Comments on: How little do you need to retire? http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html --- a combination of simple living, anticonsumerism, DIY ethics, self-reliance, and applied capitalism Fri, 25 May 2012 19:02:53 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: retirement planning http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-30120 retirement planning Sat, 26 Nov 2011 02:55:54 +0000 http://earlyretirementextreme.com/?p=804#comment-30120 Early retirement is achievable with good savings habit and regular investing of the savings. Ultimately, the retirement age is determined by one's daily living expenses. If one is able to live on $20 a day, then he can retire earlier than someone who spends $200 a day. Early retirement is achievable with good savings habit and regular investing of the savings. Ultimately, the retirement age is determined by one’s daily living expenses. If one is able to live on $20 a day, then he can retire earlier than someone who spends $200 a day.

]]> By: blah http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-22437 blah Sat, 04 Jun 2011 17:21:37 +0000 http://earlyretirementextreme.com/?p=804#comment-22437 I notice that all the people who talk about wanting to just die when they get old, sick or disabled are young healthy and able bodied. I think there is a reason for that. When the rubber meets the road, I think you all will change your minds and so should plan for that in your finances instead of avoiding it. I have been very close to death, very sick on and off a lot of my life and have a physical disabillity, but you would be hard pressed to find someone who loves life more. The increased medical expenses are the only thing that has really been avoided on these kind of blogs because people, for good reason, are overwhelmed by the staggering cost in the USA. So, knowing I want to ERE because I may not live that long, or at least don't want to take life for granted, or that I may even be forced to ER, I have thought about this. Right now, the best you can do is get a plan where you do the math and you win. That health care plan will differ for each person. Almost always the insurance company wins this game. I have to say that unfortunately, that hasn't been the case with me. So, here's the thing, try the best you can to buy private coverage such that you come out ahead, but by the time you get too poor to afford it all, there is a lot of government programs like medicare, medicaid and a bunch of community health clinics or patient assistance programs either within the community, the hospitals, or via organizations and drug companies, etc. That isn't ideal and I surely don't wish that on anybody, but medical stuff is so expensive that if you wish to retire at any age, unless you really are Bill Gates rich, it is likely you will end up there as I heard a statistic on Market Place radio show that 2/3 of all seniors in nursing homes end up on medicaid or public assistance before their death whether they started out on a private plan or not. It isn't that I agree with the way healthcare is in this country. Actually, I think it is terrible, the whole insurance system makes us no longer direct consumers and so allows them to circumvent a fair market value system. So, that is why I think it costs so much. I think however, you don't have much choice in the matter except trying to save what you can for those later years, knowing you may have to have uncle sam help you in this broken system, but putting that off for as long as possible without giving up all your good years to pay for it is the wisest best effort you can make. I notice that all the people who talk about wanting to just die when they get old, sick or disabled are young healthy and able bodied. I think there is a reason for that. When the rubber meets the road, I think you all will change your minds and so should plan for that in your finances instead of avoiding it. I have been very close to death, very sick on and off a lot of my life and have a physical disabillity, but you would be hard pressed to find someone who loves life more. The increased medical expenses are the only thing that has really been avoided on these kind of blogs because people, for good reason, are overwhelmed by the staggering cost in the USA. So, knowing I want to ERE because I may not live that long, or at least don’t want to take life for granted, or that I may even be forced to ER, I have thought about this.
Right now, the best you can do is get a plan where you do the math and you win. That health care plan will differ for each person. Almost always the insurance company wins this game. I have to say that unfortunately, that hasn’t been the case with me. So, here’s the thing, try the best you can to buy private coverage such that you come out ahead, but by the time you get too poor to afford it all, there is a lot of government programs like medicare, medicaid and a bunch of community health clinics or patient assistance programs either within the community, the hospitals, or via organizations and drug companies, etc. That isn’t ideal and I surely don’t wish that on anybody, but medical stuff is so expensive that if you wish to retire at any age, unless you really are Bill Gates rich, it is likely you will end up there as I heard a statistic on Market Place radio show that 2/3 of all seniors in nursing homes end up on medicaid or public assistance before their death whether they started out on a private
plan or not. It isn’t that I agree with the way healthcare is in this country. Actually, I think it is terrible, the whole insurance system makes us no longer direct consumers and so allows them to circumvent a fair market value system. So, that is why I think it costs so much. I think however, you don’t have much choice in the matter except trying to save what you can for those later years, knowing you may have to have uncle sam help you in this broken system, but putting that off for as long as possible without giving up all your good years to pay for it is the wisest best effort you can make.

