Anyone planning to have under $1Million?

[MMMdude]

Just curious if other MMMer's are planning to quit employment with less than $1Mil in savings (but with paid off house).  This would translate to $40K per year in annual expenses at a 4% withdrawal rate.  My plan is to reach this milestone then transition to part time employment as I think $1Mil is abit light.    My biggest concern would be impact of stock market drop on a 60/40 equity:bond portfolio

[marty998]

dividends.

Most companies (especially Australian ones) are loathe to cut their dividends. THe market can do what it wants but you will still get cash in the bank.

The strategy to counter market falls is that every $ of spare cash you get goes to a kitty and is your buying firepower when the market falls. That way when the market bounces you get a gain on your new money + the rebound from the rest of your portfolio

[arebelspy]

Absolutely.

I'd bet many of us.

MMM himself has less than 1MM, I believe.

[clutchy]

I would think having a paid for home would be a major contributor towards doing that.

I would also think having a rental to diversify your income stream might also be beneficial.


I'm currently building up a brokerage account(outside of my 401k and other) to see how a dividend portfolio would work.  It's a 3 year test or thereabouts so we'll see how it goes.  Mostly I'm trying to figure out how much dividends can replace other income sources and what they're able to pay for.  obviously as your passive income rises your earned income becomes less and less critical but it takes awhile to get there.

[MMMdude]

I would think having a paid for home would be a major contributor towards doing that.

I would also think having a rental to diversify your income stream might also be beneficial.


I'm currently building up a brokerage account(outside of my 401k and other) to see how a dividend portfolio would work.  It's a 3 year test or thereabouts so we'll see how it goes.  Mostly I'm trying to figure out how much dividends can replace other income sources and what they're able to pay for.  obviously as your passive income rises your earned income becomes less and less critical but it takes awhile to get there.

My income would come entirely from dividends and bond interest.  Right now I am bringing in 18K per year off those.  Where I live, rental properties are way overpriced IMO.  Like a 400K house here would rent out for $2K per month tops.  The numbers just don't work for new landlords where I live

[Kriegsspiel]

Definitely.  I think the real question on this site is, who is going to save MORE than a mil before they retire.

[cats]

Definitely.  I think the real question on this site is, who is going to save MORE than a mil before they retire.

No kidding.  If your paid-off house is not factored into the assets, $1M seems like plenty to me.  I currently spend <$20k/yr and a huge portion of my monthly spending is rent (like, over 1/3).  Yes, I realize even a paid-off house costs money, but not at anywhere near the same rate.   

If you are on the younger side and likely to be bringing in occasional supplemental income as a growing safety margin against stock market volatility, $1M again seems safe.  Also, are you thinking $1M for a single person, couple, family?  For one person it seems almost excessive, for a couple or a small family it seems comfortable, for a very large family it is perhaps starting to skate on thin ice.

[grantmeaname]

My biggest concern would be impact of stock market drop on a 60/40 equity:bond portfolio

You don't have to have a 60/40 allocation just because it's the default for people who don't want to think critically about their portfolio. Since your time horizon is effectively your entire lifetime, you should be much more concerned about losing long-term to inflation than about short-term volatility. To me, that suggests a much less conservative portfolio than the typical retiree needs.

[arebelspy]

My biggest concern would be impact of stock market drop on a 60/40 equity:bond portfolio

You don't have to have a 60/40 allocation just because it's the default for people who don't want to think critically about their portfolio. Since your time horizon is effectively your entire lifetime, you should be much more concerned about losing long-term to inflation than about short-term volatility. To me, that suggests a much less conservative portfolio than the typical retiree needs.

+1.

Especially if you're a Mustachian, meaning you have safety nets in terms of flexibility in spending and potential to earn some income, at the very least.

[Southern Stashian]

Family of five - 39, 37, 10, 8, and 3. Plan on being completely commitment free (house and land) within 3 - 5 years and currently have no other commitments (cc debt, car loans ...) Once our investment accounts hit the $650K - $700K mark and the above obligations are free and clear, we will most likely step away from the rat race, most likely in our early to mid 40's.

