AgCPA95 said:
26.2 said:
HouAggie said:
Quote:
People that save up several hundred thousand, quit their jobs, and don't have any income stream will blow through their 'retirement' in short order. Fixed income yields are non-existent.
Why would they quit their jobs with only several hundred thousand?
Conceivably, per the Trinity Study, you could retire on less than $1M in equities and have a 95% chance of success based on the last 100 years or so of market returns (success defined as not going bk). $900,000 * 4% annual withdrawal = $36,000 spend per year. You can live like a king in a lot places (Europe, Asia, Latin America) on less than $36,000 per year. Many people retiring on less than $1M in the US also have fully paid off homes so spend little on housing in retirement.
Interesting discussion. Most Americans that have $900,000 would have likely be people that also lived lifestyle that costs well in excess of $36k per year. Even with a fully paid off house that has a value of $300,000, you are looking at roughly $10,000 per year just in property taxes and insurance here in Texas. Of course it is doable and you could start tapping into your equity, but you are talking a MAJOR lifestyle change in retirement for most.
Don't live in Texas?
Serious answer; when you retire, you typically downsize. Why do you still need, or want, the 4 bedroom 4 bathroom house when you retire? Hopefully, your kids have their own families and 4/4 house so you can visit them. You and wife get a condo/apt, an RV, etc.. My father in law lives on lake conroe in a glorified trailer park, and because he is required to travel for 1 month out of the year (by the 'neighborhood'), he pays $0 in yearly property tax (or some loophole like that). Thousand trails, it's like an rv park, but mostly retired people.
Also, this hypothetical family you've identified included kids; clothes for kids, toys/cars for kids, food for kids, college for kids, eating out with kids, entertaining kids, etc. All that is gone when you retire (presumably), as well as mortgage, so that same 'lifestyle' is much cheaper now.
$3k a month goes a long way with no mortgage, kids or car note/commuting costs, etc. Think about your own situation, and do the math. It works just fine for me, and I'd say we live an middle-upper class lifestyle.
I'm in late 30s, and hopefully can easily reach $1mm in by mid 40s and $2mm by 55. Wife retires at 55, and gets $35k or so a year from pension. College for two kids of course can change a lot, but my kids have very generous grandparents
