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The poster in question didn't have a pension plan and won't qualify for SS for at least 6 more years. She hasn't yet determined what her SS benefit would be. She seems to expect to live well (she mentioned things like trips and remodeling) on only $24,000 a year that comes from her investments, which is a nice lump sum, but if she's got that invested in CDs, she's going to suck out a goodly portion of it before she reaches 62. If she's got it invested in higher earning investments, she runs the risk of her investments not performing as she expects.
I'm a greedy person when it comes to retirement as I've been poor in the past and don't intend to be poor in the future. I have a secured pension and I know how much I'll get in SS ... which is why I decided to work until FRA (66) rather than retire at 62. To each his/her own.
That was what concerned me about her situation - no pension and doing all those things including new vehicle on 24K. I would say more like 35 - 40K .
I'm sure she will be fine and things will work out.
Part of costs and perspective about money come from where one lives. I decided to look up the OP's location of Scotia, NY. I have been in that area. It is a low-cost, economically-depressed part of NYS. If the OP was from a few hundred miles south in the NYC area, they would have a substantially different idea of costs.
Next the OP shows us a part of their character when they refer to travel as a "fetish." The OP also considers that some people may have expensive hobbies or activities they "indulge." WOW, I guess without the fetishes and indulgences one could just sit around the house in Scotia and get by with little money. I look at retirement entirely differently. I am not just trying to get by, but I want to enjoy life, continue to learn and even continue to contribute. I like to travel not as a fetish but because I want to experience different art, beauty and different cultures and activities that are not present where I live. And yes I also have some activities besides travel that can be expensive. Those would include photography which at a high level can get expensive.
I don't think anyone can say how much is enough and I would certainly avoid telling others that anything beyond the basics is a fetish or indulgence or even unnecessary.
You are wrong on several counts, but I will first address your scourging interpretation of my diction.
First, I applaud you for your interest in art, beauty, and global culture. I share your interests in these. However I suspect that many people travel simply because they can and because it is the thing to do. Personally, I've never been interested in being a tourist. I love languages and would want to spend enough time in one place to pick up a good helping of the local lingo and unearth some of the real life and not just the touristy high spots. Perhaps the people here on CD are not the usual ugly American travelers. I have no way of knowing this one way or the other.
You may have some small justification on arguing the word 'fetish', but 'indulge'? Absolutely not. No sort of judgment should be inferred at all. It is simply a verb that describes a pursuit.
Furthermore, I do not see where I have excorciated anyone for 'indulging' activities that are 'beyond the basics'. I included those items as a countdown to reasonable expenses that financially secure people would incur.
I too plan to enjoy retirement and plan for it to be much more enjoyable and productive than the worklife that preceded it. I will be retiring to Maine - talk about economically depressed! However, I am fortunate that I do not require large sums with which to enjoy life. True, my newest 'indulgence', painting, is more expensive than any I've had previously. You would not believe the cost of art supplies!
Finally, Scotia-Glenville is not economically-depressed. The zip code, unfortunately, comes up as Schenectady and Schenectady is another world. Most of us work for the state and while that might be chump change in NYC, here it is good enough.
1. No more 7.65% payroll taxes
2. No more $1,500 monthly 401(k) contributions (or whatever)
3. No more IRA deposits or pension plan contributions.
Bottom line, when you retire you can stop saving for retirement. For many, that means 75 or 80% of pre-retirement income is the SAME disposable income when retired.
Also, a newly retired 62 year old spends more than a 72 year old or an 82 year old, on average. Spending tends to decline in retirement, on average.
Also your formula totally ignores investment income; I say you can average 9% on a diversified portfolio, take 5% for income and still have some growth in capital AND income to offset inflation. So if you have capital of twenty times your annual net cash need after SS and pension, you can invest on a permanent endowment basis. But you have to do the investments right.
Also, if your spending is so restrained that SS takes care of most living expenses, you HAVE a big inflation hedge as SS is indexed above the COL.
My opinion, it is a free country, you can disagree.
You are the Plato to my Socrates
Add to your bullets no more mortgage, mileage on the cars cut back by 80%, the bloodsucking leeches (my kids) have graduated and moved on. . .
Pension and SS to cover our living expenses. A portfolio designed to provide income to be enjoyed and growth to leave behind to the aforementioned bloodsucking leeches.
Also, if your spending is so restrained that SS takes care of most living expenses, you HAVE a big inflation hedge as SS is indexed above the COL.
I wanted to call out these two items -- yes, they are correct today as costs that disappear in retirement. But the government has changed similar rules in the past. And both of these "sacred cows" have been bandied about lately as potentially subject to change.
(1) Payroll taxes.