We will have investment income ($26K - $28K yearly), sell our land and pick up a rental or two along the way, have savings and emergency fund accounts totaling $60K to fall back on, open a $50K line of credit on our main home, work side jobs when it makes sense to and have reduced our yearly overhead down to $20K - $24K. We should have an income twice that of our yearly expenses ($40K - $45K), so we'll be able to splurge some along the way and reinvest the rest. In addition, I have a pension from my current employer to claim once I hit the "traditional" retirement age of 55 - 67, one that I can also cash out if needed.

So yes, totaling it all up we will be over the $1MM mark in total assets, assets that we should never have to touch and watch roll over from year to year in our early "retirement". Like many on these forums though the reason for our early departure from the grind mill is being able to reduce our spending and avoid debt while increasing and diversifying our income streams for the future.

Also, open a www.Mint.com account, put in all of your accounts (assets and liabilities) and check in from time to time to see your Net Worth. It definitely motivates us to see our NW increase from year to year (sometimes doubling). It makes all of our hard work that much more fulfilling.


www.theFIguy.com

[MMMdude]

Definitely.  I think the real question on this site is, who is going to save MORE than a mil before they retire.

No kidding.  If your paid-off house is not factored into the assets, $1M seems like plenty to me.  I currently spend <$20k/yr and a huge portion of my monthly spending is rent (like, over 1/3).  Yes, I realize even a paid-off house costs money, but not at anywhere near the same rate.   

If you are on the younger side and likely to be bringing in occasional supplemental income as a growing safety margin against stock market volatility, $1M again seems safe.  Also, are you thinking $1M for a single person, couple, family?  For one person it seems almost excessive, for a couple or a small family it seems comfortable, for a very large family it is perhaps starting to skate on thin ice.

Me and my spouse, no kids, 2dogs/1 cat. I guess I am just on the more cautious side.  We are getting by on about 30K per year on spending but doesn't include auto replacement and major home repairs.

So are most planning some kind of part time income or to pull out  completely? I'm an accountant and dislike it so currently exploring alternative career options that are flexible....or perhaps if I did the accounting thing for 15 hours a week it wouldn't be so terrible.

Also, will have canada pension plan of about 12000 per year starting at age 65 (that is today's dollars) and then wife 8 years later will qualify.  I don't count that as a certainty though

[MMMdude]

My biggest concern would be impact of stock market drop on a 60/40 equity:bond portfolio

You don't have to have a 60/40 allocation just because it's the default for people who don't want to think critically about their portfolio. Since your time horizon is effectively your entire lifetime, you should be much more concerned about losing long-term to inflation than about short-term volatility. To me, that suggests a much less conservative portfolio than the typical retiree needs.

I disagree and there are reasons that 50/50, 60/40 splits are out there versus an all or most equity portfolio.  It would have been devastating to lose 40% of your portfolio as per the most recent crash.  Multiple studies have proven that the additional risk with higher equities is not compensated for adequately.

[Southern Stashian]

Definitely.  I think the real question on this site is, who is going to save MORE than a mil before they retire.

No kidding.  If your paid-off house is not factored into the assets, $1M seems like plenty to me.  I currently spend <$20k/yr and a huge portion of my monthly spending is rent (like, over 1/3).  Yes, I realize even a paid-off house costs money, but not at anywhere near the same rate.   

If you are on the younger side and likely to be bringing in occasional supplemental income as a growing safety margin against stock market volatility, $1M again seems safe.  Also, are you thinking $1M for a single person, couple, family?  For one person it seems almost excessive, for a couple or a small family it seems comfortable, for a very large family it is perhaps starting to skate on thin ice.

Me and my spouse, no kids, 2dogs/1 cat. I guess I am just on the more cautious side.  We are getting by on about 30K per year on spending but doesn't include auto replacement and major home repairs.

So are most planning some kind of part time income or to pull out  completely? I'm an accountant and dislike it so currently exploring alternative career options that are flexible....or perhaps if I did the accounting thing for 15 hours a week it wouldn't be so terrible.

