Is $100k a year a lot? Is it Fat FIRE? Used to think so but starting to wonder!

[FIRE 20/20]

In retirement, your withdrawal is your income, they are logically equivalent. Whether I'm getting my $100k from a job or that is my portfolio draw per my safe withdrawal rate, that is what I have to live on per year. And for me, $100k is not FAT. Key words there being "for me"

This is simply not true.  I am FIREd and I live on (spend) a lot more than my withdrawals.  How?  I have lots of post-tax accounts that I spend down while I optimize my tax and health insurance costs by keeping my withdrawals low.  In addition, $100k from a job is nothing like $100k of spending.  I took some of my data (below) from the Smartasset.com tax estimator.

For someone pursuing FIRE, assume a $100k annual income.  In order to FIRE, a 30% savings rate is close to a minimum.  According to MMM's Simple Math post, a 30% savings rate = 28 working years, so someone starting after college (age 22) would FIRE at age 50.  Let's assume they max out their 401(k) ($19,500) so their taxable income is $80,500.  They save $10,500 in Roth/after tax accounts.  Their federal taxes would be about $10,700, FICA would be about $6,200, and they may have state taxes (assume $0 here).  That's close to $17,000 in federal and FICA taxes.  So from that $100k income, we subtract $19,500 in 401(k) contributions, $10,500 in other retirement savings, and $17,000 in federal taxes.  That leaves $53,000.  This person also needs to pay for work clothes, maybe commuting, and may pay for things like car repairs, lawn service, cleaning service, and other job-related expenses. 

It's not hard for someone FIREd to keep their expenses much, much lower.  My spending level is around double my taxable income, and that person doesn't need to save anything for retirement.  If I assume $50k of taxable income that would only mean $4,300 in Federal Income Tax, and they wouldn't be paying FICA taxes.  They also wouldn't need to save anything for retirement because  by definition they're already retired.  So this person would have about $95,700 to spend compared to the $53,000 from the working person. 

Health care costs don't change this.  A quick check shows a typical Silver plan for someone age 50 in my state is in the $400-600 range, so about $6,000 / year.  OOP max is about $17k.  If someone somehow gets totally free health care through work (not likely), and spends the absolute maximum on health care after they're FIREd, they still have tens of thousands of dollars more available to spend than the working person. 

Even making the most lopsided assumptions - low (30%) savings rate, zero health care costs while employed and maximum health care costs when FIREd, ignoring work-related costs that disappear, and minimal tax optimization, the FIREd person "spending" $100k a year has tens of thousands of dollars extra to spend than the working person.  If they FIREd person optimizes just a bit they'll be even further ahead. 

I can say that for me personally, in the 2 years I've been FIREd I live the same lifestyle I did while working, while my taxable income is 15.3% of my working income while my spending is the same at about 45% of my working income.  So if I earned $100k a year while working, I now "earn" $15,300 in taxable income while living on $45k of spending each year.  Those aren't my actual numbers, but the ratios are correct. 

[Tigerpine]

Yes it's a lot. No it's not FatFIRE. I would call it ChubbyFIRE. But obviously just one person's opinion, there is no standard definition and depends on location and blah blah blah

I'm puzzled by this opinion. With a paid off house in a mid-COL area, the whole MMM family (pre-divorce) was spending ~$25k/year for everything.

Even if that were true, which it's not, that would be more like PovertyFIRE. I mean literally that is below the federal poverty line.

$100k is the 64th percentile for household income, not even in the top 1/3 (almost, but not quite).

First, *spending* $25k/year with a paid off home is no where near the federal poverty line.  It’s actually very close to the typical middle-class retiree’s budget.

Second, we are discussing $100k in spending in retirement, not earnings

In both cases you’ve conflated income with retirement spending, which are two very different things.

LOL family of three living on $25k is def poverty level in my book. Paid off house or no.

In retirement, your withdrawal is your income, they are logically equivalent. Whether I'm getting my $100k from a job or that is my portfolio draw per my safe withdrawal rate, that is what I have to live on per year. And for me, $100k is not FAT. Key words there being "for me"

But it's not the same, if for no other reason than income taxes.  Let's assume that the $100k in discussion is total income (i.e., gross income, pre-tax) and filing Single.

--------Scenario #1-------------
So let's start with $100k of earned income.  For simplicity's sake we'll say that all income is W-2 wages.
Start:  $100k
Std Deduction:  ($12,400)
--------------------------------
Taxable Income:  $87,600
Income Tax:  ($15,110) <---- From the IRS tax tables for tax year 2020
--------------------------------
Income after income tax:  $72,490
Soc. Sec. (6.2% of $100k) = ($6,200)
Medicare (1.45% of $100k) = ($1,450)
---------------------------------------------
Income after FICA & Income Tax:  $64,840 + $12,400 = $77,240

So in this scenario, you get to "spend" $77,240 of your $100k income.

--------Scenario #2-------------
Now it starts to become much more complicated, because the source of your income becomes very important, as not all income is taxed the same.  Let's say the $100k is all coming from a 401(k) or tIRA

Start:  $100k
Std Deduction:  ($12,400)
--------------------------------
Taxable Income:  $87,600
Income Tax:  ($15,110)
--------------------------------
Income after income tax:  $72,490 + $12,400 = $84,890

In this scenario, you get to "spend" $84,890 of your $100k income.

