Minimum Net Worth Needed to Retire in SD (San Diego, El Cajon: house, buy)

[Ragnar]

Originally Posted by Larry Siegel

I'm jumping in after some hostility and some inclarity, but I'll try to answer since I've considered retiring in SD on a similar amount of money. I've been disappointed with the houses I've seen around $1 million in top-notch areas such as La Jolla and Del Mar - they need a lot of updating and usually don't have a view, much of a yard, or a nice architectural style. Still, coming from an upper middle class suburb in the Midwest, as I do, I could live in such a house.

I'd want $150,000 in income that rises with inflation. $75,000 just doesn't go very far. To generate that at a 4% withdrawal rate you'd need a lot of money, but most of us get Social Security. If I wait until I'm 70, which I plan to do because I enjoy my work and can do it from home, my wife and I will get $62,000 a year, which leaves $88,000 to be generated from investments. At a 3% withdrawal rate, you'll need $2,933,000; at 4%, you'll need $2,200,000. Which withdrawal rate is the right one is one of the mysteries of life that I cannot solve.

I'm talking about 2 people - husband and wife, over 55. These numbers are before taxes. Taxes are a bear.

I could live in such a house too, Larry. Great points. I'll add that I'd want at ~$200k easily accessible cash in the bank as an emergency fund and/or for unexpected home repairs over that 30-40 years. Even $30k for a typical repair such as windows would derail a 75k/yr. cash flow pretty quick. You could always draw down the principal faster for such emergencies, but why do so if you do not have to? Do that enough times too close together and you're no longer living on $75k/yr. At least if your CA furnace goes out, you don't freeze to death in winter like in the Midwest.

[Ultrarunner]

The median income is around 68k in San Diego last I checked.

It would seem a person with no mortgage would hardly "Need" 150k to live comfortably.

[cy_flembeck]

Somebody has been watching too much Suze Orman and her convoluted retirement advice.

The thought of living off your interest only and protecting your principal until you die is your own choice.

That scenario basically has you scrounging after a lifetime of hard work so people can inherit all of your money.

If you had $2.5 million, averaged a 3% return and took $96,000 a year out for 30 years, you would still be left with over $1.4 million. If you took out $108,000 for 30 years you would still have almost $900,000 left.

If you have SS coming and wait till you are 70 to get it, you will be living better than 95% of your age group in retirement.

[Larry Siegel]

Originally Posted by cy_flembeck

Somebody has been watching too much Suze Orman and her convoluted retirement advice.

The thought of living off your interest only and protecting your principal until you die is your own choice.

That scenario basically has you scrounging after a lifetime of hard work so people can inherit all of your money.

If you had $2.5 million, averaged a 3% return and took $96,000 a year out for 30 years, you would still be left with over $1.4 million. If you took out $108,000 for 30 years you would still have almost $900,000 left.

If you have SS coming and wait till you are 70 to get it, you will be living better than 95% of your age group in retirement.

This analysis completely ignores inflation. At 3% inflation, an $8 cheeseburger will be a $32 cheeseburger in 40 years.

Suze Orman uses my research. http://corporate.morningstar.com/ib/...gOptimizer.pdf
Laurence B. Siegel

[cy_flembeck]

Originally Posted by Larry Siegel

This analysis completely ignores inflation. At 3% inflation, an $8 cheeseburger will be a $32 cheeseburger in 40 years.

Suze Orman uses my research. http://corporate.morningstar.com/ib/...gOptimizer.pdf
Laurence B. Siegel

Your response completely missed the point. I was comparing the difference between simply living off the principal or chipping away at the principal over time. It was a simple exercise in math, not financial advice.

If inflation is your hang up, then what do you say to the original plan to live on just the principal interest? My example gives them an additional $33k a year for 30 years and still leaves them with $900k or an extra $21k a year and leaves them with $1.4 million.

To satisfy your inflation dilemma you can stagger how much you peel off the principal each year to mitigate inflation ( more like 2.6 % the past 20 years and decelerating) and my example was 30 years, not 40.

