I know this will be different for everyone depending on your lifestyle, location, personal goals, etc. (which is sort of why I’m asking)…
How much material wealth, real assets, disposable investment income, MONEY is ‘enough’ to retire on?
…by retire, I mean give up working for a living without the fear of financial insecurity
I’d especially like to hear the thoughts of those at opposite ends of the age scale - people who have already given up work (ahead of normal retirement age) and any young people at college or just starting work who have an opinion on this…
See, this is how I figure. I don’t want to get into interest and investments, so let’s say I just had the two mill sitting under my matress. I’d like it to last me about 50 years. In case I make it that long. So, two million divided by 50 is $40,000 a year. And let me tell you, compared to what I get payed now, $40,000 a year is a fortune. And I could definitely live on it.
So there you go, from an 18 year old makin barely over minimum wage. That’s my 200,000,000 cents on the matter.
The definition of wealth, in my view, is having enough money/assets so that you can live your chosen lifestyle on the return from those investments.
My number is AUD5 million. This is based on retiring in Sydney.
$2 mio for the house/cars/extras, and $3 mio in investments (at 5% returning about $1,500 a week after tax, etc.)
$2 mill USD is about all you need. If you can manage a paltry 4% interest rate from a bank that’s $80k a year. Not too shabby of an income for doing nothing.
Several million dollars - enough that you can live well and do what you want to do by collecting interest. Never having to touch the principle. I’m 28 and an entrepreneur, BTW.
And I do plan on retiring by the time I’m 35 - worst case.
If i had $250,000 to invest, I could live off the interest. Mind you, I might still have to pick up a few odd jobs here and there, but I’d hate to have nothing to do.
However, since my Hubby is going to go on to become obscenely successful in his chosen career, I won’t have to worry about that for too much longer ::
Or, I could just hold my breath and buy a lotto ticket.
I figured out that to make it worth my while, the lottery would have to be a minimum of $15 million. I break it down like this, although I’m basing on the payment method, rather than the lump sum, since I know absolutly nothing about investing and such. roughly, you get $50K per year for each million of the jackpot before taxes. That’s $750K before taxes. Figure half for taxes ( I know, more than you’d actually pay, but not enough more to make the math hard on myself) So that leaves me with $375K a year. My wife and I make about $100K a year right now combined. Now if neither of us are working, we’re going to be travelling and spending money, probably a lot more than we do now. There’s also no way that I’m going to let either my mother, or her mother have to keep working, or her father. So that adds another $100K worth of earning right there that we’d have to support. So just the amount that it would take to cover all the people that wouldn’t be working anymore would be at least $200K a year. That leaves $175K a year for travel, gifts, charaties, ect. ect. ect. That sounds like a lot, but if I’m traveling all the time, no way am I sitting in coach anymore…or staying in tiny itty bitty hotels…so that means traveling will be more expensive, and last longer…won’t take long to go through that amount.
So there you go…enough for me would be $15 million. Anything less than that, I don’t even bother to play.
$40,000 a year may seem like a fortune now. But, in 30 years you will probably been eating dog food if that is all your income. And, what happens when you turn 68?
I think that I would want at least 10 million after taxes. I would invest it and spend as much time traveling as I could.
No, I think 2-3 Mill would do it if you’re going after interest income. Choose your investments wisely and the interest rate should adapt to inflationary pressures.
If you’re not interested in leaving the $2M to your estate and/or the government, you can safely take some of the principal each year, too, meaning you could probably get by on much less than $2M if you can also live on less than $80K per year.
Social security, as long as there are many more workers than retirees, will also help reduce that $2M figure.
On the other hand, my crystal ball says it’s going to be a long time before banks are paying 4% again.
I agree with In Conceivable - $40k may sound a lot compared to your current income but trust me when you earn that salary you’ll find plenty of ways of making it seem like not enough. Having said that, in some parts of the world $40k (inflation adjusted) would probably be sufficient if all main expenditure was taken care of (house, car, etc.) – our antipodean friend BamBam reckons AUD 1,500 a week would be enough in Sydney which is roughly $40k a year…
I don’t really plan to stop working either, just to be free from the financial and time constraints that tie me to an over-paid job that I don’t really enjoy. I plan to have a very busy ‘retirement’ mainly doing things that don’t pay very well, if at all (making $10 bil from nothing would require being a particular sort of person that I’m not so I’m aiming a bit lower!).
$2 mil is not going to earn you $80k per year without risk. Assets such as house(s), car(s) will whittle away that principal. 4% interest from a bank is a little optimistic (unless you live near BamBam) and the tax man will take a decent slice of it too…
when I was 20 I intended to retire by 30, at 25 it was 35, at 30 it was 40… now I’m 35 and I’m figuring this 10 year rolling plan isn’t quite working. So I’m mulling redefining my goals and posting related questions on SDMB! Good luck with your business and hope you’ve got your feet up somewhere hot n sunny in 2010.
You could live off the interest on $250k?! That’s less than $1k per month. Hmmm…that would cover my girlfriend’s clothes bill… just a few other things I’d need though!
I reckon $10mill would definitely be enough but is off the radar barring lottery type luck. I agree with Jonathan Chance $2-3 mill would probably be enough to get out of the office and pursue personal interests
There was an article in Business Week a few months ago on this very subject. They used an estimated investment return of 5% over the rate of inflation and used that to come up with several retirement categories.
The one I remember in particular was their “Beef and Beer” category of $100,000 a year of living expenses which required $2 million in investable funds.
I know a retired person with modest tastes who lives solely off a trust fund with a capital base of ~$360,000. That’s not flush. She doesn’t spend much, and her house is paid for, and when her car croaked last year, two of her kids got together and bought her one.
But she has what she needs, and manages air fare for about eight or so trips every year. She’s 85, BTW, and relies on Medicare for major medical.
Actually, I talked to my Dad about this and he is pretty much the S*** when it comes to money. IIRC it works out that if your total rate of return on your investments is %10 you can spend %2 of your total principle a year without touching the principle itself. The %2 is after taxes and adjusted for inflation. The way it works is this. Say you are earning %10 on your money. About 1/3rd or your earnings are going to go to taxes. So now you are at ~%6. When you factor in inflation you need to take about another ~%4 off so you end up with ~%2 usable moeny if you do not touch the principle.
If you have a million in investments that earns %10 you can spend 20,000 with out touching the principle per year. That ain’t much. 5 million would give you about 100,000 a year to spend and that seems comfortable to me.
So, factoring taxes and inflation, 5 million is probably the starting number if the market is somewhat stable.
Oh, and to add to my comment about $40,000 a year being plenty enough. Another little piece of background info: My parents have been surviving, and raising two kids for quite some time on roughly half that. So yeah, I could DEFINITELY live on $40K a year, unless inflation gets really bad.
And when I get 68, with my family history, I’ll be lucky to be around, let alone still active enough to spend $40K a year.
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