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> and live off a VERY modest retirement (WELL under a million saved/invested) for the next 40 years Do you mind sharing how much? I'm curious why most people

> and live off a VERY modest retirement (WELL under a million saved/invested) for the next 40 years Do you mind sharing how much? I'm curious why most people seem to think $1M is somehow not enough money to retire modestly on. If previous trends continue, you could easily live on >$4K after taxes per month indefinitely. That's almost 50% higher than median wage (after taxes). Median wage = ~$41,000. Even with $0 state tax, just after federal tax, you're at ~$30,000. At this income, you likely can't deduct more than the standard deduction... It's just obvious that you CAN live on 50% more than median wage. Yet at the same time, so many people seem to think this is some absurd proposition. Even at $500k - you can draw down the same amount for ~10 years, and then rely on SS (which would be much more modest - although, obviously still completely doable considering almost half the senior population does it). Also - a lot of people still do something that makes money in retirement...

jermaustin1 5y ago
> Do you mind sharing how much? The current (November 31) valuation of my assets is almost $200k. That isn't counting debts (which are small, but still exist), and that isn't counting the assets or value of my consulting company (which unaudited is around $50k). I'm hoping to stash away another $150-200k over the next couple of years to really make my retirement last. But either way, it isn't THAT hard to have a working retirement on < $500k. You aren't rich, but you are financially secure enough to chose what you want to do.
long_time_gone 5y ago
The "4% rule" [1] would recommend pulling out $40,000 each year if you had $1 million. This is the amount you can draw down each year without ever depleting the $1 million. The theory is that after you draw down your $40k, the remaining $960k will grow enough to get you back to $1 million by next year's draw down. You can still live on $3,333/month, (especially since this person plans to keep working and there is likely some social security after age 67) but wanted to add some context. [1] https://www.marketwatch.com/story/the-4-rule-is-being-debated-again-but-heres-what-you-should-do-11636999447 https://www.marketwatch.com/story/the-4-rule-is-being-debate...
sokoloff 5y ago
The person who accumulated $1M (above real estate equity) likely did so by having a larger than median income over their working life (and likely has an associated higher expense profile). For me, I think a 4% safe-withdraw-rate feels about right. Some argue for 3.5%. Others for 5 or 6%. Each of those has an impact on the cashflow in retirement, but $1M is probably not going to provide a replacement income for the typical folks who accumulated $1M. (Median household income in my state is $87K/yr before taxes.) https://www.statista.com/statistics/233170/median-household-income-in-the-united-states-by-state/ https://www.statista.com/statistics/233170/median-household-...
- dionidium 5y ago
  You can add a couple grand from Social Security and I guess the assumption is also that your house is paid off. Also, you no longer have a commute or any of the related expenses. Given those three things, you can live pretty comfortably. Not lavishly, but quite comfortably.
  - NineStarPoint 5y ago
    If you're trying to retire early Social Security isn't going to kick in for a fair amount of years.
alistairSH 5y ago
Many retirement calculators assume post-retirement montly outflow of ~70% of pre-retirement amount. I don't know if this holds true for very high income families, but whenever I run various scenarios, I leave it. I also assume many people won't have paid-off homes, so they're stuck paying rent or mortgage. Cars aren't cheap to keep running. Medical expenses are insane in the US.
- lowercased 5y ago
  I may still have a mortgage in 'retirement' (~10-15 years off, depending on multiple factors), and... depending on provable income, may not be able to get another one. While it's definitely a 'monthly debt' to pay off, it will likely not even be close to the cost of health insurance. Current lowest cost plan we got last year was $900/month for two people - that was $150 more than our mortgage. Mortgage/taxes/insurance were coming out around $1000. Even if I paid off the mortgage, property taxes and insurance would be ~$300/month. Health insurance is (for us) 3x that right now. Yes, it's insane.
erehweb 5y ago
Are you factoring medical insurance into consideration? Can be c. $3K / month for a family.
- dionidium 5y ago
  Retired people typically have Medicare.
  - jermaustin1 5y ago
    People who retire at retirement age. But that age keeps getting bumped up every year, same with social security benefits.
- Jach 5y ago
  It definitely helps to not have a family, and not to get sick, but if the finances work out after considering everything a generic fear of medical expenses shouldn't necessarily keep someone from pursuing an early "retirement". Home expenses are the more important consideration I think unless you've already got some medical stuff going on. I kind of did things in the wrong order and quit my job last year before finding a place to move to, and still haven't really settled on a new location, so I'm continuing to rent in high cost Bellevue WA. With no job, if I want to buy a home (that's absurdly overpriced even in places like Wyoming relative to 2019/most of 2020) somewhere and not pay in cash I'll need to do an asset depletion loan, whose typical 70% of assets calculation puts me at about a third of the more traditional 28% monthly income rule for qualification purposes. My personal health insurance is a crappy plan that's $250/mo (it's going up to $280 for next year) -- I don't plan on actually using it and I have an HSA fund from my last job that will cover 1-2 years of hitting the out-of-pocket max if something does happen. Depending on the something, and its chronic nature, that may force me to change my situation, but top of the list of likely doable changes is to just go back to work (either to afford a better plan that'll cover something I need or get with the group plan the company has). If being "retired" young doesn't work out so well in the first few years, it's not that rough to become un-retired, compared to being in your 60s or 70s, and hopefully at least you had a fun break.
- onlyrealcuzzo 5y ago
downrightmike 5y ago
If you also have to look after parents who never saved, you'll need to calculate out a fair bit. One example I saw on reddit was about 40% more than you need for yourself. Then there's teh part that if you don't own a home, you'll be paying that off in retirement.
lotsofpulp 5y ago
>I'm curious why most people seem to think $1M is somehow not enough money to retire modestly on >It's just obvious that you CAN live on 50% more than median wage. Yet at the same time, so many people seem to think this is some absurd proposition. It is because they have a different definition of modest than you. I know I can live on even less than median wage. I grew up with far less. But my family did not have access to healthcare and good schools or being able to help out family members if they needed support. We were always 1 legal or health problem away from being ruined. Is living 1 legal or health problem away from being ruined modest? That is a personal opinion. I aim to cover the legal and health risks for me and my family members, so $1M is nothing where I live. I also predict that I need quite a big buffer the way the population pyramid is shaping up, because labor is going to get more and more expensive, along with devaluation of the dollar. I also think either me or at least my kids (years 2050 to 2100) is going to have to contend with problems due to climate change and access to clean water and air that have yet to materialize, so need buffer for that too.