Also, will have canada pension plan of about 12000 per year starting at age 65 (that is today's dollars) and then wife 8 years later will qualify.  I don't count that as a certainty though

I don't think that part time employment will be a factor for us. We'll have plenty of safety nets in place and will most likely only consider side work when the terms are greatly in our favor (pay, hours ...)

What may happen though is that after taking some time completely away from the grind stone, we may start some sort of business or pursue some kind of charity work, one's that we can contribute our time and energy to. Thats something that we will consider once we get there.


www.theFIguy.com

[James]

My biggest concern would be impact of stock market drop on a 60/40 equity:bond portfolio

You don't have to have a 60/40 allocation just because it's the default for people who don't want to think critically about their portfolio. Since your time horizon is effectively your entire lifetime, you should be much more concerned about losing long-term to inflation than about short-term volatility. To me, that suggests a much less conservative portfolio than the typical retiree needs.

I disagree and there are reasons that 50/50, 60/40 splits are out there versus an all or most equity portfolio.  It would have been devastating to lose 40% of your portfolio as per the most recent crash.  Multiple studies have proven that the additional risk with higher equities is not compensated for adequately.

Is there a reason you didn't link to those studies?  Throwing out the word studies in relation to finances is pretty light "proof", not to mention that mustachian retirement is different than "normal" retirement.  Flexibility can lower that additional risk into an acceptable compensation range.

[grantmeaname]

I'm not arguing that they shouldn't exist ever. There are people that 60/40 and 50/50 splits are great for. Mustachians are not those people. Take a look at FIREcalc for a 60/40 versus a 100/0 portfolio and tell me which does better.

And once again, for the millionth time, let me repeat, science does not advance through proof, science advances through disproof. Studies in finance do not prove things, they suggest things.

[The Money Monk]

I wouldn't need anywhere near 1 mil to retire, house paid off or not. If my house was paid off, then I would only need like 1000 bucks a month to maintain my current lifestyle.

so that would be like a 300k portfolio, I guess?

[Tyler]

I'm not arguing that they shouldn't exist ever. There are people that 60/40 and 50/50 splits are great for. Mustachians are not those people. Take a look at FIREcalc for a 60/40 versus a 100/0 portfolio and tell me which does better.

Plenty of Mustachians invest in things other than 100% stocks.  For example, there's an entire section of the boards dedicated to real estate.

Reasonable people can have different opinions on investments.  In retirement, it's not simply a matter of what does best on a spreadsheet but also what you can stick with without losing sleep at night or selling low out of panic.  Even if it means you need to save a little more before pulling the ER ripcord, we all have to find that balance.

[gooki]

$500k invested in today's dollars would work for our family of 4.

Will probably jump ship even earlier, because FI doesn't mean never earning money again. Just on my own terms.

[tooqk4u22]

No - I plan to have over $1mil unless I can find some rentals that pay higher returns and then I might need less. 

One thing this thread makes me think of further is single, couple, family dynamic....costs are definitely less for singles/couples on just about all counts (food, insurance, housing, etc.) and this greatly affects this. So for me with a family of five my expenses are fairly high some of which is due to optional expenditures such as activities such as sports/lessons.

So what I have been trying to figure out is what I really need - I know what I spend now but what about in the future when the kids are out of the house, in that case some of these costs may be greatly reduced and we may be able to move into a smaller house/apartment.

[JFC]

Also, will have canada pension plan of about 12000 per year starting at age 65 (that is today's dollars) and then wife 8 years later will qualify.  I don't count that as a certainty though

12K per year (in today's dollars) is the maximum CPP available, which most retirees don't qualify for (nevermind early retirees).  You have to work 40 years—all at the maximum CPP earning level—to be eligible for this amount. If you are planning to retire early or work part time, you might want to take this into account with your estimated (but not counted on, as you say) CPP calculation.

[kythuen]

Well, there's no way on earth I'm getting to $1 mil before retirement, starting as late as I did, so I certainly HOPE it can be done on less than that!

I'm single, and have no plans to be otherwise again in this lifetime.  I know plans like that can change, but right now I'm a happy 41yo spinster.  :)  No kids, and at this point future kids are (both biologically and financially) extremely unlikely.

