How much do you plan on living on in ER?

[ziggy29]

Depends on what happens with health care and on how taxes and qualifications for entitlements change.

If we wind up with universal health care which is heavily subsidized for lower incomes, means-tested Social Security and higher taxes on higher incomes, you can bet I'll configure my lifestyle to "need" as little income as reasonably possible for a comfortable but simple lifestyle. If these things don't happen, I'm prepared to ratchet up our lifestyles a bit and take more income.

With a simple lifestyle, a small and paid-off house and no debt, many would be surprised at how little one needs to live, especially if the 800-pound health insurance gorilla is no longer standing in your way.

 

[Coloradoblonde]

We tracked our spending, built a budget based on that, and then made sure that we had enough in the ER portfolio to cover the gap between my pension (started 2002) and spouse's pension (2022).

Reality has worked out better than the budget. ER turned out to be cheaper than we expected, we've had plenty of time to pay attention to cutting costs, and dropping interest rates have allowed us to considerably cut back on mortgage expenses.

I'm not sure I understand the original question, because everyone's financial situation is different and everyone has different living standards. Does that answer your question, or were you asking for different info?

Everyone's answers are great. I just wanted to make sure my target figure wasn't really out of the ordinary high or too low as if I was forgetting to put something in my calculations. It seems like ER budgets range from $20K to $55K a year and maybe a crazy spender with a fancy lifestyle would be up near $75K

 

[Bestwifeever]

We figured out a bare bones budget (some people call it "heat and eat") that covered everything we had to spend without moving somewhere cheaper or otherwise adjusting our circumstances--I think it's @$2600/mo for both of us. I think that is a really good place to start when figuring out if you have enough for retirement. Our resources are higher than that, so we are not actually living on the bare bones budget.

Skyvue's monthly expenses above would be the opposite of a bare bones budget--it's also a good point to start in that it's a list of all the things one would want to have enough money to afford.

 

[dm]

Retired, two of us, we spend around $72,000 per year. $12,000 is health insurance. $6000 to $10,000 on golf.

 

[chinaco]

I will ER at 55. DW ER'd at 51. We are over prepared. We can spend about 140% of our current spending level when I ER. We have mega corp retirement insurance.

We have always lived below our means. The increased spending will fund travel and snowbird living in the winter.

 

[freebird5825]

Many moons ago, my late husband and I bought our starter home based on 1 income only. We paid it off within 15 years. I still live here.
Therefore, I figured my decision to FIRE based on my own post-w*rking income only.
I am not trying to be grim here, but when you are widowed at age 46, you learn first-hand the meaning of "sh*t happens".
Oddly enough, a CFP had modelled our worst case and had actually done 2 realistic and independent analyses for each of us living on our own after that type of scenario.
Always plan for the "worst case" financially and then go upwards from there.
If all goes well, you're in the gravy.

 

[kypix]

I figure about $1,000.00 per day should cover just about anything that comes up. Can get there with about 3.8 million in paid for rental real estate.

 

[calmloki]

I figure about $1,000.00 per day should cover just about anything that comes up. Can get there with about 3.8 million in paid for rental real estate.

Hmm. think you are going to be about 50% short of your necessaries unless unless your return is way better than mine. not that i'm playing with that much real estate.

 

[kypix]

Hmm. think you are going to be about 50% short of your necessaries unless unless your return is way better than mine. not that i'm playing with that much real estate.

The recession has been good to some of us.

Closed on a SFR last month. Paid $24K. Long term (4+ yrs) tenant in place paying $825/mo. KY property taxes are about 1% of assessed value. Current assessment is 67K. Pretty much automatic to get assessment lowered to sales price. Insurance is low here too. Vacancy not much of a factor - collected 102% of our scheduled rents last year. Of course, not all of our properties (20 homes) throw off 40+% returns. But, like I said, the recession has been good to some of us.

That $1,000.00 per day goal is closer than ever.

 

[plex]

Kypix, essentially you are going to need a near 100% dependable income stream of 365k/year. If you had a normal portfolio, this would mean 8.5M-9M. Since it is real estate (which is essentially a business), it is much harder to predict exactly what your 100% safe scenario is without a lot more information, but regardless, it is your "worst case" scenario. If you were to liquidate everything, and get out of the real estate business, and invest the money, you would indeed need 8.5-9M, because you would stop working. Using a $X million in equity is only one part of determining what your worst case scenario is, because the equity itself, e.g. 3.7M, is only increasing at something near, or slightly above, inflation. Of course, this is a business, so there is much more to the income than just equity, there is income, leverage, and probably in this case, profit.

