How much $ to retire and how to fund your lifestyle in retirement

[cusetownusa]

I don't think I'm in the right forum to be asking this, but is there anyone who retired early with expenses under $30-40k a year? If so, when did you retire and about what was your nest egg / withdrawal strategy like?

I'm in a moderate COL city but have a low-cost lifestyle. No other people to worry about, paid off my mortgage years ago, and paid off my Model 3 (which should last forever since I only drive about 5k miles a year pre-covid). Annual expenses were under $21k last year when ignoring the car pay-off. The only major retirement expense increase I see is health insurance and medical costs. (Not worried about entertainment)

Also, how do you find the will to keep working when your stressful day job can't even cover the bill from your capital gains taxes? If only this year's gains could be repeated every single year...

I can't answer your specific question as I am not retired but as far as health insurance expenses...have you tried pricing out an ACA policy through your States health insurance portal? With expenses that low you should get almost fully subsidized health insurance which would limit your health insurance and medical costs substantially.

 

[Oil4AsphaultOnly]

I think anyone posting on TMC would have a problem retiring on less than $100,000 per year unless they were an ascetic. I would suggest you consider your current income to be more realistic. Remember inflation will eat into that over the years.

FTFY. Ascetics wouldn't care about aesthetics. ;-)

 

[MABMAB]

All young people videos offering financial advice? Blah, decide for yourself, they don't have enough grey hair for me.

 

[juanmedina]

Here's something I struggle with: estimating our annual living expenses after retirement. We track and categorize everything we spend now, and have for years, so historical data is plentiful. We currently have two teenagers and, if things go well, we're probably going to retire right when the youngest one leaves for college in 18 months or so (though she might live at home and go to the community college nearby for the first year while she decides on a major).

That said, using all of this historical data, I've tweaked and modified various categories to best estimate how much we'll be spending when it's just the two of us. The figure I keep coming up with is double or more the "40k to 50k" that I see many people in various online retirement blogs and newsletters say that they expect to spend annually.

In my calculations I've tried to think of everything, including recreation, travel, dining out, new clothing, and even a car payment (because we're going to want to have at least one of our two cars be the latest and greatest Tesla), so maybe I'm being overly generous to ourselves, I dunno. I don't to retire only to sit at home and eat Alpo.

Still, even in a relatively decent cost of living area, without a house payment and our no longer saving for college, I don't see how we can retire comfortably on the $40k or $50k that many sites report as a typical annual retirement expenditure.

We track all our expenses through Personal Capital and for this year we are tracking to be under 50k in expenses. We have a 5 year and 2 year old and I feel like spend money on things that we don't need all the time. Our house is been paid off since before I turned 30 and I make 6 figures, the wife works too and we have a paid off rental property. I have not idea what I would buy if I spend 100K a year on... maybe I would replace my Model 3 Performance with a Tesla Roadster . I live in South Carolina so is cheap and maybe that has something to do with it. Thanks to Tesla I can retire with 100k a year including some light call selling but since I am working from home I feel like this is an intro to early retirement and will probably quit if they make us go back to the office full time.

 

[Rockster]

We track all our expenses through Personal Capital and for this year we are tracking to be under 50k in expenses. We have a 5 year and 2 year old and I feel like spend money on things that we don't need all the time. Our house is been paid off since before I turned 30 and I make 6 figures, the wife works too and we have a paid off rental property. I have not idea what I would buy if I spend 100K a year on... maybe I would replace my Model 3 Performance with a Tesla Roadster . I live in South Carolina so is cheap and maybe that has something to do with it. Thanks to Tesla I can retire with 100k a year including some light call selling but since I am working from home I feel like this is an intro to early retirement and will probably quit if they make us go back to the office full time.

Just wait until you have teenagers! They're expensive.

 

[juanmedina]

Just wait until you have teenagers! They're expensive.

They can get a job. I come from a third world country they can pay their own cell phone lol. I can always go back to work I feel like people are way to prudent and end up just wasting time which is precious behind a desk.

 

[ReddyLeaf]

I don't think I'm in the right forum to be asking this, but is there anyone who retired early with expenses under $30-40k a year? If so, when did you retire and about what was your nest egg / withdrawal strategy like?

I'm in a moderate COL city but have a low-cost lifestyle. No other people to worry about, paid off my mortgage years ago, and paid off my Model 3 (which should last forever since I only drive about 5k miles a year pre-covid). Annual expenses were under $21k last year when ignoring the car pay-off. The only major retirement expense increase I see is health insurance and medical costs. (Not worried about entertainment)

Also, how do you find the will to keep working when your stressful day job can't even cover the bill from your capital gains taxes? If only this year's gains could be repeated every single year...

