Author Topic: Beginner Mustachian - how little do we need to retire (and travel extensively)  (Read 3037 times)

elaine amj

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I have just joined the forum and feeling my way around here. This seems to be a great place to be to nurture my dreams of an early retirement! Both my DH and I have great jobs - but we dearly love to travel and just be together and I am pushing hard for an early retirement.

To introduce ourselves...
I am 34 and DH is 43 and we have 2 kids, 12 and 11 years. We are Canadian so have a decent social safety net to fall back upon if the going gets tough. 
We have a combined annual after tax income of $84K and save approximately 50% of that. Right now I think we will need $40K a year to retire and this will go down as we grow older/less active. I used the Ultimate Retirement Calculator and plugged in that our needs would go down 10% every 10 years (which would bring me at worst to about $25K when I'm old and can't do anything).  We have about $428K in cash/investments right now and another $250K tied up in our home and 2 rental properties. I am not counting the houses or our 2 vehicles or our kids' RESP savings into our retirement savings. Based on the calculator, it says we should be able to retire in about 6 years when we should have about $650K in savings. We're pretty frugal folks although we like to splurge too. My approach to money is that I will scrimp and save on regular stuff so I can splurge on what I want.

We love all kinds of travelling - from tent camping, hiking and canoeing for hours on end to luxurious cruises, big cities, Europe, Asia - we find most things appealing. However, we don't drink, smoke, gamble, or spend on expensive guided tours. We love finding the most cost-effective way to have the most fun. We do credit card churning (airmiles, hotel points, etc), so our travel costs are 1/2 of what most people spend. e.g. we went with close friends on a Disney cruise in March. We spent $3K in total and they spent $5K on what was essentially the same vacation (we both did sightseeing/theme parks before the cruise).

For those who have/are planning to retire early and travel extensively, how much do you budget for total expenses annually? I know there is no hard and fast number and everything depends...but I am looking for inspiration and some ballpark ideas of what we should shoot for.

Eric

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Right now I think we will need $40K a year to retire and this will go down as we grow older/less active. I used the Ultimate Retirement Calculator and plugged in that our needs would go down 10% every 10 years (which would bring me at worst to about $25K when I'm old and can't do anything). 

We love finding the most cost-effective way to have the most fun.

For those who have/are planning to retire early and travel extensively, how much do you budget for total expenses annually? I know there is no hard and fast number and everything depends...but I am looking for inspiration and some ballpark ideas of what we should shoot for.

First things first.  Start tracking all of your expenses and how much you're spending.  This will give you a much better idea of how much you'll need per year.  There's a reasonably large difference in the amount you'll need to have saved between, for example, $40K and $45K. ($125K in stash if you're following the 4% Safe Withdrawal Rate)

Second, I'd be careful about assuming your expenses will drop that much as you age.  For one, there's inflation, so while you might only be spending $25k/yr in today's dollars, that will be more by then.  And also, I'm guessing that my own spending will simply adjust, from travel and fun to medical procedures and care, depending on health.  Something to consider.

The good part about travel after retirement in my mind is the combined flexibility and time available.  You can travel in the offseason.  Take the slow train instead of the express.  Take the two stop flight instead of non-stop.  Drive instead of fly.  Rent an apartment on the outskirts of Paris for a week instead of a hotel in the city for 2 days.  Stuff like that.  Since time will be much less of a factor, you'll be able to do everything slower and cheaper which will extend your travel budget.

That said, you'll still need to budget, as travel is expensive.  I personally want to pull the FIRE trigger once I have enough of a stash to cover my basic expenses with only light travel included (a camping week or two, a continental flight or two.)  Then I plan to earn money in some capacity in order to afford the more expansive or exotic vacations, like Europe or Asia.  But you can budget for how much you'd like to travel.  Figure out how much your travel might cost above and beyond what you're already spending currently.  Then you'll have the option of saving more ahead of time or earning some post FIRE.

There are a few folks around here who are planning on traveling extensively once they retire, and are budgeting to spend more per year in retirement then they spend now.  Maybe they'll chime in here with some other ideas.

davisgang90

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I agree with Eric that 10% every ten years seems like a steep drop.  That being said, the Ultimate calculator does account for inflation.  Check out firecalc for a more robust look at retirement scenarios.

Travel should certainly be a lot cheaper in retirement when time isn't so critical.  Just about every flight I take they are giving out free flight vouchers to folks willing to stay in a hotel overnight and fly out the next day.  Most times, my schedule doesn't allow it, but I have friends who do lots of free flying this way.

elaine amj

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Some really good points. The supplementing of our income does sound like a pretty good safety net. I do see us doing stuff to earn a side income, especially in the beginning. While I may dream of just lazing around, we have a fairly entrepreneurial bent and I can see us doing something here or there. Plus, DH earned his Masters this year and has started teaching online courses at a nearby university (his field is healthcare education) and we can see that being an ideal retirement side job.

And slow travel really is MUCH cheaper than the kind of vacations typical families take. We also like to optimize our travel money. e.g. we spent one summer with season passes to Cedar Point (DD and I adore coasters) and visited about a dozen times, never getting bored. When we visit Disney World, we stay for 10-12 days because our per day cost is much lower that way. I can see us spending one year living in Orlando with annual passes and just chilling at the parks. Up front costs would be fairly $$$, but spread out over the year, it would be cheap entertainment. Another year we would buy a trailer or whatever and just travel through the country camping and then sell it when we are done. Another year travelling through Europe staying a month or so in each country.

As for medical care, we live in Canada - so right now thinking of relying primarily on our country's free health care. That said, this brings up a great point to consider - health insurance as we travel. That can get quite $$$.

I think  a 10% drop every 10 years is rather steep. And yes, I did make sure inflation was part of the calculations. But frankly, we can easily live on $30 - $35K, I figured I would give us extra money the first 10-20 years so we can get the worst of the travel bug out of our systems. And then downsize after that. Plus, we would have the cushion of our house value as I am not counting that into our retirement savings.

Eric: I like the way you think about how much is the bare minimum...and then working a bit to cover the luxuries. Our bare minimum is likely about $30K for a non-deprived lifestyle.

Dulcimina

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It's not just healthcare though. It could be just needing a little more help with say, mowing the lawn or housework.