Additionally, people tend to spend less money as they age so that is a bit of a hedge against inflation as well.

Once again, the point is you don't have to slave your whole life to build a pile of money, then only live off interest or appreciation, then die and leave 3 million to someone else.

I have seen that dingbat Suze Orman tell people that all of the time. The other day she told a 50 year old guy who had a net worth of about $850k that he could not afford $6,000 in football tickets because he didn't have $50,000 in a cash account. She is a hack who suggests that people make all of their decisions based on fear.

[Larry Siegel]

A 3% withdrawal rate that increases with inflation is pretty secure. This will consume some of principal over time; 3% investment returns aren't guaranteed. You wrote,

>If you had $2.5 million, averaged a 3% return and took $96,000 a year out for 30 years, you would still be left with over $1.4 million. If you took out $108,000 for 30 years you would still have almost $900,000 left.

That's numerically correct, but with 2.6% inflation (again not guaranteed to be that low), an $8 cheeseburger today will cost $17.28. Still happy with $96,000 a year?

If you want to consume all your money before you die in an efficient manner, you'll need to purchase annuities. Moderator cut: url removed

[ndfmnlf]

Mr. Siegel,

Thanks for the article you linked. Very informative. My original post which cited the 3 to 4% withdrawal rate is a "total return" approach rather than a dividend only or interest only approach. It is also inflation-adjusted. According to Census Bureau data, San Diego (city) QuickFacts from the US Census Bureau San Diego's median household income is $64k, and median housing cost is $452k. Someone with $3million who spends 500k for a house, and draws $75k annually from the remaining $2.5 million should have a solid floor (minimum) of assets for a sustainable retirement.

Originally Posted by Larry Siegel

A 3% withdrawal rate that increases with inflation is pretty secure. This will consume some of principal over time; 3% investment returns aren't guaranteed. You wrote,

>If you had $2.5 million, averaged a 3% return and took $96,000 a year out for 30 years, you would still be left with over $1.4 million. If you took out $108,000 for 30 years you would still have almost $900,000 left.

That's numerically correct, but with 2.6% inflation (again not guaranteed to be that low), an $8 cheeseburger today will cost $17.28. Still happy with $96,000 a year?

If you want to consume all your money before you die in an efficient manner, you'll need to purchase annuities.

[mysticaltyger]

Originally Posted by shmoov_groovzsd

The point of view is somewhat odd and vague. Why this couple earned 3MM is inconsequential to the facts you are trying to lay out. If you are a CFP trying to get a better gauge on how to direct your clients, you should tell them to seek someone else for professional advice. If you are a family member, then tell them to get a decent CFP to help their roadmap out.

Now that you actually have ages involved. No, I certainly dont think 3MM is enough to live on for the rest of their lives. That is unless they decide to ever work again at some point.

So again, your hypothesis doesnt take into account their actual lifestyle which ultimately makes it a moot point after you have established the other points such as age and profession.

One of the rare times I disagree with you, Schmoov. In fact, I think you're flat out crazy . Isn't 60K like the median income in SD???? If your house is paid for 60K should be fine assuming there are no medical or other financial catastrophes. No, it's not going to be lifestyles of the rich and famous... but c'mon! Heck, I live in the SF Bay Area on less than 60K and I sock away 13K a year.

[mysticaltyger]

Originally Posted by earlyretirement

That's an easy answer. Because they spend more than they "make".

I don't think anyone is saying most people can't easily do it. Because the reality is that they could. I think all people are saying is it's good to find out what you are spending each month and what kind of lifestyle you want to live.

As I mentioned, for many people ultimately it doesn't boil down to how much they "make" each year. It boils down to how much they "spend" per year.

People who are overspenders have no clue about such things as 3% or 4% sustainable withdrawal rates. Gimme a break!

[mysticaltyger]

Originally Posted by Ultrarunner

The median income is around 68k in San Diego last I checked.

It would seem a person with no mortgage would hardly "Need" 150k to live comfortably.

Thank you

Some posters here are afflicted with a severe case of Affluenza. They live in a different world from the rest of us, apparently.