--------Scenario #3-------------
Let's say all your income all comes from an after-tax brokerage account that you've stopped contributing to over a year ago.  So let's say that your $100k breaks down as follows, just for argument's sake:
Dividends:  $40,000 <---- (Assuming a dividend rate of 2% of $2M assets)
Long Term Gain:  $45,000
Return of Basis:  $15,000

LTCG Tax:  $0 <--- Taxable income is < $80k in this example
Qualified Dividends Tax: $0 <------ Taxable income is < $40k in this example (Qual. Div. Income is not included in this number.)
----------------------------------
Income after tax:  $100,000

NOte:  This is not tax-advice.  I am not a tax professional, and you should verify any information contained herein.

EDIT:  Thank you to @Alternatepriorities for reminding me to add the Std Deduction back to the income.

[mall0c]

In retirement, your withdrawal is your income, they are logically equivalent. Whether I'm getting my $100k from a job or that is my portfolio draw per my safe withdrawal rate, that is what I have to live on per year. And for me, $100k is not FAT. Key words there being "for me"

This is simply not true.  I am FIREd and I live on (spend) a lot more than my withdrawals.  How?  I have lots of post-tax accounts that I spend down while I optimize my tax and health insurance costs by keeping my withdrawals low.  In addition, $100k from a job is nothing like $100k of spending.  I took some of my data (below) from the Smartasset.com tax estimator.

For someone pursuing FIRE, assume a $100k annual income.  In order to FIRE, a 30% savings rate is close to a minimum.  According to MMM's Simple Math post, a 30% savings rate = 28 working years, so someone starting after college (age 22) would FIRE at age 50.  Let's assume they max out their 401(k) ($19,500) so their taxable income is $80,500.  They save $10,500 in Roth/after tax accounts.  Their federal taxes would be about $10,700, FICA would be about $6,200, and they may have state taxes (assume $0 here).  That's close to $17,000 in federal and FICA taxes.  So from that $100k income, we subtract $19,500 in 401(k) contributions, $10,500 in other retirement savings, and $17,000 in federal taxes.  That leaves $53,000.  This person also needs to pay for work clothes, maybe commuting, and may pay for things like car repairs, lawn service, cleaning service, and other job-related expenses. 

It's not hard for someone FIREd to keep their expenses much, much lower.  My spending level is around double my taxable income, and that person doesn't need to save anything for retirement.  If I assume $50k of taxable income that would only mean $4,300 in Federal Income Tax, and they wouldn't be paying FICA taxes.  They also wouldn't need to save anything for retirement because  by definition they're already retired.  So this person would have about $95,700 to spend compared to the $53,000 from the working person. 

Health care costs don't change this.  A quick check shows a typical Silver plan for someone age 50 in my state is in the $400-600 range, so about $6,000 / year.  OOP max is about $17k.  If someone somehow gets totally free health care through work (not likely), and spends the absolute maximum on health care after they're FIREd, they still have tens of thousands of dollars more available to spend than the working person. 

Even making the most lopsided assumptions - low (30%) savings rate, zero health care costs while employed and maximum health care costs when FIREd, ignoring work-related costs that disappear, and minimal tax optimization, the FIREd person "spending" $100k a year has tens of thousands of dollars extra to spend than the working person.  If they FIREd person optimizes just a bit they'll be even further ahead. 

I can say that for me personally, in the 2 years I've been FIREd I live the same lifestyle I did while working, while my taxable income is 15.3% of my working income while my spending is the same at about 45% of my working income.  So if I earned $100k a year while working, I now "earn" $15,300 in taxable income while living on $45k of spending each year.  Those aren't my actual numbers, but the ratios are correct. 

Yes I understand all that and none of that is relevant to my argument.

I am FIRE'd too. I spend about $125k/yr. My AGI is obviously a lot lower than that for the reasons you mention. I am living the same lifestyle as someone in the 80-90% income decile depending on how much they save and pay in taxes. I do not consider myself FatFIREd, although many here on MMM would consider that FatFIRE. MMM leans minimalist.

OP is asking for opinions of whether $100k is a lot and whether it's FatFIRE. Yes, and no. My opinion, speaking from experience in that range.

[Alternatepriorities]

But it's not the same, if for no other reason than income taxes.  Let's assume that the $100k in discussion is total income (i.e., gross income, pre-tax) and filing Single.

--------Scenario #1-------------
So let's start with $100k of earned income.  For simplicity's sake we'll say that all income is W-2 wages.
Start:  $100k
Std Deduction:  ($12,400)
--------------------------------
Taxable Income:  $87,600
Income Tax:  ($15,110) <---- From the IRS tax tables for tax year 2020
--------------------------------
Income after income tax:  $72,490
Soc. Sec. (6.2% of $100k) = ($6,200)
Medicare (1.45% of $100k) = ($1,450)
---------------------------------------------
Income after FICA & Income Tax:  $64,840

So in this scenario, you get to "spend" $64,840 of your $100k income.

--------Scenario #2-------------
Now it starts to become much more complicated, because the source of your income becomes very important, as not all income is taxed the same.  Let's say the $100k is all coming from a 401(k) or tIRA

Start:  $100k
Std Deduction:  ($12,400)
--------------------------------
Taxable Income:  $87,600
Income Tax:  ($15,110)
--------------------------------
Income after income tax:  $72,490

In this scenario, you get to "spend" $72,490 of your $100k income.

--------Scenario #3-------------
Let's say all your income all comes from an after-tax brokerage account that you've stopped contributing to over a year ago.  So let's say that your $100k breaks down as follows, just for argument's sake:
Dividends:  $40,000 <---- (Assuming a dividend rate of 2% of $2M assets)
Long Term Gain:  $45,000
Return of Basis:  $15,000

LTCG Tax:  $0 <--- Taxable income is < $80k in this example
Qualified Dividends Tax: $0 <------ Taxable income is < $40k in this example (Qual. Div. Income is not included in this number.)
----------------------------------
Income after tax:  $100,000

NOte:  This is not tax-advice.  I am not a tax professional, and you should verify any information contained herein.