Yes! It all depends on your location, hobbies, and outlook. I retired early and my pension is $1047/mo (not a typo). This is REAL retirement; no part time job, no rental property, writing blogs, etc. I’ve lived on less than $36k/yr for the past few years, including while working. One year that included three US vacations and three weeks in Italy. Most years are 2-3 West Coast vacations, BC, CA, HI, OR coast. Twice have been road trips to the Midwest, once to TX (love that free unlimited supercharging). In short, I’m enjoying lots of great experiences. I don’t stay in 5-star hotels or have extravagant hobbies. My main hobbies are gardening, bicycling and hiking. I spend a lot of time reading because I’m sore from the first three.

This year my expenses are WAY down because Covid has eliminated the entertainment and eating out budget. I have low food expenses because I’m a VERY successful gardener (only a 1/4 acre) while still giving away food to 5-6 neighbors and coffee shop baristas (they are generous enough to save used grounds for my compost).

As for finances, in order to reach 59-1/2, I created a basic CD ladder prior to retirement ($5k every other month). I planned to retire at 50, but had trouble training a replacement, so bought a model S and kept adding to the CD ladder until I had an extra two years at $5k/mo. I’m currently converting about $12k/yr from regular to ROTH IRA, just enough to stay under the limit for ACA health care subsidies. After 62, I’ll probably start drawing down my 401(k) since my IRAs are now almost 100% TSLA and I want to keep it for the long term. It certainly hasn’t been a chore to live on <$3000/mo total, though I couldn’t do this in a big city or CA, but it’s very easy in lower costs areas.

 

[adiggs]

Here's something I struggle with: estimating our annual living expenses after retirement. We track and categorize everything we spend now, and have for years, so historical data is plentiful. We currently have two teenagers and, if things go well, we're probably going to retire right when the youngest one leaves for college in 18 months or so (though she might live at home and go to the community college nearby for the first year while she decides on a major).

That said, using all of this historical data, I've tweaked and modified various categories to best estimate how much we'll be spending when it's just the two of us. The figure I keep coming up with is double or more the "40k to 50k" that I see many people in various online retirement blogs and newsletters say that they expect to spend annually.

In my calculations I've tried to think of everything, including recreation, travel, dining out, new clothing, and even a car payment (because we're going to want to have at least one of our two cars be the latest and greatest Tesla), so maybe I'm being overly generous to ourselves, I dunno. I don't to retire only to sit at home and eat Alpo.

Still, even in a relatively decent cost of living area, without a house payment and our no longer saving for college, I don't see how we can retire comfortably on the $40k or $50k that many sites report as a typical annual retirement expenditure.

I'm with Fidelity - they have a good and detailed retirement expenses form / calculator. It's really a form designed to prompt you through common buckets and get you thinking about a variety of issues. You'll probably have something equivalent available to you - I'd guess there were 100+ questions / buckets to think about expenses. These include 1 time expenses that you're planning for now, as well as recurring expenses that you know will end (like say, the last 3 years of a car loan).

Something of that sort might help.


The primary thing that I saw missing from your list is medical insurance / expenses. The company I'm retiring from will provide access to a retiree medical plan, for the low low price of $2500/month. That's a high deductible plan, so the first $6 or 7k per year in actual expenses would also be mine.

Doing some research, I think I've found a comparable plan outside that retiree plan for only $1k/month, with the same high deductible. The good side for medical expenses I've landed on is $18k / year (for 2 of us). I haven't found info on dental or vision insurance, though Costco has worked so well for me on the vision side, I'll probably skip the vision insurance and go self insured on that one.

 

[AudubonB]

...Now, very seriously: if someone thinks he or she + family is interested and potentially capable - and I can tell better than you if that is so - after a quarter century building and nurturing and loving ==>our wilderness lodge<== in Alaska we ourselves are ready to move on and sell it to whoever can demonstrate is best able to carry on. It is a great way to be productive in your mature years. Any of you who don’t know who I am or can’t figure out the operation and how to contact me from the breadcrumbs throughout TMC....doesn’t qualify.

