Personally, I plan to turn my “On/Off” switch to “Off”.
I’ve lived on under 2k/mo…my rent was 650/mo. I had 50-100/mo left in disposable income to spent on gas/entertainment/whatever after food, rent, car, and savings.
Yes. If you’re single, you can certainly get by on $2000/mo even in a big city like Chicago. You can find a two bedroom in my neighborhood for around $600/mo. Heck, you can find a one-bedroom for $350/month. When I moved back to the US in 2003, $2000/month was more than enough to cover for all my living expenses, health insurance, entertainment, and still leave money left over for savings.
I find this discussion fascinating as an investment professional. If there is interest I may do an "Ask the . . . " thread. I am unusual in that I am a salaried financial planner who has a knowledge of investment products, but works with the “Do I have enough?” question on a daily basis. I have hesitated posting this because each firm has a compliance department which is generally loath to have its employees giving financial advice on the internet. I think they would be OK though with a general educational discussion without personalized advice. I will send an email to them tomorrow if there is any interest.
There is an underlying assumption here that the accumulation of wealth beyond what one ‘needs’ would be worth condemnation. In other words, that the problem with the OP was simply that the number he cited was too low. The truth is that I have worked with countless decent hard working people with more than they needed. These people are generally amazingly generous with the extra, and frugal even when they don’t need to be. Their savings are generally used well and most of my clients have given considerable thought to how they want to use their savings to impact society.
What really irks me is that people like the OP will be asking what the government will do for them when they are no longer able to work and find they can’t support themelves.
I’m not sure I understand the question, but I’ll try to answer. Money today is worth less as time goes on, while the cost of living will continue to rise with inflation. Someone who considers $900 rent today “normal”, will be paying close to $1600 20 years from now, and that will be considered “normal”. For you to be able to afford $1600 at that time (maybe in retirement considering the 500k example given as a “nest egg”), the money you had 20 years ago needs to be saved and invested so it doesn’t lose its purchasing power, otherwise $1600 a month will eat at your non-invested 500k faster then it would if it were invested and averaged 7% a year and then would equal 1.9 million.
There are ways around that though, especially if you bought a house with a fixed mortgage. That payment will remain the same for the life of the loan, which also beats inflation. But then interest kinda eats away at any real savings you had if it were just principal payments, but the payment doesn’t change, making yearly expenses easier to tolerate then renting for life. Where as rent will continue to rise in most markets along with the economy.
There may have been some flaws in my examples, but the point remains - things will continue to rise in price and non-invested money loses value. If the the OP doesn’t work (or work enough), save and invest, he won’t like his situation any better later on. I forget which post, but he posted another thread recently asking why things keep getting more expensive. Things are more expensive for him because he isn’t saving and investing, while goods continue to rise. With, or without him. It’s his choice. And leaving money in a non-interest bearing account because you believe usury money is “evil” is fairly stupid. Because that bank is going to invest your money whether you like it or not. You might as well get paid for the risk of you loaning them your money, so they can then turn around and loan it right back to the business world. And yes, it is a risk, so get paid for it! So I find it contradictory for the OP to believe in “hard work”, but then disregard his hard earned money in a bank for people to use it for free. By doing that, his “hard work” and not investing negates any real work he has done, over time.
An Annnuity. Should be 6 or 7% at that age. With an Annuity you get income for life, and my figures show a guaranteed income of around $9000/mo from that much investment.
You haven’t been reading one of those idiot books on “how much you’ll need to invest in order to retire” have you? The almost never take into account Annuities, Reverse Mortgages, Pensions or even Social Security. They seem to assume you’ll just withdraw the cash year by year and spend it. :rolleyes:
And as LionelHutz405 posted "You need to keep in mind that the people providing this advice have an incentive to get you to save/invest more. They make more money that way. There is zero incentive for them to address how you can live comfortably on less income. That doesn’t mean they are wrong, just that they focus on the income part of retirement and ignore the outgo part.
That’s why they come up with insanely high numbers like 80 percent. There is no logic to that number. They just pull it out their arse to try and scare you into investing more money with them."