Scenarios 1&2 are missing the "Std deduction" in the net after tax income. That $12,400 needs to be added back in to the after tax calculations. A minor quibble that doesn't change the conclusion, but it drives me nuts when bad math makes tax rates look either better or worse than they really are. Scenario 1 should be $64,840+$12,400 = $77,240 and #2 should be $72,490+$12,400=$84,890. I have a friend who pulled off something very close to scenario 3 and had a $100,000+ income there first year of retirement tax free.

It should also be noted that a number of people refer to after tax income as "income" including MMM. See "the simple math of early retirement" post. In talking to friends about this and helping them "get it" I've come to see why. A deep dive into moving income around to maximize tax efficiency makes most peoples eyes glaze over. ROMs and hand waving the numbers get people way more excited about the possibility of not working till they die and the details come later.

To the question: For us 100k a year would feel very fat as we've never spent that much in a year. That would mean a lake front house and all the outdoor toys I could want, probably even an airplane... or giving away about half and living like we do now...

[AlanStache]

...

I am FIRE'd too. I spend about $125k/yr. My AGI is obviously a lot lower than that for the reasons you mention. I am living the same lifestyle as someone in the 80-90% income decile depending on how much they save and pay in taxes. I do not consider myself FatFIREd, although many here on MMM would consider that FatFIRE. MMM leans minimalist.

OP is asking for opinions of whether $100k is a lot and whether it's FatFIRE. Yes, and no. My opinion, speaking from experience in that range.

125k/year in spending is FFFFFAAAAAAAATTTTTTFire. 

I am struggling to see how (non-mortgage) spending much above 60k/year is not FatFire.  There may be 1000 laudable, worth while, good ways to spend above that that make the world a better place and bring happiness to all around but it is still a shit ton of money to be spending.

[FIRE 20/20]

Yes I understand all that and none of that is relevant to my argument.

You made a statement, specifically "In retirement, your withdrawal is your income, they are logically equivalent.  Whether I'm getting my $100k from a job or that is my portfolio draw per my safe withdrawal rate, that is what I have to live on per year. "
That statement is not true and been demonstrated repeatedly to be not true.  If someone is planning to FIRE and saving for FIRE, living on a $100k / year income is nothing at all like being FIREd and living on $100k from a portfolio.  To say that they are is simply to make a statement that does not comport with reality, as has been repeatedly shown in this thread. 

[Tigerpine]

Scenarios 1&2 are missing the "Std deduction" in the net after tax income. That $12,400 needs to be added back in to the after tax calculations. A minor quibble that doesn't change the conclusion, but it drives me nuts when bad math makes tax rates look either better or worse than they really are. Scenario 1 should be $64,840+$12,400 = $77,240 and #2 should be $72,490+$12,400=$84,890. I have a friend who pulled off something very close to scenario 3 and had a $100,000+ income there first year of retirement tax free.

Quite right.  I was so concerned with the taxes, I missed that.  Thank you for pointing that out; I'll fix it and give credit where it's due!

[FIRE 20/20]

<Excellent work here - see above>

Scenarios 1&2 are missing the "Std deduction" in the net after tax income. That $12,400 needs to be added back in to the after tax calculations. A minor quibble that doesn't change the conclusion, but it drives me nuts when bad math makes tax rates look either better or worse than they really are. Scenario 1 should be $64,840+$12,400 = $77,240 and #2 should be $72,490+$12,400=$84,890. I have a friend who pulled off something very close to scenario 3 and had a $100,000+ income there first year of retirement tax free.

It should also be noted that a number of people refer to after tax income as "income" including MMM. See "the simple math of early retirement" post. In talking to friends about this and helping them "get it" I've come to see why. A deep dive into moving income around to maximize tax efficiency makes most peoples eyes glaze over. ROMs and hand waving the numbers get people way more excited about the possibility of not working till they die and the details come later.

To the question: For us 100k a year would feel very fat as we've never spent that much in a year. That would mean a lake front house and all the outdoor toys I could want, probably even an airplane... or giving away about half and living like we do now...

Thank you @Alternatepriorities and @Tigerpine for doing a better job that I did.  I will add that the big difference comes in from not having to save for FIRE.  People pursuing FIRE generally save somewhere around 30-70% of their income and it's often their largest expense while working.  I realize that makes the math harder to do, but it really drives the actual spending money that people have in each scenario. 

[Metalcat]

...

I am FIRE'd too. I spend about $125k/yr. My AGI is obviously a lot lower than that for the reasons you mention. I am living the same lifestyle as someone in the 80-90% income decile depending on how much they save and pay in taxes. I do not consider myself FatFIREd, although many here on MMM would consider that FatFIRE. MMM leans minimalist.

OP is asking for opinions of whether $100k is a lot and whether it's FatFIRE. Yes, and no. My opinion, speaking from experience in that range.

125k/year in spending is FFFFFAAAAAAAATTTTTTFire. 

I am struggling to see how (non-mortgage) spending much above 60k/year is not FatFire.  There may be 1000 laudable, worth while, good ways to spend above that that make the world a better place and bring happiness to all around but it is still a shit ton of money to be spending.

This seems to be a theme, that people who spend 6 figures think that their high spend doesn't count as fatFIRE because it matches their personal priorities.

I've had years spending 6 figures and it didn't feel particularly, overly luxurious, but I have no illusion that I wasn't spending a fuck ton of money.

