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Someone making 21k a year basically makes 10 bucks a hour. $400 a week. They can direct the payroll to automatically take $40 and put it in a 401k or some tax deferred account as pre tax money. Now they are paying taxes on $360 bucks rather than $400 of taxable income. They won't even see it as it comes out of their check.
I should point out:
That those of us who are used to living on less than $40k/year need les, (some far less) than $1mil....
healthcare is the big wild card. medicare is not priced to bad but it does not cover everything . in fact medicare , an f-plan medigap policy and long term care insurance is going to cost us 18k a year.
that does not incliude deductables, co-opays , dental , vision ,hearing aids , etc.
try retiring at 62 and see what it cost a couple since you don't get medicare until 65..
there are cheaper medigap plans but hit an area where coverage is sparse and it can cost you dearly.
if you have no assets it isn't a problem as you can get subsidies and medicaid. but get caught in that typical american middle ground area and you get zero .
medical in retirement is paid with after tax dollars too . it is not only subject to a 10% threshold of what your agi is but you first need to even be able to itemize to get that.
how much income from savings will healthcare consume just to generate enough for medicare and medigap plans for a couple . ? a few hundred thousand.
Last edited by mathjak107; 04-01-2015 at 03:22 AM..
I basically started when I was 35 and as a letter carrier I am on track to have a million at retirement. It was just a basic planning figure to shoot for
I hope you bought a home early enough to keep those costs fixed. L.A. has high housing costs
at a conservative 2% withdrawal rate, that's only $20k/year...less than $2k/month. do average people / couples spend that low in retirement even after social security + medicare + own your home outright? i highly doubt it. maybe just me, but even if i owned my cars, etc. just my utilities + insurance (car, home, etc.) + eating out + travel would be way more than that.
granted, i probably spend a lot more than normal folks but i actually think my wife and i need more like $10k/month at retirement (in today's dollars) including savings withdrawals, social security, and rental income and that's assuming that we own our house and cars.
at a conservative 2% withdrawal rate, that's only $20k/year...less than $2k/month. do average people / couples spend that low in retirement even after social security + medicare + own your home outright? i highly doubt it. maybe just me, but even if i owned my cars, etc. just my utilities + insurance (car, home, etc.) + eating out + travel would be way more than that.
granted, i probably spend a lot more than normal folks but i actually think my wife and i need more like $10k/month at retirement (in today's dollars) including savings withdrawals, social security, and rental income and that's assuming that we own our house and cars.
Well your withdrawl rate is very conservative for starters and secondarily SS can fairly easily provide 40k annually for a couple if not a lot more. Right now I'd project to have 31k in annual ss and my wife just under that.
Based on that 60k plus a swr if 4% on 1mm you are right at 100k. I will note our plan is to have 10mm but I'm simply playing out the numbers
at a conservative 2% withdrawal rate, that's only $20k/year...less than $2k/month. do average people / couples spend that low in retirement even after social security + medicare + own your home outright? i highly doubt it. maybe just me, but even if i owned my cars, etc. just my utilities + insurance (car, home, etc.) + eating out + travel would be way more than that.
granted, i probably spend a lot more than normal folks but i actually think my wife and i need more like $10k/month at retirement (in today's dollars) including savings withdrawals, social security, and rental income and that's assuming that we own our house and cars.
And yet, there are families living on less than $20k + SS benefits, who still manage to cover all of their expenses AND save.
Like others have said, 4% is considered the conservative withdrawal rate, not 2%. Unless of course you will be retiring at 45-50, then 3% may be a better idea for the first 10-15 years because instead of needing your money to last 20-30 years you will likely need it to last 30-40 years. Also, most median income earning families will qualify for another 45-50k in SS, 40k + 50k is 90k/yr. That's a fairly large sum of money for most retirees, especially if your cars and home are both paid off.
The big expense that many people often forget and MathJak mentioned is healthcare. My assumption is always 1.2-1.5k/month for health insurance for 2 people (in today's dollar).
at a conservative 2% withdrawal rate, that's only $20k/year...less than $2k/month. do average people / couples spend that low in retirement even after social security + medicare + own your home outright? i highly doubt it. maybe just me, but even if i owned my cars, etc. just my utilities + insurance (car, home, etc.) + eating out + travel would be way more than that.
granted, i probably spend a lot more than normal folks but i actually think my wife and i need more like $10k/month at retirement (in today's dollars) including savings withdrawals, social security, and rental income and that's assuming that we own our house and cars.
Honest question:
If your house and cars are paid off, unless a serious chunk of that is property taxes...
What do you spend it on?!
I mean, (as I said, I alot myself ~$1950 and typically spend under $1500) I can see me spending about $4k perhaps.... If I was "living well and enjoying life" Rather than being in "money saving mode" at the moment.
But without doing some "living like I won the lottery" I don't know WHAT I would spend $10k/month on month in and month out!
(and $120k/year is OVER 2x the $52k median income (that people still manage to save off of..)
Again, not trying to judge or criticize, I could see if it included lots of travel or something, but you said "need"
I spend 100k or so between taxes(fed med ss and property) mortgage, and the rest of daily expenses and we travel a lot. My property tax, prop insurance and mortgage only account for 20k or so
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