Author Topic: How much Income is needed ?  (Read 2835 times)

1962colreb

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How much Income is needed ?
« on: August 05, 2017, 08:08:20 PM »
I'm wondering if it is wishful thinking to expect my wife and I(50 and 55) to retire in a few years ?
Our pensions and savings should provide 4500 per month. The pensions will receive yearly COLAs.  Health insurance for both of us will run a out 400 a month. With a paid for house and a modest lifestyle, is 4500 going to be cutting it too tight ?
« Last Edit: August 05, 2017, 08:11:47 PM by 1962colreb »

GenXbiker

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Re: How much Income is needed ?
« Reply #1 on: August 05, 2017, 08:36:12 PM »
It depends on your other expenses.  And don't forget the occasional ones like maintenance and out of pocket healthcare costs (not just insurance premium.)

As a single person, $2000/mo. would work fine for me, but I'm building a bigger cushion.

Bateaux

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Re: How much Income is needed ?
« Reply #2 on: August 05, 2017, 08:52:07 PM »
Since your health-care costs are fairly low and no debt, it seems doable.   I'd plan for the uncertainty of increased health-care costs.  Get that 4500 a month stream and a years expenses in some type of savings.  You should FIRE when ready.

1962colreb

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Re: How much Income is needed ?
« Reply #3 on: August 05, 2017, 09:19:15 PM »
Setting the budget for retirement seems to be the biggest hurdle.  I do plan
on starting Social Security at 62 which would bring another 1400 a month.
I guess the worry is whether free time will just mean more time to spend
or more time to reduce expenditures. 

Bateaux

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Re: How much Income is needed ?
« Reply #4 on: August 06, 2017, 03:01:29 AM »
To spend more when unnecessary would be poor personal choice that coukd make you poor.  Do you have a stash or just pensions?   $4500 a month plus the SS $1,400 should allow for some stash to build if not.

Monkey Uncle

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Re: How much Income is needed ?
« Reply #5 on: August 06, 2017, 05:01:29 AM »
Do you know how much money you are spending now and what you are spending it on?  And do you know whether that will change materially once you retire?  Without the answers to those two questions, there isn't much we can do to help you.

How will you obtain health insurance for $400/mo in your late 50s?  I presume you are able to carry your employer-provided insurance into retirement?  Otherwise, that number might be way off.

1962colreb

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Re: How much Income is needed ?
« Reply #6 on: August 06, 2017, 06:33:52 AM »
We have 6 months living expenses and will build it up to a year's expenses before
retiring . Healthcare will be covered through my employer until 65 when we shift to
Medicare . I'm estimating 70 percent of our current take home pay as the minimum
needed for retirement.  Downsizing the house, eliminating a car, and no work expenses
should be a giant step .  Fingers crossed.

Papa bear

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Re: How much Income is needed ?
« Reply #7 on: August 06, 2017, 06:52:02 AM »
I'm wondering if it is wishful thinking to expect my wife and I(50 and 55) to retire in a few years ?
Our pensions and savings should provide 4500 per month. The pensions will receive yearly COLAs.  Health insurance for both of us will run a out 400 a month. With a paid for house and a modest lifestyle, is 4500 going to be cutting it too tight ?

How much do you spend? That's the only question that needs answered. 


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BTDretire

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Re: How much Income is needed ?
« Reply #8 on: August 06, 2017, 07:09:07 AM »
I have seen this scenario many times on MMM.
 People earning a certain income say $80k and they
are saving $20k. Then they start asking, "can I live on
4% of $1M?"
 My answer is why aren't you already? Nothing stopping you
from living on $40k while earning $80k.  Everything is there
to live on $40K why not do it as a test before you lock yourself
out of an income earning position.
  There is only one caveat, that is costs of earning your income.
In my case, I don't see much expense to earn my income.
I see more expense from having all the extra hours to spend money.
 But I understand some people need to spend money to have the
position they have.
 It wouldn't be that hard to document cost of working expenses,
then you will know those expenses and can cut them out of retirement
expenses.
 Reduced tax bill is a bonus.

runewell

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Re: How much Income is needed ?
« Reply #9 on: August 06, 2017, 08:15:45 AM »
Why don't you spend a few months (1) tracking your expenses, or (2) living off that amount.

Monkey Uncle

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Re: How much Income is needed ?
« Reply #10 on: August 06, 2017, 05:21:57 PM »
We have 6 months living expenses and will build it up to a year's expenses before
retiring . Healthcare will be covered through my employer until 65 when we shift to
Medicare . I'm estimating 70 percent of our current take home pay as the minimum
needed for retirement.
  Downsizing the house, eliminating a car, and no work expenses
should be a giant step .  Fingers crossed.

O.K., but you still haven't told us how much that is.  Once we know that, we can easily compare it to your projected 4,500/mo income.  But then you probably already did that, and if that had given you an answer you liked, you wouldn't be asking the forum if it's enough.  So I'm going to guess that you're currently spending a good bit more than 4,500/mo.  Or perhaps you don't know how much you're spending, and you're speculating that 70% of current income would be enough?

So, yes, Runewell hit the nail on the head: you need to track your spending, and then you need to set a reduction target and practice living off of that amount.