[honeybbq]

If you think you need $100k or more in retirement, you may be missing the entire point of this blog.

I think you missed the the point of this thread.

And... nursing facilities can cost 100k a year. So, I do find it a reasonable goal.

[honeybbq]

People seem to frequently grossly overestimate their taxes.

Hear, hear!
I live in the city of Boston, MA.  Property tax last year on our single family home was nowhere even close to $15k.  It wasn't even a third of that.  Here's a hint if you want to save money on property taxes in Boston:  live in Boston.  They charge more to people who own property here but don't live here.

EDIT:  specified that I'm talking about last year's property taxes.

$15k doesn't sound that far fetched to me, depending on the town - mill rates vary widely.  We had a $250k ish house in CT and property taxes on house + cars was about $10k each year.  We don't have new or fancy cars, either.

The post I was (indirectly) responding to was discussing property taxes in Washington State, where I found the numbers/assumptions to be objectionable.  I'm well aware that there are regions with higher property taxes where $15k is definitely not far-fetched.  New Jersey always seems to make that list, as it combines both fairly high property prices with high tax rates; most other states might have one or the other (for example, CA has high prices but a lower rate; Texas has high rates but low prices), but not both.

My property taxes in WA state are over 15k a year. I have a nice house in the city proper, but not a McMansion.

[Alternatepriorities]

And... nursing facilities can cost 100k a year. So, I do find it a reasonable goal.

Assuming this is true and assuming I could save 100k a year after taxes and spending I'm trading 1 year of work (while healthy) for 1 year in a nursing home... To me this is a terrible trade. I'm much better off RE while I can still do the things I love and ending life under a bridge.

[nereo]

Family of three living on $25k is def poverty level in my book. Paid off house or no.

In retirement, your withdrawal is your income, they are logically equivalent. Whether I'm getting my $100k from a job or that is my portfolio draw per my safe withdrawal rate, that is what I have to live on per year. And for me, $100k is not FAT. Key words there being "for me"

“Poverty Level” is a federally defined level. It doesn’t matter what “your book” says, though it does matter how many people are in the household. More to the point, many households at the median income level would have an increase in spending if they 1) did not have a mortgage 2) had the favorable tax treatment of LTCG and 3) were no longer saving for retirement nor incurring work-related expenses (e.g. commuting).

As others have pointed out, earned income and spending are not “logically equivalent” as they do not result in similar amounts of discretionary spending.

[honeybbq]

And... nursing facilities can cost 100k a year. So, I do find it a reasonable goal.

Assuming this is true and assuming I could save 100k a year after taxes and spending I'm trading 1 year of work (while healthy) for 1 year in a nursing home... To me this is a terrible trade. I'm much better off RE while I can still do the things I love and ending life under a bridge.

I have children and would never want to burden myself on them - they'd take care of me whether they I wanted them to or not.  Dying alone under a bridge when I'm old without proper medical care... doesn't sound that appealing.

[Alternatepriorities]

My property taxes in WA state are over 15k a year. I have a nice house in the city proper, but not a McMansion.

I have a brother in the Seattle area... His RE is going to cost twice as much as mine for reasons such as this. Our property taxes are under 3k a year for a 1500 sq ft house with garage on an acre... Our father lives in a town without property taxes and with 5 acres paid for he's living well in the house he build for ~20k a year. That includes the premiums on a supplemental insurance beyond Medicare. He does grow much of his own food in subarctic conditions and heat his domestic water off his wood stove with a system of his own creation... so it might not be good target for many...

[Metalcat]

And... nursing facilities can cost 100k a year. So, I do find it a reasonable goal.

Assuming this is true and assuming I could save 100k a year after taxes and spending I'm trading 1 year of work (while healthy) for 1 year in a nursing home... To me this is a terrible trade. I'm much better off RE while I can still do the things I love and ending life under a bridge.

I have children and would never want to burden myself on them - they'd take care of me whether they I wanted them to or not.  Dying alone under a bridge when I'm old without proper medical care... doesn't sound that appealing.

Nobody is criticizing anyone for their reasons for wanting to have 6 figures of retirement income. Calling it fatFIRE is not an insult, it's simply recognizing that it's a lot of money to spend.

You obviously have your reasons for wanting to be able to spend a lot of money, that's cool, but your reasons don't make it not a lot of money. I say this as someone who also intends to have a 6 figure retirement income.

[Arbitrage]

People seem to frequently grossly overestimate their taxes.

Hear, hear!
I live in the city of Boston, MA.  Property tax last year on our single family home was nowhere even close to $15k.  It wasn't even a third of that.  Here's a hint if you want to save money on property taxes in Boston:  live in Boston.  They charge more to people who own property here but don't live here.

EDIT:  specified that I'm talking about last year's property taxes.

$15k doesn't sound that far fetched to me, depending on the town - mill rates vary widely.  We had a $250k ish house in CT and property taxes on house + cars was about $10k each year.  We don't have new or fancy cars, either.

The post I was (indirectly) responding to was discussing property taxes in Washington State, where I found the numbers/assumptions to be objectionable.  I'm well aware that there are regions with higher property taxes where $15k is definitely not far-fetched.  New Jersey always seems to make that list, as it combines both fairly high property prices with high tax rates; most other states might have one or the other (for example, CA has high prices but a lower rate; Texas has high rates but low prices), but not both.

My property taxes in WA state are over 15k a year. I have a nice house in the city proper, but not a McMansion.

Fair enough.  However, I'm assuming that's a house that would sell for $2M or so these days...which leads right back to the notion that such a house is consistent with fat FIRE.  Not trying to judge, but I think the notion that a multi-million dollar house is somehow average (as in average-, but not fat-FIRE) is a bit far-fetched.