There are different ways to use the equity, a good portion of it can be leveraged by being invested in the market, this provides perhaps 2-3% after subtracting the costs of the loan (this approach require steel nerves though). This still would not give you the income stream you need on its own, off the cuff, I would guess you need something like a worst case scenario of 200k/year (10% vacancy rate?) or so in profits (rent+deductions+credits-costs), and be able to increase rent with inflation (no city regulations which require set % increases).

 

[Katsmeow]

It seems like ER budgets range from $20K to $55K a year and maybe a crazy spender with a fancy lifestyle would be up near $75K

Depending upon individual situations you can spend more than $75k without being a crazy spender or having a fancy lifestyle. Of course some of this also deals with wants v. needs. In our case, we are retiring soon with two kids about to graduate high school and one about to start high school. Our spending for the next few years will exceed $75k without having a fancy lifestyle at all. It will go down after that.

Even so there are things I would like to have in the budget that I know are wants and aren't necessary. I have put certain things in the budget that I would like to have but I recognize they aren't necessities. I have several versions of the budget from a very bare bones one to one that is sort of midrange and then to one that has much more wants in it. I suspect we will end up around the midrange one.

 

[Rambler]

Based on my estimates, we would be not quite but pretty close to bare bones at $75k per year post tax. Biggest reasons are the 13k in property tax and insurance on the California McMansion, and 13-17k estimate for health insurance and deductibles/pharma. There is a bit of spending & travel money in that 75k, but not a whole lot. I'm hesitant to say what my "target" is, but its quite a bit higher than 75k.

R

 

[Ken11]

66K in current dollars after tax for the two of us.
This corresponds to the past few years spending during work minus

Fed & State Taxes
SS/Medicare
401K
Mortgage ( almost done with mine, will be moving & taking no mortgge)
Kids tuitiion & support ( they are now off the payroll)
10K adjustment for land taxes ( NY versus Fla or similar low tax locale)
A few other adjustments -both up and down.

Since this involves no squeezing of recent spending i expect we could take 10% or so off of this amount without much pain.

(I'm retiring next month at almost 56)

 

[MasterBlaster]

I wasn't going to respond to this thread. There really is no correct answer on how much you need to live on once the utmost basics are covered. The rest is gravy.

I thought that I wanted to retire early and planned accordingly . Then when the nestegg could support my somewhat frugal lifestyle my attitude changed. All of a sudden I didn't mind working anymore. In fact I look at it as a privilege and an honor to be working. So now that the frugal retirement is covered I'll reach for a better lifestyle - both now and after I quit working.

Working isn't so bad if you quit worrying about all the things that really don't matter. Yes the place could be managed better. yes some of the co-workers have unusual personalities. But who cares I can walk away anytime I want. For the first time you can be yourself at work - You don't have to keep your head down anymore.

My advice is to skip the collection of stuff when you are young to enable financial independence. All that stuff won't really make you happy. And it just may cause you to work way harder to support it all. Collecting stuff means working harder which raises the stress level and lowers your contentment.

Being financially independent is really quite liberating.

 

[Ken11]

I wasn't going to respond to this thread. There really is no correct answer on how much you need to live on once the utmost basics are covered. The rest is gravy.

I thought that I wanted to retire early and planned accordingly . Then when the nestegg could support my somewhat frugal lifestyle my attitude changed. All of a sudden I didn't mind working anymore. In fact I look at it as a privilege and an honor to be working. So now that the frugal retirement is covered I'll reach for a better lifestyle - both now and after I quit working.

Working isn't so bad if you quit worrying about all the things that really doesn't matter. Yes the place could be managed better. yes some of the co-workers have unusual personalities. But who cares I can walk away anytime I want. For the first time you can be yourself at work - You don't have to keep your head down anymore.

My advice is to skip the collection of stuff when you are young to enable financial independence. All that stuff won't really make you happy. And it just may cause you to work way harder to support it all. Collecting stuff means working harder which raises the stress level and lowers your contentment.

Being financially independent is really quite liberating.

There is much wisdom in the above. Great post.

However, Im still leaving this month.

 

[ziggy29]

Working isn't so bad if you quit worrying about all the things that really doesn't matter. Yes the place could be managed better. yes some of the co-workers have unusual personalities. But who cares I can walk away anytime I want. For the first time you can be yourself at work - You don't have to keep your head down anymore.

