Article - 35% of Millionaires won't be able to retire

[Gumby]

The "And?" one? I saw it. I read it. It certainly did not get me.

Nope. The one before that, which you quoted.

 

[Sunset]

I way overpay for internet. It just went up to $85/mo. I pay it because it is 95%+ of my entertainment.

Due to your low income (?) . You may easily be eligible for free internet.

https://www.highspeedinternet.com/resources/how-can-i-get-free-internet

 

[Samsung4321]

Do you have any kind of inflation protected bonds there? We come out ahead with high inflation here in the U.S. because Social Security is adjusted for inflation and we have a lot of inflation adjusted bonds, plus a fixed mortgage and capped property taxes, so a big chunk or our expenses aren't impacted by inflation.

Much more modest indexed bond offerings than USA:
https://www2.asx.com.au/markets/trade-our-cash-market/equity-market-prices/bonds

I keep an envying eye on indexed bonds but the large probability of interest rates increases and resulting short to medium term capital losses hold me back for now. Nice to have a bell rung at the peak of interest rates.

Discounted capital gains tax still taxes inflationary gains to a degree.

The mortgage market is dominated by variable rates contracts, the reverse of USA.

Property taxes are a small fraction of equivalent USA - mine $A2,500 / y.

Dividends come with [franking] tax credits - like wages - unlike USA.

More generally, Aus does well economically from commodity price inflation.

 

[Samsung4321]

Nope. The one before that, which you quoted.

"Numbers is hard"

Are my numbers not?

 

[ESRwannabe]

$40k is comfortable in small town in USA.

I was spending around $36k (excluding taxes) in 2020-2021 before inflation took off. Probably spending around $40k now.

I made myself voluntarily unemployed at the end of June. I am tied up dealing with family obligations until probably 2024. Helping my parents sell their house and move to another state.

Living off of $30k in divs (3% yield) from the SCHD etf in my taxable account and cash savings. Roughly $1M in taxable, excluding cash, and similar in traditional retirement assets, age 46.

This inflation spike sucks. However, I'm confident that I can avoid having to un-retire myself and get another job, if I am willing to just live overseas half the year, for a couple of years. The dollar is so strong I think it would offset the inflation.

Option "1", travel around and live in a tropical area during the winter months. Option "2" go back to work.

 

[ESRwannabe]

Well, in February something put a big wrench in our spending. DW found a new apartment complex right on the beach 3 miles from where she grew up.
The rent is $5K per month. The view is priceless.
I am 84, and she is 78, and we get $80K a year between SS and pensions, so we can afford it.
We lived in a +55 MHP, and it is like a ghost town. Here other than the ocean, we see cyclists, joggers, dog walkers, and all sorts of folks.

I think once I turn 55 I will take a hard look at the 55+ communities to buy a house or mobile home. I haven't looked at them that much but they seem to be priced very cheap compared to "normal" housing areas. I'm guessing that is due to the more limited set of buyers.

I'm thinking that by the time I am 55, i.e. 9 years, there will be a good number of these for sale in those areas due to Baby Boomers having to move onto assisted living places and such by then. Prices might be exceptional bargains by then.

 

[daylatedollarshort]

I haven't looked at them that much but they seem to be priced very cheap compared to "normal" housing areas. I'm guessing that is due to the more limited set of buyers.

I've noticed that, too. Some here in California are priced way less than the surrounding communities. Not only do they have age restrictions, but at least some also have income restrictions so that lowers even further the potential number of buyers.

 

[TheWizard]

I was spending around $36k (excluding taxes) in 2020-2021 before inflation took off. Probably spending around $40k now...

Before I retired in 2013, I made a spreadsheet of my expenses and I believe my BASE expenses came to around $40k per year.
BASE expenses are probably a bit higher now; property taxes are just over $10k per year. I don't actually track my spending, so some guesswork there.

My DISCRETIONARY expenses exceed my base expenses again nowadays with travel open again. Off to Australia for four weeks before long, that should be fun...

 

[aaronc879]

Well, spending more does buy some happiness. Up to a point.

For me, that point is below $200K/year (way below), unless inflation runs rampant.

Yeah I always disagree with those people who say money doesn't buy happiness. I would be much happier if I could afford to spend say $60K/yr instead of $12K/yr. But once you get over a certain amount then it doesn't have the same effect. That amount is well under $200K/yr for me.

 

[jollystomper]

$40k is comfortable in small town in USA.

Our current target retirement annual spending is (not that we actually reach it) is about $135K. We call that an extravagant retirement .

We could squeeze things down to probably under $50K. But that would not be a happy retirement for us.