[Sandi_k]

@jehovasfitness23 - yes. Bay Area

$40k/yr for property taxes? holeeee shit

That's a $3M property then. Most CA areas are 1-1.25% of purchase price. I've lived in the Bay Area since 1987, and there's no way anyone MUST have a $3M house here. That's a choice, not a requirement.

[Sandi_k]

Too many here have conflated spending with earnings, and pre-FIRE budgets with post.

Not necessarily. I just did an update of my proposed retirement budget, and was horrified to realize that since I will not be getting healthcare through my employer - pretax premiums, natch - it means that I have to pay for those premiums pre-tax. Since they won't reach 7.5% of AGI, they will not be deductible. That's about a $3500 swing in taxes on premiums alone.

I will also pay about $15k MORE in taxes, simply because my income will no longer be offset by pre-tax savings that greatly reduced our tax bill each year.

So my post-FIRE budget will have nearly $20k more in taxes, just because of those two line items.

[RWD]

Too many here have conflated spending with earnings, and pre-FIRE budgets with post.

Not necessarily. I just did an update of my proposed retirement budget, and was horrified to realize that since I will not be getting healthcare through my employer - pretax premiums, natch - it means that I have to pay for those premiums pre-tax. Since they won't reach 7.5% of AGI, they will not be deductible. That's about a $3500 swing in taxes on premiums alone.

I will also pay about $15k MORE in taxes, simply because my income will no longer be offset by pre-tax savings that greatly reduced our tax bill each year.

So my post-FIRE budget will have nearly $20k more in taxes, just because of those two line items.

If you aren't saving anymore then why do you need that same income?

[Sandi_k]

Too many here have conflated spending with earnings, and pre-FIRE budgets with post.

Not necessarily. I just did an update of my proposed retirement budget, and was horrified to realize that since I will not be getting healthcare through my employer - pretax premiums, natch - it means that I have to pay for those premiums pre-tax. Since they won't reach 7.5% of AGI, they will not be deductible. That's about a $3500 swing in taxes on premiums alone.

I will also pay about $15k MORE in taxes, simply because my income will no longer be offset by pre-tax savings that greatly reduced our tax bill each year.

So my post-FIRE budget will have nearly $20k more in taxes, just because of those two line items.

If you aren't saving anymore then why do you need that same income?

Because we will still have other expenses in retirement - such as travel - that we skimp on now. I also expect our medical expenses to rise. So we have to offset the increase in taxes and medical care with the reduction in savings. Happily, because we've lived so far below our means, this realization  won't skew plans significantly.

But $20k more in expenses in any category is worth thinking about - I had focused instead on all the SAVINGS we'd have! No more mandatory retirement savings; no more voluntary savings for retirement! No more FICA! No more ST or LT disability insurance! No more life insurance premiums!

And to other assertions that taxes are lower in retirement? No, they aren't, if you have a pension.

The pension means that 85% of our Social Security income will be taxed. It means I can't control income to reduce tax bracket thresholds. It means that any distributions from our pre-tax accounts will be taxed at 24% Fed (or more, post 2026) and also the additional 9.3% state - a nice even 33.3%. 

I can't even move out of CA, as my retiree health care coverage is only in effect if I live within CA - and the healthcare equation is so much more expensive than the CA state income tax, it effectively traps us here.

If we need to depend on the ACA - assuming cliffs and costs resume after the 2022 expiration of the ARP reductions - we will have no way of getting subsidies. A bronze plan in CA will run us nearly $35k annually for the two of us.

So yeah - that's why we're planning on 100% of working income as our target for retirement income. The categories may shift post-employment, but the dollar outlay is expected to be remarkably similar.

[maizefolk]

Your pension plus 85% of your social security alone are in the six figures? Nice!

If you anticipate 15k in new taxes from not being able to deferring income taxed at a 1/3 rate that suggests $45,000 of pretax savings/year. Are you a teacher/university worker with access to both a 403b and 457? In any case, you're budgeting for $30k a year in additional travel in retirement? That's almost $360/day of travel expenses if you're going on a one week trip every month.

Sounds like a fascinating retirement. Not exactly the one I'd plan, but I hope it is one which will make you happy.

[honeybbq]

People seem to frequently grossly overestimate their taxes.

Hear, hear!
I live in the city of Boston, MA.  Property tax last year on our single family home was nowhere even close to $15k.  It wasn't even a third of that.  Here's a hint if you want to save money on property taxes in Boston:  live in Boston.  They charge more to people who own property here but don't live here.

EDIT:  specified that I'm talking about last year's property taxes.

$15k doesn't sound that far fetched to me, depending on the town - mill rates vary widely.  We had a $250k ish house in CT and property taxes on house + cars was about $10k each year.  We don't have new or fancy cars, either.

The post I was (indirectly) responding to was discussing property taxes in Washington State, where I found the numbers/assumptions to be objectionable.  I'm well aware that there are regions with higher property taxes where $15k is definitely not far-fetched.  New Jersey always seems to make that list, as it combines both fairly high property prices with high tax rates; most other states might have one or the other (for example, CA has high prices but a lower rate; Texas has high rates but low prices), but not both.

My property taxes in WA state are over 15k a year. I have a nice house in the city proper, but not a McMansion.

Fair enough.  However, I'm assuming that's a house that would sell for $2M or so these days...which leads right back to the notion that such a house is consistent with fat FIRE.  Not trying to judge, but I think the notion that a multi-million dollar house is somehow average (as in average-, but not fat-FIRE) is a bit far-fetched.

