. Our renters just bought an 1800 square ft home in Rotonda West for 250k. Several 350k plus homes are now under 300k. I don't get why they just keep building and building without taking into consideration the infrastructure for medical services. 6 months to see a doctor but keep building and increase the population seems smart.
In the Islands, it's the opposite. Getting a permit to build or even rebuild is near impossible. I hear that 6 people have gotten permits to rebuild in Lahaina. I have heard that 56% of the cost of building in the Islands is getting permits and cutting red tape. Our population is receding because housing is too expensive. The good news is that health care is available - much more so than where I used to live on the mainland - and the old home town is building like crazy - as prices go up and up.

Returning you now...
 
I'm sorry, but that made me laugh. Fellow CA here, so I get it. :D

To OP - I'm in Coastal S. CA, an area a bit less pricey the the SF Bay Area, but still very pricey. We do not, but could definitely, live on $120,000 a year, and quite well. In playing with my budget numbers, it would allow for all necessary expenses such as taxes, insurance, utilities, and food, plus a good $20-$30,000 to play with.

Have you made a budget and tested it yet? Otherwise it seems a bit pie-in-the-sky of guesswork.

I tested a budget for two years ( a year and a half was probably ok in retrospect.) i used 1 credit card and one checking account during that whole time to keep things simple. i didn't have a projected budget that i did. i just lived the way i would like to in retirement and then evaluated the checking account and credit card at the end of my test window. i had no intention of moving elsewhere , which also kept it simple. i found that very valuable in helping validate what my spending was likely to be - i didn't trust conjuring up a budget on my own without a test of it to get a good sanity check and i was fine working that length of time as i wasn't hellbent on getting out immediately. at "evaluation time" i then added in factors like additional retirement travel allowances etc.. & healthcare subscription
 
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Most tax that retired people pay, at least before RMD, is primarily determined by what they need to live on. You can have $150,000 in income each year, coming into deferred accounts and capital gains, but if you are even halfway smart, you have that arranged such that your taxable income is about what you actually need to live on. ...
Then some of us (such as me), aren't even close to being "halfway smart". Most of my portfolio is in taxable accounts, and even though it's mainly index funds treated as buy-and-hold, the annual dividends incur substantial income tax. The Barista FIRE job gets to pay SS tax, federal and state income tax... and bumps the AGI, such that... things happen to those taxable dividends. Posting specific numbers accomplishes nothing, since it only gets panned as bragging or trolling.

Barring some calamitous event in the markets, as life goes on, the dividends compound into new index-fund holdings and hence geometrically more dividends, raising the tax expenditure. Being nowhere near "halfway smart", I can not conceive of a scenario (again, short of aforementioned calamity) where annual personal expenses become any significant rival to the taxes.

Now please, educate me! I might not be able to become smart, but at least I might absorb some actionable knowledge.
 
Now please, educate me! I might not be able to become smart, but at least I might absorb some actionable knowledge.
So you have your taxable funds in a broad market index such as the S&P500? If you are like most retired people, which I was referencing, this amount is probably no more than $1 million dollars (probably less than that for most retired people). The S&P500 dividend rate is 1.27% (I think). So that is $12,700 in dividend income that you would have, which I agree with you is unavoidable, even if you actually need less than $12,700 plus SS to live on.

Or are you one of those half way smart people who has $10,000,000 in taxable and thinks they are the average retired person?
 
Then some of us (such as me), aren't even close to being "halfway smart". Most of my portfolio is in taxable accounts, and even though it's mainly index funds treated as buy-and-hold, the annual dividends incur substantial income tax. The Barista FIRE job gets to pay SS tax, federal and state income tax... and bumps the AGI, such that... things happen to those taxable dividends. Posting specific numbers accomplishes nothing, since it only gets panned as bragging or trolling.

Barring some calamitous event in the markets, as life goes on, the dividends compound into new index-fund holdings and hence geometrically more dividends, raising the tax expenditure. Being nowhere near "halfway smart", I can not conceive of a scenario (again, short of aforementioned calamity) where annual personal expenses become any significant rival to the taxes.

Now please, educate me! I might not be able to become smart, but at least I might absorb some actionable knowledge.
I'm curious as to why you have a Barista FIRE job. Is it to make ends meet or something else?
 
I'm curious as to why you have a Barista FIRE job. Is it to make ends meet or something else?
I'll give an example/analogy. Jenny is a waitress in a cocktail bar, earning very modest wages. She shares an apartment with her roommate, and does her best to contribute to her Roth IRA. One day, Jenny's rich uncle Rufus dies, and leaves to her $10M. Jenny puts the $10M into the Vanguard S&P 500 index fund. The calendar rolls over, and now it's tax-season in the following year. Vanguard sends to Jenny a 1099R, showing that hey, over the months that she's had that account, it has generated $100K in taxable dividends. Now she needs to scramble to pay her tax bill... take extra hours at the bar, maybe get a second job... except that those extra hours or job, also mean more income tax. By becoming richer, Jenny has become... poorer.

The peanut gallery might yell, "Hey Jenny, you dumb [expletive]! Don't ya know, ya gotta pay taxes on that them thar gains?" Yeah, Jenny knows. Now she makes quarterly estimated payments to the IRS (next one is due tomorrow, BTW)... meaning, that even less of her paycheck is hers to keep.

OK. The solution is right under Jenny's nose, yes? She can withdraw some of that money from her account, using it to pay her taxes, yes? She can. But she wants to keep contributing to her retirement... or at very least, not withdrawing from her accounts. Now suddenly she has to! She never earned much, but she spent a lifetime trying to be frugal and diligent and set money aside. Now, she can't.

I'm not Jenny. I don't work in a cocktail bar. I don't have a rich uncle Rufus. No stupendous windfalls here... just gradual accumulation. But eventually one wakes up, and realizes: "Holy [expletive!]! I have become just like Jenny!"
 
It doesn't matter if it comes from work or from investment, there are always taxes on income. But tax rates are never 100%, so more income is always better. It just seems like Jenny and you want to eat your cake and have it too.
 
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It doesn't matter if it come from work or from investment, there are always taxes on income. But tax rates are never 100%, so more income is always better.
My Dad always said "If you're complaining about taxes, that means you are making money!"

Flieger
 
It doesn't matter if it comes from work or from investment, there are always taxes on income. But tax rates are never 100%, so more income is always better. It just seems like Jenny and you want to eat your cake and have it too.
Checko.
Where it matters is what you are doing to get the extra income.
Some folks are doing nothing additional; they get an inheritance or maybe a spouse passed away and they have more income as a Single person.

That's fine.
But if you're still working in a high tax bracket when you easily could be retired, then there's room for discussion there...
 
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