 

[Aerides]

If they’ve bought a huge house like in that picture they probably have no savings at all anyway.

Where I live, those are $5m homes.

And if I lived somewhere small-town ish there is still no way DH and I could do $40k per year and be happy. A single person without a condo and few hobbies, little travel, maybe.

 

[finnski1]

If they’ve bought a huge house like in that picture they probably have no savings at all anyway.

Yeah some of those houses are huge. In some parts of the south you can buy much larger houses for the same money as here in New England for a house half that size if your lucky.
On top of that I absolutely couldn't stand that many houses right on top of me. Just personal preferences obviously but give me a huge lot with a smaller house any day. I have almost 9 acres and can see no neighbors at all. Paradise for DW and I.

Also people living in those neighborhoods tend to have to keep up with the neighborhood standards. In other words if your neighbor drives home with a new Lexus you almost have a duty to have a nice car yourself. This also carries over to the clothing, furnishings, kids extracurricular activities, expensive schools etc. You do all those things and good luck saving much.
Call it lifestyle creep, keeping up with the Joneses or whatever, throw in some marketing to your demographic and you can almost see why the desire to spend is so strong.

 

[COcheesehead]

The ability to retire is a function of how well you can use your assets (pensions included if you have one) to pay for your chosen lifestyle. So either you have enough assets or you reduce your lifestyle. For some of us, it’s not really a choice and we have plenty. For others it’s OMY or lower your lifestyle expectations.

 

[Music Lover]

Where I live, those are $5m homes.

And if I lived somewhere small-town ish there is still no way DH and I could do $40k per year and be happy. A single person without a condo and few hobbies, little travel, maybe.

Of course, it's different for everyone. If you don't care about travel, have an inexpensive hobby, and live in a paid off house/condo then it's a lot easier to live comfortably on a lower income.

For example, compare the annual costs of owning a boat to owning an acoustic guitar.

Or, spending $30k+ a year on world travel as opposed to $5k for 2 or 3 months somewhere warm in winter.

 

[old medic]

We are nowhere near millionaires... Truth be told we aren't even quarter millionaires. But feel confident in our 6-legged retirement stool.

 

[yosemite]

I live in a HCOL area (bay area) and the nice thing is there are so many free and low cost activities nearby that i don’t feel the urge to travel as much. I see my relatives in Texas going on cruises much more for entertainment. So we actually seem to spend less per year than the Texas relatives but do way many more things than them.

 

[LARS]

I guess everyone is really scared of inflation now.



https://www.investopedia.com/millio...te-yahoo&utm_source=yahoo&utm_medium=referral

I don’t find this (not having sufficient funds to retire) surprising at all. I am willing to bet the vast majority of the 26 million plus "millionaires" in America are millionaires because of basically one single asset: their home.

Indeed, I would go further to say a substantial majority of these millionaires probably could not afford to buy their own homes at current market.

Their wealth is FED induced housing inflation.

 

[CRLLS]

I have never spent that much in a year in my life. I will spend this year and I could have spent less. $40K/yr would be livin' large by my standards.

Good going. For us, our Medicare, Supplement and Part D, plus RE tax (averageish home) alone exceeds $12,XXX. That leaves nothing for food, clothing and other non-discretionary expenses. Not everyone can live that thrifty.

 

[Fermion]

If you have a true million...especially if some of it is in a Roth, HSA or other tax free account, then coupled with a decent SS, even at age 62, you are going to have at least $60k a year to retire on.

That is enough to retire for almost everyone if you have a paid off house in a not too expensive area.

Or, you know, don't retire in LA or New York?

 

[Gumby]

I don’t find this (not having sufficient funds to retire) surprising at all. I am willing to bet the vast majority of the 26 million plus "millionaires" in America are millionaires because of basically one single asset: their home.

Indeed, I would go further to say a substantial majority of these millionaires probably could not afford to buy their own homes at current market.

Their wealth is FED induced housing inflation.

I hesitate to ascribe housing inflation to a single cause, but I think your point is correct. As for me, I mostly consider our house as the future buy-in to a CCRC. Prior to that, it is simply a cost center, not a source of income to finance retirement.

 

[LARS]

I hesitate to ascribe housing inflation to a single cause, but I think your point is correct. As for me, I mostly consider our house as the future buy-in to a CCRC. Prior to that, it is simply a cost center, not a source of income to finance retirement.

What do lawyers say… a preponderance of the evidence… but nothing is ever just one cause so I get your point.

 

[scrabbler1]

I have never spent that much in a year in my life. I will spend $12,XXX this year and I could have spent less. $40K/yr would be livin' large by my standards.

