A million is not enough according to the mainstream

[Accidental Fire]

discuss....

https://www.bloomberg.com/news/articles/2017-08-21/how-far-does-1-million-savings-go-in-retirement-state-by-state

[OurTown]

Apparently it goes farther in LCOL states than HCOL states.  Who knew?

[jlcnuke]

discuss....

https://www.bloomberg.com/news/articles/2017-08-21/how-far-does-1-million-savings-go-in-retirement-state-by-state

Using the assumptions they use, that sounds about right. The source material is here btw https://www.gobankingrates.com/retirement/how-long-million-last-retirement-state/

[dogboyslim]

So assume no return on the money, but inflate all the costs.  Also, use "average" expenditures rather than median so it is skewed upwards for the spendy-pants.  Not all that useful IMO.  Works to scare people into thinking there's no way they can make it, so why bother.  Maybe that's bloomberg's goal?

[Accidental Fire]

So assume no return on the money, but inflate all the costs.  Also, use "average" expenditures rather than median so it is skewed upwards for the spendy-pants.  Not all that useful IMO.  Works to scare people into thinking there's no way they can make it, so why bother.  Maybe that's bloomberg's goal?

Exactly my thoughts. A million doesn't go far when you have a perpetual $450 dollar a month car payment in retirement

[jlcnuke]

So assume no return on the money, but inflate all the costs.  Also, use "average" expenditures rather than median so it is skewed upwards for the spendy-pants.  Not all that useful IMO.  Works to scare people into thinking there's no way they can make it, so why bother.  Maybe that's bloomberg's goal?

Bloomberg is just reporting on someone else's article (linked above). As "most people" consider themselves "average", I don't see a problem with a generic article talking about "averages". Most people are also "spendy-pants" as a general rule... so again I have no problem with them using such numbers.

IMO, the purpose of the original article was to show the significant variance in how far money would last based on location. For that purpose, the simplistic approach it used was just fine. Not every article or report has an ulterior motive.

How "useful" is any of that? Well, about as useful as any other retirement information put out for the masses - which is to say not very since it's not tailored for any specific person reading it.

[RWD]

Amazing how fast you run out of money when you don't invest your million bucks and have no social security... For me this article is actually encouraging for how far $1 million will go. I only have to spend about 10% less than the mean 65 year old American (person? household?) in order for $1 million to be sufficient with a 4% SWR.

[GenXbiker]

I looked it over pretty quickly, but I didn't see any reference to single vs. married couples.

[Spork]

The thing is... with the habits of a large portion of the population, a million isn't enough.  And yet, they still have that Dr Evil "million dollars, muahahaha" stuck in their brains like a million would quadruple their lifestyle and then leave their legacy for their children's children's children.

I have a sibling that is about to retire and has significantly more than that target.  And I worry about her ability to live at her current lifestyle. 

[GenXbiker]

I don't get anything out of these mainstream articles.  Here's a new one at CNN Money on how to retire rich:

http://money.cnn.com/2017/08/21/retirement/retire-rich/

[koshtra]

I don't ascribe any sinister motives to Bloomberg -- they're just trying to sell a magazine. But I do worry about people glancing through articles like that and just giving up. "Well, obviously retirement is never going to be for me."

Most Americans are living beyond their means, and no one in the media or in politics really has any incentive to tell them so.

I guess that means it's up to us :-)

[BlueMR2]

Got my latest healthcare numbers and a million is no longer looking like enough for us.  Looking at having to out of pocket $1200/month just for catastrophic coverage.

[slugline]

I dislike seeing cost of living compared state-versus-state instead of metro-versus-metro. A state can contain both HCOL cities and LCOL small towns.

[Lan Mandragoran]

Got my latest healthcare numbers and a million is no longer looking like enough for us.  Looking at having to out of pocket $1200/month just for catastrophic coverage.

Yuck, yuck, yuck. Biggest unknown for me planning our fire. Like alot of people I'm sure. I'm not even going to start looking at the numbers till we're lots closer. Hopefully not to unpleasant of a surprise.

[Jrr85]

I don't ascribe any sinister motives to Bloomberg -- they're just trying to sell a magazine. But I do worry about people glancing through articles like that and just giving up. "Well, obviously retirement is never going to be for me."