Oooh ooh! Let me guess ... you run an animal shelter (if I were one of your guests, that label would be appropos)!?!?

~~~Errr...How can you be so right and yet so wrong? Or is it the other way around?~~~

 

[MikeQ]

Here's something I struggle with: estimating our annual living expenses after retirement. We track and categorize everything we spend now, and have for years, so historical data is plentiful. We currently have two teenagers and, if things go well, we're probably going to retire right when the youngest one leaves for college in 18 months or so (though she might live at home and go to the community college nearby for the first year while she decides on a major).

That said, using all of this historical data, I've tweaked and modified various categories to best estimate how much we'll be spending when it's just the two of us. The figure I keep coming up with is double or more the "40k to 50k" that I see many people in various online retirement blogs and newsletters say that they expect to spend annually.

In my calculations I've tried to think of everything, including recreation, travel, dining out, new clothing, and even a car payment (because we're going to want to have at least one of our two cars be the latest and greatest Tesla), so maybe I'm being overly generous to ourselves, I dunno. I don't to retire only to sit at home and eat Alpo.

Still, even in a relatively decent cost of living area, without a house payment and our no longer saving for college, I don't see how we can retire comfortably on the $40k or $50k that many sites report as a typical annual retirement expenditure.

We live in a moderate cost of living area and there's no way we'd maintain our current lifestyle on $40-$50k. We're looking at more like $140k. I'm going to adjust our 72t to the RMD method of calculating since TSLA has grown quite a bit since we retired. That's going to push us to a budget of about $250k. We don't need that much but it will let me move some money out of the 401k and into regular capital gains territory. If we don't start getting money out of the 401k now, we're going to get murdered when RMDs kick in.

If you end up doing a 72t, I'd take as much as it will allow. It's designed to let you withdraw a low % of your total IRA/401k worth so that you don't deplete it. However, you can use it to your advantage like I'm doing. Take more than you need and re-invest what you don't need outside of your IRA/401k. Of course if you have a Roth or money a lot of money outside retirement accounts, then the 72t might not make sense.

 

[MikeQ]

They can get a job. I come from a third world country they can pay their own cell phone lol. I can always go back to work I feel like people are way to prudent and end up just wasting time which is precious behind a desk.

What about college? Today college cost way more than what a kid can afford on their own and you don't really want to saddle them with tons of debt.

 

[MABMAB]

For those that have or are near F you levels of money, would you ever consider pulling a chunk out of the stock market and buying an annuity for a guaranteed floor of income for the rest of your lives? We have >2x needed expenses, at some point, perhaps at 3x, we would consider doing this for a joint life policy. It would allow absolute peace of mind and allow us to not panic with any market/TSLA big moves.

What say you?

 

[FS_FRA]

For those that have or are near F you levels of money, would you ever consider pulling a chunk out of the stock market and buying an annuity for a guaranteed floor of income for the rest of your lives? We have >2x needed expenses, at some point, perhaps at 3x, we would consider doing this for a joint life policy. It would allow absolute peace of mind and allow us to not panic with any market/TSLA big moves.

What say you?

Full disclosure and caveat: I'm from Germany and we have a healthy social security system, universal healthcare for all (at an affordable cost), etc. so my need to finance my retirement is probably quite different to someone from a country where this is not the case.

I don't yet have FU money, but this is part of my retirement plan options that I've been considering.

I like the idea of having a guaranteed flow of income that covers my baseline needs, no matter what. However, I am a real strong proponent against wrapping wealth creation inside an insurance policy, as the costs of insurances policies eat a huge part of the returns. Insurance is for protecting against risks. Wealth creation or preservation should be done outside of an insurance policy IMHO.

Would having a large enough portfolio of real-estate rented out give you similar peace of mind? It's the other option I'm considering for this part of my retirement plan.

 

[UkNorthampton]

We live in a moderate cost of living area and there's no way we'd maintain our current lifestyle on $40-$50k. We're looking at more like $140k. I'm going to adjust our 72t to the RMD method of calculating since TSLA has grown quite a bit since we retired. That's going to push us to a budget of about $250k. We don't need that much but it will let me move some money out of the 401k and into regular capital gains territory. If we don't start getting money out of the 401k now, we're going to get murdered when RMDs kick in.

If you end up doing a 72t, I'd take as much as it will allow. It's designed to let you withdraw a low % of your total IRA/401k worth so that you don't deplete it. However, you can use it to your advantage like I'm doing. Take more than you need and re-invest what you don't need outside of your IRA/401k. Of course if you have a Roth or money a lot of money outside retirement accounts, then the 72t might not make sense.

I'm in UK.