Not quite but nearing that. Housing prices have nearly doubled here in Seattle in the past 10 years. Plus add on ridiculous bidding wars and paying 100k-200k over asking... Absurdity. I can commute downtown via bike or bus and spend ~30 minutes each way commuting. That as one of my limits. (plus a yard for kids and gardening).  When I pull the trigger we will move out of Seattle proper to the 'burbs and hopefully buy a house that is half price (or less).

As someone who had a house with a pool in Texas and we sold for ~150k... I get it. But I don't want to move back to Texas!! :D
 

[RWD]

Too many here have conflated spending with earnings, and pre-FIRE budgets with post.

Not necessarily. I just did an update of my proposed retirement budget, and was horrified to realize that since I will not be getting healthcare through my employer - pretax premiums, natch - it means that I have to pay for those premiums pre-tax. Since they won't reach 7.5% of AGI, they will not be deductible. That's about a $3500 swing in taxes on premiums alone.

I will also pay about $15k MORE in taxes, simply because my income will no longer be offset by pre-tax savings that greatly reduced our tax bill each year.

So my post-FIRE budget will have nearly $20k more in taxes, just because of those two line items.

If you aren't saving anymore then why do you need that same income?

Because we will still have other expenses in retirement - such as travel - that we skimp on now. I also expect our medical expenses to rise. So we have to offset the increase in taxes and medical care with the reduction in savings. Happily, because we've lived so far below our means, this realization  won't skew plans significantly.

So your spending increases. That's the whole point. For the same "income" you can spend more in post-FIRE.

[Sandi_k]

Your pension plus 85% of your social security alone are in the six figures? Nice!

If you anticipate 15k in new taxes from not being able to deferring income taxed at a 1/3 rate that suggests $45,000 of pretax savings/year.

Yep, that's correct. Plus DH's Social Security. Plus investment withdrawals. Plus (in Year One) a payout of vacation PTO that will be substantial.

Are you a teacher/university worker with access to both a 403b and 457? In any case, you're budgeting for $30k a year in additional travel in retirement? That's almost $360/day of travel expenses if you're going on a one week trip every month.

We're planning $20k per year in travel, and another $10k in medical costs. Plus some house renovations that I've been too cheap to pay for while working - we're probably at coast Fat FI now, but I just can't reconcile spending all of it on taxes now - delay as long as possible, while maxxing the stash has worked well.

[DireWolf]

We are currently spending in the $70-80k/yr range in FIRE as a family of three. We don’t spend lavishly at that level and I consider us pretty regular FIRE. But, we have the luxury of paying low taxes, low premiums, and have a low OOP Max for health care (which we’ve already hit this year). If our income mix was different, we could be paying much more.

IMO this stuff highly depends on the specifics. A single person with $100k/yr from mostly Roth money is doing really well. A family with $100k from 100% traditional accounts, with everything taxed as income, full rate for healthcare, and a high OOP Max might well have less left over after taxes and health care than we do.

[nereo]

genuinely confused - why would money coming from taxable investment accounts ever be fully taxed as income? 
I mean, sure... you will have a minor amount of STCG, but unless you are day trading most will be LTCG, even if you have zero in Roth or HSA accounts...

[maizefolk]

nereo, I think the scenario is if everything is in traditional (e.g. tax deferred) retirement accounts. In which case it counts as regular income when you withdraw it (at normal retirement age) or roll it into a Roth conversion pipeline (in FIRE), although you still saving by being able to skip payroll/self employment taxes.

[nereo]

nereo, I think the scenario is if everything is in traditional (e.g. tax deferred) retirement accounts. In which case it counts as regular income when you withdraw it (at normal retirement age) or roll it into a Roth conversion pipeline (in FIRE), although you still saving by being able to skip payroll/self employment taxes.

ok, thanks.  I was trying to figure out how that would ever occur...

[ixtap]

I find it fascinating that we are discussing $100k on MMM vs. $50k on bogleheads...

[nereo]

I find it fascinating that we are discussing $100k on MMM vs. $50k on bogleheads...

there was a thread a couple years back about whether this forum has gone soft.  Back then there was a lot of talk about around a retirement spending threshold of $50k-60k....

It still blows my mind when people come into a discussion declaring that a spend rate substantially above the median income in a region should be considered "about average/normal/typical".  Um, no... by definition it puts you among the privileged upper percentiles. Great for you! But still not normal.

[Alternatepriorities]

I find it fascinating that we are discussing $100k on MMM vs. $50k on bogleheads...

Maybe we need to focus the discussion on ways to do more with less so that 100k/year seems like fatfire again...

For example: This is my answer to "money can't buy happiness, but it can buy a boat" The whole setup including trailer cost me less than $2500 and will get me into much of the same amazing country as a jet boat at 1/10th the cost.

[nereo]

amazing locale. 
I love small boats. Particularly the human-powered kind, though a 16' skiff with a small kicker on the back can get you to all sorts of places that you can't easily access without a boat OR with a much bigger, fancier, heavier boat. 

[maizefolk]

It still blows my mind when people come into a discussion declaring that a spend rate substantially above the median income in a region should be considered "about average/normal/typical".  Um, no... by definition it puts you among the privileged upper percentiles. Great for you! But still not normal.

I think it really illustrates how much of a bubble many high earners live in. When all your friends and co-workers are earning and spending six figures it's easy to fall into the trap of assuming that your personal social circle is representative of society at large and in fact earning and spending that much is the only way to live.