I think so. To me, FI is the holy grail to seek, not specifically RE. With FI comes the ability (but not the obligation) to RE. FI is what enables all else.

I know I've mentioned this before, but this was my dad's mindset and experience. Once he turned 55 and became eligible for the pension, he knew they had the financial means to retire (i.e. they achieved FI). And at first he planned to retire at 55.

But the thing is, his bosses didn't want to lose him to retirement, so suddenly all the parts of his job that made him want to retire magically started going away and dropped on someone else. He told me that the last couple of years at work were among the most enjoyable ever because his bosses removed most of the crap and drudgery from his job. Plus, he had the ability to tell them to stick it and walk away if it became intolerable.

It wasn't until a couple of years later at 57 when he received an early retirement incentive I can only dream about and drool over: 6 months' pay as lump sum severance, an extra 5 years of credited service for pension calculations, and 100% employer-funded retiree health insurance until age 65. (Those were the days -- this was in 1992, actually. You don't see much of that in the private sector any more.) That offer was, obviously, way too good to pass on and more than I can even conjure up in my most pleasant retirement dreams.

 

[Onward]

For the first time you can be yourself at work

I experienced the same thing, once FIRE was truly in sight. W*rk became game-like and easier to endure. But "being myself" includes speaking my mind and standing up for myself, which was incompatible with the sanctioned atmosphere of quiet desperation at my company. You can bow down to a naked emperor for only so long. So I bowed out, instead.

 

[midlifeguy]

MasterBlaster, I totally agree with you. The psychological comfort of FI (even if your FI supports a relatively bare bones lifestyle) is the real goal, moreso than the FI itself, if that makes sense. I am kind of at that point right now (39, $1.9M portfolio, $1M paid-off home, partner with pension).

I am not working right now, but am interviewing for a big job to go back into my field at a leadership level. I actually like the work I do, and I'm drawn to the concept of making a big salary for a few more years and socking it away for even greater security. I live in New York, so I don't feel particularly wealthy, and I barely feel FI, but I know that if I get fed up, I can sell the house and move and leave the BS behind, go teach or write, and probably manage to live a decent life without working much. That makes the prospect of returning to a high-stress position infinitely more appealing. It's like jumping back on the ship but with your finger on the lifeboat release latch at all times. (Not sure that metaphor really works, but you get what I mean).

 

[calmloki]

The recession has been good to some of us.

Closed on a SFR last month. Paid $24K. Long term (4+ yrs) tenant in place paying $825/mo. KY property taxes are about 1% of assessed value. Current assessment is 67K. Pretty much automatic to get assessment lowered to sales price. Insurance is low here too. Vacancy not much of a factor - collected 102% of our scheduled rents last year. Of course, not all of our properties (20 homes) throw off 40+% returns. But, like I said, the recession has been good to some of us.

That $1,000.00 per day goal is closer than ever.

Ahh. Your return IS much better than mine. OTOH, 50 or 60 homes are going to require an energetic amount of management. Good on you - its a great time to be buying.

 

[Katsmeow]

In January I told my boss that I was retiring at the end of April (just as I turn 56). It is not public news yet at my place of employment but things are so much easier now. Knowing that I can leave any time just removes all stress. He has asked me to stay on indefinitely for one day per week doing only the things that I like. It is an extremely appealing offer and one that I will likely take.

 

[Xman]

For me, the most relevant benchmark is how much I'll spend relative to what I spend now. I'm basically planning for spending to be flat. However, one of the major worries I deal with is that I will give up the opportunity to increase spending(significantly) if I want to in the future.

This is a bit illogical, as I spend as much as I want now. And I am comfortable at this spending level. I feel like I'm wasting money if I spend more. But it does nag at me, that I'm giving up the opportunity to upgrade my lifestyle if I get the urge. Being FI and working, it is really quit pleasant to just spend what I want, knowing I could always make more and I've got all the savings I need. I do like that situation. But I believe that benefits from RE will outweigh the benefit of not having to think about money.

Xman

 

[akck]

For the plan, I budget $80K in retirement with the mortgage, however I'm confident we'll really be in the $60-70K range. The mortgage is planned to be paid off 2-3 years after retirement for educational tax purposes and once it's paid off the budget goes to $65K. However, I think the real range will be $45-55K.

This is for two of us plus one of the kids who'll likely continue on to graduate school. Hopefully the others will be completely on their own by then. I use actual expenses as my estimate, less any work related costs that should disappear, plus any retirement insurance expenses. I'm using a larger expense number just to be conservative, making sure my plan will survive.

