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

[Romer]

I'm pretty sure most of us with under 2 - 3% fixed rate mortgages are happy we kept them right now,.

I had a 2.75% 15 year mortgage and I paid the last 3 years off in early 2021 while the market was at a peak. For me, I am glad I made that call. Everyone has a different perspective based on all the threads for and against having a Mortgage.

 

[luckydude]

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.

Our family of 4 (with 2 teenagers) live in VHCOL area and our annual spending is around $120k (with no mortgage payment). Note that this figure doesn't include income/cap gain taxes, which are high due to DW's salary and our investments, and they are tracked separately.

That said, we find that $120k is way more than enough for a very good life even in a VHCOL area, and a big part of that is entirely discretionary. We can go on 2-3 nice vacations a year, fund my addiction to the latest/greatest mountain bike parts, kids' activities, hobbies and tutoring, in addition to meeting basic everyday living expenses. We would struggle to try to spend more than that annually.

That's why I find the spending levels described in this article interesting. The article doesn't break down the expenses, but I would be interested in knowing how these older retirees manage to spend up to low six figures. I'm not passing judgement; I just want to see where the money is going. Who knows, that might give me some good ideas on BTD

 

[daylatedollarshort]

I had a 2.75% 15 year mortgage and I paid the last 3 years off in early 2021 while the market was at a peak. For me, I am glad I made that call. Everyone has a different perspective based on all the threads for and against having a Mortgage.

Okay, maybe I should have said those of us who prioritize maximizing our retirement income are pretty happy we kept the 2 - 3% mortgages.

 

[Winemaker]

Everyone has their own idea of what is "normal" and "excessive". Having a mortgage/ pet/ EV/ granite countertops/ fine wine/ Waygu beef/ Mercedes/ Kia/ 2nd home/ etc. Another clickbait article from a WSJ reporter, just like any other rag/new website.

DW and I worked long hour for our money, saved a bunch because we LBYMs, and now we got a stash. I don't light our beeswax candles with $100 bills, unless it makes us happy. Unless the SHTF, the kids will get a nut, and until I'm 6" under, we have enough to cover any/all expenses, thru the grace of God. I don't mind spending what we've made, I despise those holier than thous in Washington and Harrisburg, that want to take it.

 

[DrRoy]

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!

His pension is 2.3X mine.

 

[Andre1969]

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.

Paying off the mortgage is definitely a personal decision, and, as the old saying goes, YMMV. I bought my house at the age of 48, refinanced twice as rates fell, and now, at the age of 52, my mortgage is projected to be paid off when I'm 80. It would be nice to be mortgage free, but I don't feel a pressing need to cough up roughly $448,000 to pay off a 2.875% mortgage.

My Mom and stepdad are 73 and 70, respectively, and have a mortgage. Mom gripes about it, but whenever she does, I ask her how much is left on the mortgage, and how big the payment is, and it sort of grounds her, at least until the next time it comes up in conversation. I forget what the original terms of their mortgage were, but I think the balance is below $100K, and their payment is below $1,000/mo. Meanwhile, they're both retired, and their pensions exceed their bills by a wide margin, so even though they've been retired for 11 years, they're still accumulating!

But, there is something to be said for being mortgage free. It is a nice feeling, and it's hard to put a dollar value on that.

 

[Andre1969]

Unless the SHTF, the kids will get a nut, and until I'm 6" under, we have enough to cover any/all expenses...

Well, that will certainly save on the labor portion of burial costs :
Sorry, couldn't resist.

 

[Badger]

After reading the posts I scanned the article and found it to be like so many others of its kind. Nothing in it that makes me think I spent that time well.

Cheers!

 

[Winemaker]

Well, that will certainly save on the labor portion of burial costs :
Sorry, couldn't resist.

The plots are already paid for, and as well as the opening of the graves and burial. They were "on sale" this past spring when Mom passed. Mom and Dad bought their graves maybe 20+ years ago, we bought 2 next to them since thet were still available.

 

[Andre1969]

The plots are already paid for, and as well as the opening of the graves and burial. They were "on sale" this past spring when Mom passed. Mom and Dad bought their graves maybe 20+ years ago, we bought 2 next to them since thet were still available.

I was joking about the "6 inches under"

 

[Jerry1]

The plots are already paid for, and as well as the opening of the graves and burial. They were "on sale" this past spring when Mom passed. Mom and Dad bought their graves maybe 20+ years ago, we bought 2 next to them since thet were still available.

He was referring to the typo where you’re only going to be 6” (six inches) under. I noticed that too and thought the same thing.

 

[Bamaman]

Those picked to showcase by the Wall Street Journal were not typical retirees, obviously. The article means little to us Joe Six Packs.

 

[Golden sunsets]

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.