]]> By: Looking Back at My Roaring 20s « Life in the Third Stage of Personal Finance http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-19950 Looking Back at My Roaring 20s « Life in the Third Stage of Personal Finance Mon, 20 Dec 2010 21:06:17 +0000 http://earlyretirementextreme.com/?p=804#comment-19950 [...] until I was up for Social Security, with my 401(k) as a supplement. Only lately have I realized you don’t need millions of dollars to retire and that the idea of retirement in general is not well defined. I prefer to think in terms of [...] [...] until I was up for Social Security, with my 401(k) as a supplement. Only lately have I realized you don’t need millions of dollars to retire and that the idea of retirement in general is not well defined. I prefer to think in terms of [...]

]]> By: YOU ARE WEALTHIER THAN YOU THINK | Barbara Friedberg Personal Finance http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18378 YOU ARE WEALTHIER THAN YOU THINK | Barbara Friedberg Personal Finance Thu, 02 Dec 2010 17:30:19 +0000 http://earlyretirementextreme.com/?p=804#comment-18378 [...] some security. At every opportunity, we have chosen to live beneath our means. In fact, Jacob of  Early Retirement Extreme has made a career of living off very [...] [...] some security. At every opportunity, we have chosen to live beneath our means. In fact, Jacob of  Early Retirement Extreme has made a career of living off very [...]

]]> By: deegee http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18141 deegee Fri, 19 Nov 2010 17:00:40 +0000 http://earlyretirementextreme.com/?p=804#comment-18141 Btbw2380, the bond fund I found is Fidelity's Focused High Income Fund which invests mainly in B, BB, and BBB rated bonds. Those are corporate bonds which are at or slightly below investment grade. The risk is lower than that of a more typical junk bond fund which invests mainly in even lower rated (or unrated) bonds, but the yield is higher than that of a bond fund which invests in higher rated (A, AA, AAA) bonds. Btbw2380, the bond fund I found is Fidelity’s Focused High Income Fund which invests mainly in B, BB, and BBB rated bonds. Those are corporate bonds which are at or slightly below investment grade. The risk is lower than that of a more typical junk bond fund which invests mainly in even lower rated (or unrated) bonds, but the yield is higher than that of a bond fund which invests in higher rated (A, AA, AAA) bonds.

]]> By: btbw2380 http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18140 btbw2380 Fri, 19 Nov 2010 13:44:50 +0000 http://earlyretirementextreme.com/?p=804#comment-18140 Carlos and degee, I too am a New Yorker. Unfortunately the state provides very few options for individual Health Insurance and they are expensive. Why an effort to lower health care costs didn't include allowing competition across state lines for insurance is ridiculous. degee, curious, what bond fund did you end up going with? Carlos and degee, I too am a New Yorker. Unfortunately the state provides very few options for individual Health Insurance and they are expensive. Why an effort to lower health care costs didn’t include allowing competition across state lines for insurance is ridiculous.

degee, curious, what bond fund did you end up going with?

]]> By: deegee http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18139 deegee Fri, 19 Nov 2010 13:14:14 +0000 http://earlyretirementextreme.com/?p=804#comment-18139 Carlos, I found the plan on ehealthinsurance.com. It is not a high-deductible plan but it is not a very comprehensive plan as far as what it covers, either. No HSA because most of the premiums are tax-deductible on Schedule A anyway. My auto/home insurance company does not offer HI in my state (New York). I can't seem to find a high-deductible plan in NY. I was paying $470 a month in 2009 but it will rise to $694 a month in 2011. My spreadsheet did not project 20-25% annual increases in HI. It did not account for Obamacare. Carlos, I found the plan on ehealthinsurance.com. It is not a high-deductible plan but it is not a very comprehensive plan as far as what it covers, either. No HSA because most of the premiums are tax-deductible on Schedule A anyway. My auto/home insurance company does not offer HI in my state (New York). I can’t seem to find a high-deductible plan in NY.

I was paying $470 a month in 2009 but it will rise to $694 a month in 2011. My spreadsheet did not project 20-25% annual increases in HI. It did not account for Obamacare.