Don’t get me wrong, you’ll need more than just Soc Sec. But $500K in tex-deferred savings should be fine, if not luxurious. If you have a reverse Mort and other stuff you’ll be quite well off.
I read it as once you are retired, you will no longer need to save, so the percentage of your income going into savings will now be money you can spend (or reduce from your “monthly living expenses”)
You guys are doing a fine job of ridiculing VCO3’s understanding of wealth, but that is only scratching at the surface of the very deep pool of idiocy and ignorance that is the OP.
In fact, VC03 may have set a record for clueless idiocy density in paragraph form.
Here’s a list of the utterly wrong-headed notions VC03 spewed on us:
- Investments are necessarily ‘sin money’.
- earning interest is by definition usurious.
- Money you invest is just money ‘left over’ after all your needs and wants are met.
- That no one who has saved half a million can be in the middle class.
- That money lent to banks doesn’t ‘work’.
- That George and Laura Bush describe themselves as middle class.
- That people he once dated and presumably cared for should be referred to as girls he ‘stuck it in’.
- That the girl being Jewish is somehow useful to point out, other than that it makes us aware that besides being a hateful moron he’s an anti-semitic prick.
- That wanting to save for your retirement so others don’t have to care for you is a crime deserving of beheading.
All this and Catholic talk radio makes VO3 sad and homicidal. Sad murderers are worse than sad clowns. At least if a clown is killing you, he’ll have a big red nose and big floppy feet and you can take comfort in the sheer surrealness of your demise. With VC03, all you’d get is flaring nostrils and spittle dressed up in a Che Guevera T-Shirt.
There is something else to consider, which is that you are not going to be spending the same amount of money year over year. You might want to travel at 65, but probably aren’t going to be nearly as interested in it at 85. A study I read about in the Times a while ago said that the investment advice from these places is indeed pessimistic in not taking this into account. Looking at my father and father-in-law, both over 90 and in good health, supports this.
I recently ran the numbers for us, and we were pleasantly surprised what a big chunk Social Security represents. No, it won’t do for everything, but it sure helps that $500K go a long way.
On page 1 of this thread people seemed to be computing retirement income by taking the amount of money saved by 65 and dividing by the number of years you needed to be supported - as if the money wasn’t being invested. That’s not exactly showing a good financial sense.
BTW, I am now a bleeding heart liberal, full of concern for the poor and underprivileged - and agree with all that VCO3 is a shmuck.
Thanks, I had to run the numbers: 1,500,000 * .065 / 12 = $8,125 per month. Not bad.
I still have 21 to 25 years, but how do you safely get these annuities when the time comes?
If you retire before 65, don’t you have to expect to incur a large extra expense to bridge medical coverage until 65?
I have a hope of my wife and I building up maybe $3m between 401k and House value. If I achieve this, I doubt we will have anything to worry about, but it sounds like I am indeed overestimating what we need to live in a lifestyle that **VC03 ** would despise. 
I do plan to dedicate my retirement to hobbies, travel and 30+ hours a week in green causes. I don’t want to think about going back to work unless it is in a used book store for the fun of it.
Jim
You know, I normally like VCO3, froth and all. But the fact that he dropped this turd of an OP two days ago, and then embraced the better part of valor by staying away as everyone’s pointed out how factually wrong he was, does nothing for my respect for him. Sad.
Be careful not to overestimate the house value. If you are a Baby Boomer, you will be downsizing at the same time as a whole bunch of other boomers. The same thing that drove house prices up when the boomers reached their raise-a-family years, will drive them down when they reach the downsizing years. In my opinion, small houses and condos will become more expensive and suburban, multi-bedroom homes will become cheaper and harder to sell simply due to the supply and demand effect the boomers will have.
I’m a post boomer and I might keep the house for the first few years of retirement anyway. I like it. It would be 20-30 years in the future. The Mortgage will be gone or nearly gone.
Jim
He always does that in his pit threads. Drops a turd and lets everyone else clean up.