jermaustin1 5y ago

> Do you mind sharing how much? The current (November 31) valuation of my assets is almost $200k. That isn't counting debts (which are small, but still exist), and that isn't counting the assets or value of my consulting company (which unaudited is around $50k). I'm hoping to stash away another $150-200k over the next couple of years to really make my retirement last. But either way, it isn't THAT hard to have a working retirement on < $500k. You aren't rich, but you are financially secure enough to chose what you want to do.

long_time_gone 5y ago

The "4% rule" [1] would recommend pulling out $40,000 each year if you had $1 million. This is the amount you can draw down each year without ever depleting the $1 million. The theory is that after you draw down your $40k, the remaining $960k will grow enough to get you back to $1 million by next year's draw down. You can still live on $3,333/month, (especially since this person plans to keep working and there is likely some social security after age 67) but wanted to add some context. [1] https://www.marketwatch.com/story/the-4-rule-is-being-debated-again-but-heres-what-you-should-do-11636999447 https://www.marketwatch.com/story/the-4-rule-is-being-debate...

sokoloff 5y ago

The person who accumulated $1M (above real estate equity) likely did so by having a larger than median income over their working life (and likely has an associated higher expense profile). For me, I think a 4% safe-withdraw-rate feels about right. Some argue for 3.5%. Others for 5 or 6%. Each of those has an impact on the cashflow in retirement, but $1M is probably not going to provide a replacement income for the typical folks who accumulated $1M. (Median household income in my state is $87K/yr before taxes.) https://www.statista.com/statistics/233170/median-household-income-in-the-united-states-by-state/ https://www.statista.com/statistics/233170/median-household-...