 

[RunningBum]

The challenge is to remember everything, such as income taxes, home and car maintenance, a capital budget (cars, furniture, TV, etc, don't last forever), health care, vacations, possibly helping out grown kids, and so on. I suppose there's some value in seeing if you're in the right ballpark, but how your number compares to others' means nothing if your number is just flat wrong.

 

[Rambler]

The challenge is to remember everything, such as income taxes, home and car maintenance, a capital budget (cars, furniture, TV, etc, don't last forever), health care, vacations, possibly helping out grown kids, and so on. I suppose there's some value in seeing if you're in the right ballpark, but how your number compares to others' means nothing if your number is just flat wrong.

...exactly. My budget includes an accrual for capital items, and I think I have all the bases covered, but just to be safe, everything is budgeted at a higher amount than I think I will really need, and there is a 30% slush fund in the initial budget target to cover the unknowns/helping kids/etc.

R

 

[sheehs1]

I agree with skyvue. Here are my projections in todays dollars: You might have to scroll a bit...as I copied and pasted from Excel files....

RETIREMENT BUDGET​

​

​

​

​

​

EXPENSES​

​

​

​

​

​

Without House Payment or Country Club​

​

​

​

​

​

​

​

​

​

​

MONTHLY FIXED​

​

​

​

​

​

MONTHLY​

​

​

​

​

​

YEARLY​

​

​

​

​

​

Column1​

​

​

​

​

​

Charter​

​

​

​

​

100​

​

​

​

​

1200​

​

​

​

​

Electric,H20Trash City​

​

​

​

​

450​

​

​

​

​

5400​

​

​

​

​

Anthem Health Care​

​

​

​

​

600​

​

​

​

​

7200​

​

​

​

​

Verizon​

​

​

​

​

100​

​

​

​

​

1200​

​

​

​

​

SunTrustEquity House PYMT​

​

​

​

​

0​

​

​

​

​

Encompass Insurance​

​

​

​

​

200​

​

​

​

​

2400​

​

​

​

​

Country Club​

​

​

​

​

0​

​

​

​

​

Sum​

​

​

​

​

​

1450​

​

​

​

​

​

17400​

​

​

​

​

​

MONTHLY OTHER​

​

​

​

​

​

Newspaper​

​

​

​

​

15​

​

​

​

​

180​

​

​

​

​

Groceries​

​

​

​

​

500​

​

​

​

​

6000​

​

​

​

​

Me-_Gas​

​

​

​

​

150​

​

​

​

​

1800​

​

​

​

​

Me- Spending​

​

​

​

​

200​

​

​

​

​

2400​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Sum​

​

​

​

​

​

865​

​

​

​

​

​

10380​

​

​

​

​

​

TAXES​

​

​

​

​

​

City Property Tax House​

​

​

​

​

250​

​

​

​

​

3000​

​

​

​

​

City Property Tax Car​

​

​

​

​

100​

​

​

​

​

1200​

​

​

​

​

City Property Tax Car​

​

​

​

​

0​

​

​

​

​

Sum​

​

​

​

​

​

350​

​

​

​

​

​

4200​

​

​

​

​

​

OTHER A​

​

​

​

​

​

House Maint/Yard​

​

​

​

​

100​

​

​

​

​

1200​

​

​

​

​

Dogs: Haircuts​

​

​

​

​

30​

​

​

​

​

360​

​

​

​

​

Dogs: Food​

​

​

​

​

75​

​

​

​

​

900​

​

​

​

​

Clothes:​

​

​

​

​

200​

​

​

​

​

2400​

​

​

​

​

Clothes:​

​

​

​

​

0​

​

​

​

​

Haircuts:​

​

​

​

​

75​

​

​

​

​

900​

​

​

​

​

Haircuts:​

​

​

​

​

0​

​

​

​

​

YMCA​

​

​

​

​

66​

​

​

​

​

792​

​

​

​

​

Sum​

​

​

​

​

​

546​

​

​

​

​

​

6552​

​

​

​

​

​

OTHER B​

​

​

​

​

​

SunTrust Credit Card​

​

​

​

​

Doctos Appt​

​

​

​

​

Health Deductible​

​

​

​

​

Prescriptions​

​

​

​

​

Christmas​

​

​

​

​

Birthdays​

​

​

​

​

Travel​

​

​

​

​

Hobbies​

​

​

​

​

Sum​

​

​

​

​

0​

​

​

​

​

EXPENSES​

​

​

​

​

​

3211​

​

​

​

​

​

38532​

​

​

​

​

​