I am not quite in your low-end neighborhood, but in my 14 years of ER I have exceeded $30k in spending only 1 time, in late 2019, when I liquidated an actively managed stock fund in favor of a similar stock index fund. This pumped up my income tax bill, pushing me over the $30k mark in spending but then reduced my spending to around the $20k mark (and income to around $27k) the last 3 years and getting me back on the coveted ACA premium subsidy train again.

Even during my working years, my spending rarely exceeded the $40k mark. Only some higher income tax years in the 1990s, when I bought my new cars in 1992 and 2007, and when I cashed out my company stock in 2008 did I spend over $40k.

 

[aaronc879]

Good going. For us, our Medicare, Supplement and Part D, plus RE tax (averageish home) alone exceeds $12,XXX. That leaves nothing for food, clothing and other non-discretionary expenses. Not everyone can live that thrifty.

My property taxes will likely hit $3000(home value of $150K) when I get the bill in a couple weeks. If not for that I would be in the 4 figures for annual spending but that is for one person. You say "us" so it's not reasonable to compare to a single person.

 

[Fermion]

For us it is probably food that is one of the more expensive items. We don't specifically budget it but it seems like we spend about $200 a week at the grocery store for 2 people. This includes some Keto foods, toiletries, cleaning supplies, but even so, with ground beef at $5 to $6 a pound (heck, even the cheap stew meat cuts are now $5 to $6 a pound), groceries add up. $800 a month is $9600 a year JUST in food. This isn't dining out either!

 

[ESRwannabe]

Of course, it's different for everyone. If you don't care about travel, have an inexpensive hobby, and live in a paid off house/condo then it's a lot easier to live comfortably on a lower income.

For example, compare the annual costs of owning a boat to owning an acoustic guitar.

Or, spending $30k+ a year on world travel as opposed to $5k for 2 or 3 months somewhere warm in winter.

That sounds like me, expect I don't own a house yet.

I have never liked traveling. I would rather watch a good documentary on some location than actually go there. Ironically, I may be forced to travel for a few years in order to save money. Theoretically living in south east asia, south america, etc. and traveling every few months depending on visa requirements, is cheaper than staying in the US.

I'd rather make my own food at home than go out to eat anywhere, including fast food. IMHO, there is no reason to ever pay more to eat out.

My non-work clothes are usually from Goodwill, Walmart or Amazon Essentials.

My hobbies are reading, streaming movies/tv, and video games. Even video games are cheap as I will just wait a few years after a game comes out and then buy it on sale for $5-$10. I can buy a good book for $.10 and be entertained for a week.

Taxes will go down to $0 next year as my only income will be from qualified dividends, which I estimate to be in the $30k to $35k range. My health insurance premiums will drop to around $140 a month.

I'm not married and have no kids. So, there is nobody else that I have to make compromises with on spending. Especially now that I am unemployed. Obviously when I was working, I would spend whatever was necessary to fit in, i.e. overpriced work clothes, eating lunch out, etc.

The only financial goal I have left to achieve is to buy a house at some point. I maybe waiting another nine years until I am 55, and then see what I can find for a cheap price in a 55+ community. Hopefully a lot of openings from Baby Boomers by then. Iin nine years it will be 2031. The youngest Baby Boomer will be 67 and the oldest will be 85. GenX has always been much smaller. So, there might be some good real estate opportunities especially in a 55+ area where there is no competition from the broader market.

Right now, Baby Boomers own 44% of the housing and most GenX also have a house with 31% of home ownership. Millennials own 11% of homes but they are also pretty poor with only 7% of the US wealth. Millennial wealth is also more skewed, i.e. a higher concentration in the top 10% vs Baby Boomers and GenX. So, it is looking pretty favorable for the real estate buyers' market. There should eventually be a large amount of inventory from the older Baby Boomers and not much competition to buy those houses.

There will be a large transference of wealth from Baby Boomer to their kids but the data is showing it will be highly skewed towards the top 10%. So, this is good for me as that means even with this money I don't see an increase in competition for housing. I think it will actually increase the amount of housing on the market as these genx/millennial children are probably going to want to sell a lot of the inherited real estate.

Looking outside the US there could be significant opportunities due to population decline. Over in Japan they are actually giving houses a way for free to people willing to live outside the major cities. I could see the same happening in Europe as populations plunge more.

https://itsyourjapan.com/japan-is-giving-away-8-millions-abandoned-homes-for-free-get-yours/

I could imagine a time when more cities/states/countries actually start bribing people to move to them.

https://www.movebuddha.com/blog/get-paid-to-move/