]]> By: Carlos http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18138 Carlos Fri, 19 Nov 2010 12:56:00 +0000 http://earlyretirementextreme.com/?p=804#comment-18138 @Deegee May I ask what type of HI you got and how much it costs? I assume it's a high-deductible plan with an HSA. I'm 38 and am targeting FIRE at 45 similar to you, maybe a little sooner if things work out. @Deegee

May I ask what type of HI you got and how much it costs? I assume it’s a high-deductible plan with an HSA.

I’m 38 and am targeting FIRE at 45 similar to you, maybe a little sooner if things work out.

]]> By: Landon http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18134 Landon Fri, 19 Nov 2010 06:49:04 +0000 http://earlyretirementextreme.com/?p=804#comment-18134 Great post, Jacob. Once again, your fortitude is a little more than mine.. An alternative for a young fella like myself to retire soon is semi-retirement. Working part time at an enjoyable, stress-free job while living a modest lifestyle is doable if you have enough investments in treasury bonds, dividend stocks, etc. to fund your lifestyle. Ever read "Work Less, Live More"? Great post, Jacob. Once again, your fortitude is a little more than mine..

An alternative for a young fella like myself to retire soon is semi-retirement. Working part time at an enjoyable, stress-free job while living a modest lifestyle is doable if you have enough investments in treasury bonds, dividend stocks, etc. to fund your lifestyle. Ever read “Work Less, Live More”?

]]> By: deegee http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18133 deegee Fri, 19 Nov 2010 05:40:57 +0000 http://earlyretirementextreme.com/?p=804#comment-18133 I retired 2 years ago at age 45. For me, it was some key pieces of the puzzle falling into place in 2007 and 2008 which enabled me to do this. (1) Finding an affordable individual HI policy. However, the premium for this policy has risen by 50% in 2 years, so if that continues I will end up paying $2,000 a MONTH before I become eligible for Medicare. (2) Waiting for the value of my (former) company stock shares to hit the $300k mark. That was how much I wanted to take with me (before taxes) when I left and liquidated it. (3) Finding a bond fund which gave me a somewhat higher rate of return than the usual bond fund with high-rated bonds but did not include an inordinate amount of added risk from slightly lower rated (not junk) bonds. I was able to find one in 2005 and carefully tracked it for 3 years before I left and invested the proceeds from (2) above into it. I was already debt-free since 1998. I am single and childfree, the latter a huge reason I was able to retire at age 45 two years ago. My financial plan included a considerable buffer, or surplus, of dividend income over expenses. This would provide me with added security should some unforseen expenses arise during the year. Also, I expect my expenses (currently at $22k per year) to rise more quickly than my income, so that surplus will likely become a deficit (not a huge one) in about 10 years. This assumes that HI won't cost me $24k a year at some point before I am eligible for Medicare. My main challenge is to make it to age 60 intact financially because that is when I can tap into the first of my "reinforcements." Those include access to my IRA which has $300k right now and can grow (double?) in the next 13 years, followed by access to SS and my frozen pension a few years later. So as long as my taxable accounts can keep me well afloat for the next 13 years I will be fine. I retired 2 years ago at age 45. For me, it was some key pieces of the puzzle falling into place in 2007 and 2008 which enabled me to do this.

(1) Finding an affordable individual HI policy. However, the premium for this policy has risen by 50% in 2 years, so if that continues I will end up paying $2,000 a MONTH before I become eligible for Medicare.

(2) Waiting for the value of my (former) company stock shares to hit the $300k mark. That was how much I wanted to take with me (before taxes) when I left and liquidated it.

(3) Finding a bond fund which gave me a somewhat higher rate of return than the usual bond fund with high-rated bonds but did not include an inordinate amount of added risk from slightly lower rated (not junk) bonds. I was able to find one in 2005 and carefully tracked it for 3 years before I left and invested the proceeds from (2) above into it.

I was already debt-free since 1998. I am single and childfree, the latter a huge reason I was able to retire at age 45 two years ago.

My financial plan included a considerable buffer, or surplus, of dividend income over expenses. This would provide me with added security should some unforseen expenses arise during the year. Also, I expect my expenses (currently at $22k per year) to rise more quickly than my income, so that surplus will likely become a deficit (not a huge one) in about 10 years. This assumes that HI won’t cost me $24k a year at some point before I am eligible for Medicare.

My main challenge is to make it to age 60 intact financially because that is when I can tap into the first of my “reinforcements.” Those include access to my IRA which has $300k right now and can grow (double?) in the next 13 years, followed by access to SS and my frozen pension a few years later. So as long as my taxable accounts can keep me well afloat for the next 13 years I will be fine.