dionidium 5y ago
You can add a couple grand from Social Security and I guess the assumption is also that your house is paid off. Also, you no longer have a commute or any of the related expenses. Given those three things, you can live pretty comfortably. Not lavishly, but quite comfortably.
- NineStarPoint 5y ago
  If you're trying to retire early Social Security isn't going to kick in for a fair amount of years.

alistairSH 5y ago

Many retirement calculators assume post-retirement montly outflow of ~70% of pre-retirement amount. I don't know if this holds true for very high income families, but whenever I run various scenarios, I leave it. I also assume many people won't have paid-off homes, so they're stuck paying rent or mortgage. Cars aren't cheap to keep running. Medical expenses are insane in the US.

lowercased 5y ago
I may still have a mortgage in 'retirement' (~10-15 years off, depending on multiple factors), and... depending on provable income, may not be able to get another one. While it's definitely a 'monthly debt' to pay off, it will likely not even be close to the cost of health insurance. Current lowest cost plan we got last year was $900/month for two people - that was $150 more than our mortgage. Mortgage/taxes/insurance were coming out around $1000. Even if I paid off the mortgage, property taxes and insurance would be ~$300/month. Health insurance is (for us) 3x that right now. Yes, it's insane.

erehweb 5y ago

Are you factoring medical insurance into consideration? Can be c. $3K / month for a family.

dionidium 5y ago
Retired people typically have Medicare.
- jermaustin1 5y ago
  People who retire at retirement age. But that age keeps getting bumped up every year, same with social security benefits.
Jach 5y ago
It definitely helps to not have a family, and not to get sick, but if the finances work out after considering everything a generic fear of medical expenses shouldn't necessarily keep someone from pursuing an early "retirement". Home expenses are the more important consideration I think unless you've already got some medical stuff going on. I kind of did things in the wrong order and quit my job last year before finding a place to move to, and still haven't really settled on a new location, so I'm continuing to rent in high cost Bellevue WA. With no job, if I want to buy a home (that's absurdly overpriced even in places like Wyoming relative to 2019/most of 2020) somewhere and not pay in cash I'll need to do an asset depletion loan, whose typical 70% of assets calculation puts me at about a third of the more traditional 28% monthly income rule for qualification purposes. My personal health insurance is a crappy plan that's $250/mo (it's going up to $280 for next year) -- I don't plan on actually using it and I have an HSA fund from my last job that will cover 1-2 years of hitting the out-of-pocket max if something does happen. Depending on the something, and its chronic nature, that may force me to change my situation, but top of the list of likely doable changes is to just go back to work (either to afford a better plan that'll cover something I need or get with the group plan the company has). If being "retired" young doesn't work out so well in the first few years, it's not that rough to become un-retired, compared to being in your 60s or 70s, and hopefully at least you had a fun break.
onlyrealcuzzo 5y ago

downrightmike 5y ago

If you also have to look after parents who never saved, you'll need to calculate out a fair bit. One example I saw on reddit was about 40% more than you need for yourself. Then there's teh part that if you don't own a home, you'll be paying that off in retirement.

lotsofpulp 5y ago

>I'm curious why most people seem to think $1M is somehow not enough money to retire modestly on >It's just obvious that you CAN live on 50% more than median wage. Yet at the same time, so many people seem to think this is some absurd proposition. It is because they have a different definition of modest than you. I know I can live on even less than median wage. I grew up with far less. But my family did not have access to healthcare and good schools or being able to help out family members if they needed support. We were always 1 legal or health problem away from being ruined. Is living 1 legal or health problem away from being ruined modest? That is a personal opinion. I aim to cover the legal and health risks for me and my family members, so $1M is nothing where I live. I also predict that I need quite a big buffer the way the population pyramid is shaping up, because labor is going to get more and more expensive, along with devaluation of the dollar. I also think either me or at least my kids (years 2050 to 2100) is going to have to contend with problems due to climate change and access to clean water and air that have yet to materialize, so need buffer for that too.