Wonder if the last year has actually exaggerated this effect since so many people with high incomes have been working from home and only interacting with co-workers and people they have close enough connections with to set up zoom social events. Even fewer random/unplanned encounters with people. I was on a zoom call with someone from industry earlier today and she mentioned that, coming in to the office for the first times, one of the things she realized was that, while she still had seen the people on her team regularly over zoom, she hadn't realized how she'd let connections with security guards and other facilities staff she used to chat with when working from the office full time lapse so completely.

[nereo]

Wonder if the last year has actually exaggerated this effect since so many people with high incomes have been working from home and only interacting with co-workers and people they have close enough connections with to set up zoom social events. Even fewer random/unplanned encounters with people. I was on a zoom call with someone from industry earlier today and she mentioned that, coming in to the office for the first times, one of the things she realized was that, while she still had seen the people on her team regularly over zoom, she hadn't realized how she'd let connections with security guards and other facilities staff she used to chat with when working from the office full time lapse so completely.

Completely anecdotal, but from my perspective it certainly has.  I was furloughed due to the pandemic while my wife worked.  My siblings (of which there are six pairs, if you include those on my spouse's side) were evenly split between work from home and unemployed/underemployed.  Listening to each talk about the economic impacts of 2020 couldn't be more stark.  To those of us who lost some or all of our income it's been the worst economic period on record. To those siblings who kept their positions, they are riding high (having spent far less with no vacations or dining out, and often having racked up overtime). Two of my siblings are pursuing major purchases they never previously though obtainable.  Two others have been on extended unemployment and have burned through their entire savings.  Yet to listen to any one of them they naturally assume that their experience is largely reflected by the others, have have to be reminded just how different our experiences really are.

[wageslave23]

And... nursing facilities can cost 100k a year. So, I do find it a reasonable goal.

Assuming this is true and assuming I could save 100k a year after taxes and spending I'm trading 1 year of work (while healthy) for 1 year in a nursing home... To me this is a terrible trade. I'm much better off RE while I can still do the things I love and ending life under a bridge.

This is the best post I've ever read on MMM!  Hahaha!  And I totally agree.

When you are drooling on yourself in a nursing home, its not going to matter if it costs $100k or its free from the government. 

[ixtap]

I find it fascinating that we are discussing $100k on MMM vs. $50k on bogleheads...

Maybe we need to focus the discussion on ways to do more with less so that 100k/year seems like fatfire again...

For example: This is my answer to "money can't buy happiness, but it can buy a boat" The whole setup including trailer cost me less than $2500 and will get me into much of the same amazing country as a jet boat at 1/10th the cost.

I have a 40' sailboat, and I consider $100k to be a high spend year, not an average.

[DireWolf]

It still blows my mind when people come into a discussion declaring that a spend rate substantially above the median income in a region should be considered "about average/normal/typical".  Um, no... by definition it puts you among the privileged upper percentiles. Great for you! But still not normal.

In our case, median family income for our large county is over $90k/yr. Our particular town is closer to $120k. So much depends on where you live and your family size. We’ll spend significantly less once empty nesters.

[nereo]

It still blows my mind when people come into a discussion declaring that a spend rate substantially above the median income in a region should be considered "about average/normal/typical".  Um, no... by definition it puts you among the privileged upper percentiles. Great for you! But still not normal.

In our case, median family income for our large county is over $90k/yr. Our particular town is closer to $120k. So much depends on where you live and your family size. We’ll spend significantly less once empty nesters.

Yes, but...

1) you aren’t proposing to spend significantly more than your regional average and call it normal

2) not to sound like a broken record but spending isn’t the same as earnings. If it were very few would ever be able to retire.

[Alternatepriorities]

I find it fascinating that we are discussing $100k on MMM vs. $50k on bogleheads...

Maybe we need to focus the discussion on ways to do more with less so that 100k/year seems like fatfire again...

For example: This is my answer to "money can't buy happiness, but it can buy a boat" The whole setup including trailer cost me less than $2500 and will get me into much of the same amazing country as a jet boat at 1/10th the cost.

I have a 40' sailboat, and I consider $100k to be a high spend year, not an average.

I'd consider a sailboat to be another example of doing more with less. Especially if you are planning to live on it part time and sail around seeing the world. Probably more expensive than slow traveling out of a backpack, but still possible to do frugally.

[Alternatepriorities]

amazing locale. 
I love small boats. Particularly the human-powered kind, though a 16' skiff with a small kicker on the back can get you to all sorts of places that you can't easily access without a boat OR with a much bigger, fancier, heavier boat.

I am hoping to spend more time exploring the rivers up here in retirement. This is my first powered boat, and the longtail motor is for very shallow water, but I think a small kicker would add some nice versatility. I'd like to get a kayak or canoe at some point too.

This is the best post I've ever read on MMM!  Hahaha!  And I totally agree.

When you are drooling on yourself in a nursing home, its not going to matter if it costs $100k or its free from the government. 

Thank you!

[ixtap]

I find it fascinating that we are discussing $100k on MMM vs. $50k on bogleheads...

Maybe we need to focus the discussion on ways to do more with less so that 100k/year seems like fatfire again...

For example: This is my answer to "money can't buy happiness, but it can buy a boat" The whole setup including trailer cost me less than $2500 and will get me into much of the same amazing country as a jet boat at 1/10th the cost.

I have a 40' sailboat, and I consider $100k to be a high spend year, not an average.

I'd consider a sailboat to be another example of doing more with less. Especially if you are planning to live on it part time and sail around seeing the world. Probably more expensive than slow traveling out of a backpack, but still possible to do frugally.