]]> By: btbw2380 http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18125 btbw2380 Thu, 18 Nov 2010 18:59:59 +0000 http://earlyretirementextreme.com/?p=804#comment-18125 Interesting discussion regarding the later stages of life and the balance between having enough money for those years and enjoying life leading up to that time. Personally I'm choosing to live more in the healthy now and if I need to pay someone to change my diaper in the later years then I don't want to be around. @Executioner, I've raised the same question with Jacob. I enjoy his blog and think he has a lot to offer but have likened his choices and approach to those in the Ernie Zelinski book - Real Success Without a Real Job. Interesting discussion regarding the later stages of life and the balance between having enough money for those years and enjoying life leading up to that time. Personally I’m choosing to live more in the healthy now and if I need to pay someone to change my diaper in the later years then I don’t want to be around.

@Executioner, I’ve raised the same question with Jacob. I enjoy his blog and think he has a lot to offer but have likened his choices and approach to those in the Ernie Zelinski book – Real Success Without a Real Job.

]]> By: et http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18124 et Thu, 18 Nov 2010 16:52:49 +0000 http://earlyretirementextreme.com/?p=804#comment-18124 What countries are you thinking about here? "Another alternative is “simply” to move to a country where such care does not cost a fortune." Having immigrated several times I know its not as easy as people often assume. There are simply not a lot of countries waiting with open arms for older folks with declining incomes and no family. What countries are you thinking about here? “Another alternative is “simply” to move to a country where such care does not cost a fortune.”

Having immigrated several times I know its not as easy as people often assume.

There are simply not a lot of countries waiting with open arms for older folks with declining incomes and no family.

]]> By: retirebyforty http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-18123 retirebyforty Thu, 18 Nov 2010 16:03:16 +0000 http://earlyretirementextreme.com/?p=804#comment-18123 My goal is $1million by 40 and don't draw on it until I'm in the 60s. From 40 to 60s, I'll depend on rental, side jobs, spouse income, and what ever I can scrounge up. :) My goal is $1million by 40 and don’t draw on it until I’m in the 60s. From 40 to 60s, I’ll depend on rental, side jobs, spouse income, and what ever I can scrounge up. :)

]]> By: What Do You Need to Get out of the Rat Race and Achieve Financial Freedom? | Invest It Wisely http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-16950 What Do You Need to Get out of the Rat Race and Achieve Financial Freedom? | Invest It Wisely Tue, 05 Oct 2010 16:37:37 +0000 http://earlyretirementextreme.com/?p=804#comment-16950 [...] Wait a second, I am asking you guys to both pay off your mortgage AND save up $640,000? I agree, that is a tall order, but this is just what I consider the minimum number to be safe, if you never work a day again in your life. What if you do continue to work? Generating $2000 a month for a couple is very doable, and with a rat race portfolio of only $320,000 and an income of $2000, you would spin off plenty of income to travel and enjoy life with. One guy is already doing it and enjoying life with less than that. [...] [...] Wait a second, I am asking you guys to both pay off your mortgage AND save up $640,000? I agree, that is a tall order, but this is just what I consider the minimum number to be safe, if you never work a day again in your life. What if you do continue to work? Generating $2000 a month for a couple is very doable, and with a rat race portfolio of only $320,000 and an income of $2000, you would spin off plenty of income to travel and enjoy life with. One guy is already doing it and enjoying life with less than that. [...]

]]> By: George http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-12826 George Tue, 22 Jun 2010 00:35:28 +0000 http://earlyretirementextreme.com/?p=804#comment-12826 Accumulating $1 million isn't tough if you have 30 years: even in a 25% brack taxable account at 6%, you can get there by depositing $14k/yr and increasing it by 1% each year. That's $538 per biweekly paycheck. It's much tougher, however, when time is not on your side. If you're aiming for 20 years and starting from zero, you'll need to save $28k/yr and increase it by 1% each year. Still doable on the median annual income of $48k, but just barely for most individuals. (Yes, I'm using what many would consider to be low returns, but look at how little the S&P500 returned over the past decade, even if you include the average dividend yield of 2.7% for the dividend payers!) Accumulating $1 million isn’t tough if you have 30 years: even in a 25% brack taxable account at 6%, you can get there by depositing $14k/yr and increasing it by 1% each year. That’s $538 per biweekly paycheck.