No. I believe the 2 million included the cash value of his pension. He only has $350,000 in investments. So he's rather thin on NW, but with a healthy pension. Not sure how those who are married in the article are counting their net worth and expenses. Does the NW reflect the assets of both? And how about expenses? For one or both?

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[Andre1969]

After reading the posts I scanned the article and found it to be like so many others of its kind. Nothing in it that makes me think I spent that time well.

Cheers!

I didn't bother to read the article, because I'm not a WSJ subscriber, but I think I learned more from the comments here than I would have from the article!

Kind of a shame, too. $2M was my number, at least until COVID hit, and I started working remotely, and then inflation kicked in. I was kinda hoping I might learn something from them But in my case, I would have been retiring ON $2M. It sounds like these people are retiring mostly on pensions, and not particularly early in life. They might have $2M, but it seems like it's mostly the pensions, that allowed them to retire. So, I'm guessing I really don't have much in common with these people.

 

[Golden sunsets]

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.

No no no. The 1.3M reflects the cash value of the annual 83K pension. Either count the 1.3M or the 83K annual pension - not both.

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[Aerides]

I didn't bother to read the article, because I'm not a WSJ subscriber, but I think I learned more from the comments here than I would have from the article!

Kind of a shame, too. $2M was my number, at least until COVID hit, and I started working remotely, and then inflation kicked in. I was kinda hoping I might learn something from them But in my case, I would have been retiring ON $2M. It sounds like these people are retiring mostly on pensions, and not particularly early in life. They might have $2M, but it seems like it's mostly the pensions, that allowed them to retire. So, I'm guessing I really don't have much in common with these people.

They mostly have $2M but not actual NW - because they have debt/mortgages. The guy we're debating above with the 1.3 and the pension has $400k in debt which doesn't seem to have been deducted in the top line numbers.

$2m with a paid off house and expenses under $100k? Go for it.

That is not any of these people.

 

[Montecfo]

At best the article was dubiously titled.

 

[street]

They mostly have $2M but not actual NW - because they have debt/mortgages. The guy we're debating above with the 1.3 and the pension has $400k in debt which doesn't seem to have been deducted in the top line numbers.

$2m with a paid off house and expenses under $100k? Go for it.

That is not any of these people.

That is how I see it also.

 

[ShokWaveRider]

$2m x 4% (Currently 4.3% return is available with a MYGA) + $50k SS (2 People) = $130. That is more than enough with no Mortgage. While this example does not reduce capital a modest withdrawal will get one even more.

 

[Out of Steam]

+1 on carrying a mortgage into retirement.

We have a small mortgage (P+I under $1000 a month) at under 3% after retirement.

If inflation falls again, we'll probably pay it off quickly. In the meantime, it allows us to keep our annual retirement account draw reasonable until we both file for Social Security.

In the meantime, I'm not concerned about it.

 

[TheCaptain67]

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

I was surprised that every one of them appeared to be still paying a mortgage in retirement…..

 

[GenXguy]

I didn't bother to read the article, because I'm not a WSJ subscriber, but I think I learned more from the comments here than I would have from the article!

Kind of a shame, too. $2M was my number, at least until COVID hit, and I started working remotely, and then inflation kicked in. I was kinda hoping I might learn something from them But in my case, I would have been retiring ON $2M. It sounds like these people are retiring mostly on pensions, and not particularly early in life. They might have $2M, but it seems like it's mostly the pensions, that allowed them to retire. So, I'm guessing I really don't have much in common with these people.

Kind of the same way with me. No debt and $2M, but no pension, and younger not getting SS for about 10 years. Soaring inflation has definitely been a factor in me delaying retirement.

 

[daylatedollarshort]

I was surprised that every one of them appeared to be still paying a mortgage in retirement…..

Low interest rate mortgages are real money makers today's investing environment. Per my earlier post, a 6% mortgage / investment differential on $300K mortgage is an extra $18K per year, which can then be invested for even more income. I don't understand why it would be surprising that retirees would choose to do that. An extra $18K isn't chicken feed to me. A low interest rate mortgage, especially if offset by TIPS and I-bonds, is a great inflation hedge.

 

[dixonge]

No no no. The 1.3M reflects the cash value of the annual 83K pension. Either count the 1.3M or the 83K annual pension - not both.

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Article states the following for this individual:

Deferred Compensation: Was $1.7M, now down to $1.3M
Pension: $6,900/mo (article states "he also has" - meaning *in addition to* the deferred compensation
Cash and Savings: $350k
Wife's retirement savings: $400k
Wife's income (number not stated)

Huston55 had it right

 

[Out of Steam]

Those picked to showcase by the Wall Street Journal were not typical retirees, obviously. The article means little to us Joe Six Packs.

My wife and I are on the lower income side of this forum. Except that we live in an much less expensive house, our retirement assets and spending are very similar to the last couple discussed in the article.