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Saying an expense should 'come out of savings' doesn't mean you don't need the income for it, because you then have to rebuild the savings.
If you say it isn't part of the 20k, you are implying that the savings are rebuilt using some other income, in which case I say, fine. But then you're not really living on 20k!
You can't have it both ways, sorry...
[Note that I have not yet made the argument that you also need to include the 'imputed rental income' on the house you own outright!]
Live on $10k (this amount is set in stone)
Bank $5k
remaining $5k can be banked or spent
If one starts with $20k in the bank - after 5 good years they have $45k.
If one needs to put on a roof and upgrade plumbing one year, that $6k comes from savings.
Savings is now at $39k
Two years later it's up to $49k.
The same year one needs a car repair ($1500) and a new HVAC ($3000)
Savings drops to $44500
Three years later it's up to $59,500
Three years after that it's at $64,500 and you need a new car ($15k)
Savings drops to $49,500
Repeat this stuff over 20 years.
Note that I'm not taking into consideration compound interest over all these years.
it is always so amazing how things work out on paper so nice. as they say ,you work up all those numbers on paper and god just laughs as to how you think it will work in theory..
what do you think happened to all those little sheets of paper from those who retired in 1965-1966 who ran head on into 20 bad years of market performance only to be hit with double digit inflation . they had to draw out almost 2x the income over the next few years just to pay the same bills . that is after heavy spending down and no growth for the prior years.
crap happens my friend and all those calculations go right up in smoke.
those who planned and calculated and retired in the year 2000 may have spent so far down the early part of the decade that they too may be failing far to soon.
starting in 2001 you were okay again if you were just retiring..
history has shown us over and over just when you think you have it all figured out, you are wrong. it can take fairly large cushions of cash to hold things together.
Last edited by mathjak107; 12-29-2013 at 10:22 AM..
it is always so amazing how things work out on paper so nice. as they say ,you work up all those numbers on paper and god just laughs as to how you think it will work in theory..
I agree. None of us know what the future holds. The best we can do is come up with something pretty logical and pray it works out. If I can live the next 10 years in good health, I'll be extremely happy.
hope and pray are not stratagies in my book. good planning is not based on hope and pray.
You just said things can work out on paper then totally fall apart...
Seems to me even the best "good planning" can fall apart. Imagine having a child with some rare form of cancer that requires one parent to quit work and fly to doctors around the country. After 5-10 years of this, a middle class family with the best "good palnning" can have all that go out the window.
What I do like about your lifestyle is you don't plan on running up debt and living off credit cards which seems to be a bad habit among many Americans. I think this plan is OK when you are younger but keep in mind when you get old and don't have much saved up, you will be relying almost totally on government payments like social security and medicare, and in 30 or 40 years who knows what those programs may be like. Being totally reliant on the government in retirement is a risky proposition IMO.
Being totally reliant on the government in retirement is a risky proposition IMO.
Further - as it becomes more and more obvious that OP is considering making a specious disability claim - that program isn't going to be around in present form and amount forever. First, the tremendous extent of fraud in the program has percolated through the consciousness of Republican voters and politicians in recent years (and through the general public - witness this thread), causing a real pent-up demand for political change and dissatisfaction with the status quo. Second, the program may be non-discretionary spending, but by law it is tied to a payroll taxes and a rapidly shrinking trust fund. This may be an accounting trick considering these funds are invested in treasuries, but it has a real-world consequence: when that fund gets exhausted (current estimate is in 2016) the default will be a 20% cut to the program. This reduction in funds is a best-case for the OP if he goes ahead with this: the Democrats will want Republican buy-in to avoid those cuts, and it's a very reasonable possibility that the Republicans will demand an eligibility tightening and aggressive anti-fraud measures as the price of that.
One of my favorite blogs is called wandering earl. He's living frugally, traveling the world - doing everything I wish I had done in my 30's. And he's figured out a way to make an income out of it, too.
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