It’s much tougher, however, when time is not on your side. If you’re aiming for 20 years and starting from zero, you’ll need to save $28k/yr and increase it by 1% each year. Still doable on the median annual income of $48k, but just barely for most individuals.

(Yes, I’m using what many would consider to be low returns, but look at how little the S&P500 returned over the past decade, even if you include the average dividend yield of 2.7% for the dividend payers!)

]]> By: Bankruptcy Ben http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-12818 Bankruptcy Ben Tue, 22 Jun 2010 00:03:13 +0000 http://earlyretirementextreme.com/?p=804#comment-12818 I think you need to factor in historic inflation rates as well. Inflation might be low at the moment but could easily creep back up. Personally I'm not sure why accumulation $1 mil is such a big deal. I think you need to factor in historic inflation rates as well. Inflation might be low at the moment but could easily creep back up. Personally I’m not sure why accumulation $1 mil is such a big deal.

]]> By: Hitch http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-11019 Hitch Wed, 28 Apr 2010 03:32:12 +0000 http://earlyretirementextreme.com/?p=804#comment-11019 The guy talked about stages makes a good point. People who blithely talk about not being worried about old age are just completely clueless. First if that is their attitude now then it's not going to change much when they're 80. In other words they're going to want to enjoy life just as much then as now. I've seen it. My father at age 80 was as spry as someone at 60 and then boom he got hit with billiary duct cancer and within six months he was dead. The less you plan to retire on the more you are going to be at risk. You can't predict the future. You don't know what will happen to markets or the economy. Any withdrawal rate over 2% increases risk. The guy talked about stages makes a good point.

People who blithely talk about not being worried about old age are just completely clueless. First if that is their attitude now then it’s not going to change much when they’re 80. In other words they’re going to want to enjoy life just as much then as now. I’ve seen it. My father at age 80 was as spry as someone at 60 and then boom he got hit with billiary duct cancer and within six months he was dead.

The less you plan to retire on the more you are going to be at risk. You can’t predict the future. You don’t know what will happen to markets or the economy. Any withdrawal rate over 2% increases risk.

]]> By: Tim http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-10515 Tim Fri, 09 Apr 2010 02:45:42 +0000 http://earlyretirementextreme.com/?p=804#comment-10515 I agree with Jacob on using the net income (and not the gross income) when computing for the savings rate. The money that went to taxes is money that never even reached my hand. Therefore, I never even had the opportunity to save that money. I agree with Jacob on using the net income (and not the gross income) when computing for the savings rate. The money that went to taxes is money that never even reached my hand. Therefore, I never even had the opportunity to save that money.

]]> By: north9nj http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-10455 north9nj Sun, 04 Apr 2010 17:21:16 +0000 http://earlyretirementextreme.com/?p=804#comment-10455 tylerosu is right i retired at 55 i knew i had 20 good! years left. the end game is different for everyone when your old and infirm you might not want a lot of money? as a veteran i'll have a place at the old sailors home. what do i care who gives me my stewed prunes. thats what living wills are for or may by then they'll just stick you out on the ice flow. (i think not lol) tylerosu is right i retired at 55 i knew i had 20 good! years left. the end game is different for everyone when your old and infirm you might not want a lot of money? as a veteran i’ll have a place at the old sailors home. what do i care who gives me my stewed prunes. thats what living wills are for or may by then they’ll just stick you out on the ice flow. (i think not lol)

]]> By: Thad http://earlyretirementextreme.com/how-little-do-you-need-to-retir.html/comment-page-1#comment-8816 Thad Thu, 14 Jan 2010 18:32:57 +0000 http://earlyretirementextreme.com/?p=804#comment-8816 I would use the savings/gross method. It then focuses on setting the % savings as your first priority. Indeed if you decide to save in a 401k vs mutual funds, your tax rate may change so why be confused with figuring "net" when net will always change (do you include state tax? soc sec? medicare? What if you over withhold and get a tax refund? What about after you max soc sec?). It also makes it easier when you get an incremental piece of income/gift to apply your set (gross) rate of savings against this and feel good/disciplined about it. I would use the savings/gross method. It then focuses on setting the % savings as your first priority. Indeed if you decide to save in a 401k vs mutual funds, your tax rate may change so why be confused with figuring “net” when net will always change (do you include state tax? soc sec? medicare? What if you over withhold and get a tax refund? What about after you max soc sec?). It also makes it easier when you get an incremental piece of income/gift to apply your set (gross) rate of savings against this and feel good/disciplined about it.

]]>