Everyone has their own situation, but I'm genuinely confused and interested on what I'm missing (and potentially missing out on!). 140k USD is £105k which would put one at 97th percentile in UK.

We do have free healthcare, but the UK is generally considered quite an expensive place. My biggest luxuries/discretionary spends would be holidays/car/eating out.

Percentile points from 1 to 99 for total income before and after tax
97 percentile


Where do you fit in -

NB. HOUSEHOLD income (eg both parents + adult children if present?)

48000 GBP / 67,730 USD (2 adults, 1 child under 13)
With a household after tax income of £896 per week, you have a higher income than around 74% of the population - equivalent to about 48.5 million individuals.

70k GBP / 92,940 USD
With a household after tax income of £1318 per week, you have a higher income than around 91% of the population - equivalent to about 59.7 million individuals.

104k GBP / 138,120 USD
With a household after tax income of £1970 per week, you have a higher income than around 97% of the population - equivalent to about 63.6 million individuals.

Much beyond 70k GBP / 92.94k USD - wouldn't fit on the graph... 94.94k USD is red bar

 

[MABMAB]

Full disclosure and caveat: I'm from Germany and we have a healthy social security system, universal healthcare for all (at an affordable cost), etc. so my need to finance my retirement is probably quite different to someone from a country where this is not the case.

I don't yet have FU money, but this is part of my retirement plan options that I've been considering.

I like the idea of having a guaranteed flow of income that covers my baseline needs, no matter what. However, I am a real strong proponent against wrapping wealth creation inside an insurance policy, as the costs of insurances policies eat a huge part of the returns. Insurance is for protecting against risks. Wealth creation or preservation should be done outside of an insurance policy IMHO.

Would having a large enough portfolio of real-estate rented out give you similar peace of mind? It's the other option I'm considering for this part of my retirement plan.

Yes but the RE would be work. As it is we are considering selling our RE.

 

[FS_FRA]

Yes but the RE would be work. As it is we are considering selling our RE.

Sure could be work. Could also hire a RE management company to take care of it...?

 

[juanmedina]

What about college? Today college cost way more than what a kid can afford on their own and you don't really want to saddle them with tons of debt.

The way I see it Tesla should grow at faster pace than what college tuition will increase per year. We have 13 years with my daughter to figure that out. I went to a two year community college and than transferred to a 4 year college and I hope my kids do the same. The cost of community collage is really negligible and current tuition at a 4 year college like Clemson is $30,000 with room board for a year which is local to me. For 2 years and my two kids I will need $120,000. My kids will not be at the 4 year college at the same time so I would need to pull out $30,000 the fist year. During high IV conditions I been able to sell calls for $8000 per week for 12-10 contracts so I would have to that 4 times in that year or I could just sell 3 September 21s 800s at their peak to cover the entire tuition.

My wife and I have been lucky that she was able to get scholarships for all her schooling including her PHD and I did too for the schooling that I did. I hope my kids can do the same. Maybe I am looking at this the wrong way. If they want to become doctors we might have a problem...

 

[FS_FRA]

Yes but the RE would be work. As it is we are considering selling our RE.

So this got me thinking some more. I called a friend who has FU money, retired at 51. The only asset he has left that he has to "actively" manage is his RE portfolio. He has 37 rentals and he insists on managing them instead of having an agency doing it. His justification is that he needs to do "one thing" not related to doing "nothing" in retirement.

YMMV of course..

 

[st_lopes]

For those that have or are near F you levels of money, would you ever consider pulling a chunk out of the stock market and buying an annuity for a guaranteed floor of income for the rest of your lives? We have >2x needed expenses, at some point, perhaps at 3x, we would consider doing this for a joint life policy. It would allow absolute peace of mind and allow us to not panic with any market/TSLA big moves.

What say you?

If I got to the point of having 3x the figure I need to comfortably retire I would absolutely put a tranche in some kind of annuity or managed payout solution. https://www.rbcgam.com/en/ca/products/mutual-funds/rbc-portfolio-solutions/rbc-managed-payout-solutions

While you could arguably do better by just keeping the cash invested, or selling premium, or in real estate- to your point, it’s not about maximizing returns in perpetuity- it’s about mental health, balance, and stability. Every individual and family will have its own mix of needs and risk tolerance though. So, naturally not a one size fits all solution.

 

[Beltsbear]

So this got me thinking some more. I called a friend who has FU money, retired at 51. The only asset he has left that he has to "actively" manage is his RE portfolio. He has 37 rentals and he insists on managing them instead of having an agency doing it. His justification is that he needs to do "one thing" not related to doing "nothing" in retirement.

YMMV of course..

If he is really personally managing 37 rentals, he is not retired. I would say that even if he had just 10. Now having 37 with a management company is more like retirement.