Most Americans are living beyond their means, and no one in the media or in politics really has any incentive to tell them so.

I guess that means it's up to us :-)

Maybe not sinister, but certainly incompetently misleading.  The only information the article actually provided was how much annual costs vary from state to state.  By packaging it as "how far $1M will go in retirement", and then not including any return on the $1M, it moved into misleading territory. 

[CheapScholar]

Got my latest healthcare numbers and a million is no longer looking like enough for us.  Looking at having to out of pocket $1200/month just for catastrophic coverage.

YGBFKM.  I hope we have single payer by the time I want to retire (have the option to) in 13 years.

[FrugalToque]

So assume no return on the money, but inflate all the costs.  Also, use "average" expenditures rather than median so it is skewed upwards for the spendy-pants.  Not all that useful IMO.  Works to scare people into thinking there's no way they can make it, so why bother.  Maybe that's bloomberg's goal?

Yeah, that seems pretty suspicious.

I was with them on their basic premise: that most Americans could not continue their spending levels if they tried to retire on $1M.  Either you save more or you learn to spend less.

But then they failed to take into account that you could invest the money?  If the average expenditure is $44k, then $1M almost gets you there via the 4% rule.  So what?  You need $1.11M.

Toque.

[scottish]

I bet if most people had $1M, they would treat themselves to something instead of living on $40K/year.

[human]

Quoted from the article:

The annual expenditure numbers also don’t factor in any return on the pot of money seniors are presumably holding while they live in retirement. Gains there could offset purchasing power lost to inflation.

Not sure why everyone is bashing the article, they clearly state gains could be made and right after say:

Still, the data are useful in starting to map the relative power of a fixed sum of savings from one state to another.

Which is entirely true . . .

[uwp]

The only information the article actually provided was how much annual costs vary from state to state.

This.
They just took 1 million and divided by the COL in each state.  An article about state by state COL might be interesting, but instead the whole thing focuses around the million dollar number which obfuscates things.

[clarkfan1979]

In order to walk away from my job with our current lifestyle we would need a paid-off house in the 600K range. That's the median house price for Kauai. And we would probably need 1 million in the stock market or $40,000 spending cash/year. As a result, our current target number is 1.6 million. We are about 30% of the way, at 496K net worth. However, it's just a number on a piece of paper. I probably will never retire because I love my job.

[JLee]

I overhead a coworker who felt like a genius saying he figured out you only need $10 million to retire for the rest of your life. If I was a part of the conversation I would have liked to explain my plans.

$400k/yr at 4%, holy crap. That's what, approximately $20k a month net? Maybe more if you're paying capital gains on it instead of earned income taxes...

[Spork]

I overhead a coworker who felt like a genius saying he figured out you only need $10 million to retire for the rest of your life. If I was a part of the conversation I would have liked to explain my plans.

$400k/yr at 4%, holy crap. That's what, approximately $20k a month net? Maybe more if you're paying capital gains on it instead of earned income taxes...

More likely it means "hey, I've never done the math, so ... big number."

[RWD]

I overhead a coworker who felt like a genius saying he figured out you only need $10 million to retire for the rest of your life. If I was a part of the conversation I would have liked to explain my plans.

$400k/yr at 4%, holy crap. That's what, approximately $20k a month net? Maybe more if you're paying capital gains on it instead of earned income taxes...

More likely it means "hey, I've never done the math, so ... big number."

Or super conservative numbers. For example, 0% return on investment (i.e. not invested), 3% inflation, spend $50k/year inflation adjusted, and the $10 million will be gone after about 66 years.

[WhiteTrashCash]

$40,000/year for free forever is not enough for the people who want to take four vacations a year to the Caribbean so they can take photos of their food for instagram. For people around here, it's no problem.

[JLee]

I overhead a coworker who felt like a genius saying he figured out you only need $10 million to retire for the rest of your life. If I was a part of the conversation I would have liked to explain my plans.

$400k/yr at 4%, holy crap. That's what, approximately $20k a month net? Maybe more if you're paying capital gains on it instead of earned income taxes...

More likely it means "hey, I've never done the math, so ... big number."

Or super conservative numbers. For example, 0% return on investment (i.e. not invested), 3% inflation, spend $50k/year inflation adjusted, and the $10 million will be gone after about 66 years.

