How low can you go?

[sol]

The basic premise of this site is that you can retire early by decreasing your expenditures.   With that in mind, what is the minimum amount of income you would need secured before you would feel comfortable retiring?

I ask because we live in a lovely house that costs several hundred thousand dollars, and even saving aggressively will require that we work at least a few more years to pay it off.  Then we could live here and consume rice and beans and library books for the next fifty years, but we will probably work an extra few years just to have more luxuries in retirement, pay for college expenses, and expand our travel options.

If the whole point is to think smaller and reduce consumption, how low are you really willing to go?  Is anyone here planning on giving up paying work to live on a salary of $1000/month?  $500/month?

[TLV]

If I were single, sure I could go down around or below $1000/mo in expenses (note I say expenses, not income - I'd want income to be higher than that for SWR purposes). With a family it will be higher overall, but could be less per person.
Our current living expenses run around $2k-2.5k/mo. for 3 people, but 1 is an infant, we're planning on having more kids, and health insurance is provided by my employer at no cost, so we'll almost certainly need more income than that in retirement even if we move to an area with cheaper housing.

[arebelspy]

I'm projecting right about 5k per month for us and two kids, though I think it will be less, and I will bank the difference.

I'd rather have a bit too much, and save/invest the rest, than come up a bit short.

[Miyazaki]

I'd still like to maintain at least a 20% savings rate after FI, just to be on the safe side, so that pushes my total up above $1000, even though my basic living expenses are below $1000.

[shedinator]

$1,000 in today's dollars. Perhaps more if we retire before we're empty-nesters. We're on a $250/week spending limit atm, which will have to increase for a couple of years while we pay rent, and remain up while we buy & renovate a house. The idea is to own our home outright, get rid of existing debt, and have around $1,200,000 set for early retirement funding (bolstered by 401(k) & IRA several years later), then live off ~1% of savings/year, which will still be more than what we should need.

Edited to change amount, keyboard failed me again

[kolorado]

Basic living expenses for our family of 5 is $1300 a month. That does not count the mortgage or what the workplace pays in health insurance. I'm planning on a monthly income of $2500 a month(in today's dollars)for hubby's retirement ages of 50-59.5. We will not have a mortgage or debt during retirement. Hubby is more likely to retire at 55 than 50 so our income will be closer to $4K a month if he waits. I am 7 years younger than my hubby so if he retires early and our planned income isn't enough, I have the option and hopefully the health to work part-time to bring it up.

[sol]

have around $1,200,000 set for early retirement funding (bolstered by 401(k) & IRA several years later), then live off ~1% of savings/year, which will still be more than what we should need.

Wow, that's a killer withdrawal rate.  Why so low?  I suspect most people would be happy with 2 or even 3%, which could get you there much sooner.

Is that 1.2mil in addition to whatever you have in your 401k/IRA accounts? 

I'm trying to remind my self that early retirement is not a one way street.  If I quit working at 40 and then later decide that I want more income, I can always go back to work.  This is helping me to revise downward the size of the cash cushion I need before I'm ready to quit.

[The Money Monk]

Im currently around 1500-1600 average a month in total spending.

I could always go lower, as I am not really sacrificing very much at these levels. But That is the level of spending I am planning on maintaining once I 'retire' at forty.

that includes my mortgage though, which hopefully I will have paid off by then, dropping my spending to around 1000 without any change in lifestyle. Booyah.

[sol]

A family unit that has $4k in monthly expenses would need to work 47 years if they makes 60k/yr, or only 17 years if they can raise their income to 120k/yr.

Alternately, if they lower their monthly expenses to only 2000/month, then they can retire in only 16 years on 60k/yr or 7.5 years on 120k/yr.

Which one of these two plans is easier to implement: cutting your expenses in half or doubling your income?

You can retire earlier by cutting expenses in half than you can by doubling income.  Doubling income is most beneficial if your budget is very high, and not so helpful if your budget is already low.  Both doubling your income AND halving your expenses would shave almost four decades off your cubicle time. 

Doing the comparison this way makes it apparent that at 60k/yr and 2k/month expenses, every additional $100/month a person spends while working obligates them to work for about an additional two years.  That's 2 whole years of paid vacation they are giving away, that could be reclaimed for the price of $100/month.

What do people spend on smartphones or cable tv?  Think they would keep them if you offered a two year all expense paid vacation in exchange for dropping either one?  How about a four year paid vacation for dropping them both?

Every time I do this calculation, it motivates me to learn to live with less.  I'm becoming a ruthless budget cutter.

Assumptions:
all numbers are after tax
retirement expenses equal current expenses
no mortgage, which would change expenses over time
3% withdrawal rate in retirement, wage inflation, and expense inflation
7% investment returns

[arebelspy]

Those are some powerful numbers Sol.

Thanks for posting them. It made me motivated!

[dahlink]

Right now I'm between 2-3K.  Getting lower as time goes by.  I'm still young with a small stache (80K) and am turning 30 so I have a little ways to go, but I'll get there.

[shedinator]

have around $1,200,000 set for early retirement funding (bolstered by 401(k) & IRA several years later), then live off ~1% of savings/year, which will still be more than what we should need.

Wow, that's a killer withdrawal rate.  Why so low?  I suspect most people would be happy with 2 or even 3%, which could get you there much sooner.

Is that 1.2mil in addition to whatever you have in your 401k/IRA accounts? 

I'm trying to remind my self that early retirement is not a one way street.  If I quit working at 40 and then later decide that I want more income, I can always go back to work.  This is helping me to revise downward the size of the cash cushion I need before I'm ready to quit.

The 1.2 includes standard retirement accounts, which is a part of why the withdrawal rate will be low, at least to start. The other is that I'm paranoid :). Realistically, we could probably be semi-retired with 300k and a paid for home, and fully retired at 600k, but I'd rather have surplus than shortfall, and a huge part of what we want to do if/when we reach retirement is be able to give. So if we're shooting for a 3-4% withdrawal rate, only 1-2% would be going to our expenses, while the other 2% would be divided amongst charities, church, and meeting needs of friends, family, and random strangers. I know other people dream of surplus so they can do the golf and the trips and whatnot, but we just wanna help folks out :).

[nondualie]

Sol - that reminder is awesome..

I think I could go $750/mon if we were living in Thailand or Central America, but in the US, I'm probably at $1,500 IF our house/condo is paid for and the dues/taxes aren't too high.

I'm more looking at FI as Freedom Insurance though, so if I can get my investments to cover half my expenses, I'm fine with continuing to work off/on to cover the rest,..doing something I love of course...or something I'm good at...or something I care about.

If I can dial-in our expenses just a bit more by cutting housing costs, I think we could be there in 3-4 years...and I only have ~$50K saved so far.

[James]

I'm not too worried about monthly income, since our monthly expenditures should be pretty small, but I hope to do a lot of medical work abroad once the kids move out.  Those expenses add up quickly but only come a couple times per year.  Once I save enough to cover monthly expenses I hope to semi-retire and just work enough to cover travel, both leisure and medical missions.  I love my work so I don't feel the need to retire completely, but I want to reach FI.

[travelbug]

Hi
I voted 3-5k a month as we want to travel alot when we stop working next year.
This has been a dream for us for many years and why we have worked so hard and saved most of our income.
We also have two small children and need a buffer. we live in Australia and COL seems expensive here compared to many places in the world, which is another reason why we are going to travel; to find somewhere cheaper to live! Or maybe afew places.
C