I expect some form of SS to be around when I retire, though I don't expect it to be "full strength"; however, I'm not planning on SS. 

I also expect to be doing some kind of work, and therefore making some kind of income, after I'm financially independent.  It's likely to be part-time and in some other field than the one I'm in currently.  I spent a year unemployed, and while that's certainly a different emotional experience from retirement, I found that a complete lack of externally imposed regimentation didn't suit me.  I need "stuff" to do, and I need people counting on me to do it, in order to be happy.  But I do expect I'll find I need only about half as much regimentation as I currently get.  :)

[MMMdude]

Also, will have canada pension plan of about 12000 per year starting at age 65 (that is today's dollars) and then wife 8 years later will qualify.  I don't count that as a certainty though

12K per year (in today's dollars) is the maximum CPP available, which most retirees don't qualify for (nevermind early retirees).  You have to work 40 years—all at the maximum CPP earning level—to be eligible for this amount. If you are planning to retire early or work part time, you might want to take this into account with your estimated (but not counted on, as you say) CPP calculation.

12K includes cpp/oas.  Yes I know that age of oas is now 67.   I am figuring $546 for oas (maximum) and then the rest from cpp - it'll probably be more than that, just being conserative

[xtrfuel]

Does this include all traditional retirement accounts or are you just referring to savings outside of 401/IRA?
If it's counting everything I must be a lot more conservative than most.  I'm hoping to have 2.5-3mm before retiring.

[MountainFlower]

Does this include all traditional retirement accounts or are you just referring to savings outside of 401/IRA?
If it's counting everything I must be a lot more conservative than most.  I'm hoping to have 2.5-3mm before retiring.

Me too.  We live frugally, so that isn't the issue.  I just don't want to be at the whim of crappy insurance if I get  a serious illness, and it seems like that's the direction that things are going.  .  Maybe that's living in fear, but I've seen my father and FIL go through cancer treatments in the last 12 months.  Their insurance paid.  I wonder if insurance in the future will pay for someone in their mid-70s to get those kind of treatments.  Not going to be at the mercy of insurance/government.

[Tyler]

I understand the health fear. 

However, how much money are you seriously wanting to save for medical treatments?  Another million?  It just seems like there may be other ways to handle health risk than simply working forever.  Like moving/traveling to a cheaper country if necessary.  Perhaps others have ideas. 

At some point, no matter how much money you have you can't buy off death.  Perhaps if I become ill later in life I will regret not working another few years to earn enough to purchase a few more.  Right now, I feel like I will be more thankful for maximizing the time I had.  But who knows. 

[MountainFlower]

Those are good questions Tyler.  I think that I would want an extra 250K just for the purpose of going to another country to get the treatment that I want.  250K wouldn't buy you much here. 

Also, I forgot to mention, that I love the idea of moving to a senior community when I get to be a certain age.  I've bee to a couple and they seemed like they would be a lot of fun:  Dorms for seniors!  Seriously.  That aint cheap. 

[burly]

My minimum number with home paid off is ~360,000

Right now, my wife and I spend about 12,000 a year without our debt. We just had our first child so I will adjust our numbers as we go, but I am assuming I will quit my job with $500,000 in the stache and our primary residence paid off. However, if the wife keeps working (she loves her job!), I may quit at the 360 mark!

[secondcor521]

I'm going to take stock and consider my options once I hit 25x / 4%, which would be less than $1M based on a FIRE budget of ~$25K or so.  I'll hit that in the next few years depending on how all the variables work out.  I probably won't retire at that point, but I would feel pretty comfortable doing so.

2Cor521

[dragoncar]

I think the majority here would be fine on under a million.  MMM was around $750k when he retired, and we have some ERE readers (Jacob was more like $150k I think).  If you are retiring on $1 million, you are not really "badass" or "extreme".  With a million (i.e. $40k/year), you are living a solidly middle class consumer lifesyle.