With an average retirement duration of ~20 years, that still seems like a lot.

[Jrr85]

I overhead a coworker who felt like a genius saying he figured out you only need $10 million to retire for the rest of your life. If I was a part of the conversation I would have liked to explain my plans.

$400k/yr at 4%, holy crap. That's what, approximately $20k a month net? Maybe more if you're paying capital gains on it instead of earned income taxes...

More likely it means "hey, I've never done the math, so ... big number."

Or, doctor or dentist or other very highly paid individual who has inflated their spending to match their income.  You put a few kids in expensive private school and then have a financed expensive house, and then lease two expensive cars, a boat, maid, throw in local property taxes and car tags, then throw in a couple of expensive vacations each year, and it's pretty easy to get to a "baseline" spending close to $200k before talking about food, insurance, clothes, etc. 

Account for taxes and it probably does look like $400k in income is "what you need" to retire.   

[COEE]

<on soap box>
I usually don't like these threads that just reference a link - contribute something damn it!
<off soap box>

I don't think 1M is enough for the average American with a decent car and a house.  I've watched our spending for almost 5 years now.  We spend about $65k/year.  About $16k/year is our mortgage.  We own a modest (for the area) $350k house.  So with a $40k/year spend rate we need about $1.2M in invested assets to meet the 4% rule.  We also need $350k for our house (in today's numbers) - that's about $1.5M net worth. 

$40k/year is pretty reasonable I think for a family of two.  Able to take a nice trip or do some major home repairs/upgrades as needed each year.  The only place I know I can really trim the fat is on food.  We're pretty frugal otherwise.

This is figured for two people.  I dread finding out more about getting healthcare on our own as we get older and closer to FIRE.

[coppertop]

It's all in your perspective.  I once overheard an attorney in our office pontificating about how you need at least $12 million to be happy.  When asked why, he said so you can leave a certain amount to each of your four kids. 

[koshtra]

Yes, if you're going to spend 65K every year, you definitely need more than a million dollars.

[GenXbiker]

I don't think 1M is enough for the average American with a decent car and a house.

$40k/year is pretty reasonable I think for a family of two.

This looks like a contradiction, since the 4% rule would provide the reasonable $40K/yr on the 1M dollars.

I'm single, but I figure $45K/yr after taxes will provide a nice cushion for enjoying FIRE for the first decade of my retirement (with an inflation adjustment).  After that first decade of FIRE, SS calculators are showing I should should then be able to get about $17K/yr more (in 2017 dollars.)

If I had to bare bones it with just a little extra, I could probably get by with $20K/yr.

If I had to rely only on SS, I could live on that alone beginning at age 62 by working until then.  Fortunately, I'll be able to FIRE a decade earlier thanks to stache, and much more comfortably at that!

[Spork]

This is figured for two people.  I dread finding out more about getting healthcare on our own as we get older and closer to FIRE.

It varies by location (and how many insurance providers, who they are, etc).  And politically, it might change.  But for 2 people in their 50s, we're paying just about $200/mo.  We also had high deductible insurance before ACA.  Again: it was a little over $200/month.  (ACA jacked up the price, then subsidized it back to about where it was before.)   YMMV...  but it's not always as awful as people think it is.

[COEE]

I don't think 1M is enough for the average American with a decent car and a house.

$40k/year is pretty reasonable I think for a family of two.

This looks like a contradiction, since the 4% rule would provide the reasonable $40K/yr on the 1M dollars.

Ah yes - I messed up my figures since I was going off memory.  Looks like my annual spending is $70k, My house payment is still about $15k of that, so I need $45k/yr after my house is paid off, and need around $1.125M in invested assets.  With a NW of around $1.5M.

Maybe it's time for a case study to see where I can trim the fat some more.  Honestly - I've trimmed and trimmed.  I don't know that I can do it cheaper.

Hmmm...

[Bicycle_B]

This is figured for two people.  I dread finding out more about getting healthcare on our own as we get older and closer to FIRE.

It varies by location (and how many insurance providers, who they are, etc).  And politically, it might change.  But for 2 people in their 50s, we're paying just about $200/mo.  We also had high deductible insurance before ACA.  Again: it was a little over $200/month.  (ACA jacked up the price, then subsidized it back to about where it was before.)   YMMV...  but it's not always as awful as people think it is.