The federal government has already broken the glass wall on this in a general sense. It used to be that only wages were ever subject to payroll taxes. Now, the Medicare portion of the payroll tax applies (for some taxpayers) to all types of income: ordinary income, capital gains, dividends, interest. I think it is probable that this taxation will soon be extended to more and more taxpayers (via lower thresholds), and then I think the same strategem will be applied to the Social Security portion of the payroll tax.
There is great hue and cry from the left about how payroll taxes are regressive, and that application of payroll taxes to all types of income (including retirement income, i.e., investment income), would be more "progressive."
(2) Social Security COLA.
This was a bargaining chip proffered by Obama during the 2012 and 2013 budget negotiations that were later abandoned. He has since withdrawn this as a bargaining chip. However, both parties appear to be willing to change (downward, of course) the automatic COLA for Social Security. This is a sacred cow that I suspect will meet its maker and sooner rather than later.
However I suspect that many people travel simply because they can and because it is the thing to do. Personally, I've never been interested in being a tourist. I love languages and would want to spend enough time in one place to pick up a good helping of the local lingo and unearth some of the real life and not just the touristy high spots. Perhaps the people here on CD are not the usual ugly American travelers. I have no way of knowing this one way or the other.
I'd bet CD posters, just like non-posters, travel because they enjoy visiting other places, not because "it is the thing to do". We usually stay 2 weeks to a month in any one place, giving us time to soak up a little more local culture as well as hitting the high spots. Staying a longer time doesn't make you or me any less tourists, it just makes us a different variety tourist. It's all good. Taking shorter trips does not make one an inferior traveler and for sure being an "ugly" traveler has nothing to do with the length of stay.
I'd bet CD posters, just like non-posters, travel because they enjoy visiting other places, not because "it is the thing to do". We usually stay 2 weeks to a month in any one place, giving us time to soak up a little more local culture as well as hitting the high spots. Staying a longer time doesn't make you or me any less tourists, it just makes us a different variety tourist. It's all good. Taking shorter trips does not make one an inferior traveler and for sure being an "ugly" traveler has nothing to do with the length of stay.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Someone in their 70s may spend less than in their 60s, but then it goes way up again for many. As we are reaching retirement age we have relatives aged 95 an 99, one recently passed at 98.
A good assisted living facility can cost $4,000-6,000 a month. Going in at age 83 and living to 95 is going to cost someone $600-800,000 assuming no increases over those 12 years.
There are seniors out there like my 78 year old MIL who need the newest iphone, country club memberships complete with daily golf and meals, and a new car every few years because heaven's forbid she drives an old one to the country club. And then complains about the price of necessary expenses such as food, utilities, etc.
My BF's MIL is the complete opposite. She is in her late 70's and is still working as a music teacher. She paid for both of her childrens higher educations (pharmacy school, masters), and never splurges on herself. She's very selfless and gets pleasure out of giving to others (expensive Christmas presents, leaving her children a nice inheritance, etc.).
I'd rather go into retirement having too much money and knowing that even if I don't get to enjoy it, perhaps future generations will than not planning enough or just scraping by.
There isn't a crystal ball that tells you when you leave this earth. We all know that Seniors are living longer. A person can very well live into their 90's. And if your having to pay for round the clock care, cost adds up very quickly.
Oh my, I'll probably get a lot of heat for this, but I want to emphasize that if I am guilty of anything it is merely stupidity. I am not trying to be offensive or confrontational.
Another caveat: It is overwhelmingly obvious that I know zip about economics. Money as subject matter is almost as boring as, oh let's see, as football. Bores me into catatonia.
In a current thread, a poster reveals her financial worth and asks if she has enough for retirement. It is a HUGE amount of money. And the talking money heads herein weighed in quite cautiously. IMO.
My question is this: what is all the money for? Let's assume that mortgage is paid and health insurance is in place. One is then left with the usual post-industrial necessities to pay for. Then what?
Travel seems to be a fetish that just keeps on collecting devotees. Okay, so most of the high rollers here can afford to travel. Then what?
All of us would like to have a healthy hedge against inflation. Okay. Then what?
Most folks, I hope, have some hobbies or recreational activities they indulge. Some can get expensive. Okay, but it is unlikely that anyone will be able to indulge those until they drop dead at 99.
I don't get it.
Oh, yes you do. And you are spot on, too.
We're retired. And have more than we need. I am mostly Curator of Our Home. And Keeper of Family Peace.
So we send our grandson to college and have firm plans to give most of it away when we die. But we won't give much to the children. None to the grandchildren. They know we love them and they know we don't believe in such things.
We believe in Libraries. Animal shelters.
And in the meantime, we are NEVER going to have to ask you or anyone else for anything at all. And that's what it is for.
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