People keep telling me that I need at least $1,000,000 to retire comfortably. This concerns me somewhat since I don’t have one million and because it would take about 10 more years to save for one. Now, one million would throw off a cost of living adjusted $40,000 a year in capital income if it is set up as a perpetuity (you never lose principal) and even more if set up as an annuity. For instance, assuming 8% over 60 years will result in $74,812 per year. This income will result in an effective post-credit post-deduction tax rate of 10-15%, so let’s go with the higher one. Now I have $34,000 left but at least I can sleep well knowing that my money is spent in the diligent and productive manner that is becoming of the government, ha!

Now what to spend that $34000 on. First things first.

Housing. In the midwest I can rent a new 3 bedroom house for about a grand a month. Now, I don’t really want to spend time taking care of such a big house. I mean, if wandering around from room to room was entertaining to me, I might, but still. The house would just feel big and empty. Moving to the coast instead, the rent would go up to $1200/month for a nice two bedroom apartment. That’s just perfect although I admit a 1 bedroom house would be neater and easier to maintain again given that housekeeping is not a hobby of mine.

Alright, so $1200 times 12 is 14400, and that’s half the money gone.

I now have $19600 left to spend.

Food comes down to about $100 per month. I prefer home cooked healthy food which is generally not expensive. That’s $1200/year leaving $18400.

If I’m retired I probably won’t be spending too much time driving around. If I wanted to drive somewhere, I’d probably rent a car or go by air. Nevertheless I do like fancy road bikes, so that would be an easy $400 to deprecate and maintain a speedy $2000 carbon bike. This leaves $18000.

I would like to keep playing hockey when I’m retired. Hockey is an expensive sport. There are rink fees plus wear and tear on equipment. This could easily cost me a good $500 a year in fees and equipment. On the other hand, it’s the most fun that can be had while wearing full body padding, so I would really like to keep playing. Down to $17500.

I like CDs and books. I typically get them used anyway and don’t really see any reason to get new ones. Sadly there’s an upper limit to how much I can read, so maybe $500 a year, tops. That leaves $17000.

Almost forgot health insurance. Let’s say $100 a month for a high deductible plan to be on the conservative side. I now have $15800 left.

Let’s splurge and say $800 per year on clothes and misc. I’m not sure I could spend that much, but I could try. That leaves $15000.

Hmmmm ….

What should I spend the excess money on?

Maybe full subscription cable, a basic human need! That ought to be worth $5000 a year if we include subscription costs, TiVo, and a 50″ plasma screen that needs to be upgraded every other year.

I don’t like phones and I don’t like cell phones in particular, but I guess I could get an iPhone with the mandatory AT&T enrollment. This phone would allow me to make phone calls by tapping a screen rather than a keypad and allow me to listen to the maybe 2 daily voice mails I get in ANY order I want. I think that’s another $2000 in phone and subscription fees.

The good news now is that I still have $8000 left to spend. The bad news is that I still have $8000 left to spend.

I guess I could buy a Jaguar on credit to demonstrate how I appreciate “emotional engineering” and “daring visions”. This will allow me to drive around in a car that is “far greater than the sum of its extraordinary parts”. I think I deserve one. Getting an easy loan would probably set me back $7500 leaving $500.

It only seems natural that if you have a fancy sports car that can go from 0 to 100 in 4 seconds that you should drive it two blocks down to 7-11 to pick up caffeine at least once a day. This will easily cost me $500 a year leaving me $0.

Problem solved! 🙂

I think the perceived need to retire with large amounts of money comes from the desire to spend retirement as a part of the rich consumer class a.k.a. the upper middle class. However, with more modest consumption goals, I don’t think a million dollars is a requirement for retirement.

Originally posted 2008-01-07 06:53:20.