We have lived onboard full time in the past and plan to again in the relatively near future, so yes, we are making the most of it.  I pointed out that the cost of a boat could buy a lot of nights in hostels before we bought the boat, but DH really likes sleeping in his own bed :)

[Alternatepriorities]

I find it fascinating that we are discussing $100k on MMM vs. $50k on bogleheads...

Maybe we need to focus the discussion on ways to do more with less so that 100k/year seems like fatfire again...

For example: This is my answer to "money can't buy happiness, but it can buy a boat" The whole setup including trailer cost me less than $2500 and will get me into much of the same amazing country as a jet boat at 1/10th the cost.

I have a 40' sailboat, and I consider $100k to be a high spend year, not an average.

I'd consider a sailboat to be another example of doing more with less. Especially if you are planning to live on it part time and sail around seeing the world. Probably more expensive than slow traveling out of a backpack, but still possible to do frugally.

We have lived onboard full time in the past and plan to again in the relatively near future, so yes, we are making the most of it.  I pointed out that the cost of a boat could buy a lot of nights in hostels before we bought the boat, but DH really likes sleeping in his own bed :)

Well I "only" had a little over 100k in my stash when I took my first year long retirement so I slept in a lot of hostel beds... It did get a little old after a while, but I think part of that was moving too often.

[Just Joe]

For example: This is my answer to "money can't buy happiness, but it can buy a boat" The whole setup including trailer cost me less than $2500 and will get me into much of the same amazing country as a jet boat at 1/10th the cost.

Are we talking about sneaking across a border??? ;)

[Alternatepriorities]

For example: This is my answer to "money can't buy happiness, but it can buy a boat" The whole setup including trailer cost me less than $2500 and will get me into much of the same amazing country as a jet boat at 1/10th the cost.

Are we talking about sneaking across a border??? ;)

Haha, I hadn’t really thought about it, but now that I do, I’m sure there numerous small rivers crossing the boarder no one around up here. Seems like a lot of extra effort considering how friendly the Canadians at the boarder are (during non covid times). One time they let me cross just to buy gas...

[Alternatepriorities]

Additional Mustachian solutions: Yesterday I figured out how to use the trailer I got for free with that boat to haul two snowmobiles... On the drive home I designed the modification to make it work as well as a dedicated sled trailer... Sketched it this morning and for a $300 bucks in materials and a little work I'll save myself $3500!

[OurTown]

100 does seem like a lot.  I am anticipating about 48 in FIRE living expenses and up to another 24 in fun money.  Ergo 72, the happiness Frontier.

[maizefolk]

$75,000/year in 2009 dollars [1]. $92,000/year in today's dollars [2]. Inflation sneaks up on all of us.

[1] The original study showing no further increase in emotional wellbeing beyond $75,000/year was published in 2010 using data collected in 2009 [3]. https://www.pnas.org/content/107/38/16489

[2] Obviously mustachians know a lot more about how to practice conscious spending on things which bring them genuine happiness while cutting out a lot of the mindless spending, so the fact it took the average american $92k/year in income to max out on the beneficial emotional effects on having more money doesn't mean it should take those of us in this discussion nearly so much to do the same.

[3] Disclaimer that a more recent study came out earlier this year using a different method of measuring happiness and finding that happiness continues to grow with log transformed income up to at least ~$500,000 year. https://www.pnas.org/content/118/4/e2016976118

[Alternatepriorities]

LOL are you me ;-). I did the grungy hostel staying backpacker thing the first 2 years I Fired (lean FIRE) and yeah it does get old. My solution was to rent an inexpensive place or room for a month or longer and stay put in some cool place. Lots of fun, cheaper then moving all the time or staying in hostels or even camping and way more comfortable. I didn't have a home base then so very cheap. If I had a home base I could have rented it out and that would have paid not only all my house expenses but my budget travel.expenses too. Now I like to camp to have my own "space" or do the cheap rental apt. Lots of ways to do many things on a much lower budget then expected if a fancy cruise and 5 star resorts stays aren't your thing.
[/quote]

After about 4 months on the move ever day or three I rented an AirBNB in northern Italy for a week of not "going" anywhere. Turned out they hadn't meant to make the listing live but as it was getting dark and there was no where else to go they let us stay anyway. He had the BNB to ourselves, dined with the proprietor despite limited communication and helped celebrate the grand opening of his restaurant. That week ended up among the highlights of the year.

I sometimes struggle to realign spending expectations to the length/type of trips. It's almost always going to cost more to be in Europe than to just go hiking in Nepal for two months. I was living pretty fat on $20 a day there and I lost a lot of body fat at the same time. Win/win.

[Alternatepriorities]

$75,000/year in 2009 dollars [1]. $92,000/year in today's dollars [2]. Inflation sneaks up on all of us.

[1] The original study showing no further increase in emotional wellbeing beyond $75,000/year was published in 2010 using data collected in 2009 [3]. https://www.pnas.org/content/107/38/16489

[2] Obviously mustachians know a lot more about how to practice conscious spending on things which bring them genuine happiness while cutting out a lot of the mindless spending, so the fact it took the average american $92k/year in income to max out on the beneficial emotional effects on having more money doesn't mean it should take those of us in this discussion nearly so much to do the same.

[3] Disclaimer that a more recent study came out earlier this year using a different method of measuring happiness and finding that happiness continues to grow with log transformed income up to at least ~$500,000 year. https://www.pnas.org/content/118/4/e2016976118

This is a really good point. I hadn't given any thought at all to how long ago that study was. On the other hand, I don't think I would have any interesting problems left to solve (see above) on 92k/year and I might actually miss that. I honestly have no idea how I could spend $500k/year. I would be very susceptible to OMY at that income level though as I struggle to conceive how I would ever have such an opportunity again.