[smalllife]

With a paid off house I would pull the 9-5 plug at $350-$400K.  I can easily live on $1000 a month, and plan on doing so (the $2-4k/yr is for the unexpected expenses), but I intend to work a side job or two to make the stache grow a bit more for my old age.  I consider $300k to be complete FU money to negotiate to part time at work, etc.   

[rtrnow]

I plan to leave my current job or at least cut back to 50% well below 1mil. I do plan part time work in an area I really love. I'm pursuing and building a bit of a client base in that area now. For me, the goal of ER is butting heads with me being really burned out at my current job. So, I plan to stick it out until I could theoretically cover my basic no frills expenses but actually do some side work and not draw off retirement accounts for a few more years.

Those numbers for me are 300K in tax deferred accounts and a paid for rental property that generates about 50% of my monthly living expenses. I'm at 220K and only 50K left on the mortgage which hopefully means only two more years full time.

[jrhampt]

For the two of us, I think about 900k and a paid off house would give us plenty.  That's probably 4-5 years away.  My husband would prefer 1.2 million or so for more cushion, since he fears health costs and having to support our parents. 

[lauren_knows]

Right around $1MM.  Depends greatly on how college costs look in 20 years for our little ones, but minus those funds, right around the equivalent of $1MM in 2013 dollars.

[SMMcP]

I think alot depends on how early you are retiring.  I'm retiring this year, but not very early (I will be 62).  I have a net worth of $670,000.  Add in social security and a small pension and my income is about $4000/month.  Thanks to Mr. Money Mustache I now live comfortably on $2000/month.  That leaves plenty for some travel, helping my adult children when they need it and for emergencies.  Before I learned the principles taught here I really thought I would be working until I was 70.

[JanMN]

Yes, probably around the 650-700k mark with a paid off house - have 2 years to go yet.

[vwDavid]

absolutely yes, with all of it paying dividends...

[John74]

I started planning for retirement well before ERE and MMM showed up on my radar screen and was influenced by more traditional ER books / forums / blogs. So my number was always significantly higher than $1M.

[Jamesqf]

I've no plans to retire (I enjoy my work!), but I considered myself minimally financially independent (what I call being independently poor) at around $250K.  That is, I might have to sell this house and move to a cheaper place, but I would keep eating and be able to sleep indoors and take hot showers.

Bump that up to $500K, and I'd be firmly in independent middle class.  Add a paid-off house (an extra $100K or so), and I'm pretty well into luxury territory.

[MMMdude]

Those are good questions Tyler.  I think that I would want an extra 250K just for the purpose of going to another country to get the treatment that I want.  250K wouldn't buy you much here. 

Also, I forgot to mention, that I love the idea of moving to a senior community when I get to be a certain age.  I've bee to a couple and they seemed like they would be a lot of fun:  Dorms for seniors!  Seriously.  That aint cheap.

I am very grateful to live in Canada for this reason.  Dont' have to worry about major health care costs.  Sure, we still have to pay for optical/dental/Rx drugs, but anything major is taken care of here.   I would think this is at least a 100K benefit for Canadian MMMers versus US ones.  I base this on a presumed $4000 per year cost in US (for benefits) X 25 multiple. 

[Jaherman99]

My number is 1-1.2 mill.  Over the next year or two I hope to move that number down into the 700-800k range through conversation and compromise with my soon to be DW.

[Jon_Snow]

I just recently turned 41 and my wife is 40. I am looking to quit my job in a year or two - my wife isn't quite ready to leave a career she loves and wants to work at least another ten years.

I sat down a few days ago and took stock of our financial situation. We currently have about 850k in investable assets, and the all important paid off home. If I do stop work next year, at 42 years old, we will probably be at around 950k, so just shy of the million dollar mark. With my wife willing to work another 10 years (although I tell her that she probably doesn't have to) I don't think I need to keep getting up at 5am to go to a job that makes me miserable. We save a ridiculous amount of cash every month... without my income we will still be able to manage a 50% savings rate (we are 80% now). We have been Mustachians in every sense of the word for about ten years now.

I think that if she does work another ten years our nest egg may be approaching 2 million by the time she joins me in retirement. :)

[KimAB]

I am very grateful to live in Canada for this reason.  Dont' have to worry about major health care costs. 