Consider that there is a certain portion of the political spectrum that is hell bent on convincing America that they can have the government provide for all our wants and needs and pay for it by taxing “the rich”. Then consider that in the light of the above exchange, and you might begin to get an idea of one of the reasons some of us so vehemently oppose the socialist agenda being pushed by the left. Conspiracy theory nonsense? Maybe. I don’t see it as an organized conspiracy, but I do see it is a likely outcome, intended or not.
Interesting explanation of your paranoia.
I jest, really I just jest.
Strange, I started life poor or at least lower Middle-Class by “America Standards” and still I was ended up a Republican. Now I guess I have worked my way into the proper class that all Republicans are suppose to be. To bad my party went on a religious binge.
Is this little sidebar about Bush vetoing health care tho children?
Jim
No, it doesn’t have to do with anything specific, it’s about fostering a culture of “The government will take care of you” instead of “You are expected to take care of yourself”. That’s not to say that the social safety net is a bad thing, quite the contrary, but the social safety net should be minimal. Food should be provided to keep you from starving, housing to keep you from freezing, medical care to keep you from dying. Beyond that each individual should be on his or her own. Don’t like eating rice and hamburger each night in your small apartment? Fine, work to get more for yourself. Society owes you a life, it doesn’t owe you a good living. To use the example at hand, if we start categorizing normal, working and middle class people as “rich” because they were disciplined enough and had enough foresight to plan ahead and save for the future, that has two results. Number one, it makes it acceptable to take what they have saved and give it to other people (Hey, they’re “rich”, right? they should share with the less fortunate, the greedy bastards) and number two, it removes incentive for people to responsibly plan for the future (why should they bother? The government is going to give that all to them anyhow, Forget saving for the future, be a consumer whore and buy that plasma TV today!). I don’t like that mindset, and I don’t like the elitist thinking and class conflict that it fosters either.
As an aside that’s more appropriate perhaps to IMHO, I really wonder about the desire to bank a large part of your investment future in “downsizing” your house.
I could type my puzzlement and objections for pages, but since no one will really care, I’ll summarize.
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I like where I live, and I like my house enough I don’t want to move. While I bitch a lot about things about my house, I don’t want to leave it. I’m comfortable and it’s familiar to me. Are there really that many people out there that are planning to uproot and leave all their memories behind when they turn 65? When I’m 85, I want to wake up in a place that is my home, that has roots and history. I reckon there are all sorts of modifiers to this (such as, if your neighborhood declines, or you need/want to move to a warmer clime, etc.)
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You hear a lot about these massive savings in utility bills and such by downsizing. I’ve done the math, and I’m not seeing the savings that would ever justify moving. At worst, I’m seeing the potential for a gradual improvement in appliance efficiency, insulation, and weatherproofing over time that results in a relatively low utility bill upon retirement. Think about it - water and sewer won’t change, electric for appliances won’t change just as a function of the house size (unless you always leave lights on in rooms you don’t use), so it’s really heating and cooling. And if you close off rooms you don’t use, block vents, etc…really, the math I have doesn’t show more than a $20 a month average “savings” by significantly downsizing.
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I can see property taxes and insurance possibly being lower, true. But is it low enough that you abandon your neighborhood, the house where you lived in for so long and all the emotional investment?
I’m not criticizing anyone here for wanting to downsize for retirement, just saying that I don’t understand it. I almost think that’s it’s more a case of some (note the qualifier) people justifying either buying a McMansion that’s way beyond their means right now, or not saving enough elsewhere for retirement, or both. I work with many folks who very happily buy into nearly half-million dollar houses but who save only the absolute bare minimum to get matching for their 401k. As they say, “no one sees your portfolio from the street”, I guess.
Well, I’ll leave my house in a NY minute. Queens, NY is an expensive place to live, but I stay for the access to many employers. I want to stay away from area reliant on 1-3 employers (in my field). You talk about $500,000 houses. In Queens, that will give you roughly the house that Archie Bunker lived in - narrow, little yard, street parking.
When I retire, I want warmer weather and cheaper housing. I could get the same size house and two - three times as much property for half the price outside of major metropolitan areas. My wife and I were looking at housing in her native country - we could double our size for half our money! I won’t think twice about leaving what I have behind.