+1 Spork.

You might find out you can adjust your income to affect the situation.  I do this.  This year's premium net of subsidy is 99.60... for the year (8.30/month). 

Sorry to get off the mainstream topic, just didn't want a fellow Mustachian to be more fearful than necessary.

[Jrr85]

I don't think 1M is enough for the average American with a decent car and a house.

$40k/year is pretty reasonable I think for a family of two.

This looks like a contradiction, since the 4% rule would provide the reasonable $40K/yr on the 1M dollars.

Ah yes - I messed up my figures since I was going off memory.  Looks like my annual spending is $70k, My house payment is still about $15k of that, so I need $45k/yr after my house is paid off, and need around $1.125M in invested assets.  With a NW of around $1.5M.

Maybe it's time for a case study to see where I can trim the fat some more.  Honestly - I've trimmed and trimmed.  I don't know that I can do it cheaper.

Hmmm...

I'm in the same boat.  I know I could do it cheaper, but I have no clue how to get down to anything close to what the people on this forum do.

Just my relatively fixed expenses blow away what many people here apparently managed. 

$20k pa for childcare.
$6k pa home insurance and property taxes.
$12k pa mortgage
$1.8k pa life insurance
$2.8k pa electric and water utilities
$6.8k pa health insurance
$2.6k pa copays/medicine

That puts me at $52k before talking about food, clothes, transportation, gifts, internet/phone, home/car maintenance, etc. 

I definitely could downsize my home, but with all the people living in HCOL areas, I don't feel like housing is the difference.  Even when childcare goes away, that's still a $32k baseline before dealing with some fairly basic stuff.  The places I know we're out of line like food are not a big part of our budget to begin with.     

[OurTown]

You could always keep a p/t side gig until SS kicks in.

[Dicey]

I don't think 1M is enough for the average American with a decent car and a house.

$40k/year is pretty reasonable I think for a family of two.

This looks like a contradiction, since the 4% rule would provide the reasonable $40K/yr on the 1M dollars.

Ah yes - I messed up my figures since I was going off memory.  Looks like my annual spending is $70k, My house payment is still about $15k of that, so I need $45k/yr after my house is paid off, and need around $1.125M in invested assets.  With a NW of around $1.5M.

Maybe it's time for a case study to see where I can trim the fat some more.  Honestly - I've trimmed and trimmed.  I don't know that I can do it cheaper.

Hmmm...

Seriously, if you've amassed a good nest egg at a young age and it's invested well, all you have to do is sit back and wait.

[GenXbiker]

You could always keep a p/t side gig until SS kicks in.

I'll have about $2300/mo for a cushion before SS kicks in, so that should be plenty to enjoy FIRE.

I've considered whether I would want to work 24 hr/wk at my current job for another year, which is enough hours to retain my really low cost health care benefits/deduction, and I could still add to my stash while working an easy work schedule, but I'm not even sure if I want to do that rather than just completely FIREing for more freedom right from the start.  I won't even know if moving to 24 hours will be an option until I let work know I'm retiring, so I don't give that much thought for now.

[COEE]

I don't think 1M is enough for the average American with a decent car and a house.

$40k/year is pretty reasonable I think for a family of two.

This looks like a contradiction, since the 4% rule would provide the reasonable $40K/yr on the 1M dollars.

Ah yes - I messed up my figures since I was going off memory.  Looks like my annual spending is $70k, My house payment is still about $15k of that, so I need $45k/yr after my house is paid off, and need around $1.125M in invested assets.  With a NW of around $1.5M.

Maybe it's time for a case study to see where I can trim the fat some more.  Honestly - I've trimmed and trimmed.  I don't know that I can do it cheaper.

Hmmm...

Seriously, if you've amassed a good nest egg at a young age and it's invested well, all you have to do is sit back and wait.

I wouldn't say we have a good nest egg.  We're on our way and have good salaries, but we're still 10-15 years away or so to FIRE.  Putting us between 45-50 to retire, better than most, but not really where I want to be.

[martyconlonontherun]

I bet if most people had $1M, they would treat themselves to something instead of living on $40K/year.