Have you looked at the cost of Canadian nursing homes, MMMdude?  ;-)

[MMMdude]

I am very grateful to live in Canada for this reason.  Dont' have to worry about major health care costs. 

Have you looked at the cost of Canadian nursing homes, MMMdude?  ;-)

No - but have heard about them.  Yea, not cheap if you want decent care.  The gov't does provide basic senior housing for free if you fail a means test from what I understand.  I am mainly worried about my mother.  Doing great at 75 now, but who knows in the future.  My brother and I would want the best for her and something decent is about 4K per month which we would of course split the cost on.  As for our care, the plan would be to ditch the house to fund that kind of care if needed.

[KimAB]

:-)  I'm really not trying to start a fight. On the whole I agree with what you said, MMMdude.  I think it is true that we need less (generally) for retirement in Canada because of medical costs.  I'm sure not going to have a million dollars at retirement.  I'm looking at something in the 100,000 range and a paid for property to live in-somewhere with cheap property.  (Small town?  Shudder!) 

I keep hoping the provinces will get it right by the time I need a nursing home. 

[BYUvol]

Definitely.  I think the real question on this site is, who is going to save MORE than a mil before they retire.

$3.5 million is my number, I'll retire when I hit it, whether that's in 5 years or 30 years.

I came to that number factoring in a complete lack of SS and health care costs increasing at a 10% annual rate. I know its not very likely SS will be completely gone, but given demographic trends, I think its safe to say Medicare and SS benefits will be lower than they are today, and health care will be more expensive, I just have no idea of knowing what number I can safely plan for, so I took the worst case scenario. I don't want to end up living on Costco samples at 75.

[JohnGalt]

I'm surprised by the percentage of people actually saying they'll be over $1M.  Maybe it's because I started out on the ERE forums.

I'll be well under the $1M mark myself. Though - I don't actually plan on retiring, just shooting for enough to cover my basic expenses so I can choose to work where/when I want.

[sol]

I'm surprised by the percentage of people actually saying they'll be over $1M.  Maybe it's because I started out on the ERE forums.

As mentioned above, I think it depends on circumstance.  A single person retiring at age 45 can get by on a much smaller stash than a family of six retiring at age 30.  I think $1mil is more than adequate for the former, but perhaps a squeeze for the latter if they intend to contribute to college expenses.

Then are some folks who could happily retire on much less, but just really like their jobs and see no reason to quit.  If it's a choice between sweeping your driveway in your pajamas and working longer at a job you love so you can donate a million dollars to a cause you believe in, the pajamas may not seem so attractive.

[travelbug]

Nope, we will have around 1.2M in shares and a paid off house and another RE investment that will generate sufficient income.
We do have two small children, so would rather have more than less. We will be retiring later this year at 41 and 37.

[Mike]

$350,000 or thereabouts is about all I'll need (if that).  Being single and not having kids helps.  Having a pension kick in at 62 also helps.

[DoubleDown]

While I understand the uncertainty over health care in the US and the desire to accumulate a giant fund to handle it, I've chosen not to get overly concerned about it. Had this exact discussion with my wife a few months ago. We're not altering ER plans to accumulate extra for health care. Related to the death/old age thread, what extraordinary measures are you willing to go to in order to be prepared for any health eventuality life might hand to you? And is it worth it delaying your ER and working years extra for it?

From a practical standpoint, health care in the U.S. will get resolved one way or another. It will not be the case that health care will be unaffordable for the middle class, even in some distant future. That's just not sustainable. I'm confident whatever health insurance we have plus our savings will adequately handle just about anything. And on the extremely remote chance that anyone got some horrible, debilitating, life-long disease, that made you infirm, do you really worry about ending up in the gutter, hungry? Heck, we could always just travel to Canada for treatment ;-)

There are plenty of assistance programs to handle catastrophic situations like that (medicare, medicate, SS), it's what we all pay taxes for. If I'm so sick and broke or demented and unable to figuratively pull the plug, go ahead and institutionalize me or pull the plug. And not for one second would I regret not having working years more to save up a million dollars extra to handle my long term care.