I'm all for most of the mustachian philosophy of cutting your expenses on things that don't make you happy, but if I'm working hard and saving hard during my 30s and 40s I plan on letting me slip into some luxuries. If I'm 50/60s and traveling, I'm taking the rental on the beach or downtown instead of the cheaper rental a mile walk away.

[WildJager]

I bet if most people had $1M, they would treat themselves to something instead of living on $40K/year.

I'm all for most of the mustachian philosophy of cutting your expenses on things that don't make you happy, but if I'm working hard and saving hard during my 30s and 40s I plan on letting me slip into some luxuries. If I'm 50/60s and traveling, I'm taking the rental on the beach or downtown instead of the cheaper rental a mile walk away.

No one is saying not to take the luxuries you appreciate.  That's fine, you just have to fund them.  The whole point of this is that, frankly, most of the modern "necessities" are luxuries that people take for granted.  Trim the fat and you can easily come out ahead.  Then, magically, $1 mil is easy to make work into an unending pool of money.  Theoretically, of course, depending on how the world actually turns.  But having the capacity to not "need" a lot of what people spend on today is what makes you flexible and, barring catastrophic circumstances, successful. 

[letsdoit]

Got my latest healthcare numbers and a million is no longer looking like enough for us.  Looking at having to out of pocket $1200/month just for catastrophic coverage.

Yuck, yuck, yuck. Biggest unknown for me planning our fire. Like alot of people I'm sure. I'm not even going to start looking at the numbers till we're lots closer. Hopefully not to unpleasant of a surprise.

and do you have to leave the US bc of it

[mizzourah2006]

I'm in state #2! Haha.

[FireHiker]

Our target number is actually $2.5M, so no, a million is not "enough" for our "wants" (mostly travel) in retirement. But, it easily covers our needs and some wants. I am nervous about health insurance, but if something happened and we could never earn money again (seems pretty unlikely) then we would easily cover our needs and some wants with our current NW (approx 1.5M, but 600k of that is home equity).

The biggest problem is that the mainstream want the cars AND the house AND the travel AND the gadgets AND the gardener AND the housekeeper, etc, etc. What's the saying, you can have anything but not everything? Yes, with a million, I'd say that's true.

[TheAnonOne]

Wow there are some spendypants people here.

We travel internationally yearly for 2 to 3 weeks and another 3 to 4 domestic trips a year. All on 40k to 45k.

That being said, young DINKS here.

If I spent 75k like some here it would be paid first class seats everywhere with no travel hacking and probably another $10,000 on blackjack at vegas.

[Loren Ver]

I would say for most people a million isn't enough.  Making $40k per year in income is considered low (59k us median 2016), so 40k in retirement would also seem low.
 
DH and I plan on going out with about a $30k per year spend, so less than a million needed.  We don't think that is low because if we take out the house and cost of work, we spend around $30k now.  The house will be paid off before to stop working so it all works out.  We live in a very affordable city.  If we don't pay off the house, it only goes up by about $5k per year, but that knocks us over the 1 million mark and adds on too much time.

33 weeks left!

LV

[OurTown]

A million will be enough for us.  I'm going to take a little more than 4%, let's say 4.8%.  That gives us $4 grand / month out of the 'stache.  I will also probably keep a side gig going, which should give us an extra $1,500 / month.  We are in a LCOL metro area, and we should be able to live quite comfortably on $5,500 per month.  I don't know what healthcare is going to look like, so that's still an open question.   

[HPstache]

A million invested will easily be enough for us because we'll be mortgage free by when it's time to FIRE.

[BTDretire]

We earned $73,500 last year. We put $7,650 into an HSA and $13,700 into SEPs.
We also paid $10,400 in SS taxes. That left us $41,750 to live on.
We also still pay some support/tuition for our two kids. Last year was a little lite,
so say $5,000, Now we are down to $36,750.
Our home is paid for, I still have the kids on my health insurance.
Once the kids are totally on the their own, $40,000 should do us well.
 But it gets better, we have over $1M and collecting SS is near.

[Skyhigh]

I have several clients who have lived well into their 90's and have seen first hand the devastation that comes from outliving one's resources. Given the uncertainty of health care costs and a lack of faith in the stability of SS I would not be comfortable attempting to retire on less that one million.